Real estate has been all over the news for the past two years. First it was the real estate bubble in 2006 and early 2007, then the word “subprime” became almost a household term (and it definitely became a household term for Realtors and mortgage brokers), then real estate began slipping nationwide, and then the market crashed last September, credit dried up, foreclosures doubled and even tripled in some cities, and the financial world markets went into a tailspin. What a fun ride it has been!!

Luckily, for those of us who live in Raleigh and make a living working with Raleigh real estate, our lives have been much less affected than some of our fellow professionals in Florida, Nevada, California, and the Northeast. Downtown Raleigh real estate and North Raleigh real estate remain two market places that have remained very stable and numerous neighborhoods have actually appreciated. Cameron Village, for instance, has seen it’s median home price appreciate 8.1%! Most people don’t believe that… either trust me, or look it up, it’s true! Of course, there are certain neighborhoods in our downtown Raleigh real estate market that have gone down in value as well, like certain condo projects or certain new construction neighborhoods where supply vastly outweighs demand…. but me being the optimist that I am makes me want to focus on the positive. Also, by understanding these statistics and trends, I’m better able to educate my clients on the Raleigh real estate markets so that they can make an informed decision on the home purchase or investment.

But amidst all of the recent foreclosure chaos, there has been an interesting phenonenom occuring. Banks are so backed up with foreclosures that they are too busy to grant requests for loan modifications to borrowers who are currently paying their mortgages on time (those select few)… Many borrowers need to refinance, or modify, their loan into a fixed rate that they can afford so they don’t go into foreclosure. So these “loan mods” (mortgage lingo) are in many cases granted first to the borrowers who are in default.  So here is the interesting trend that is beginning to occur: Many borrowers around the country are “under water” meaning their mortgage balance is more than the house is worth. These borrowers can afford their payments, but they desire to complete this loan modification. But the only way they can do this is to quit paying their mortgage for a few months. This way, they have the attention of their bank, and the bank is forced to either modify the loan, or take back yet another property into foreclosure. Given the two choices, the bank will likely modify the loan because they know that the foreclosure process is expensive, and if it forecloses they will take back an asset (the house) that will be worth less than the new balance on the new loan. So they modify the borrowers loan and the borrower gets to lower his payment and/or balance in some cases.

The question that was brought up by CNBC on this video is this: Is intentionally quitting on your mortgage, even when you can still afford it, immoral? In other words, many borrowers truly can’t pay… they’ve lost their jobs, etc… and they have to foreclose. But there are certain people, like the investor in this video that stop paying their mortgage in order to get some negotiating power with his bank so he can lower his payment. Take a look….

http://www.cnbc.com/id/15840232?video=1182586806&play=1 (I couldn’t figure out how to embed the CNBC video so this link will take you to CNBC’s site)

Again, many of these people are in locations where home prices have dropped 10%, 20%, or even more. Luckily, we live in an area where demand for Raleigh real estate has been stable and the supply has not grown completely out of control. Nevertheless, it’s still a buyers market out there and will be for a while to come. Rates are low, there’s still time to collect the $8000 if you are a first time buyer, and prices are very affordable…. what a great combination!

John Huber works with downtown Raleigh real estate, North Raleigh real estate, Raleigh investment real estate and other surrounding areas of Wake and Johnston County. He studies statistics, knows the neighborhood trends, and helps his buyers and investors make good decisions and helps sellers maximize their profits. He also works with other real estate professionals to help increase their residual income.