Many families and individuals in the market for a new home are aware the real estate market has been in a decline, in some areas more than others. Gone are the days of double digit price increases so prevalent during the last few years, at least within the foreseeable future. This being the situation, we must attempt to understand what has happened and why. And what, if anything, we can do about it for our benefit.

What has happened-

 Lending institutions, prodded by investors to make more loans, produced loan products that enabled many to purchase taking advantage of teaser rates, offering low initial payments, that would eventually escalate to much higher payments hardly affordable to the consumer. Relaxed credit and income standards were allowed, some so relaxed as only requiring a "breath test" of the potential home owner. No down payments were required in most instances. Assisted by increasing home prices and the possibility of future equity build up, these potential home owners were convinced they could in the future re finance out of what appeared as a "bad loan" into one more stable which would control the payment changes being experienced by many. This is what and why.

What is happening now-

Many lending institutions have filed bankruptcy, or have gone out of business all together in an attempt to minimize their losses. The investors have suffered huge losses and most likely will suffer larger ones. A more restrictive climate has appeared, one that ensures a more normalized lending approach. It will take more than a "breath test" to obtain financing now. Credit scores are more important than ever, along with stable job history, adequate income and a substantial down payment . The down payment requirement allows a cushion for the lender and purchaser, showing stability if additional price adjustments were to occur. Government backed or associated programs, more likely to have better oversight and underwriting requirements such as Fannie Mae, Freddie Mac, FHA and The Veterans Administration are ramping up to fill the loss of available funding left from the lenders fleeing the lending market. Some of these programs still require no down payment such as the VA, but the underwriting requirements are adjusted accordingly to minimize the risk to the lender and the borrower. Additionally a VA loan is guaranteed by the VA, offering additional incentive to the lender to fund the loan. The FHA offers similar assurance to the lender by an endorsement of insurance.

What we can do now-

 Always, the best way to do anything is to adequately prepare. By monitoring our credit, minimizing credit use, and saving for a down payment, you will be better positioned to purchase your home. Investigate various loan programs, understand the ramifications of each as to their affect on you. And always remember, if it sounds too good to believe, it normally is. Ensure you are in position before you take the leap forward.

Is now the best or worst time to buy?

 In an increasing market, we all want to buy before the top is reached, allowing for a ride up in appreciation. This has occurred with every cycle of the real estate market for decades. In a decreasing or declining market as we have been experiencing, few want to purchase with the risk of substantial loss. This is normal, rational thinking. With this thought process, no one will purchase, the market will stagnate and prices may drop further. They may also, not drop as much as we rationalize. Anticipated price reductions have been realized. In some areas more than others. Investors are now watching the market more closely, looking for that window of opportunity, the one that opens just before the market changes. As change is inevitable, so is an increase in housing prices. Just when this will happen is the question.

What happens now-

The current real estate market holds several opportunities for investors and potential home owners. But just how will this benefit you? Prices are down substantially, allowing for lower mortgage payments. Sellers are offering concessions, not only in closing costs, but additional price adjustments as well. With less buyers in the market now, choices are greater, allowing for that "one window to open". Bank owned properties (foreclosed on properties) and short sales (properties selling for less than what is owed) are prevalent. Even these properties have some room for negotiation albeit more difficult. Sellers on the market now, are not testing the market, they are more serious in selling. Realizing all of this, buyers are upon possibly the most advantages time to purchase their new home.

What happens if you do nothing-

You will continue to pay rent to a landlord, building his or her equity and not yours. Rents will be increased and you will pay more in the long run. The "window of opportunity" may close, the one that could have saved you thousands of dollars not only in home price and costs but future payments as well. How can I prepare or take advantage of my own window? Start by discussing your needs more closely with your trusted advisors. I would hope I would be one of those.

It may be, your window is open now. I can be reached 24 hours a day at (951) 205-6950. Sincerely, Mike Arnold