Answer to Dylan

Dylan Asked:
This is a piggyback on Jeff's question above: How will people just entering the mortgage brokering field today make money in the next several years when and if the housing bubble bursts?

Dylan,

Over the last few years, we have had an amazing amount of new loan officers and mortgage brokers enter the business. Everyone is looking to make money quick. And with rates being so low and every homeowner wanting to refinance, it wasn't hard to find loans.

But that is over. The Housing Bubble on the other hand, is causing home prices to rise. Too quickly. Low rates, recovering economy, lack of confidence in the stock market, easy to get loans: ARMS, interest only, etc, have caused many people who have no business being in real estate to become real estate investors.

Let's say the bubble bursts today. Prices in many parts of the country will stop rising. In some areas they will fall because there will be no more investors causing prices to rise. If rates go up, there will be more people who cannot afford their homes and there will be more foreclosures.

As a loan officer, I don't see much trouble. People will still be buying. In fact, the smarter ones will wait until then and snatch up great deals. Investors with money or smarts will make fortunes buying when everyone else is selling. As long as people keep buying homes, we will be ok. Times will get tougher. Competition will get more fierce. But many of the people who we compete with today, will be gone as well, looking for easy money somewhere else.

As for me, I am saving my money. Hoarding it until the sky falls. And it will. Maybe not this year or next, but this mania cannot keep going at this rate. Eventually people will not be able to afford the high prices.

I am in Texas, and the prices here have not gone up at all. In fact, we have several neighborhoods around Houston where prices have gone down. We can't refinance these people because they are upside down. They owe more than the value of the house, even though they have lived there for more than 3 years.

So I plan on buying outside of Texas when prices start dropping and foreclosures start happening. If any of you remember the S&L scandal and the REO coroporation, it'll be similar but with single family dwellings this time.

Be ready for it.