New Year-Now what?

Happy New Year to all of you! I know that this greeting is probably old for some of us-so much for the "New".

We are just back in our same old routine and still facing the same problems especially when it comes to our REAL ESTATE woes.

I recently stumbled on this CNBC article and I can't help but to be excited and at the same time scared of the changes that is about to happen with the market.

For one, the loss of the 100% loan and the infamous "STATED INCOME" loan.  As far as I can remember this was mostly the loans my clients could only avail of (First time home buyers and my California investors)

So now what?

Excited for two reasons, one is that the buyers that will come out are the truly qualified ones, meaning if I am on the seller side of the transaction I will no longer worry about the loan of falling out (well I know something bad can still arise) and if I am on the buyers side I know that my buyer is in the loan he can truly afford and they are the "Serious" buyers because they know what is at stake (money that they are putting down to get the loan and the house).

Scared because how many people nowadays have money in the bank for our V12 gas guzzlers? Let alone for a down payment on a house?

That being said, the banks are now really strict about all the other things. Before that, the "Stated Income" loan was solving (almost magically) everybody's "Debt to Income ratio"(DTI) and "Loan to Value"(LTV) problems and of course the 580 credit scores that could still avail of a 100% loan (it was like MAGIC).

Nowadays you have to have a minimum of 680 FICO (ok, I might be wrong here but this is the latest one I am facing with a client of mine.) to even be considered with the right LTV and DTI ratios with a minimum of 5% down to get a loan.

I am sure there is more changes/new rules,regulations and requirements that will come up in the coming months as we face more foreclosures, short sales and people with bad credit defaulting on loans they could not afford in the first place (I know, it's such a cliche now).  Reality is tough people, this has really turned ugly for many.  But lose hope we must not.

I want to quote M.Scott Peck,M.D author of the book Ian and I love, "The Road Less Traveled".

"Life is difficult. This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult-once we truly understand and accept it-then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters."

If I may I would like to paraphrase it relating to the Real Estate Market for both the professionals (me included) and the public, here we go:

"The Market is Difficult. This is the truth, the only truth (as I write this). And once you accept it then you will understand. That if you are a seller you know you can't sell your home if you price it to what your neighbor sold it for last month, heck you probably can't even sell it if you price it lower because of your competition out there has a better showing , not right away at least.

If you are a buyer it may mean that we need to be more wary of this little thing called DTI (Debt- to income ratio) a few sacrifices here and there like skipping on the very valiant pick up truck you've been drooling over for the past three years.  I have a friend who can easily afford the truck of his dreams but decided to hold on to his liquid in these dire times, ' you'll never know when opportunity is gonna hit you Joe, you just have to be ready.'

And lastly to myself and to my peers in the business (including investors), You See What We Did! Tsk tsk.  This cannot happen again.  Ignorance is not a valid excuse my friend (of course how can I forget, my 2005 self very much part of this list).

Let's say goodbye with the past but not without learning from it and Let's embrace the future given with all it's new hurdles and difficulties, because once we truly accept it then the fact that the Market is difficult no longer matters.

Lastly I leave everyone with a quote from another wise man of our time
Borat Sagdiyev "Come on give me a smile!" "HIGH FIVE!".

Happy New Year!