In the late 70’s, I worked in the banking field.  At that time, we offered 30 year fixed rate loans (in the 5% range).  There were no adjustable mortgages.  During this era, most banking executives were Caucasian men. Typically only the head of personnel and escrow departments were women.  There were very few (if any) minorities in executive positions.

Four memorable events happened in the 1980’s:

1) The government intervened and banks started promoting women and minorities.  I was in the right place at the right time and ultimately was promoted to Vice President for the mortgage banking division of Sterling Bank.

2) Interest rates rose and at one point the interest rate on new loans was 21%.  I purchased my first home in the 1980’s and my interest rate was 15%.

3) Once interest rates increased, adjustable loans were invented so that buyers could be offered a lower initial interest rate.

4) In 1989 I married George and decided to get out of mortgage banking and use my experience and become a real estate agent.

Bankers and Wall Street’s greed caused this housing crisis. I believe that it could take years before homeowners realize much appreciation. The caveat is that there will be inflation, which will increase prices (the value of your home, if you are fortunate enough to own one) and interest rates will also rise. 

Today, you can purchase a nice 3 + 2 home in La Crescenta for $550,000  

 

An 80% loan is $440,000 assume an interest rate of 4.5% and your monthly mortgage payment is $2229.42.  At 12% the mortgage payment is $4525.90. 

But you believe prices are still falling…okay how much more? 10% more? The $550,000 home is now worth $495,000 and an 80% loan is $396,000. At 12%, your monthly payment will be $4073.31

I don’t know if prices will further decrease but if they do, I don’t believe they will drop another 20%.  But for giggles let’s say they do.  The $550,000 home is now $440,000 and the 80% loan is $352,000 and at 12% the monthly payment will be $3,620.72.

Buying real estate now is a smart move.  I don’t believe you should buy a home you don’t like, but should wait for one that you will love coming home to.  You may be there for a long time.  Later, I’ll discuss what to do if you can’t find and afford the home of your dreams.

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