At the end of 2010, the interest rate on a 30-year mortgage was just under 5 percent… 4.97% to be more precise. Over the next 28 months actions taken by the Fed pushed that rate down as low as 3.42%.
And wonders of wonders… miracles of miracles… soon we were witnessing the inexplicable recovery of our previously decimated and hopelessly underwater housing markets from coast-to-coast. Throughout this past year, stories of streets being paved with the gold of home equity and sprawling rental empires were being passed along from Realtor to mortgage broker throughout our apparent Land of Opportunity… the worst was finally over… everyone said so… even on T.V. so it simply had to be true.
Not only that, but my wife told me that she heard that our neighbor down the street has a friend whose cousin just met someone at a company picnic whose parents just sold their home in a really upscale area up north somewhere… no… maybe it was back east or in the midwest, she wasn’t sure… and after only two days on the market, they got four offers at their asking price.
“Wow,” I said.
I asked her if she knew what their asking price was… she didn’t. I asked her if the buyer or back-up offers had qualified for their loans? She wasn’t sure. “Did they own their home free and clear?” I wanted to know… she hadn’t thought to ask. All she knew was that they had tried to sell a few years ago but finally gave up and pulled it off the market.
“Well,” I had said at the time, “that certainly settles it for me. Happy days are obviously here again.”
But, according to the Wall Street Journal on August 15, 2013… an analysis conducted by economists at Goldman Sachs showed that more than half of all homes sold in in 2012 and 2013 were purchased for all cash… as in without a mortgage. The Goldman analysis estimated that only 44 cents of every $1 of homes sold currently is being financed.
The Goldman study used figures from the Census Bureau and the National Association of Realtors to analyze home sales, and the Mortgage Bankers Association and Lender Processing Services provided the data on mortgage-originations.
The study also stated that, “purchase-mortgage origination volumes have fallen from around $1.5 trillion in 2005, when …read more