Optimistic Thoughts for the Post-Pandemic Real Estate Market

Right now, it's hard to visualize what the world, and the real estate market, will look like after the pandemic is over.  The article below, sent by a friend in Northern New England, provides a rational basis for a booming market in the second half of the year:

With all of the volatility in the stock market and uncertainty about the COVID-19 coronavirus, some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The feeling is understandable. There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show dramatic differences.

1. Mortgage standards are nothing like they were back then. During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association releases a Mortgage Credit Availability Index which is “a summary measure which indicates the availability of mortgage credit at a point in time.” The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is even more difficult than it was before the bubble

2. Prices are not soaring out of control. Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash. There’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did in the early 2000s.

3. We don’t have a surplus of homes on the market. We have a shortage. The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.

4. Houses became too expensive to buy. The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:

5. When it comes to housing, people are equity rich, not tapped out. In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:

During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can’t happen today. Bottom Line If you’re concerned we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

Why Is This a Good Time to Sell?

Prices dropped in Connecticut last year in most places.  We also have the lowest appreciation of almost all the states.  And only a few towns are back to 2006 price levels.  So why is this a good time to sell?

There are buyers.  Everywhere.  Millennials are coming into the market, now that they are marrying and having children.  They need places to live, and, surprising, are choosing many of the same things that their parents chose.  Although they do want smaller houses, on smaller lots, in neighborhoods with sidewalks, they are having to pick from what's available.  Your home could be on the list, if  you list now.

They have money.  Mortgage rates are very low still, by historical standards.  What matters to buyers is what they need to have for a monthly payment.  If interest rates are lower, they can pay more.  It's that simple.  In addition, many of them are in dual career families, and those that aren't burdened by student debt, and even some that are, can afford what's for sale.

There isn't enough supply.  Obviously,  you will get more for your property if many people are competing to get it.  High demand also reduces what sellers lose in inspection problems, assessments, and closing costs, because back up buyers keep people in contract, and asking for less. Things sell faster, too, when there aren't enough to go around.  This is more likely in places like Connecticut, where lack of land, high building costs, and a poor economy led to less construction over the past decade.

You will get more for your money when you  purchase your new home.  If you are buying where you are selling, it doesn't matter whether you buy and sell high, or buy and sell low.  It evens out.  Caveat:  Most sellers end up spending more on finishes and add-ons, so that even a downsized home costs close to what their original, larger home cost.  It's still a good deal.  Even if  you plan to winter elsewhere, a summer home near your friends and family will make sense.

Still not convinced?  Think about the stock market.  Why not put some of your gains into real property?  There couldn't be a better time than the present to make that decision, or so it seems to many pundits.  And you will have more years to enjoy your new home!

A Pause in Rates

Many of us thought that rates would continue to rise, and have been pleasantly surprised.  New buyers, and even those who haven't bought in a while, should be reminded that the price you pay for a property is often less important than the monthly payment you have.  When you get prequalified, you should ask for those numbers, at least the ones around your target range.  You can tell by the monthly amount what you can afford, and that's the number to focus on, when you sign a contract.

Usually rates go up in the spring, and down in the fall.  They are usually at their lowest around Election Day.  However, that's not when most people want to buy--that would be now.  Seize the moment, and capture the current rate.  Don't miss out, and later wonder why you waited!

Even the Experts Are Confused

Yesterday's New York Times had a column by Bob Shiller that was titled "Rising Home Prices Blur Crystal Balls".  He began by stating that we are well into, and maybe at the end of, the third biggest run up in home prices in a century.  The first was the post WWII boom, the second was from 1997 through 2006, and this is the latest.  The basic point was that, despite some indications that the boom is or has ended, it's hard to tell these days just what is going on.  I say "amen" to that!

One of the most predictable characteristics of the past ten years or so is that very little is predictable.  The market will be strong when you think it won't be, then weak when you least expect it.  Even the seasons are shifting, so that weather isn't a strong indicator, and school years don't matter as much as before.

