Solid markets take a hit from subprime tightening

Posted by Erion Shehaj in Real Estate Industry on Saturday, June 16, 2007 | no responses

It is finally here! Just like an infection that sooner or later reaches the healthy organs of the body, the housing market is showing strains in parts of the country that were previously going strong. First let me clarify that I am not joining any panic bandwagon here. I never really bought into the sensationalist stories ran by every major media outlet in the country about the impending market correction. After all, the Houston market and others like it (Austin, Charleston etc.) had been growing at the usual tortoise rate of 5-7% annually and to speak of a correction in those markets is plain idiocy. However, now it seems like the cool air has gotten in through the back door. Yesterday, the Houston Chronicle ran a story that gave me goosebumps. The lower end of the Houston market is being hit by the tightening regulations in the subprime mortgage market. As lenders tighten the belt, no money down financing options for folks with challenged credit have been thrown off the table and this is causing lower end homes ($80,000-$140,000) to stay on the market a while longer. And this is not due to a lack of buyers but to a lack of qualified ones.

Any colleagues reading this post from other parts of the country may think: Well, what’s the big deal with the $80k -140k market slowing down? It can’t be a major part of the overall Houston market.

It actually is. In a market where the median home price fluctuates around $150k, this particular part of the market constitutes a substantial chunk.

For the moment, folks with challenged credit and challenged assets will have to revert to FHA financing and will have to deal with its restrictions. On the good side of the coin, the higher end properties are moving at a very healthy rate. Then there is that suggestion that May is usually a slow month and that it should pick up in the summer. All I’ve got to say is that this article has got me thinking about how I can diversify my advertising to include properties in a higher price bracket. Adaptation is after all the number one human skill.