Will The Sub-Prime Lending Problem Affect Your Home's Value?

Will The Sub-Prime Lending Problem Affect Your Home's Value?

By Marie de Espinosa

Easy Come, Easy Go?

RealtyTrac, a leading industry resource on foreclosure activity reports that one in every 316 homes in Colorado is now in foreclosure, up a whopping 11.25% in August from July 2007.

The supply of sub-prime easy money definitely helped to increase demand for housing here in Colorado: now that the faucet of easy credit is being turned down, the National Association of Realtors indicated in their latest report that pending home sales are down 20.7% in our sector of the country and predicts housing demand trends will continue.

The bottom line of slowdown in these lending practices— increased housing supply and reduced demand for homeownership— does not affect all Denver homeowners the same.
In fact, the more expensive your neighborhood, the better chance you have of not being affected at all.

It’s Still a Local Market

Premier Colorado Economist Tucker Hart Adams with US Bank expects that housing will continue to soften, a result of the number of new homes built exceeding demand. Adams notes that Denver’s “bubble” is “not nearly as large as it is nationally.”

A review of MLS statistics indicates that it is the homes closest to average home prices that are most affected by the increased supply and reduced demand. The Colorado Association of Realtors is reporting that median Colorado home price in the second quarter of 2007 fell to $225,000, down from $232,222 in 2006.

The good news for homeowners in this price range is that housing starts are down dramatically this year from their high in 2004 and the loan adjustments fueling mass foreclosures has a foreseeable end. According to the Adams Group, housing permits skyrocketed 17% in 2004 only to plunge 16% in 2006.

Furthermore, FHA limits are being reset in order to help those who want to keep or purchase homes. Conventional loan rates, including “jumbo” loan rates are still in the 6% range for those with good qualifications.

Your Personal Picture

If you are considering selling, buying or refinancing, take the time to get to know all the options available to you as far in advance as possible.

Sellers will want to be very sure of the lending position of anyone making an offer on their home.

The equity position of your home may have recently changed. Before you refinance, make sure you know the latest about home values in your neighborhood.

Buyers may spend more time negotiating with Lenders to ensure they are getting the best rates and fees available.