The real estate downturn won’t last forever, and the subprime
crisis is teaching lenders and borrowers valuable lessons
Homeowners in South County, as in most of California, have become spoiled. We’ve come to expect that housing prices would continue to skyrocket; that houses would sell as quickly as they are listed and often for higher than the asking price.
The boom in real estate lasted so long and the downturn came quickly and in a surprising manner. The decline in home sales and its financial repercussions for real estate agents hit South County coincidentally on the onerous date of Sept. 11 when more than 90 agents with Century 21 Premier in Gilroy and Morgan Hill learned they would lose their jobs as the offices announced their closures.
But let’s keep a healthy perspective. Real estate has always been cyclical, with times of increasing values and times of stagnation, but owning a home in California has been and will likely continue to be a tremendous investment. Of course, having an adequate down payment, manageable loan payments and a reasonable outlook on your home as a place to live and not as a piggy bank are important qualifiers.
Fueled by low interest rates and let’s say a number of “creative” mortgage plans, in hindsight it is clear that some folks who didn’t have the resources were able to become homeowners. It is the American Dream. But sometimes dreams become nightmares.
Those facing foreclosure are the most visible victims of the housing bubble now burst and the so-called subprime mortgage crisis. The entire state, and cities such as Stockton, face the dubious distinction of having the highest foreclosure rate in the country. Many of those families, regrettably immigrant and low-income families, took out interest-only or adjustable rate mortgages because, well, they were available and the only option.Â
There are others with companies or jobs in real estate related businesses who are also being washed out as the tide of tightening credit sweeps over the housing industry. And it is natural for people who may be considering selling their homes to be a little concerned. We’re sympathetic, but let’s not lose focus.
Take a deep breath. The sky isn’t falling and federal and state legislation is on the way to prevent this nightmare from happening again and particularly hurting high-risk borrowers who were victims of predatory tactics.
 It may take a few months or more than a year, but the situation will improve. It always has. And, we remain confident that property values here in South County will remain strong, even if they don’t grow at annual double digit rates.
