Current Tough Market Not Only Sub-Prime Loans’ Fault

sudler-sothebys-logo15 July 2009 ? According to a recent article in the Wall Street Journal, Stan Liebowitz, University of Texas Economics Professor, shared his findings on mortgage foreclosure trends since 2007. Overall, Liebowitz learned that sub-prime mortgage lenders are not the primary cause of current market conditions, and in essence, debunked the prevailing belief that these lenders tricked helpless borrowers into taking complex, low initial rate loans that eventually sky-rocketed. He noted that the focus on sub-primes ignores the widely available industry facts (reported by the Mortgage Bankers Association) that 51% of all foreclosed homes had prime loans, not sub-prime, and that the foreclosure rate for prime loans grew by 488% compared to a growth rate of 200% for sub-prime foreclosures. Liebowitz also found that interest-rate resets did not measurably increase foreclosures until the reset was greater than four percentage points. Only 8% of foreclosures had an interest rate increase of that much. In a nutshell, the overall impact of upward interest rate resets was much smaller than the impact from reduction in homeowners’ equity. The good news, according to Liebowitz, is the reduction in homeowners’ equity appears to be ending. He notes that housing prices are likely to stop falling soon. In turn, a perceived, and very real, end to the drop in housing prices will begin to stimulate further activity?as we are experiencing in the Chicago market.

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About Catherine Brennan

Catherine Brennan is a seasoned real estate agent with over six years experience in closing hundreds of transactions and developing a network of satisfied clients. Because she values customer service above all else, she teamed-up with Nancy Gaspadarek to create the G and B Real Estate Team. Catherine has lived in the city of Chicago since 1990. She is a member of the Lakeview Chamber of Commerce, a volunteer for the Friends of Blaine and Umoja which both focus on enhancing child education. She enjoys investing in real estate and golfing when she can.
You can visit Catherine’s web site or reach her directly at 312.613.8022 or catherine@gandbteam.com

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