Wednesday, February 18, 2009

On Housing

So, Obama has finally unveiled the $75 billion plan to aid homeowners. Most of the reviews so far have seemed positive. This is after the Census released new data on housing starts and new home sales Monday that was quite dismal. We have an excess supply of housing that will take a while to work off.

Timely, today in my Personal Financial Planning classes we were looking at the chapter dealing with selecting and financing a home. I had a local realtor come and give wisdom, she did a great job.

Some notes. While interest rates have fallen, lending standards have tightened dramatically. The banks in town now require a credit score of 740 (out of 800) in order to qualify for the lowest rates. The cutoff used to be 620. Anything below 740 and you actually have to pay additional fees for loans you qualify for. And, of course, everyone has to put 20% down now. Only FHA & USDA qualifiers can get by with less.

There are 300 houses for sale in Bolivar city limits right now. Given that the town only has about 10,000 people, that's a lot of excess housing.

Many of these are new homes built in the past year or so that haven't sold yet. But, as prices keep falling we keep moving down the demand curve and more units start to move. But we won't be buying a house anytime soon.

No comments: