U.S Property Bubble Burst - Mortgage Lenders Take Strain

For the sake of those who don’t understand the American property market "bubble burst", I thought of summarizing it as I understand it;

A few years ago the interest rate in America was 1% per annum, therefore, money was cheap and people could easily pay two bonds. But, instead of buying two properties, they took out second bonds equal to more than the 150% of the value of the property, making the bonds much higher than the values of the properties.

The institutions that granted these 150% bonds (known as subprime mortgage lenders) were exceptionally devious, they knew that this bubble would burst(It's happened before), but they saw a money-making opportunity and took the gap.

These devious American mortgage lending institutions carried out huge marketing campaigns and granted as many 150% bonds as they could, they then immediately sold their debtors books to other institutions who were extremely greedy. Some of the greedier mortgage institutions sold the debtors books over again and even syndicated them. The inevitable then happened;

The US Federal Reserve started pushing up interest rates.

Today the interest rate is more than 5% and that means that people are now paying more than 5 times as much on their mortgage bond repayments. The people that did not initially fix their interest rates cannot afford this and have stopped paying(U.S. in serious debt). Selling their property is not a solution, as they cannot get a high enough price to settle the bond. The company that now owns the debtors book is going bankrupt and the investors who bought share in these companies are losing billions.

The investors in the rest of the world HAVE panicked and sold all the shares they have causing some of the worlds biggest loans companies to go bang.

Dear South African’s and Mr President …. our property market is very healthy and we are not in the same bracket as America. Our banks unwillingly give us 100% loans and our interest rates would have to increase five fold to 67.5% so the chances of that happening are probably zero… don’t be put off…keep buying property in South Africa and make sure you can afford it and make sure you do your home loan through Wizard MIDRAND.

2007 season coming to a close!

It's time for me to do a bit of an early round up for the year. It's been a year of excitement and passion and LOADS of fun. It's been a year that's taken Wizard Home Loans into new and exciting grounds and I'm glad that I was a part of this. Wizard Midrand's website is officially in the top 10 home loans sites on the South African web right now and along with our very own South African Property BLOG we're now a major force to be reckoned with. With the help of the Wizard Staff this BLOG has swiftly become one of the leading property and finance portals on the South African BLOGOSPHERE.

There are a couple of sites and people I'd like to mention here. Amatomu, thank you! You guys have really helped generate alot of traffic and alot of responses to my posts. In fact at one stage the 5 hits a day I was getting from Amatomu was the most traffic I was getting from any site other than Blogspot ;-)... Viva South African blogs.

I did thank a couple of people earlier on in the year by sending them a hamper but I thought I would say thanks to the lot of them again for their continual support:

1. South Africa BLOG - http://www.southafricablog.co.za/
2. RLDaly - http://rldaly.wordpress.com/
3. Cape Town Daily Photo - http://www.capetowndailyphoto.com/
4. CharlNet - http://charlvn.za.net/
5. Property Loan - http://www.propertyloans.co.za/
6. Live The Life - http://www.actionsport.tv/wordpress/
7. Wildlife Property South Africa - http://wildlifepropertyinsa.blogspot.com/
8. Webtrepreneur.co.za - http://www.webtrepreneur.co.za/

I good old thanks to all the BLOG sites out there that's I've left out. Maybe a little more push from your side next year and we'll send you something ;-) who knows!

This is something I've been wanting to do on this BLOG for a while and that's mention a ULTRA special thanks to Mr and Mrs Wizard Midrand (Pictures at the top of this post if you're wondering) for giving me the opportunity to take Wizard online and bring a new dimension into their business, p.s. and for paying for my flight to the Las Vegas Webmaster World Conference :)))))

These two people are amazing directors, fathers, mothers and an inspiration to not only me but everyone that comes into contact with them. They are my driving force and my guides. It's because of him that my other ventures:

http://www.ivolution-seo.com/
http://www.homesouthafrica.com/
http://safari-travel.blogspot.com/
http://southafrica.amagama.com/

have all started up. (keep posted ladies and gents there's loads coming on board next year).