Although many points in the article apply to us locally, we haven't experienced the strong activity and soaring prices here in Connecticut.  One of the most difficult questions to try to answer is whether we will still go down when other places do, since we never went up the way they did.  It seems likeliest that we will, since monetary policy, tariff issues, student debt, and demographics are national in scope, so, if they drive the market down, Connecticut should fall also.  On the other hand, our prices are not at the historic highs of other areas, so perhaps we won't see that effect.

I felt so much better that everything is uncertain, and that it's not just our company and our market.  The problem remains, though, that we don't know how to predict even next year.  Will mortgage rates drive the market?  Will there be a cooling-off period for housing?  To me, his most interesting speculation was that people may just be conditioned--regardless of reality--to thinking that 5% per year appreciation will go on forever, and that that will continue, because of the "housing is the American dream" effect.  That seems likely to me, but how it will play out in the near term is, as Professor Shiller says, blurry in the crystal ball.

Report from Denver

I just returned from a meeting of similar companies from around the country, held this time in Denver.  We always poll the group about market trends, and there was a great deal of commonality this year. Inventory, or the lack thereof, is the driver in most of the United States.  Even Connecticut is short on supply in the lower price ranges, and in the healthy range for all but the million plus category.  That higher supply in more expensive homes is also true in most areas around the country, but the real story is that starter homes and homes under about $500,000 have marketing times that are measured in days in most communities.  This is driving up prices, which hasn't happened here as often yet, although we are seeing it with well-maintained and desirable homes.  Mortgage rates are headed up as well, so time matters for many lookers.

Another big trend is in marketing.  With the exception of certain kinds of direct mail, mostly postcards about homes just listed or recently sold, advertising is going digital at a rapid rate.  We in Greater New Haven spent more on newspaper ads than almost anyone else, and very few did print advertising at all anymore.  Digital ads (SEM) or organic search tools (SEO) dominate the field, along with costs of website improvements and video production. Lead generation is front and center, often focused simply on how to track leads. Some are even spending money to appear in the answers given by Alexa!

Some things haven't changed much.  Personal relationships still account for most agent transactions, and, although people search for an agent on line (and pay a lot of attention to client testimonials), they are often starting with a recommendation from someone they know.  Good agents still generate a lot of repeat business, and good agents are doing more and more of the total transactions.  Real estate is an expensive business to be in for agents and for brokers (lately, even agents might feel sorry for the pressure put on broker returns!), and more is sold by a few top agents than ever before.  As the market improves, more people are going into the business again, and they are more likely to be younger, but the industry as a whole skews old and non-diverse.

Companies are also consolidating, so that megafirms are more and more a dominant force.  Teams have mostly taken the place of small firms,  and are run as companies within companies.  Legal and ethical compliance are big reasons for this tightening of the market, along with cost drivers that favor economies of scale.  One-half of one percent of brokers did a third of all the business in the last year reported.

Buyers haven't varied in their desires as much as most thought they would, given the demographic profiles we see.  Gen Xers and Millennials nationally still favor traditional homes with outdoor space, and in good school districts.  That's good news for sellers, although the younger buyers are much more concerned with maintenance and walkability scores.  Since there hasn't been enough new housing built in many regions, buyers will eventually have to buy what sellers have to sell, at least in the short run.

What are the takeaways here?  Almost everyone thinks that mortgage rates will rise, and prices will rise as well, making now the time to buy.  This is especially true at the high end of the market.  Buyers will still want personal assistance in navigating home ownership, and sellers want that touch as well. Therefore, we will be reaching out to them in new and different ways, but with the same message:  We're here to help.

Should I Wait Until Next Year To Buy? Or Buy Now?

Article is from the KCM Blog, click here to view on their website

 



 

 

Some Highlights:

• The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices & interest rates were to increase over a period of time.
• Freddie Mac predicts interest rates to rise to 5.1% by 2019.
• CoreLogic predicts home prices to appreciate by 4.3% over the next 12 months.
• If you are ready and willing to buy your dream home, find out if you are able to!





