The talk of the town, the times and the cocktail parties this week is that home sales are getting stronger around the country. However, a sale is not a sale until the “fat lady sings.”

 

Here, we can refer to the Fat Lady as the banks and mortgage lenders out there. The loans are getting harder and harder to get approved and clients are nervous about the lag time in approvals. Whereas a loan would get approved for a borrower with spotty credit or new job within two weeks, a year or so ago, even the cream of the crop is taking 60 days to close.  FYI: if your loan is taking more than 45 days to get approved, you might want to question the loan officer on the probability of it happening. I have heard stories of people waiting 6 months for an approval that never comes.

 

In the middle of the loan process, home values are going down, people are getting laid off or just plum getting scared. This turns pending sales into dead sales.

Although there is more activity due to the home buying season, foreclosures on the market and people just needing to move- these numbers might be false. I am not saying the process in play is not working, because I think it is. The media, realtors and sellers need to give it more time to level out into a realistic flow.

 

Not to be a downer, but we do not want these numbers to quickly build consumer confidence and create a spike in home prices. A quick increase in home prices will create a false start in the rebound and will really depress us when it plummets again. The real estate market must continue to go through it adjustments and stabilize before the prices go up again. Only then will the values be at true levels. During this timeframe, the lenders will be able to get control of their guidelines and begin to ease up on the loan approvals.

 

Another hench in the hog, is that interest rates have gone up over the past week. This is due to the Treasury buying bonds and changes in the financial market. This is good for the stock market (our savings) but bad for borrowing (home loans). I believe that this spike in the market is just a short term change and the rates will go below 5% again soon. If only the lenders will part with some of this government dough, we will see some light!

 

Dale Siegel