Submitted by John, May 22, 2007 13:34

Mr. Willis

Take my comments for what they're worth; maybe they will spawn an idea for a future atricle. I remember reading a bunch of these articles in late November/early December. With first mortgage defaults exceeding 22% (May 2007 Equifax report), the number of homes sold will probably increase over the next 6 months, but the price of homes will drastically decrease. We will see a surplus of bank owned homes, which is somewhat historic in nature because the number of homes purchased will increase, but so will the number of homes on the market. The banks are looking to offload their foreclosed upon homes as quickly as possible, and will shortly become willing to take a hit in price as long as they can get someone to loan the money to and take the homes off of their hands. This in-turn will bring more buyers into the market because some of these homes will sell for what they were orignally sold for when first put on the market (2004-2005 type homes)

Lenders baited some risky and probably not qualified borrowers into these ARMs...people keep talking about the ARMs but they're not looking at these 3-5 year interest only loans many low credit buyers got involved with. In 2004, comsumers purchased anything they could get their hands on, thinking they would pay their interest only loans and flip the houses in 2-3 years prior to the 'balloon' part of the loan becoming due. Unfortunately, ARMs increased, housing prices decreased, and many of these properties people paid extravagant prices for peaked out in 2004 and have been on the decline ever since.

When the banks start off-loading their houses for prices far below market value, then we will see a return to a more 'normalized' market and a slowing of the housing slump. Until then, expect to see housing prices continue to fall!

john

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