S.O.S. Sorting Out Subprime - Page 4 of 7

S.O.S. Sorting Out Subprime

foreclosure starts in those states, there would have been a nationwide drop in the rate of foreclosure filings.

But with billions of adjustable-rate subprime debt expected to reset in the next few years, the circle of subprime ripples may continue to grow wider.

The Housing Market
“Surprisingly, the high end of the real estate market has ground to a halt,” says Maceo Sloan, chairman and CEO of NCM Capital in Durham, North Carolina (No. 7 on the be asset managers list with $2.5 billion in assets under management). “The ramifications on this type of slowdown in the upper end of the housing markets will have a spillover effect into purchases of appliances, furniture, and other goods. This was certainly not an area that was expected to have problems.”

Jackie Williams, a real estate broker with 31 years of experience and the owner of Sterling Realtors in Middletown, Connecticut, puts it in perspective. “It really is not doomsday,” she says. “If we can survive 1988 through 1991—with banks closing, interest rates escalating to 10% and 11%, and a shutdown of lending to people with less worthy credit—we can survive anything.” Her agency, which has a roster of 27 agents, sells an average of 300 homes a year. Williams says that roughly 20% of her company’s transactions involve subprime mortgages.

For those who are currently looking to buy a home, she encourages people to try to identify all possible sources of funding and to exercise caution to fully understand the terms of the loan. Borrowers should be sure not to overlook smaller lending institutions such as local banks that often set aside funds for community lending programs. And as a buyer: “Now is the time to negotiate,” she says. “Everything in the world is negotiable.” Along those lines, Teer says he tells buyers not to get too caught up in cosmetic issues that they might be able to correct themselves, but to instead prioritize “health and safety” issues such as plumbing, heating, and the condition of the roof.

In Middletown, Williams says that housing inventory is up 30% to 40% over last year, making it much more competitive for sellers to get the attention of buyers. Like Teer in Riverside, she says sellers in her market have to “price to sell” and be willing to negotiate, or risk having the house sit on the market for an extended period. What’s more, because of channels like HGTV and the plethora of interior design programs on television, she says buyers often have high expectations. Sellers also should work with their realtors and tap in to their expertise in terms of setting a price and determining what steps may need to be taken before putting a house on the market.

The Stock Market
The recent market volatility hammered a wide range of investments, as risk was increasingly being thought of as a four-letter word. As a result, some instruments may have been unduly sold off as investors traded based on fear rather than a fundamental analysis of the security.

“The subprime collapse had