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Saturday, September 11, 2010

To move or not to move; unemployed job seekers face tough choices with undervalued homes

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This is the FIRST of a Series of articles that are being moved over to our blog at "Reach Out Job Search". We apologize for any notification e-mails our readers might receive on these posts. Original Publish Date-August 26, 2010-Detroit Job Search Examiner.                                       Michigan’s unemployed job seekers face many challenges when seeking new employment opportunities. The states’ double digit 13.1 percent unemployment rate, high numbers of candidates applying for employment openings and credit challenges, are just some of the issues.
Unemployed job seekers wishing to move out the state and go where more employment opportunities are located, face the reality of selling a home in a market where real estate values are between 25-50 percent underwater, from the home purchase price.
Decreased Home Values are Impacting Ability to Sell the House for What They Would Be Worth
As many as one-third of homeowners owe more on their homes than what they are valued for in the current market. If the homeowner is willing sell the home at a decreased value, another challenge they face is finding credit approved buyers. Banks have tightened their credit standards, leaving buyers that want to purchase homes, without lending options.
Melissa Brooks told NPR on August 26, that her family planned to move from Lansing, Michigan to Atlanta, Georgia, to be closer to family and more available jobs. The past year their home has been on the market, even at a steep discount, their home hasn't found a buyer.
"Recently, I guess, I've been angry at the people looking to buy my home, which sounds crazy, because I want to sell the home," Ms. Brooks told NPR. But after renovating her 19th century home with money she'll never recover, she's appalled that prospective buyers ask her whether she plans to paint the deck or replace the wallpaper. I feel like, 'Don't ask me anything,' because we're short-selling this house, we're not doing anything else to it," Brooks says.
Waiting for a Buyer to Purchase the Home, Can Be a Risky Option
Many unemployed job seekers will not be able to wait on a buyer to sell their home, which can lead to foreclosure or walking away from the property. Actions such as these are leaving a glut of open real estate in communities and neighborhoods. The number of homes on the market for more than 12 months is the highest in the last 15 years.
Subprime loans, in which buyers purchased homes at initial low adjustable rate mortgage interest rates, then in some cases doubled one to three years later; are working their way out of the system. The critical area now is prime loans, where defaults are driven by stubbornly high unemployment.
“It takes a paycheck to make a mortgage payment,” stated Jay Brinkmann, Chief Economist of the Mortgage Lenders Association. Brinkmann believes that conclusions that the improvements in housing market values will occur in the immediate future, was premature. “It’s more of a hope than anything at this point,” he told the New York Times.
Michigan's Housing Market Statistics, Provide Little Help for Unemployed Job Seekers Desires to Move for New Employment Opportunities
In Metro Detroit, 31 percent of homeowners are underwater. Michigan’s 13.1 percent underemployment rate is the second highest in the nation, to Nevada's 14.3 rate. Many unemployed job seekers, who are underwater on their houses that want to move for employment, face the option of walking away from the home, with negative impacts.
A voluntary foreclosure can impact a homeowner's ability to qualify for a new mortgage for years to come. Peter Fredman, a consumer attorney, notes that Fannie Mae and Freddie Mac will not approve a mortgage within four years after foreclosure, while the American Banking Association says it can take three to seven years to qualify for a new mortgage.
Maybe I Should Just Walk Away From My Mortgage and Buy a New Home! Think Again
Thinking about walking away from the mortgage for a new job opportunity in another state? In July, Fannie Mae announced a tough new sanction on people who deliberately default on their mortgages. Borrowers that take this option would be ineligible for a new Fannie-backed mortgage for seven years, after the date of foreclosure.
"A foreclosure is one of the stronger predictors of future credit risk," says Craig Watts, public affairs director of FICO to Bankrate.
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