First, my apologies for the lack of content the past couple of weeks. The reason is, in a nutshell: I’ve been very busy. Not only have I been working intently with current clients to achieve sales during this time, but a new wave of clients has approached- almost all at once- looking to sell. The end of June/beginning of July is not normally an active listing period in the Realtor’s year, but this market has brought us new buying and selling patterns…along with a whole host of new challenges and needs for both our buyers and sellers.

In the next few days, I’ll be posting the final numbers for May closed sales in Branchburg. Expect to see a continuation of the trend toward more days-on-market and closing prices averaging about 87-90% of the original asking price. To go a step further, be aware that our local inventory of homes offered for sale has now exceeded last year’s high (reached in September, 2006), and this year’s Spring market did little to sell through much of our standing inventory; the local supply has crawled up to nine months’ worth…up from September ’06’s previous high of eight months.

Many past and present clients have also asked me about the implications of the “subprime meltdown”, the latest example of which has been the collapse of two Bear Stearns internal hedge funds that borrowed heavily against large holdings of CDOs (collateralized debt obligations) that were securitizations (a fancy word for “bundles”) of subprime mortgages. To that, my answer is simple: this is just the tip of the iceberg. Any securities that are based upon thousands of delinquent and defaulting loans is a security that is in deep trouble. If enough mortgages within the security go belly-up, that security’s rating will be downgraded. If the company holding that security has borrowed heavily against it, that company’s lenders will issue margin calls (which is exactly what happened to Bear Stearns). It’s whistling past the graveyard to believe that this problem is isolated only to Bear Stearns; many other investment banks, hedge funds and insurance companies either directly or indirectly own these CDOs. Many of these other holders may have also borrowed against the CDOs and will be subject to margin calls when the quality of the collateral deteriorates.

What does all this mean to you and me? In the long run, it means tightening credit. As many of the “toxic” loans made to poorly-qualified buyers go belly-up and roil the end markets for the holders of this debt, institutions who are issuing credit today and tomorrow will naturally tighten their lending guidelines. Already, lenders who in the past were eager to allow 100% financing, easy credit to questionable borrowers and loans without full documentation are suddenly demanding 5-10% minimum downpayments and full documentation of income…plus proof of the ability to make regular loan payments (what a concept!). As the subprime crisis deepens, lenders will continue to raise their qualification requirements for new borrowers.