Do You Like To Play Dominos?
July 14th, 2008 categories: Finance, Market Trends
“IF you can keep your head when all about you
Are losing theirs…”
While the weekend past didn’t witness the height of the current mortgage crisis, the announcement of the financial troubles of Fannie Mae and Freddie Mac resulted in both to lose half their stock value, and more than a bit hand wringing by the Treasury Secretary, Henry M. Paulson. Fortunately, despite the government’s longstanding claim of not backing the debt of both these agencies, in the midst of a near financial stroke, Mr. Paulson seemingly did a “one eighty” by announcing on Sunday that the government would not let either of these agencies fail. One could hear the loud and long sigh of relief from Main Street to Wall Street upon hearing Paulson’s words of assurance. Unfortunately, the weekend’s news came on the heels of IndyMac Bank’s collapse and subsequent takeover by the Federal Deposit Insurance Corp (FDIC) on Friday. Predictably, the mortgage crisis dominos continue to fall with little relief in sight.
With many analysts indicating that failed banks are “lagging” and not “leading” indicators, how much more ”road kill” will the mortgage mess deliver? Will the next casualty be another national bank like Wachovia or Wells Fargo, or, is it the local banks who are due to walk the sub-prime gangplank? And, just who caused this mess in the first place? A sample line-up of likely suspects would probably look something like AJ Nisen’s list:
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Sub-prime Mortgage Brokers
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Banks
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Rating Services (Standard & Poors, Moody’s, etc.)
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Wall Street Investment Banks
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Bond Insurers
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Government Agencies (The Federal Reserve, Congress, Federal Trade Commission, The Accounting Regulatory Agency, just to name a few)
While his list is fairly comprehensive, what about the borrower? Was the borrower asleep when the lender was explaining the loan options to him? Does the borrower have a responsibility to do a risk assessment/analysis at some point prior to committing to the loan? Or, are they blameless?
What about the borrower’s real estate agent? What are their fudiciary duties? Since many of us don’t “pre-qualify” our buyers any longer, can we look after their best interest in what loan vehicle they choose? Or, do we simply take the word of the lender, even one we aren’t familiar…you know, the internet kind.
Well, enough of the finger pointing. Where we sit is the reult of a journey chock full of bad choices by many of those involved. It didn’t happen overnight. As Robert Louis Stevenson said, “Sooner or later in life, we all sit down to a banquet of consequences.” Little did we know that in this case, the meal just happens to be gruel!
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Today’s Housing Numbers, Then There’s the Good News
April 29th, 2008 categories: Market Trends, Real Estate News
In a survey released today by Standard & Poor’s, home prices have posted another record decline. The S&P Case Shiller Home Price Index, which tracks 20 of the nation’s largest housing markets, showed prices falling by 12.7% in the 12 months ending February. According to the Indices, 17 of those 20 markets posted their largest year-over-year declines ever. The good news for those of us from the Washington D.C. metropolitan area is that Las Vegas was the hardest hit with a drop of 22.8 percent. Ours, on the other had, was a decline of 13 percent. If historical home prices are something you’d like to look at, visit the S&P homeprice history which they’ve been tracking for more than 21 years. 
For anyone paying attention to the market, this price drop should not come as a complete surprise. With an increasing amount of foreclosed and short sale properties on the market, downward pressure on home prices are par for the course. According to RealtyTrac, the leading online marketplace for foreclosed properties, March figures show a 60% increase of foreclosure properties compared to last year. While this market information isn’t what sellers want to hear, the good news is, their focus shouldn’t change when marketing their home.
SELLERS
The keys to success at selling a home don’t change with the market. While there are a number of key components to properly market your home, three critical keys are:
- Understanding Your Market
- Remember - Prices and market conditions vary depending on time, location and the condition of your home.
- Have Your Home in SHOW Condition
- Especially in today’s buyer’s market, make sure your home shows like new, if possible. Hiring a staging professional may well be worth the expense. Remember the old saying, “you never get a second chance to make a first impression.” So, make the most of it!
- Price It Right
- While the first two keys are vital, pricing it right may be the most important decision you make. One of difficulties in today’s market, is an appreciation by sellers of current market conditions. That is why it is extremely important to depend upon the pro, your Realtor, for advice on the price. It is their domain - let them do their job, and listen. Any good agent will give you the support data used to support their recommendation. Trust them. Hopefully, their price justification will reinforce why you chose them in the first place to market your home.
For buyers, things don’t get much better….
BUYERS
As mentioned in an earlier blog entry, today’s market is about as good as it gets for the prospective home buyer. Inventories are at record levels, and interest rates are extremely low. Outside of a complete market collapse (in that case, we’ll have bigger worries than the diminishing value of our home), buyers and investors can almost pick and choose their next home.
If you do decide to make a trip to your local county Courthouse for the auctioning of homes, make sure your Realtor has clearly explained what’s involved. While there are great deals to be had at the Courthouse steps, make sure you show up with money in hand. Yes, a Cashier’s check will work. Again, if it’s your first auction, make sure and do your home work.
However, if you’re buying your next home the old fashioned way, give your Realtor a call. For the home buyer, refer to these 10 Critical Steps as you begin your journey. And, remember, in this market, the numbers are your friend.
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It’s Still a Numbers Game
April 14th, 2008 categories: Real Estate News, Relocating
Now that the Masters golf tournament is over for another year, the Spring house hunting season has officially begun.
Each year, about mid-April, the Northern Virginia housing market begins to heat up. For those planning a reassignment or relocation to the area, late April to mid-June is when the buyers come to town in droves. These days, it appears to be the ideal time for that Spring house hunting trip. With temperatures in the 60s & 70s, blue skies & a comforting breeze, the conditions make it less of a chore and more an invition to enjoy the natural experience of the journey. And, today’s local paper, the Free Lance Star made the thought of buying more inticing for many. While the front page headline “HOUSING PRICES IN TWO-YEAR DIVE”, wasn’t telling us anything we didn’t already know, the account made a number of valid points.
John McClain, the deputy director of George Mason University’s Center for Regional Analysis, whose has closely studied housing trends in the Washinton Metro area since the mid 1970s, says the market’s advance until 2004 was a reaction to years of price stagnation and increases in job and wage growth. Additionally, McClain contends, as do many other market experts, that “irrational exuberance”, coupled with:
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Low interest rates
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Lax lending standards
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The expectation of many homebuyers for a substantial return on their investment
resulted in an economic or housing bubble, that was doomed to burst sooner or later.
According to GMU, 10-12 percent of the total listings in Stafford and Spotsylvania counties are short sales or foreclosures. The building boom, coupled with the high rate of foreclosures and short sales have resulted in a home inventory that is extremely high, the perfect storm for home buyers. Will these conditions last long? It may be difficult to predict the future of the home market, or the overall economy. But, one thing is certain, it took years of bad credit, bad loans, and bad decisions to get us into this mess. There’s no reason to think that the journey to clearer skies for the housing market won’t take just as long. For any home buyer, that’s a deal too good to be true!
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