Forget the Calendar

After a bitterly cold and snowy first half to our winter in Greater New Haven, we can look at our sales for the past few months and know one thing for sure:  The old rule that bad weather ruins real estate sales isn't true any longer.  In fact, both December and January were blockbuster months for us at Pearce.

Some of that could relate to tax changes, and some of that should relate to rising interest rates (sadly, we know that no one believes that rates will rise until they start to do so); however, the rest seems to have come from a spike in activity that began in late October.  That's far later than prior "fall markets" started, but is in line with what is closing now.  It seems to be about more than tax and mortgage changes, and has to do with a sense of urgency that didn't exist for a long time.

In almost every part of the country, lack of inventory is driving what is clearly a sellers' market in most places.  That is pushing up prices, lowering days on market, and creating a feeding frenzy.  Connecticut has been very late to this party, but we are finally showing up.  There isn't much to show in many price ranges, millennials are coming to the fore, and market fluctuations are pushing buyers off the fence.  We've seen this in commercial markets as well; in fact,  in our region, it's stronger there, at the moment.

So what do we do with the traditional model, where homes get listed early in May, sold in June, and closed in July and August?  Throw it out?  Probably so.  For at least the foreseeable future, our Greater New Haven academic market heats up early in the year, stops dead around graduation, and picks up again in late fall, when the semester has settled in.  That's great news for sellers who are ready to list now.  Don't let us stop you--it's the time to move!

120 Days Left in 2017

If you leave out Thanksgiving and Christmas, there are 120 days between September 1st and the end of the year.  But rest assured, this is not an ad for shopping days before Christmas!  It is, however, a wake up call to action, for people who plan to move before 2018 comes along, or for people who want to move when the timing is best.

Every year, I remind agents and clients that the best time to buy a house is between Halloween and Thanksgiving.  That's when the deals are, because sellers want to close before winter, and before another tax year begins.  But what does that say about the timing?

The average residential transaction lasts, give or take, 120 days from start to finish.  Therefore, if you are planning to buy this year, you need to start looking this week.  It takes about 16 or 18 weeks to train for a marathon, so it makes sense that it would take as long to buy and move.  Luckily, mortgage rates are almost always at their yearly low around Election Day, so that works out perfectly, if you find a home to buy around that time.

For sellers, this is a reminder that New Haven is a university town.  We still do things by the school year calendar, and that includes real estate.  Late August sees a big increase in activity and traffic. If you've been planning to sell next spring, you might think again--this can be a really good time, since the end of the year provides a nice ending point for buyers to aim for, and that tends to make things move more quickly. That tends to cut down on the random lookers, too.  Mortgages also tend to have a way of going through the system faster when the holidays are coming.

So are you listening?  This is your moment.  Fall is here, and it's time to act!

Conflicting News

When people ask us how the market is, it's very tempting just to say that it's great.  However, it's more complicated than that.  I usually respond with some variation of an answer that includes the problems of Connecticut, which cause our market to lag behind the rest of the country, the bifurcated distribution of listings into those that get multiple offers and those that don't even get shown, the lack of price appreciation in most parts of our region, and the beginnings of demand outstripping supply.  It's actually hard just to figure out whether we are in a buyer's market or a seller's market.

So, as with many things, it depends.  Yes, you could be in a state that has greater fiscal health, but we are not.  Given where we are, are conditions better than a few years ago?  Certainly.  Since very little has been built, and many properties have sold over the past few years, is supply lower?  Of course.  Does that increase the likelihood that there will be more demand for the choices currently on the market?  For sure.  Are mortgage rates helping?  Without a doubt. 

And on the other hand?  Connecticut is one of the few places where the recession has never entirely ended.  We haven't gained back all of the jobs we lost, we are losing population, and we have many properties that are still worth less than they were when they were purchased, particularly if they were purchased before the big decline in 2008 and the years following.  Does this mean that pricing is still an issue, since sellers feel that they "need" to get more than buyers are often willing to pay?  I think that question answers itself.  Realism is still in short supply in some areas, especially since the rise in prices has been spotty, with some towns and neighborhoods far outstripping others. 

