Even in a normal environment, purchasing a home can be a nerve-racking experience. Those in the Los Angeles market know this fact, all too well. The debt-ceiling debate has turned into a high stakes poker game. The big problem is consumers especially those purchasing a new home are fresh bait, while the politicians haggle over what has traditionally been a routine procedure.
Are Home-Buyers Being Held Hostage?
Nobody wants to keep extending debt just for the sake of creating a negative financial position. On the other hand, this entire debacle didn’t start three years ago. No doubt, the government’s debt has increased, but this has been going on for years. Many have offered opinions but to most consumers, their appeal is for those in political leadership to cooperate and get our affairs in order.
Perhaps, President Obama’s administration should not have brought the two unfunded wars, prescription drug give-aways, and the tax breaks onto the balance sheet, as was not the case of the previous administration. Call it “slight of hands” or magical math, adding those three items from the previous adminstration should provide explanation why this discussion has become a “hot button” topic.
Homeowners or those selling a home are concerned about the economy just as much as anyone, however when it affects them personally – watch out! The housing market was brought to its knees with the economic collapse of 2007. A glut of foreclosure have seen communities decimated and values drop through the floor. Many homes sold today, are at a substantial loss to the seller. Of course those purchasing gain the benefit of a lower priced item, but tell that to the person who is trying to obtain a mortgage to purchase the home, only to find out they no longer qualify. Tougher credit guidelines, increased down payments and other factors have already thinned out the ranks of prospective buyers.
Economist Have Spoken
Whenever a seller finally gets a nibble and finds out the seller actually qualifies, there is a mad rush to close the transaction as quickly as possible, in fear something may happen to stall or terminate the purchase.
Politics aside, economist have cajoled, pleaded and stressed to our political leaders to not allow the debt-ceiling to expire. Additionally, many have added, a short term solution as some have suggested, is basically “smoke and mirrors.” Some politicians either are hard-headed or believe in playing Russian-roulette with this issue. Aside from the rhetoric being spewed by both parties, here’s the realty that nervous home buyers must deal with.
Last month in the Los Angeles region there were 26,748 transactions. The average sales price was $375,900. Most of today’s home buying public are stretching resources to deal with basic qualifying and having enough money, down to the penny, so they can close. The average 30 year Fixed Rate Mortgage is 4.500%. Assume nothing was done and you are in escrow or have yet to lock your loan!! It’s hard to predict what type of negative impact the markets will have. Surely, mortgage interest rates will increase. Could it be 1/2 point, 1 point, 2 or 3 points? Being generous and using the smaller impact of 1/2 point, that would translate into an additional $109.31 per month to buy the same home prior to the debt-ceiling resolution.
$109.31 doesn’t seem like anything to worry about, right? Wrong, again for many buyers, particularly First-Time Buyers that could be the difference of qualifying for the loan versus being declined. For the seller, it could be their worse nightmare. Stressful enough to get a buyer in the first place. Now, at the 11th hour having the rug pulled from under their feet. The end result could be catastrophe which is why, consumers should not be held hostage in this debt-ceiling charade. Over the years it has been a customary and administrative part of government. On the other hand, some are hell bent of taking out consumers, as well as blocking anything the President is trying to accomplish, just to negatively impact his chances of reelection, because that is their real agenda. Maybe they will prevail, maybe not as voters appear to have awakened and realize compromise takes two parties. Today it is the debt-ceiling debate, tomorrow it will be something else.
All consumers want, at least most in the real estate community, is a competitive environment where buyers and sellers can get a fair deal. You can’t control the markets but you can control factors which affect the market!
Hopefully, by the August 2nd deadline this issue has been resolved and Los Angeles area home-buyers can concentrate on real economic issues versus having to deal with a self-inflicted negative impact our political leaders have created.
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