Greenspan and the Subprime Market
As pointed out by this blog back in April, the subprime mortgage market implosion has been a direct result of collateralized debt obligations (CDO’s). While at the time it was simply a point of pride that Team366 had figured out what was happening to many upside down home owners in SouthEast Michigan, our gut instincts were backed up by former Fed Chairman, Alan Greenspan.
On October 2nd, at a Bloomberg hosted event in London, Greenspan pointed to the CDO’s as a reason for subprime market implosion. From the Bloomberg article:
“People always say it’s the subprime market that created this crisis,” Greenspan told investors at an event hosted by Bloomberg LP in London. “It’s the subprime asset-backed market” which did, he said. “As a consequence of that, there’s going to be some rethinking about collateralized debt obligations.”
“The Wall Street firms were under real pressure to supply asset-backed securities, and the Wall Street firms were pressing the lenders to give them more raw material,” Greenspan said today. “Credit standards just went straight down, and applications for subprime mortgages soared. The consequences of that are evident.”
So what are consequences for the Ann Arbor housing market?
Credit standards are tighter than we have seen in the past 4-6 years. To qualify for a near zero down loan, your credit score will need to be stellar. Consequently, we are also seeing the return of higher down payments to purchase a home. The days of $5,000 down on a house may not be entirely behind us, but they sure are becoming a less frequent occurrence.
Even in this market of high levels of inventory and a near historic low cost of money, homes are still selling! People still need to buy a first home, upsize because the family is expanding, or even down-size as the family moves out. As the charts from Big House Data continue to show, there is nearly 85% of the same level of sales happening this year, compared to last…that’s means that less than one out of five buyers have disappeared from the market.
Call Team366 today to learn how you can benefit from today’s real estate market. As challenging as it appears, it is a great time to be in the market!
