It seems this is the hot topic in real estate these days so I thought I’d take some time to weigh in on the issue for foreclosures here in Louisville.
- Rule #1: Prices fluctuate. That’s how things work. They go up, then come down. But in our city, Louisville, even when things are down they’re not really “down” they’re just not increasing at the historical 4-5% rate. It’s more like .5-1%. So our cycles are milder, which is good and they’re still moving up! Just be happy you’re not in Las Vegas, San Diego or Tampa.
- Rule #2: What’s bad for home sellers, is actually good for home buyers. Why don’t we hear that message very much? Bad news sells better than good news, that’s why. So depending on your situation, selling your home now and buying a new one may be a great idea, For example, if you’re moving up in price range. Or, if you’re looking to downsize, now may not be the best time for you and you should wait it out.
I’ve yet to see any data on why the foreclosures have occurred. I’m sympathetic to those who’ve had health problems or suddenly lost their jobs or something out of their realm of control, but I don’t feel remorse for those who overreached and bought more house than they could afford. It’s a tough lesson, but unlike what we hear from Hollywood, greed is not good.
If we had this data, I’d wager more than 2/3 of all foreclosures were primarily poor decisions by the home buyers. Just because some slick loan company telemarketer is yada-yada’ing about a “new program” where you pay nothing but make out like a bandit, it doesn’t mean you should sign on the dotted line. What sounds too good to be true, probably isn’t.
I just finished reading this lengthy piece from Business First about how foreclosures are coming to high-end neighborhoods too. Well, of course! Anyone can give in to the temptation to buy more home than they can truly afford. It’s a universal, human behavior.
So where do we go from here? If you’re in trouble with your current home, you’ll certainly want to speak with some reputable experts that are familiar with short sales. Ask your Realtor which real estate attorney they recommend. Continue to make payments, even if they’re less than the amount needed. But above all, be proactive. Don’t sit back and hope it will go away because it won’t. There are ways to sell a property you can’t afford and move forward with your life, but it all begins with you making that first call.
A source I trust, Crown Financial Ministries, recommends spending no more than 28% of your Net Spendable Income (NSI) on housing. This includes mortgage, taxes, insurance, utilities, and maintenance. If you maintain this standard, you’ll most certainly avoid the foreclosure scare.