Sellers should have taken the hint when their properties started staying on the market for months that things were changing.  No, they continued to expect that some sucker was going to come along and pay the outlandish price.  Agents were also stepping over the line in not wanting to deal with change.  The demand had diminished and the supply was overloaded.  Market forces were at play.  The problem was, and still is, that the players are in denial and think for some reason they are so special that their wants can override economic principles.

Newton never did figure out how to make the apple not fall off the tree.  Economic principles cannot be overridden either.  When the forces of supply and demand are out of whack, there is going to be a problem.

Houses are staying on the market and the statistics for foreclosures are at all time highs.  Here is what is going to have to happen.

Those prices are going to go down.  I know buyers want to show a profit when they sell.  They are going to have to wait until the prices start creeping up again, refinance if necessary, or lease the house and move on.

The biggest culprits in all of this are the mortgage brokers who put people in homes who had no business ever landing financing.  This became an acceptable practice in the mid-80s when fixed interest rates were so high, normal working people doubted they would be able to buy a home.  I was covering the industry the year that law passed in the California state legislature.  I interviewed the Assembly leader at the time who thought the idea awful.  As he put it, "I don't know about you, but I don't have a variable income."

Yes, allowing ARMS (adjustable rate mortgages) helped millions, but now is not the time.  That financing is putting many in the horrible position of not being able to pay their mortgage, which in some cases has doubled.  A woman with such a problem was profiled on the nightly news not to long ago.

Then, there were the sub-prime rate loans; and, believe it or not, if you haven't been keeping up with this news, loans with no down payments.  This is getting almost as bad as wrap-around-mortgages from the past.  Probably someone is going to tell me it is still going on.  I, personally, don't want to know as it gives me a headache thinking about.

If you are selling or buying, try to use some common sense when getting your financing.  No down payment only sounds good.  What it does is give you a financing package where you will not be developing equity.  If you want to refinance, for instance, if things are getting bad, it can't happen.  Refinancing is based on equity.

Don't accept a financing package which has you paying 50 percent of your income on a mortgage.  The guideline used to be 25 percent.  And, whatever you do, do not sign up for a variable rate mortgage. Wait until the market improves and your income allows you to get a reasonable/common sense packaged loan.

Will owning a home ever be a valid investment again?  Of course, if one uses common sense and doesn't panic and sell when prices are falling.  Also, keep in mind that most investments don't offer you the benefit of a place to live while a return on your investment.

Real property always has a potential for being a good investment.  But maybe, not right now.

Laura Bell