Real estate news this week is filled with sad stories of foreclosures. Of course this isn't "new" news. As interest rates rise many people who chose adjustable rate mortgages are suffering. The real news is the huge increase in foreclosures as a result. One report stated an 18% increase in foreclosures from this time last year. With ARM mortgages representing nearly 24% of all mortgages funded, there is reason for concern. A USA Today article from March, 30, 2005 warned of this exact tragedy..."(ARMs will) one day spell trouble for financially stretched consumers."

As a REALTOR these numbers represent reality. We have been in a false market for more than 5 years. Experts can talk about the real estate bubble popping but the truth is the bubble was based on hot air. A recent story compared the slow of the real estate market to the fall of the stock market a few years ago - amateur investors drove up demand which drove up price. Similar to those stock market days anyone who invested or worked in the field to make a quick buck lost big.

The difference is that there were many homebuyers looking to provide shelter for their family. With rising costs these buyers were convinced that an ARM would allow them to buy more house for less money. If it sounds too good to be true, it probably is. Now those people are having a hard time making ends meet because of rising interest rates.

As an eternal optimist I must end with good news. First, for those people caught with an ARM mortgage: refinance for a fixed rate. Although you may face closing costs, it will be less than the interest you will likely pay over the course of the loan.

Second, it is a great market for investors. You can save people from foreclosure. INVESTOR TIP: Watch your local paper for foreclosure notices and contact people (via mail) to see if they are interested in working with you. Wouldn't it be great to help someone while buying a home at a fair price.

Third, this is wonderful for buyers. Take your time to buy. Create your wish list and look for your dream house (always keeping in mind that unless you build new construction to your exact specifications you will need to compromise.) However, don't take too much time since recent reports predict interest rates will rise above 7% during the next 12 months. BUYER TIP: If you are traveling from out of town or out of state, be sure to ask your REALTOR (if it's not me - I do this automatically) to provide a comparative market analysis for SOLD listings in the neighborhood where you plan to buy. You want to be sure you are paying a fair price for your new home.

Finally, don't let the news scare you, this is good time for sellers too. There is a lot of junk on the market. Therefore it is easy (and inexpensive) to make your house "distinct" among the trash. The three things that determine the salability of your home are location, condition and price. Location is fixed but condition and price are variable. Small improvements can mean the difference between getting asking price within a reasonable amount of time and sitting on the market with multiple price reductions. SELLER TIP: Ask you REALTOR (if it's not me - I do this automatically) to conduct an absorption rate analysis. This will tell you how long it will take the market to absorb all the houses in your price range. There is a buyer for every house at every price - this will help you decide how long you can expect to wait.

I want to hear from you. Ask your question or contact me if you would like more information on The Distinctive Home Advantage approach to buying/selling a home.