Mortgage Market Week in Review – on a Wednesday?

Yeah, I know it’s only Wednesday, but when I looked at my schedule for the rest of the week, I realized that I wasn’t going to be in one place long enough or have the time to sit down and write this update, so I decided that I better do it today.    In addition to that, we’ve had plenty of news in the last couple of days.   So, here are some thoughts about the markets, the housing market, perception and reality.

The markets – I think that it’s safe to say that none of us have seen this type of stock market declines in our lives.   I wanted to bring up a couple of points about the markets:

1. It’s very important, when looking at long term investing, to keep a rational view of things.   If you aren’t going to need the money for 25 years, don’t make decisions based on fear and panic that is currently swirling around in the markets.  Look at the long term and make decisions for the long term.

2. Stop listening to the main stream media.   There are many things where they don’t know what they are talking about and they love to paint a darker and more scary picture because it helps ratings.   I was listening to a local AM radio talk show yesterday while driving between appointments and was struck by a couple of things:

a. Morning talk show hosts shouldn’t be giving out advice about FDIC insurance.   The facts as they were stating them were just plain wrong.

b. Someone who is 44 years old (they said so) called in and said that on Monday (one of the lowest points in the market in the last 5 years) he sold everything in his 401K plan and moved it to cash.   If I had the time, I would have called in and told them a thing or two.   I was shocked at how much fear is taking over for rational long term planning.

3. I’m 43 (yeah I know, I’m over the hill) and I want to answer the question a lot of people are asking me right up front.   WHAT HAVE  YOU DONE WITH YOUR 401K PLAN?

a. Nothing. That’s right nothing.   When I set up my 401K and my various IRA’s from my different former employers, I diversified it well and spread it between an annuity and various other funds.

b. I’m still putting 4% of my income in there to get the company match.

I’m not going to need the money for 25 years, so I’m not the least bit worried about what the numbers look like right now.  I know that over time, a well diversified portfolio will do just fine.

Is there a lot of fear out there?  Yep, there is.   Is some of it justified?  Yep, some of it is.  Is the emotional panic that the main stream media is stirring up something that is going to cause me to change my investing habits?  Nope.

Now a few thoughts about the housing market:

Any time that the markets seem to undergo a dramatic shift, I always try to look back and ask myself, what has changed over the last 2 weeks.   As far as the housing market, what has changed? Take a minute and think about it…..

Well, have you come up with anything that has changed for the housing market?

Have you?

Nope, I’ll bet you haven’t.   Why?   Because the fundamentals of the housing market haven’t changed in the last two weeks. Let’s look at where we’re at in the housing market right now:

1. We’re still dealing with too much inventory in most markets and most price ranges (though it varies from price range to price range and from market to market).

2. We’re still dealing with too many foreclosures.

3. We’re still dealing with a smaller pool of buyers than we had due to tightened credit requirements.

4. And pricing opportunities still abound for those who are able to buy.

Is it harder to get a mortgage now than what it was 2 weeks ago?   Not around me it’s not.

Have rates drifted down in the last couple of weeks?   Yes they have, at least for conforming rates.

Let me make it perfectly what I’m saying:

1. If you have either a downpayment or equity in the property.

2. If you have good credit.   Not necessarily great credit, but at least have good credit.

3. If you have verifiable income.

4. You will be able to get a reasonable mortgage.   By reasonable, I mean one that is in line with your income and debt load.

All of the talk in the media about a credit crisis – it’s not affecting the mortgage world for loans under $417,000.    Fannie, Freddie and FHA are still working just fine, thank you!

Is this a nasty time in the stock markets?   Absolutely.   Are a lot of banking, financial and commercial companies having problems with getting the credit that they need?  Yep.  Has the mortgage market frozen up like the media makes it sound?   Nope.

A while back, I wrote an article on my mortgage blog, 7 Things Every Home Buyer Should Know.   I went back and read through it to see if anything has changed in my outlook on that.   Nothing has.

Tom Vanderwell