Inflation Will Upset the Apple-Cart for Many Home Buyers

More and more we hear professionals in real estate, finances, economics and lending talking about the inevitability of inflation and the resulting increase in mortgage interest rates. Most everyone is expecting rates to rise back to 7% – 9% by early 2010.

What this means to home buyers is that the next six months represent the best buying scenario for California real estate a home buyer could hope for.

Historically low interest rates will continue to fluctuate between 5% – 6% until the big jump. (4% rates are gone – don't hold your breath for their return)

East Bay home prices are about as low as they are going to go? Why – won't foreclosures force them even lower? NO. Why? Because the banks are exercising more price controls over foreclosures entering the market and they are withholding foreclosures from the market.

Why would they do that – don't they want to sell them? Yes & No. The Federal government as part of their stimulus package and bankk rescue plan is allowing banks to write off today's losses against the last 3 years – which means they may get tax refunds for profits already in their pockets. If they hold a foreclosure off the market, they can write it off this year and then sell it next year.

Most home buyers cannot afford foreclosures. Why? Because banks are selling most of the foreclosures to people with all cash offers. Who are these people that are buying foreclosures? Investors are the home buyers that have always done well as the market swings from the bottom up.

Short Sales will diminish. Why? Because banks are now including language in contracts that allow them to recover the difference from the home seller.  This will force more homesellers in trouble to go the foreclosure route instead of the short sale route. Why would banks force more foreclosures? Tax write offs!

Home buyers have the market they have been begging for – why are they still sitting on the fence? We seem to be living in an age where things are never good enough – until hindsight kicks in.

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Contact Craig for more information – 925-984-4910