My advice?  Consult a Realtor before making a judgment about your property, if you are a seller.  If you are a buyer, get qualified and get educated, and then buy while the prices still seem low to most of us. 

Mortgages, Real Estate, and Elections

Why has the market slowed down this fall?  The most obvious answer is that we often see a lull before elections, as people wait for a sign about the future of whatever district is voting that year.  We are seeing it now in Connecticut, where there is a heated battle for governor, with some real philosophical differences between the two candidates, about how to spur growth and recovery in our State. 


Another side effect of looming elections, however, is a good one for consumers, and we are also seeing that.  Mortgage rates tend to hit their lowest point in a year right before elections occur (surprise, surprise, if politicians have anything to do with it!), and that is true now.  Mortgage rates are currently at their lowest level since June of 2013, and it would be a very good idea for buyers to pay attention to that fact.  They almost always rise after elections, so there is a window here of a few weeks, when buyers may be able to qualify for rates that they won't see again.  If legislators are trying to put you in a good mood before you vote, why not take advantage of that fact, and get yourself a good mortgage while you're at it? And, since the market is in limbo waiting to see what happens, you can buy at a favorable price at the same time!

Sellers Take Note

Many people read the national news when it comes to real estate and forget that, like politics, all real estate is local.  In the past couple of years, most news has been about prices rising once again, and inventories running low across the country, especially (of course) in California.

We don't like to dwell on bad news, but our region was one of only six out of the top hundred metro markets around the nation whose average price fell from May 2013 to May 2014.  Three of the past few months have also seen declines.  I hate to bring it up, but sellers considering offers, or even listing price, should take those statistics into account.

There are multiple reasons for the fall in prices here, and some will certainly go away over time, but, for now, we are in stasis at a lower price point for most real estate, and we should accept that during the fall market that lasts until Thanksgiving.  Buyers will have choices, and it's fine to stick to your guns about price, unless you want to sell in the short run.  The spring market may be different, so buyers, who may expect that low selling prices and low mortgage rates will last forever, should act now.  Everybody will be better off if everyone is realistic.

July is Sizzling!

There aren't many holiday times for real estate agents.  People tend to buy real estate when they have time, and that is often when the rest of their lives are slow.  For us, that can mean writing a contract on the hood of a car on Mother's Day, or in a kitchen on Christmas Eve.

Usually, though, we can count on the fact that, once the rush to buy and close in the spring and early summer is over, mostly by June 30th, there will be a break that can last until Labor Day.  Except for vacation-area properties, most homes are not as likely to be sold, or even shown, in the dog days of summer.  Few people choose to list their homes then, either, maybe because they'd rather be at the beach than getting property ready to show.

But not this year!  We're well into the dog days of summer, and we're cranking along at full speed still.  In my opinion, we are still catching up from the time we lost to storms, particularly the Blizzard of 2013 in February.  Closings were slow in March and April, and we're still scrambling to finish what would ordinarily have been the spring market.  And, as anyone who has been outside in the past month knows, it's not spring anymore!

What does this mean for buyers and sellers?  Sellers should reconsider holding off until Labor Day to list, and many people are doing just that.  New listings are surprisingly robust for summer. Buyers should not give in to the impulse to procrastinate.  Mortgage rates have already gone up 15%.  Prices are up in almost every part of the country, and are starting to climb on the lower end of the market here.  Don't make the mistake that so many people do, and spend your summer next year wishing that you'd bought now!

A New Problem

I've written before about how many sales are now for cash.  It's ironic, because mortgage rates are still really  low; however, it's hard enough for most people to get a mortgage, both because of credit issues and because of the paperwork requirements and timing, that many are choosing to go the cash route.  Some of those people may go back and refinance later, but they are showing up at the closing table with cash.  56% of our sales in the first four months of the year were for cash!  And that's true around the country, although in some places,  it's due to multiple bids on insufficient inventory, leading to cash offers as a tactic to secure the property by nervous buyers.

