November 23, 2009

Worsening foreclosure crisis. What does it mean for real estate agents?

A new study out by the Mortgage Bankers Association has found that a record-high 14 percent of homeowners are either behind on payments or in foreclosure.

In spite of indicators showing that the economic crisis may be lessening, the foreclosure rate is still rising. Economists explain that it’s the record high unemployment that is to blame, since today’s foreclosure rates are largely affecting people with good credit who had fixed-rate home loans.

The housing market will likely stay under pressure due to home-loan defaults, which may mean bad news for real estate agents. Agents typically only get paid when they make a house sale. The fee (usually 6% of the value of the house) is split by the seller’s agent and the buyer’s agent. With the foreclosure rate still record high, the market is likely to stay saturated with low-cost bank sales, which could mean fewer sales — or sales with lower price tags.

Congress acted last week to keep the housing sales moving, however, by extending the home buyers credit. First time home buyers can receive a $7,500 if they close on their home before April 1st. Before Congress extended the credit, a number of people rushed to buy a home in time for the previous tax credit of $8,000. In fact, housing sales rose in October 10.1%. What remains to be seen is whether the extension of the tax credit will keep sale rates high – or if they have reached their natural peak and will now decline. (Here is an article from the Washington Post examining this issue.)

Are you a real estate agent or do you work in the real estate field? What are you hearing about housing sales and the impact of the home buyers credit vs. the rising foreclosure rate? Thinking about becoming a real estate agent? Does the market’s continued instability affect your decision?

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