Ardell's post and some of the comments here got me thinking.....
Here's my theory ..... A tightening in UNSECURED credit is a factor in dragging down the housing market....
Let's be real ... for most people a monthly mortgage payment of $3,000 or $4,000 is just simply a lot of money. Even for folks with "good jobs".
But many people signed on the dotted line, agreeing to make those mortgage payments, because UNSECURED credit was also easy to get. If you ran a little short at the end of the month, there was always a new credit card in the mail ... and you could juggle balances from one card to another ...
Then as the mortgage market changed, so did the credit card market ....
New credit cards became harder to get. People received notices that their credit limits were lowered. Suddenly ... no more credit card cushion to make ends meet at the end of the month.
That monthly mortage payment of $3,000 started looking a whole lot different....
Have you seen this in your area? With your clients?
The numbers are different but the reality is the same. even with a good job eventually the media does wear you down buyer confidence is so important.
Terry -- Confidence is a good point -- But I'm thinking more in terms of "if ya run out of money before ya run out of month" no amount of confidence is going to pay the bills. Unless that confidence motivates you to sell off your stuff - hold yard sales - take a second job -- whatever people do to make ends meet.
I believe this is a nationwide epidemic -- Gee, no epiphany there, Andrew. Buyers in my market enter the shallow waters when they see little sprinkles of red in the riptide.
Yes. Buyers in our market were going crazy at that time. Some of us were sitting at the sidelines wondering if it was the end of the world.
Hey, CJ -- Interesting theory. I haven't really seen it. I think the possible "issues" in the unsecured market (i.e credit cards) are just an extention of the mortgage crisis. People will let there credit cards go into delinquency and default before their mortgage. However, it's like dominos. If your mortgage readjusts and you can't make the payment you'll let "unsecured" wait a bit. Then when you realize you can't keep up with any of it is when the rough sledding really starts.
$3,000 to $4,000 is a lot of money and it's really a lot of money when you've benn paying $1,500 to $2,000 for 3 years.
Didn't have time to read the comments, but a lot of people had HELOC and the HELOCS got reduced. This really killed people doing flip and 90% remodel projects. They had to sell them partly finished.
Unquestionably, when the consumer is getting hit from all sides by pressures such as reduced availability of short-term credit, it will slow the housing market.
Clients complain they're staring at high gasoline and household energy bills, property tax increases and reduction in available short-term credit. Keep adding straws and the camel's back will eventually break.
Cheryl: I am sure this is a situaion that is happening nationwide. And, as to flips and remodel projects... I think that is a very different category. I feel very badly about couples who are losing their own homes for a variety of painful reasons, but those who were trying to take advantage of rapidly escalating prices, and tried to buy low and then flip properties... so sorry... but that is the chance they took. They simply lost. I feel about as sorry for them as I would over someone who went to Vegas and lost at the craps tables. I think the flipping was certainly something that added measurablly to the overall housing crisis.