 We never thought we'd say this, but the change in closing dates has brought challenges that we couldn't imagine.  One of those is that personal checks, given by buyers as deposits on sales, don't always have time to clear our escrow accounts before the closings.  The big rush to close has been exacerbated, both for weather reasons (a slow start to the selling season and the need to close during the summer), and because many more people are choosing to cut out contingencies as a bargaining chip, so they have fewer things to do before they close.  Also, there are lots of investors, who are buying at what they perceive to be bargain prices, and who may be planning to renovate anyway.

That's what we love about real estate--there's a new set of challenges in every kind of market!

Buyer's Remorse

For some reason, buyers have been pulling out of contracts more than they ever did in the past.  Most of us track business through signed contracts, figuring that the number of signed contracts that do not close stays relatively close to the same percentage year in and year out, so we don't feel that we have to adjust for sales that do not close, since they don't change year over year comparisons. For the past couple of years, however, that hasn't been the case--nationally, contracts that don't result in closed sales have doubled or tripled.  For a long time, we all thought that was the fault of banks and, through them, appraisers.

 While banks are always popular to blame for most things, it appears that there may be something else at work.  Even though we are now at a point in the real estate market where units are increasing and mortgage rates have started to rise, buyers still seem to feel that they have unlimited time and unlimited choice, so they dither.  Each time something new comes on the horizon, they go off to see it, even when they have already signed a contract for something else.  Instead of the principle of cognitive dissonance, which says that your mind will convince you that you've done the right thing when you make a choice and it is done, they now seem to deal with buyer's remorse by revisiting the choice again and again.  Is this a generational issue, since first-time homebuyers, who dominate the current market, have older relatives coming in and advising them before their purchases are finalized?  Or is this the result of a world where no one thinks that his or her decisions are final?  We'll find out when the economy improves more, since there won't be as much distraction with other choices drying up.  In the meantime, our advice to sellers is age old:  Don't count your chickens before they hatch.

Rent or Buy Decisions Now

The New York Times recently had a real estate section cover story about how both sales prices and rental rates were out of sight for many areas of NYC.  There didn't seem to be a good choice for someone looking to move to make.  Here, we see things as being different.  Rentals in our region are increasingly scarce.  New Haven has the lowest apartment vacancy rate in the country.  In addition, we haven't seen the wave of foreclosures that people think may be coming in our state.  If or when it does, that will mean that large numbers of people will go from being owners to being renters, for at least the seven years that they will need to wait before they can borrow again.  Where are they all going to go?

On the other side of the equation, prices for homes are low.  Very low.  And so are mortgage rates.  That makes it a good time to buy, if you believe that prices are going to rise.  In that regard, we got some help from a Trulia article, albeit a backhanded compliment.  Greater New Haven was listed among the ten cities where the number of people looking to move out most exceeds the number of people looking to move in.  It also predicted that prices would go down a couple of percent by the third quarter of this year.  BUT, it went on to say that price increases would average 5.3% per year through 2016, meaning that someone who buys a home and plans to hold onto it for five years, whether living in it or renting it out, will be likely to get quite a bit more for it when he or she goes to sell.

That seems to me to make the rent versus buy decision pretty simple around here.  It's the time to buy.

Thinking of Waiting for Spring?

At this time of year, we often hear people say that they are putting their searches for property on hold until the spring. While we understand the appeal of taking an item off the To Do list at this busy season, I want to point out the possible consequences.

Savvy buyers don't talk about the price of the property, they talk about the monthly payment. Current mortgage rates are so low that the cost of risking an increase in rates almost surely outstrips the risk that you might buy now and have prices decline slightly before they rise again. The low rates also trump any idea that you have to bargain for the last nickel. Take the deal, lock in the rate, and gloat later.

Many consumers are acutely aware of the aspects of this housing market that favor buyers. They therefore think that, regardless of what a property is listed for, they should offer 20% less. They seem to believe that sellers are desparate, and that they need to bottom fish in order to purchase now. Since only the well-priced properties in good condition are selling, it's not even really true, as I have pointed out before, that there are so many things to choose from that such a strategy can succeed.

