By Joe Guzzardi
11/28/2008
Every day, I ask myself which will happen first. Will my grandchildren, now ages eleven and 9 graduate from high school or will I sell my Lodi house? I’m leaning ever so slightly to unloading my house. But my position shifts daily so check back with me for updates.
I base my cautious optimism — if that’s the correct word — on the 100 percent consensus among the so-called experts that financial conditions will continue to hurtle downward for the foreseeable future.
These are the same guys, I remind myself, who just months ago said that everything is fine and the economy is, pardon the pun, "sound as a dollar."
Obviously, they have been trained in the Y2K school of analytical thought. Disaster is always right around the corner until it suddenly isn’t.
Nevertheless an endless string of polls indicates the public perceives that the nation is on a collision course with, at best, a deep recession or, at worst, a full blown depression.
The bleakest outlook focuses on the real estate market. A recent Associated Press-AOL Money & Finance poll found that, "Sixty percent said they definitely won’t buy a home in the next two years, up from 53 percent who said so in an AP-AOL poll in September 2006."
Fear of foreclosure, heightened by the rising number of foreclosure filings, has many afraid of losing their homes.
The AP poll found that "more than a quarter of homeowners worry their home will lose value over the next two years. Fully one in seven mortgage holders fear they won’t be able to make their monthly payments on time over the next six months."
Investors looking to sell properties in the coming months should be aware that, according to the poll, only 11 percent are certain or very likely to purchase a home soon.
Well, as my agent keeps telling me, it only takes one buyer.
But let’s take a long look at what looser credit standards have wrought. Making it possible for virtually any warm-bodied adult to qualify for a mortgage has morphed into a national catastrophe.
I bought my first home more than thirty years ago. At that time, I had to provide in-depth credit information supplemented by a long list of references from professionals in high places.
After submitting ten pounds of paperwork the banker, still deeply skeptical because I was twenty something and "a first time home owner" told me that the committee would get back to me — within forty-five to sixty days!
I had to wait two months even though I had cash in hand for the standard 20 percent down and an impeccable financial resume. Now, "instant" credit prevails.
Luckily for me, my story has a happy ending. The bank approved my application, I bought the house and made my monthly payments on time.
Over the years, my house appreciated and the bank earned a small fortune in interest income.
What happened to the good old days?
Abruptly, during Clinton’s administration, the White House decided that every American should own a home. And Bush accelerated Clinton’s goal when he announced in 2002 his Minority Homeownership plan that included a $2.4 billion tax credit and a $200 million national down payment grant fund to facilitate lower-income first-time buyers home purchases.
Bush’s objective was to increase minority home ownership by 5.5 million.
And Bush did a great job of getting more minorities into houses. In one documented case, a man who reported $12,000 income from selling vegetables off a truck bought a $300,000 house in Maywood that he financed initially with interest only loans.
What never occurred to anyone, except for people like me who have had traditional commercial bank training, is that a house can easily be sold to anyone — especially with no money down and sub-prime borrowing rates — but how would it be paid for?
We all know what happened. None of the unqualified buyers could actually pay for their houses and after their creative financing options ran out, they walked away.
Ironically, they're not the only ones left holding the bag. Also going down with the ship are millions of Americans who played by the rules but, because of eroding market conditions, are watching their home equity rapidly evaporate.
Because I refuse to end a Thanksgiving weekend column on a sour note, I'll reach back for an old chestnut that I rely on to comfort myself and apply it to the housing market.
As the saying goes, it’s always darkest before the dawn.
Joe Guzzardi is a California native who recently fled the state because of over-immigration, over-population and a rapidly deteriorating quality of life. He has moved to Pittsburgh, PA where the air is clean and the growth rate stable. A long-time instructor in English at the Lodi Adult School, Guzzardi has been writing a weekly column since 1988. It currently appears in the Lodi News-Sentinel.
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