The Real Estate Bloggers posted today about the disappearance of no-money-down purchases from today's market, due to the credit crunch.
While I generally agree that buying a home with no money down isn't a good thing, it's important not to overcorrect in formulating our new attitude towards subprime borrowers.
Subprime borrowers buying homes they never thought they could was a major driving force in the great housing market most of us have been through in the past 3 to 6 years. Here, when I say "subprime" I mean first time buyers, who generally are younger and have so little credit history that they're pegged subprime when they make a loan application.
First timers buy a home, allowing the existing owner to buy up, who buys a home being vacated by another seller who's probably moving up...
Undoubtedly there were some bad loans made in the go-go boom years of '04 and '05. Greedy lenders gave purchase money to people who shouldn't have been loaned a stick of gum. Some people played the system to get homes they knew they'd never make a payment on, hoping against hope that they could sell at a profit before the 3 months of missed payments triggered a foreclosure.
But... if we forget about first time buyers, it could put a serious dent in the already banged up Metro Phoenix housing market.
We agents have a chance to wade into the current housing mess and really make a difference. Listing agents - don't clutter the crowded marketplace with overpriced listings. Chris Butterworth posts eloquently on this topic.
Buyer's agents - court first time buyers. Sure, they don't spend as much money and they're loads more work because you have to explain everything 3 times. But the first timers can still get qualified by the lender of last resort - the government in the form of the FHA loan. Plus, the emotional payback of putting someone in their first home is nearly indescribably wonderful.
'Course, maybe I'm just a sucker for a well produced TV commercial. As I write this, I'm remembering a commerical for the show My First Place that runs frequently on the cable network HGTV. The spot features a weepy-eyed first time buyer and a beaming Realtor handing over the keys to the buyer's first home.
Yeah, that one gets me every time. And those Hallmark commercials. Oh, and the Folger's commercials where the college age son makes a surprise visit home and wakes his parents up by brewing fresh coffee for them (relive the magic here). Yep, I'm just a sucker for an emotional TV commercial.