Lack of Inventory is here to stay.

That is all we have heard from the press, media, and even the “insiders” whom all seem to know why we have low inventory. The reason we have no inventory is no one can move. I mentioned this years ago in my newsletter that I sent out to my past clients. Lets recap a short history lesson.
1988 stated income loans showed up from World Savings. This was the beginning of the boom and the end. By 1989 all lenders had stated loans and they were growing and kept growing for the next 17 years. We went from 25% stated income loans all the way to 105% stated: income, down payment, and credit loans. Lenders like Bank of America paid mortgage brokers more commission to bring in a SISA loan (Stated Income Stated Asset) than a fully documented loan. I remember the call from Dan, my rep from BofA and he said if he threw away the taxes and bank statements they would pay me $2,500 more for a loan I had submitted. Yes, it happened with lenders thousands of times a day all across this great country. These were A paper loans, not sub prime. I know some of you think SISA loans were BAD but we could actually use a hybrid form of them again. (another discussion for another time).
Now back to the history lesson.
So people that received home loans were getting a SISA loan if they wanted it or not. Lenders didn’t have to pay for underwriting and borrowers didn’t have to qualify. This went on for at least 17 years. Now fast forward to 2013 and all these people who never qualified for their loans are in their houses, have lost some of the value from the hay days of the past and would like to move. This could be a retiree, a move up or move down, any host of reasons. THEY DON’T QUALIFY. They can’t move because they don’t qualify. The barn doors were open for 17 years and all the cattle bought houses, any house they wanted. Now those barn doors are closed and very few home owners have the option to move because they never did qualify and still can’t. I use to say that only self employed people bought houses because they had all the disposable income. Now the lions share of the buyers are salaried or government workers. Self employed people can’t qualify and they were over 50% if not 75% of the buyers. These people have taken the biggest hit to their income in the downturn even though they are the most resilient and hardest working. Times are still very bad even though the media and our government want you to believe it is all better. Still, no one can move because they don’t qualify. They didn’t qualify when they bought their home and they still don’t. Self employed people show less income because of the poor economy.
Now we have millions of self employed home owners that bought their houses when those barn doors were left open for 17 years and they can’t get back in the housing/lending/barn world because of the new (Dodd/Frank) lending rules. These home owners would like to retire, move up or down to a new house but can’t qualify and must stay where they are for now.
Just wait until the interest rates start to rise on all those SISA 5 and 7 year fixed that have now rolled over to interest only t-Bill loans. Currently they are at the super low interest rates because the government has been keeping interest low to drive our economy and get some meager level of growth. This too will finally stop and these interest rates will climb up to realistic rates and many of the people that can’t move and can’t qualify for a new loan will be forced to sell because while they currently make a payment on their $1,000,000 at 3.25%, they surely can’t make a payment on the same $1,000,000 at 7%. Again, another story for another post.
Have a great day and now you know why there is no inventory.

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