LA Realtor’s Real Estate Predictions 2012
Fortunately, I don’t earn my living as a psychic. For the last several years, I have predicted that we would return to common sense lending and I have been wrong.
Years ago, when I worked in the real estate lending field, we practiced risk management. There were no FICO scores, piecing together a loan was similar to completing a puzzle, it all had to make sense and fit.
What is common sense lending?
Loan programs requiring smaller down payments of 5-10% should be readily available for home buyers with excellent credit and verifiable income. The buyer should pay for mortgage insurance to insure the lender in the event of the buyer’s default. The maximum sales price should be at the lower end of the zip code’s average selling price (no million dollar homes should be bought with small down payments).
On the other hand, buyers who can’t verify adequate income but have a healthy 30% down payment and excellent credit should still have a loan option (with higher pricing to offset the risk).
Buyers with poor credit should be required to make larger down payments – perhaps even as much as 50%. But common sense should dictate the guidelines to offset the risk.
Interest Rates will increase
I predict sometime AFTER the presidential election that interest rates will increase (perhaps this year or next). I predict they will increase enough to price many out of the real estate market for good.
It will be more difficult for the middle class to get ahead
After being in the mortgage banking business, I wanted to personalize the process and entered the real estate profession. It is gratifying helping my clients find the perfect home. Unfortunately, I foresee that real estate investors (mega investors) will purchase lots of loans which will have been heavily discounted by the banks. I predict our population will be primarily renters. (I sincerely hope I am wrong on this).
Related Posts: 2011 Real Estate Predictions
2010 Real Estate Predictions
Lenders may foreclose and rent
The Mortgage Lending Conspiracy
The Nature of the Sub Prime Crisis was not Caused by Appraisals
I appreciate you taking a shot with your predictions. It's tough to tell what's going to happen in this market. I just hope the recovery begins in 2012!
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Thankfully, I don't make my living as a psychic either! One of my predictions for 2011 was that rates would rise, and well, I was wrong ---- perhaps just a year or two to early.
"I predict they will increase enough to price many out of the real estate market for good. "
Hopefully rates don't rise astronomically. Rates are still low on a historical basis, and hopefully (!) we'll be able to find a happy medium where the higher rates control inflation, but don't price everyone out of the market. It's a fine line. Fingers crossed.
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