The housing supply is tight. Homeowners are not too excited or able to sell, there are fewer cash buyers, as compared to the last couple of years, and higher interest rates for new buyers may make it more difficult to sell in the future. This was more or less the conclusion I extracted from two articles in CNN Money, one to the effect that it was time for sellers to sell and one about warning signs in the housing market, concluding that the market may have reached its top and may commence to stall at any time.

The predictions are not baseless, as the market may have recovered, at least in some areas, to pre-recession levels. However, the pre-recession levels may have been reached on the basis of loose lending standards, but the mortgage qualification requirements for new buyers may make it difficult for buyers to obtain a mortgage now, thus forcing a reduction in prices. For example, if a purchaser has 20% downpayment for a home priced at $650,000.00, s/he may qualify for a 30-year mortgage of $520,000.00 at a 4.25% rate, but may not qualify at a 4.5% rate because the monthly payment is too high for the borrower’s income. At some point that seller may have to reduce the price so that the average buyer for his/her house can qualify for a mortgage at the 4.5% rate. Since lenders are not likely to relax qualification requirements in the near future, counting on that to happen to sell your home may take a long time.

However, the market reacts differently to events, so do the Government and potential buyers. Population shifts, local economic conditions, Government stimulation of mortgage financing, easy for the US Government to do, since it oversees (owns) the two primary funders of home mortgages (Fannie and Freddie), are all factors that are quite unpredictable. The elasticity in prices may have reached its maximum stretch, but may not swing back from this maximum stretch.

In the short term, a possible negative effect on sales may be changes in mortgage disclosure requirements taking effect on August 1st. Lenders have not yet completely integrated changes that took effect on January 1, 2010, and now you’re going to throw new forms at them? What do you think? Your guess is as good as anyone’s. So, take a shot! Although these changes do not change much of the substance behind the January 2010 changes, they do change forms, and implementation of these changes may take lenders a long time. Not sure of what they’re doing may bring delays in processing and closings. Taking a look at the new forms, I believe that they will be better for lenders, as they simplify the process and make these forms friendlier to technological programming. One of the new substantive requirements is that the closing figures will have to be given to borrowers at least three days prior to closing. This will cause delays, as lenders like to approve today and close tomorrow. But the consumer will be better positioned to understand the mortgage they’re getting.

All this being said, maybe the best thing to do for a homeowner, is to sell when ready to sell, for whatever personal reason prompted to do so, and not try to predict where the market may be a few months from now.