Summary of Adam Leitman Bailey’s Comments on CNBC on September 28 2011

 

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We have three different real estate markets.

  1. For the (rich) above 5 million not dependent on large loan market is back to normal and productive and we have some record breaking pricing in some cities. Recovery completed.

 

  1. Typical America buys homes with lenders’ money and a very small deposit from their savings.

 

  1. Loans are harder to qualify for compared to the NINJA (Qualifying for a loan with  No income, job, assets) days. 
  2. And on October 1, obtaining a loan gets much harder.  Anything over 625,500 in big cities is considered a jumbo loan with higher interest rates and a larger down payment. 
  3. Less people will qualify for loans and when they do they will have less money to borrow as the cost of the loan has increased.
  4. This means that sales prices will fall, less people will be able to afford homes without the ability to obtain a loan and the real estate market will continue to flounder for a number of years.

 

  1. Underwater America
    1. Those who cannot afford their mortgage payments and are underwater and waiting for the foreclosure to happen or to do a short sale.
    2. This is bad for America as we need to get people in these homes that can afford them.
    3. These keeps necessary inventory off the market which would result in lower sales prices.  People that want to buy cannot afford to buy in many markets while these people live for free and fail to pay real estate taxes.

 

Conclusion:

a.  Other than the wealthly, we are years away from a real estate recovery. 

b.  At the same time we have a new  status quo.  We have a real estate market where Americans may have to live a generation where their homes do not appreciate in value and where they will lose much of their equity in their homes as prices continue to fall.

c.  The government can step in and put in articficial steroids to pump up the market but we all know about the long term effects of steriods.  Eventually, the market will be depressed again.