I was reading a Yahoo! Finance article a few days ago that highlighted some of the ongoing doom and gloom that is currently going on both in the mortgage industry and in the real estate industry. Home sales in September, 2007 dropped 8% nationwide and it seems to be the case that houses are sitting on the markets for very long periods of time. I’ve seen this firsthand, not that I’m currently trying to sell a property, but just in my casual observation of homes that are still for sale that went on the market last Spring. The Yahoo! article points out that in addition to sitting on the market for a long time, median home prices have also fallen 4% in the past year.

Of course, no party would be complete without some bad news in the mortgage arena as well, so here goes:

As if the fundamental sickness in the housing market weren’t enough, a secondary infection has developed. The credit crisis in the mortgage market that erupted in the summer has left huge numbers of potential buyers without any access to mortgages.

The subprime sector has essentially died, with the newly reinvigorated Federal Housing Administration able to replace only a tiny segment of what was once a huge market of home buyers.

The top end of the market was also frozen out, as jumbo loans (those with mortgages above the conforming level of $417,000) became more expensive or completely unavailable.

The question now is when will the real estate and mortgage markets return to some semblance of normalcy? Not the “normal” from the early part of the decade, but a more moderate growth level. Many analysts point out that real estate corrections often take 3-5 years to run their course, so for those hoping for a very quick turnaround, it may not be coming. An ominous note: the article points out that “The market will really begin to recover only after sellers capitulate on prices.” In other words…ouch!

Tags: home sales, jumbo mortgage, mortgage crisis, real estate correction, sub prime mortgage

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