Cleveland Real Estate News

Two things have been churning around in my brain and I realized the need to post about them. Both are related to how much you, the buyer, should pay for your next house.

It all started with the TV show Property Virgins. I actually like the show and think that  Sandra, the real estate agent host, does a good job explaining things first time home buyers (FTHB) need to know.  However, she frequently says something that irks me.  At the beginning of the show she asks them, how much have you been approved for and how much can you put down?  When they tell her, she adds the amount of the down payment onto the approval amount which always raises the amount they can ‘afford.’ 

Technically that is correct.  But it’s wrong! Why? If you can afford to put down $20,000 and that is going to keep you from PMI (mortgage) insurance, then your montly payments will be lower.  And to be logical, if your mortgage lender tells you $100,000 is what you can afford, that should be the top of your comfort level, no?  Not another $20,000 on top of that. 

Then yesterday I saw a Tweet on Twitter. Someone (presumably a realtor®) was exclaiming a buyer had paid more than $100,000 over list price for a home.  Okay, it was a sound bite.  Did it mean the home was listed at a very low auction or foreclosure price? Dunno. But red flags immediately went off.  Even after all the economic instability we have experienced as a Country, would people still let their emotions run rampant and pay more for a house than it’s market value?  Or have those Bubble city locations learned their lesson? 

Lastly, I’ve heard rumblings about how good it would be to again have a few ‘zero down’ mortgage programs available.  That my friends, scares the bejesus out of me.  We didn’t have a bubble here, but we sure had people dreaming about owning a home who said okay, I don’t have money but I want a house so I can be a part of the American Dream. Let me use a mortgage that does not require I put any money down.  So what if the interest rates are higher and if I still have to pay mortgage insurance monthly.  So you see where I am going with all this, and I  hope I am wrong.

Recovery in the housing market, in my opinion, means we get home sale prices at a good market value for sellers, have lots of buyers who have saved money to buy a home and can buy one, and stopped the high inventory of foreclosure homes on the market. It does not mean people go back to the 2005 buyer frenzy of paying more than a house is worth and over extending themselves on a monthly mortgage payment.  Just sayin’.

Peace Out – 3C