Buyer's Market: Nevada Leads Nation in Mortgage Foreclosures

By Richard Barrington
Local Lender Columnist
Sep 5, 2007
Nevada led the nation in mortgage foreclosures in June of 2007. Perhaps this is a natural fallout from being one of the country's hottest housing markets in recent years, or perhaps it is a reflection of mortgage strategies that were in step with a gambling culture. Either way, potential home buyers should keep in mind an old investment adage: buy on bad news.

A Cautionary Tale

The primary culprit seems to be adjustable-rate-mortgages (ARMs), whose rates have begun to adjust upward in line with a general rising trend in mortgage rates. The direction of mortgage rates may be an unfortunate turn of events, but the problem has been exacerbated where borrowers have been overly reliant on "teaser rates" (a special low rate granted for the first year or so of an ARM) to afford the house of their dreams.

New buyers can learn some valuable lessons from this cautionary tale. First, be realistic in your budgeting. Don't buy a house you can't afford in the long run, hoping that a new raise or a move down in interest rates will make it more affordable. Second, if you can afford a home at current mortgage rates, seriously consider locking in those rates with a fixed rate mortgage rather than an ARM.

Nevada is full of fun ways to gamble; gambling on the roof over your head is not one of them.

Be Aware, Not Scared

Though other people's misfortune can be a sobering lesson, it is no reason to be afraid of the housing market. The simple truth is that foreclosures add to selling demand on the market, which makes it a good time to be a buyer. Getting a better price on your home will help you make sure your mortgage is a sure thing rather than a gamble.

Source
DailyBulletin.com

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.