The Housing Bubble Gets Ready To Burst: Homeowner Tips To Survive The Real Estate Burst

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The question regarding soft or hard landings with respect to our nations housing "bubble" is about to get answered, with a touch down that will evolve into a very hard landing. This hard landing may put at risk the entire economy. The two largest culprits are homebuilders/mortgage firms that forced real estate appraisers to come up with inflated valuations and the second culprit are teaser rate, adjustable rate mortgage products that are now starting to adjust beyond many homeowners ability to make the payment. The victims are or will be our nation's homeowners, our nation's pension funds and ultimately the U.S. Taxpayer in a Katrina type bail out.

Its no longer a question of if, at this point, it's just a question of who figures it out first and takes over the mortgage/title industries

The question regarding a national real estate bubble, and or a hard or soft landing according to the President of The National Mortgage Complaint Center/Homeowners Consumer Center "is about to get answered." Mr. Thomas Martin the President of this group has indicated that the "bubble is going to be more like a nuclear detonation with consequences getting progressively worse, with no quick fix." He calls it "the Hurricane Katrina of real estate, because everyone knew it was coming and no one prepared for what it would, or could do."

"Lagging home sales and home price reductions are but one indicator, ever increasing foreclosures are the second.The reality is that with real estate valuations coming back to earth many homeowners have no equity left in their homes or actually owe more than their home is worth." So how did this happen? Martin says the answer can be summed up in one word, "Greed."

For over two years the National Mortgage Complaint Center has been expressing concern/panic over regional or national homebuilders forcing local real estate appraisers to come up with inflated or over-valued real estate valuations. The net result is, as builders inflated the price of their new homes, existing homeowners inflated theirs. This practice goes back to about 1998. It was a game of musical chairs. According to Martin,"at some point the music would stop and someone would get left without a chair. In this instance it will be the homeowners who recently purchased a home and or the pension funds who thought they were buying a real estate portfolio worth 100%. In reality new mortgage backed securities might only be worth 90% or 85%. Ultimately it will be the taxpayer; as this real estate bubble burst will call for another massive federal bail-out just like the Savings & Loan Bail Out of the late 1980s & early 1990s."

The other culprit according to Martin is a "greedy mortgage industry combined with a Fannie Mae, Senate & House Banking Committee all asleep at the switch with respect to ridiculous mortgage products such as adjustable rate mortgages (ARM's) with start rates as low as 1%. The problem is, the borrower did not understand that the rates would increase, or these mortgage products allowed borrowers to qualify for a mortgage they could never other wise afford. At some point the borrower realizes they cannot make the payments or they owe more on the home than it is actually worth, and they walk away from the house or they face foreclosure." According to Martin, "the combination of blackmailing real estate appraisers into inflated valuations combined with insane mortgage products creates the perfect storm for a real estate disaster that could be our nations most costly real estate melt down in history."

The National Mortgage Complaint Center & its partner The Homeowners Consumer Center suggest homeowners do the following to weather the 2006 real estate bubble burst.

1. Don't sell right now if you don't have to. If you do have to sell, do it now, even if you have to reduce your price. The national or some regional markets may ultimately correct to 10%-20% less than current market valuations, especially in formerly hot markets like California, Arizona, Nevada, Washington DC Metro, New York, Florida and the Carolina's. It may take 5 to 7 years for these markets to recover to 2005 price levels.

2. If you are in a mortgage that has features that call for payment increases or adjustments within the next two years, see if your current lender will allow you to convert to a fixed rate product. If not call the National Mortgage Complaint Center Http://NationalMortgageComplaintCenter.Com to see what your options might be. The Complaint Centers toll free number is 866-714-6466.

3. Consumers should not fall for some advertising gimmick from a mortgage firm/bank or homebuilder offering a 1% start rate on a mortgage or 100% financing. Why would anyone want 100% financing in a nationwide real estate market that could see values decline 10% to 15%+ in the next two years? Put another way "why purchase something that at least in the short run may not retain its value"?

4. If you are a potential real estate buyer the Homeowners Consumer Center ( Http://HomeownersConsumerCenter.Com ) & the National Mortgage Complaint Center strongly suggest you wait to see how far real estate values go down in your area before you purchase a home or investment property.

5. While real estate market prices may decline, the rental market should stay intact. Homeowners unable to sell their existing property should consider renting their property until the real estate market begins to recover. This may be the best option for many homeowners to actually hold onto their property.

For Mortgage Lenders, Mortgage Bankers & Homebuilders the National Mortgage Complaint Center Suggests; Clean Up Your Act.

The mortgage process should be simple and transparent with consumer friendly approaches to fees; par interest rates, yield spreads and pre-payment penalties, etc. Martin envisions a future, with flat fee- A-type mortgages, and flat fee title insurance. In other words the same thing that happened to the stock market with respect to flat fee stock trades is about to happen to the mortgage and title industry. "Its no longer a question of if, at this point, it's just a question of who figures it out first and takes over the mortgage/title industries".

The echo generation is now in high school or college (the largest generation of possible homeowners in our nations history). Within four to six years they will become potential home buyers or renters. By this time, we believe the market will have corrected and appreciation will begin again. By then it is the hope of the Homeowners Consumer Center that there will be much more conservative approaches to real estate valuations and deceptive mortgage products/fees will have been outlawed.


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