The Bottom Isn’t Here Until You Hear the Thump & Feel the Bump

Remember the Savings and Loan debacle?

The savings and loan crisis of the 1980s and 1990s (commonly referred to as the S&L crisis) was the failure of 747 savings and loan associations (S&Ls) in the United States. The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government—that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts[1]—which contributed to the large budget deficits of the early 1990s. – Wikipedia

Remember last year – 2007? The subprime meltdown was taking it’s toll in the mortgage industry. Over 90,000 people lost jobs related to the mortgage industry in 2007.

Have you noticed that banks are failing (IndyMac, WaMu) as are investment firms.

So the question is – who in their right mind watching these events unfold can really expect their home value to remain stable or increase?

If you need to sell, sell and move on. Make up the loss on the buy side. Believe it or not, houses are still being sold and financing is still available.

It took about 7 years to work through the catastrophe in the real estate industry due to the S&L crisis. Let’s see, if I recall, this downturn started in 2006.

Given the size of this mess and the politicalization of your suffering, who knows when things will stabilize. It seems the only thing reliable these days is the unforeseen.

Every time we think things are stabilizing, we’re broadsided with news that some other group of greedmongers has been duping the government, the SEC, the FED, the FBI. It seems your home equity has been the prime target for the Wall Street predators.

Homeowners – if you haven’t done so recently – connect with your lender or mortgage professional to verify that they are still in business. Make sure you have a solid connection, the way things are going, you may see an incredible opportunity to refinance in the not to distant future

Home sellers in the San Ramon and TriValley areas are starting to experience what much of the country has been experiencing months ago – ya gotta give a little to get a lot. The East Bay has many real estate markets that have fared the housing market storm in good shape, but the continued rennovation in the lending industry is sending ripples through many of the local housing markets once thought to be above the fray.

Housing affordability for first-time buyers and tightening credit standards for all are affecting the local real estate dynamics. Many sellers are just beginning to realize – it’s the market, not the marketing.

Here are some tidbits from around the nation today that help make the point:

Theresa Boardman had this on her St. Paul Minnessota blog today: Recommendations to REALTORS® and their customers:

• Housing must go on sale. (During the boom, sellers got a premium for their properties–that bloom will be reduced in this market.)
• Prices must drop or homes taken off the market in order to reduce the high and rising inventory.
• Buyers are being realistic in their offers…it is the sellers who do not understand three things:
• Their home values increased a lot from 2000-2005.
• They are selling into a falling market so 10% less today is better than 20% less next spring.
• Selling in this market (getting less for their home) permits them to buy in this market (buying for less).

TOUGHER LENDING PRACTICES DAMPEN BUILDER CONFIDENCE – Home buyer skepticism, fueled in large part by tougher mortgage lending practices, is straining builder confidence in the single-family market, according to the recent National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

Some notes from Bankrate.com today
These are the times that try the skills of real estate professionals, says Jim Crawford, a real estate coach in Atlanta.

"It's a buyer's market without buyers," he says. "Of the top 40 markets, 36 are down. In Atlanta at this time of year, we should have a maximum of 52,000 homes for sale; we have 114,000. What's happened is, if you can't sell in Chicago, you can't buy in Atlanta. If you can't sell in Boston, you can't buy in Florida."

Here's the squeeze: Rising inventories make it difficult to set — and get — your asking price. Buyers, caught in the same predicament, are reluctant to buy, hoping prices will return to earth shortly.

Dianna Kokoszka, vice president of Mega Achievement Productivity Systems at Keller Williams Realty, says today's buyer wants money-in-pocket value, not frills and playthings. If your home is competing with nearby new construction, be prepared to offer the same or equivalent incentives as the builder.

And, similar to the down market of the late 1980s, home sellers must now compete not only with builders, but with foreclosures, thanks to all those subprime loans you've been hearing about.

"In order for a home to sell once, it has to sell twice: You have to sell it to the Realtors and then the Realtors sell it to their buyers," says Kokoszka.

And from SquareFeet in San Jose this interesting tidbit from July data: The supply of homes for sale in California now is actually greater than for the country as a whole.

 Image by Nick Buxton

As the end of summer approaches, we find ourselves in a very mixed and volatile real estate market. The continuing effects of the subprime meltdown have moved into the Alt-A loan market and the CDO market. This has resulted in tighter loan standards for the first-time buyer to the move-up buyer.