So to Mr Green. Thank you and I look forward to next year!!!!

Finally a good old thanks to all my loyal readers. Thank you for making this BLOG one of the most successful property BLOGS of the year. Have a blessed year and a great festive season.

WizardMan Out!

First Time Home Buyers

Don't bite off too much house...

The age old method of home loan affordability could lead you to disaster and we're finding more and more queries and complaints about affordability and first time home buyers getting themselves into debt. Here's how to get a better idea on what you can afford.

I was going to start this off by saying "20 years ago..." but it's not, it's not even 6 months ago that first-time home buyers were encouraged to maximise their profitability and put all their investments and savings into a massive house. Stretch yourself and buy that R2,000,000 apartment. Hey, for first time buyers back then it even made sense.

Lets face it folks, today, it's asking for SH!T, pardon my french.

Here's what's changed in 20 years (or more) since your parents bought their first house:
Inflation. Price increases in the last 5 years meant you could count on hefty annual raises.

It's no longer just you. A generation ago, single-income families were more common. If the breadwinner lost a job, the other spouse could go to work to save the house. With more than one person both needing salaries to cover you first time loan, there's no one on the sidelines to take up the slack - Get those kids working man.

Fortunately though, these days it's very difficult to purchase a house if you can't afford it with the credit act in place and rightly so. In the long run, especially if interest rates decide to jump up again, it's going to save you alot of heart ache.

Over the last 5 days I've received hundreds of emails from first time home buyers that are now feeling the brunt and the pain of having over capitalised on their property investments and with interest rates on R2 000 000.00 bonds sitting at 12%, you've got to be earning a lovely salary to afford those repayments every month. That's excluding your monthly living expenses, kids, entertainment, food etc...

What we're finding is that people have so badly over capitalised that they're now in the predicament where they're having to sell their properties for 20% less than what they bought them for i.e. they're making a loss! PLUS they're in debt. Just, remember, if you don't know what you can afford, you can't count on your real estate agent, a mortgage loan officer, your friends and family or an Internet affordability calculator to know what you can really afford. These tools are there for first time buyers, make use of them. That's a decision you have to make yourself after reviewing your finances, your future obligations, your goals and your gut.

Is anyone here in the same predicament, has anybody got some stories, solutions for us to read about. Please share you comments and stories with us.

U.S. Subprime Mortgage - Boom or Bust for S.A. Home Loans Markets

I'm assuming that most of the people that read this BLOG are either Property Guru's or Financial Barons so if I talk about the U.S. Subprime Mortgage problems that have been going on for the last month or two you're most likely up to date.

If not take a quick read through: Economist.com

The question that's been on everyones minds is; Will the U.S. Subprime mortgage lending crisis effect South Africa's mortgage market? Personally, I don't think so and so far it hasn't. If anything we've been one of the few fortunate countries that haven't been affected. We're fortunate enough in South Africa, that our securitization mortgage market is alot smaller than our bank lending market. Their are very few companies in South Africa that use securitization as a means of supplying funding i.e. SA Home Loans, Eagle Bond Originators, Rudco Finance and now Integer Bond Originators but there's still alot of scepticism amongst South Africans and the majority still prefer using the major banks.

If anyone has experienced the dip in either the U.S. market or if anybody thinks this is still yet to affect us please comment below.

WizardMan Out!

Real Estate Search Engine

Been doing alot of surfing lately and I came across another great site.
Unique in it's own way, Ahyer.com! is a completely FREE real estate search engine listing site. Their technology is unparalleled and leap years ahead of Trulia which by the way has been really unsuccessful.

With Internet search engine marketing and optimisation being such a forefront in real estate and mortgage these days you want a serious bunch of online tecchies helping you out!

Ahyer.com has been very successful in countries such as Malaysia, The Philippines and The Caribbean and are hoping to continue their success in South Africa. Although their forms seem to be a little longer than most, don't be put off, it helps eradicate junk spam and will enable your real estate searching and selling experience become a pleasure vs a burden.

Could Private Property be on their way out?

Check them out Ahyer.com