I work with seniors to get Reverse Mortgages.
Its time to stay honest about the current economic situation and how it affects those seeking to stave off foreclosure or to stop paying their mortgage alltogether, it has been difficult to paint a rosey picture during the economic times we are in. The main audience of this blog and their interested caretakers may be well aware of the Great Depression and its dynamic on the entire economy and the world. In the 30’s it was ‘bad news bears’ for so many investors watching the stock market close in fear of further meltdown. But not all of us back then even invested in Wall Street.
Here are 4 points that make this current market even different.
- This time around we see that the stock market has not been closed for any amount of time.
- With technology we have seen a concerted effort by the Central Banks to stave off persistent meltdown.
- The congress passed the one of many (international) bailout programs to take control of bad securities.
- Even though banks like WAMU have been bought out they have not stopped their unique services and it was a particular good deal for the buyers.
With things like these it seems that although our market has spun around (down 800 for a record, up 900 for a record)
We are seeing things go quickly. Which brings me to the point of house prices once again. Being a mortgage lender I hate to see house prices fall. In fact, in my field of Reverse Mortgages it is even harder to swallow. But this time were looking at record home prices falling into a more of a national average than a complete slump.
I began to think what the following comment really means for our economy….and our seniors.
Home price declines are already approaching those in the Great Depression, when they plunged 30% during the 1930s. With prices already down almost 20% from 2007, what’s next.
If we look at the average home price in 1930:$ 7,145.00 multiply this by the inflation of $100 ($1204.42)….We see that the same house would cost $86,055.80 today. But it does not, average house prices are still over this figure by far, try $200,000.
Why do house prices not reflect avg. inflation rates?
To figure this out we have to look at a few market pressures; the level of population vs. the availability of homes; the centralization of habitation; the average job availability of your area. All of this still greatly affects the current prices of homes.
So we have a new era, and those of us who are worried about falling prices in the market should also figure out what a 20% in home value means to you.
In terms of real value you must see that the recent boom inflated the price of homes sometimes 14% every quarter for tha last 2 years. So does a 20% decrease really mean the bottom of your home value has fallen out?
I ask this because the congress just passed a bill to keep the conventional loan at 417,000 it also included reverse mortgages to cover up to this amount.
This is an interesting, if not well needed to raise to the maximum from say 300k to 417k they will guarantee more people with Reverse Mortgages. Many of the homes we service for seniors have between 280-415 thousand in value. The interesting fact is that most fall between the FHA’s past limit and the new limit of 417k. So this opens up the Reverse mortgage market to many.
Finally, the new law also brings those who have seen their home price go from 500 thousand to 417thousand (-20%) to qualify for a reverse mortgage with no special loans being needed. So in effect, many more people qualify for the benefits of the reverse mortgage. They can stop paying their mortgage bill every month and have non-taxed, secure income for whatever comes their way in the future slowdown and regaining of the market.
Just think what you could invest in>>>>Look at the banks. They bought the entire kit and kaboodle (WAMU for example) for pennies on the dollar and it seems JP Morgan and Chase could not have been happier!