One of the results is that Jumbo loans, those over $417K are being affected. Everyday we here from mortgage brokers and real estate agents about deals falling apart. We read a story a week ago about a buyer with 20% down and an 800 FICO score being rejected.

While reading all the press and coverage on the housing market, it is easy to lose sight of the bigger picture:

• There are about 44 million institutional mortgages in the U.S.
• About 5 million of these are subprime loans
• About 625K of these are in default
• Maybe half of these will go through the entire default process

How much does the lender lose on a foreclosed house? 100% of loan? No, the house sells for something. 90%? 80%?

98% of the mortgaged homes in the U.S. are not at risk.

Q: How Big Is the Sub-Prime Mortgage Market?

How Low Will Housing Go?

If you’re looking to buy, this is really a good time – if you have good credit and money to put down.

Why? Interest rates are low and there is considerable pressure on sellers to lower the price and throw in an incentive or two.

Here are the new listing presentations this week for San Ramon, Danville, and Alamo, CA:

• 207 North Hill Court, San Ramon
• 394 Ilo Lane, #703, Danville, CA
• 106 Kingswood Circle, Danville
• 305 Live Oak Drive, Blackhawk
• 135 Briar Place, Danville
• 2757 Deer Meadow Drive, Blackhawk, CA
• 533 Treyburn Circle, San Ramon
• 3835 Crow Canyon road, San Ramon
• 2053 Echo Place, San Ramon
• 1450 Laurenita Way, Alamo
• 2900 Danville Boulevard, Alamo

Help stamp out San Ramon foreclosures.

Foreclosures are starting to pop up in San Ramon, CA.

Two weeks ago, we were on our weekly tour of new property listings in San Ramon and I saw my first big black and yellow public auction sign for a San Ramon home in foreclosure. I didn’t think San Ramon was immune to foreclosures, but seeing the sign was a little disconcerting as it was on a house within ten blocks of ours.

Rick, his wife and two young children used to live in this San Ramon house.

I remember when this house sold. For a couple of months neighbors were wondering about the new neighbors.

New dual-pane windows were installed, the interior and exterior got new paint. New sod was laid in front and other interior improvements were made.

One day I was walking through this neighborhood passing out baseball game schedules for the Oakland A’s and the SF Giants, when I met Rick. Rick seemed to be in his late twenties and was putting the new fence up. I introduced myself, gave him a ball schedule and welcomed him to the neighborhood.

A few weeks ago, I was walking the neighborhood handing out some summer events flyers when I noticed a landscaping crew cleaning up the property. I had noticed for about two months that the place seem untended, but couldn’t find out any info.

The cleanup crew told me that the house would soon be auctioned. I have no idea what happened to Rick and the family. Did they fall on hard times? Are they a statistic in the adjusting housing market? Did the supprime loan meltdown claim them as victims?

I wonder if there was any way that things could have turned out different. It disturbs me when I think there might have been an opportunity to help if only we had known early enough. It seems that many people facing difficulties have trouble seeking help soon enough. I know that I suffer this malady at times. It’s unfortunate because most people respond in a positive fashion to those in such situations.

If you and your family are facing the possibility of difficult times due to the adjustment in the housing market or the subprime loan meltdown – reach out now to your lender, mortgage broker, or real estate agent. Every professional I have met in the local real estate industry would want to help you keep your home yours.

Dan Green over at the Mortgage Report has two great posts on the continuing subprime loan saga. This post simply and elegantly explains why subprime and Alt-A loans are increasing in cost. This post continues to keep us informed of the unfolding subprime loan story and the implications for the industry and the consumer.

For those following the ramifications of the subprime meltdown, there were a couple of stories in the Wall Street Journal a couple of weeks ago on the developing issues facing the Collateralized Debt Obligation (CDO) market.

The subprime apocalypse, as Dan Green calls it, may soon be upon us. We are reaching the point where the big investment institutions will no longer be able to sweep the problems under the rug. The chickens may soon be coming home to roost as massive write offs from subprime losses have to be taken and acknowledged.

The end result, undoubtabley, will be a further tightening of credit for the consumer and thus a continued slowdown in the housing market. It makes me wonder if the NAR is actually following the subprime issues, as they continue to forecast an improving housing market, though they keep pushing the date out into the future as events continue to unfold.

The import of all of this for the consumer, especially first-time buyers - is lock in your loan now. Everyday, we hear more and more stories about buyers losing their financing at the last minute due to new, tighter credit standards being imposed or loan products being withdrawn from the market.