The Sky Isn’t Falling

By Cathy Salustri

 It seems as though every other headline in the newspaper talks about people losing their homes and every time you turn on the TV newscasters are talking about foreclosures. Yesterday’s mortgage brokers work at Starbucks and Home Depot today. Some real estate agents are waiting tables or looking for other work. The unemployment lines are getting longer.

At this rate it’s hard not to believe that by this time next year you’ll have to sleep in a refrigerator box under the interstate, chugging malt liquor out of a brown paper bag.

Don’t pick out your spot of pavement under the overpass just yet though because the numbers and many homeowners don’t agree with the media hype. While headlines scream “Foreclosure Rate Triples!” and “Foreclosures Soar,” it’s likely that less than 8% of Americans will lose their homes. Many of those foreclosures are investment properties rather than owner-occupied.

Poul Hornsleth, who owns multiple rental properties and is a real estate broker in Gulfport, Florida believes that the market is starting to stabilize. What’s this hype you say? His brokerage has actually seen home sales increase in recent months.

Buyers and sellers alike now make and accept what Hornsleth calls “realistic offers.” For example, adult children who held out for high offers on mom and dad’s vacation home can’t do that anymore, fearing another offer won’t come along, and fewer investors believe they can buy a property and flip it for a quick profit.

“Markets went up about three percent a year and then suddenly skyrocketed (during the boom) several years ago,” Hornsleth said. From 2004 to 2006 sellers received top dollar for their homes, but no real estate boom lasts forever, and when markets stabilized, many hoping to make a tidy profit on their homes found themselves stuck with more house than they wanted or could afford to pay for every month.

Joe Plaia, an aerospace engineer living in Fredricksburg, Virginia, agrees that the sky isn’t falling and lays fault for the foreclosures at the feet of the banks that loaned irresponsibly. Plaia, his wife and their three children live comfortably in a home they purchased in 2000.

“We haven’t lost our home because we were fortunate enough to have bought before prices went crazy,” Plaia said, but added that banks didn’t help the situation once prices spiraled out of control.

“The banks are more to blame for this problem than homeowners,” he said, and mortgage brokers as well as Realtors say banks getting more realistic about lending and what they will and will not accept has helped the market start to stabilize.

“We’ve seen lending institutions get more realistic,” Hornsleth says, especially in relationship to accepting offers on short sales and foreclosures. Remember, though, that a stable market doesn’t equal high prices. “Don’t expect high prices of 2005 for at least 8 – 10 years,” said Hornsleuth, perhaps even longer than that.