With so much negative press about the alarming rate of foreclosures in the nation, the thought of purchasing any property has become a scary proposition. Maybe the first thing one should do is to examine and research what areas of the country are being affected, as well as the where in and whys of the foreclosures.
The majority of delinquent mortgages are located in Nevada, Florida, Michigan, California, Colorado, Ohio, Georgia, Arizona, Illinois and Indiana. All of these places are more than a thousand miles from San Antonio and our beautiful Texas Hill Country. That does not mean that we do not have foreclosures here, they are just not as prevalent in our area. It could be that some of the reasons for the foreclosures in the states mentioned above are due to the extreme relaxation of the mortgage credit policies that were created to assist mortgage holders through some of the disasters of the hurricanes and other nature-related occurrences.
Some other reasons for the increase in foreclosures could go back to the nature and understanding, or lack of understanding, of how some of the mortgages were presented to the buyers. This would primarily be mortgages referred to as ARM (Adjustable Rate Mortgages). These mortgages start out initially with low payments, and then increase in three to five years to an adjusted rate with higher payments. This being the case, buying with relaxed credit policies, a lot more houses could be sold, with low payment mortgages that would be adjusted later to a higher rate. However, the buyer’s income did not adjust accordingly. And, in many cases, their credit worthiness to refinance at a lower interest rate would have prevented a buyer from doing so, even after they were reassured, at the time of purchase that they could refinance prior to the increase of the ARM.
Another group of people, many being elderly, were encouraged, by creative advertising, to take out a second mortgage on their homes to liquidate credit card bills, take that lifetime vacation, add on to their house, or many other reasons to have the extra cash available. Once again, not totally understanding or misunderstanding how their loans worked brought about increases in payments as time progressed. All the above situations could be primary causes of many of the foreclosures.
When a person is considering making a real estate purchase, whether it is a new home or a five–acre tract in the Texas Hill Country, they need to consider and categorize their fears of a downed economy and the above reasons why many homes are in foreclosure.
People have fears or second thoughts about acquiring property due to the prices of gasoline that are soaring, and are rumored to soar even more during the summer months. Once again, you need to consider the fact that for some reason, every eight years or so, when we have a hot presidential election, prices seem to go through the roof without any good valid reason, and this is particularly true in the summer time when people vacation. So, who knows what the magic answer is to this theory.
Prospective purchasers in the San Antonio and the Texas Hill Country area, and for that matter, all over Texas, need to realize the bargain prices offered in Texas versus those in California, New York and other areas of the country, for equivalent properties.
Recently, a man purchased a tract of land with outstanding views in the Texas Hill Country. When asked how this compared with properties in his home state of California, he just stared out and said, “In California, this property would probably bring about one million to a million and a half dollars, so for my purchase of a little over one hundred thousand dollars, I almost feel like I am stealing." The same can be said for most housing in this area, whether it is a modest tract home, or large estates with gated entrances.
Once again, I say, reflect on why foreclosures happen and why other things happen that may have no real effect on your ability to buy that piece of property with a comfortable feeling. An article in the Houston Chronicle (March 20, 2008) by Peggy Fikac, and quoted below in part, says a lot about the Texas economy.
Texas’ economic strengths do not insulate it from the U.S. downturn but should provide a buffer stout enough to keep the state from following the nation into any recession, top officials and experts say.
Although the Lone Star State’s economy is slowing, it is still growing. Sales tax revenues are rising, and the state out–performs the nation as a whole on jobs.
“We do not believe there will be a recession in Texas. That’s pretty much unequivocal,” said State Comptroller Susan Combs, who added that Texas lags six to nine months behind national trends.
The state benefits, experts say, from economic factors that have outweighed gas pump sticker shock. Other factors in Texas’ favor include rising commodity prices, growing defense spending, a weak dollar benefiting exports and a reputation for a business–friendly environment.
Economist Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas in Denton, said the nation is in recession but agreed Texas will not share in it, barring catastrophe on the order of “a global financial meltdown.”
If we were in the rodeo business, I would say to you “cowboy up” and make decisions to move forward with your purchases, but we are not a rodeo, so I say “attitude up," write that earnest money checkand take advantage of the current low interest rates with long-term financing, the type that does not increase your monthly payments every few years. Settle yourself into that new home, or buy that Hill Country tract for your home or retirement.
