Cram Down.

Unlike the stock market, home inventory levels remain high. We really need stocks to go up and inventory to go down. There are 941 residential homes available as of March 1 in the Lakes Region which represents about 17 months worth of inventory. The average list price is $547,575 and the median list is $299,000. In March of 2007 there were 885 homes on the market with an average list price of $556,118 and a median list price of $321,000. Basic economics says that lower prices should increase sales, it is just a question of how low and when. But prices are not the only factor affecting our housing markets.

The government is trying to stimulate the housing markets which are clearly in dire need of help. But even with the glut of homes on the market, low interest rates, and depressed prices many buyers are still reluctant to jump into the market. Pending home sales in January across the country dropped 7.7% after a gain of 4.8% in December. Not a great start to what most consider the fourth year of this down market. Many prospective homeowners think that prices are still going to fall further. Financing, or the lack of it, can certainly be an issue and is keeping many out of the market. Others are just plain scared to make a move given all the uncertainties in the economy and some even think that interest rates will go even lower. I don’t see interest rates going lower especially if the new administration can get Congress to pass an extremely controversial piece of legislation that is appropriately called a “Cram Down” provision.

This “Cram Down” plan is intended to help stem the tide of foreclosures by allowing bankruptcy courts to modify the mortgages of homeowners that are in trouble. The plan is to reduce the principal amount owed on the loan and make the monthly payments on the home more affordable. The purpose here is to put pressure on loan servicers to “voluntarily” reduce mortgages before the buyer files for bankruptcy. Supporters of this legislation say that lenders are not doing enough to modify the loans of borrowers on the brink of losing their property. While everyone would like to see homeowners be able to stay in their homes, especially the mortgage holders, many homeowners may still be unable to make even the reduced monthly payments. The nation’s largest lenders are lobbying heavily against this proposal. They say that it would have a huge negative impact on the already weak mortgage markets by creating even greater risk for the lenders. They say this proposal would result in higher down payments, interest rates, and closing costs on new mortgages further stalling any housing recovery. I don’t know about you, but anything that is named a “Cram Down” plan, no matter what it is referring to, doesn’t sound very good. I’d like to know your thoughts on this issue as well as the state of the real estate market in general, so please feel free to leave a reply below or by clicking on “no comments” to bring up comment box…

Residential Homes Available March 1, 2009

Report covers the towns of Aton, Barnstead, Belmont, Center Harbor, Gilford, Gilmanton, Laconia, Meredith, Moultonborough, New Hampton, Sanbornton, and Tilton

This entry was posted on Thursday, March 5th, 2009 at 8:30 pm and is filed under Lakes Region Home, Market Report Posts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.