Barry Noble's Blog

"They say" there'll be up to 2,000,000 loans adjusting from teaser easy rates to rising adjustable rates in the next 18 months.  Can some of you still make Lemonade from these falling lemons? How many can be saved? How many will sink into the mire of foreclosure and how many will survive by doing something now? Need to know what your property is worth now?

At the risk of over-simplifying, in an era when not one politician has the balls (or moxie, for Hilary) to stand out ahead of the pack and offer hard, sensible solutions to even the simplest of today's problems let alone the big issues, does the following make sense?

Anyone who's loan is going to adjust within the next 2 years - should be looking to a fixed rate now - before even those rates rise and go over the top.  The simple litmus test (do they still test litmus?) - in three parts:

(1) if you go to a fixed rate now, for, say 40 years to make it easier, can you, with your current income handle the new higher fixed rate, over the easy current teaser rate?  Check around for current rates.  If yes - What are you waiting for? It will only get impossible later. I can't predict a turn around within the two years.

(2) For those who say "No, I (or we) can't pay it now." I won't beat you up with the fact you shouldn't have bought the home in the first place, but could you, with a little extra effort, pay the fixed rate by getting an extra job (or if two of you, and you're young, an extra job each?) If the answer then changes to "Yes."  Then do it now. It will only be impossible later. 

(3) If you answered "No." to the first two questions  - I would humbly suggest you should not be paying out money for a home you'll more than likely lose later, with all the bad credit consequences. No, don't run from it -  SELL THE HOUSE now - you may have to take a loss, but work with your lender and get out from under with the least damage to yourself and your family. Get it on the Market below everything around it -and in a declining Market - you may have to drop it a few extra times. Almost all lenders don't want to take the house back - so most will work with you. Need a referral to a good loan professional?

When there is a problem with the home mortgage - acting quickly always works out for the best. The Market goes through typical up and down cycles. We were rising through 2003, 2004, 2005 (A seller's Market) and at the high point of the cycle in the third quarter of 2006 - that was a shakey stable point but its on the way down now. It will soon be a super period for Buyers, aptly named the Buyer's Market.  

If you bought in 2003, 2004, 2005 and see your house value drop notably - but have a good fixed rate - don't fret.  Sit it out and ait for the next bottom-out and subsequent rise again.  If an investor - rent it out and sit tight, unless you are playing with short term teaser rates too.   It should be a good rise in value again as the cycle continues. (All this assuming we don't experience "The Big One" in California, being on the Andreas faultline, and a major national economic melt down.) Those would tend to mess around with the Market Cycles of So. California's real estate.

Barry Noble    Just like you, I Value your current or future home or the property you wan to sell -  May I help you?   barry@PalmSpringsCA.net     www.fastappraisalvalue.com