Are we heading into a Twin Cities Housing Crisis?

Rising house prices, subprime mortgages, housing inventory shortages, high construction costs - are all these headlines foreshadowing another mortgage crisis?

Here is what you should know.

The Lingering Effects of the 2007 Subprime Mortgage Crisis

The lasting effect for most consumers is that it’s more difficult to qualify for a mortgage than it was in the early-to-mid 2000s. Lenders are required to verify that borrowers have the ability to repay a loan — you generally need to show proof of your income and assets. The home loan process is now more cumbersome, but hopefully, the financial system is healthier than before when too much borrowing and flawed financial modeling, largely based on the assumption that home prices only go up plus greed and fraud.

Subprime in 2018

Investors are chasing larger profits and over-subscribing. Risky securities have doubled and they want more. What am I saying? Subprime mortgages are back! Subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) means making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks, such as unemployment, divorce, medical emergencies, etc.

Per Financial Times:

"The loans in these deals go under a variety of names and range all over the US. But what they have in common is that they are not eligible to be bought by Fannie Mae or Freddie Mac, the government-backed mortgage enterprises, or to be insured by the Federal Housing Administration, which supports first-time buyers. As such, they’re often identified as “non-QM” loans, or non-qualified mortgages." 

So... Who do you know that has been having trouble qualifying for a mortgage and is currently paying $1200/month or more for a rent? Have them call Sarah and ask about finding a mortgage lender that may be able to help them. Why pay somebody else's mortgage when you could pay your own? If you can afford your current rent comfortably and you can get a reasonable home for the same mortgage payment, you should be looking into it and working on it! 

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While interest rates are higher in spring 2018 than they were last fall, the are still great! You may hear the phrase "money is cheap" being tossed around which means that interest rates are low and purchasing power is high.  With plans for more interest rate increases in 2018, buyer purchasing power will decrease. Meaning, as interest rates rise the price of a home that a buyer can afford and qualify to purchase will decrease.

Keep in mind, housing inventory is tight and competition is fierce so you will probably need a full time REALTOR to help you find a home. Looking at public websites usually means you are too late.

Owners of entry level homes: THIS IS YOUR YEAR

EVERYTHING is in your favor. The factors that make this the prime time to make your move:

• Entry level home prices in the Twin Cities have mostly recovered to pre-recession prices - some areas higher.
• Rates are still low giving you higher purchasing power on your next home.
• The return of subprime mortgages means more opportunities for buyers keeping demand for entry level home high.
• People who bought in 2011-2013 are sitting on more equity due to rapid price gains than most homeowners in have ever seen in history.

Call Sarah Marrinan today to discuss you purchase plan! Just because a hot market makes it sound "easy to sell" there are a lot of factors in getting a homeowner from one home to the next. Your buyer may be getting one of these subprime mortgages mentioned above. Do you know how to vet the lender and buyer? Do you know how to coordinate the moves? After all, there are buyers, sellers, mortgage people, agents, title companies, movers... a lot of people to coordinate! And what about your financing? Does your financial situation put you at an advantage or disadvantage in the process? Sarah Marrinan is a Certified Residential Specialist. She can help.

Mortgage Market Update from Tim Erickson, LeaderOne Financial
What's going on and why does it matter?
Mortgage bonds opened lower today after bumping against their highest levels of the month in last week's trading.  Most Asian and European markets are closed for Easter Monday, so this week of bond trading may start off slowly. Even so, trade war fears are dominating the headlines as China announced tariffs on 128 types of US imports effective today. Later this week, President Trump is expected to provide a list of Chinese imports that will be targeted for US tariffs. As for the economic calendar, the market will be digesting some construction spending and manufacturing numbers later today. The highlight of the week, of course, will be Friday's non-farm payrolls report. The Fed is scheduled to purchase up to $625 million of GNMA mortgage bonds today.

What should you do about it?
Lock your rate to be safe.

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“Every time the interest rates go up, you eliminate a group of people who can no longer afford to buy a house,” Don Frommeyer, a mortgage broker at Marine Bank in Indianapolis, told realtor.com®. “Some people may have to rent for a period of time until they make more money—or buy a smaller house.”

Don't let rising rates reduce your buying power! Call us TODAY!

About the author: The above article “Another Crisis?” was provided by Sarah Marrinan.

With multiple certifications, awards and experience, if you’re thinking of selling or buying, I’d love to share my knowledge and expertise. Proudly servicing the following Twin Cities, MN areas: White Bear Lake, Hugo, Lino Lakes, Centerville, Vadnais Heights, Shoreview, Mounds View, Circle Pines, Mounds View, Forest Lake, Columbus, Wyoming, Saint Paul, Minneapolis, Roseville, Lake Elmo, Stillwater and Oakdale, MN.
Visit Sarah’s website at www.CallSarahFirst.com.