Let me remind any such people that this market is not a zero-sum game. Both the sellers and the buyers can win. The sellers can sell and repurchase at the current lower prices, with the lower interest rates. The buyers can buy and also take advantage of these rates. Everyone can walk away better off. This is an unusual time in that respect. If you figure out what the monthly payment will be, you may discover that it makes far more sense to buy and move than to wait.

Finally Some Helpful Press

There was a wonderful article in the Wall Street Journal this week, that actually listed ten reasons TO buy a home. As you can tell by the title, we have come to expect that every article will result in calls from clients who have decided not to go forward with a purchase. Therefore, we were thrilled to get some help from the WSJ.

You would not be surprised by most of the reasons, because you've heard them all before. There were a couple of arguments that were particularly good, however, in the way that they were phrased. One was the perennial issue of whether a buyer should buy before the market hits bottom. All real estate professionals know the answer to that--you cannot predict the bottom, so you should just get somewhere near it and not worry. The article, however, quoted a talking head as saying two years ago that prices had to fall another 17% to reach where they should be, and that the Case-Shiller Index in those two years showed prices down 18%. That's pretty close to the bottom.

The other points I really liked were really variations of the same theme---you get a better home when you buy. That's because better properties get sold and worse properties get rented, but it's also true because you can't (or won't) personalize a rental the way you can or would your own place. It's a version of what I've been saying--that you have to like where you live--but it gives some concrete reasons as to why buying does a better job of providing that.

Low mortgage rates, big inventory, fewer taxes, long-term growth--all of these ideas were listed as well. Let's hope that some of you take the plunge after reading the paper!

Second Quarter Results

We just released second quarter statistics from the Greater New Haven region, which showed a major uptick from the same quarter of last year. Of course, the homebuyer tax credit was expiring, so there was a rush to close units while that was still in place. Also, however bad the economy still is, there is some national sense that things are better than in 2009, and the base of comparison was therefore low.

Within the region, Guilford and Woodbridge had the highest prices, with Madison coming in third. Prices generally went down from the second quarter of last year to the first quarter of this year, and then climbed in the second quarter of this year. Unit sales went up more sharply, rising 20% from last year's second quarter through this year at the same time.

It would be interesting to know how many of the sales were from properties which have been on the market for a long time, languishing at high prices, where a price reduction sparked an offer. Anecdotally, we know that many of the stories we hear involve sellers who are finally putting things on where they will sell. They are helped in their efforts by mortgage rates, which are so low that they allow for buyers to feel that they are getting a good deal, based on monthly payments. A recent article in a national paper suggested that buyers are trading up as a way to lock in cheap money. Let's hope so!

Mortgage Rates are Going Up

Newspaper articles over the weekend made it clear what we already knew--mortgage rates are going up. Policies are changing, and banks can only make money by passing some of the charges along. As their ability to make money with fees is curtailed by governmental regulations, it's inevitable that the result will be higher rates.

Banks make money in at least three ways on mortgages. First, they collect fees when the loans are made. This is where the recent oversight by the Feds has led to restrictions on fees of every kind. Secondly, they make income from the servicing of loans; i.e., fees for handling the monthly payments. When a bank sells off loans in the secondary market, either to reduce risk or to preserve capital, it loses those servicing fees. Lastly, they make money from interest on the loan itself. If the first two sources of funds are curtailed in some way, it stands to reason that the banks would need to raise interest rates.

Although we have read a great deal lately about Washington's displeasure with banks and bankers, it does't seem reasonable to expect them to make loans that don't make a profit. After all, they are for-profit entities (and we want them to be, since we don't want to have to keep bailing them out!). In addition, someone has to pay for all the oversight being done; it takes time and employees to answer all the questions and fill out all the forms required by the government. There is a great deal more of that lately, and the costs of compliance have risen.

Therefore, we should all understand that money lost from one source of income must be made up for somewhere else. If we lower credit card rates and fees, or checking account fees, or late fees, something other fee or cost will have to go up. This time, it's mortgage rates.