The Feds Take Action

The front page story in the New York Times today takes aim squarely at the Feds for allowing the subprime mortgage scandal to unfold, especially after it had been warned about it for years. It is hard to see why lenders were permitted to carry on the way they did, when the fixes now seem so obvious and necessary, as they were back then. 

From the Times:

On Tuesday, under a new chairman, the Federal Reserve will try to make up for lost ground by proposing new restrictions on subprime mortgages, invoking its authority under the 13-year-old Home Ownership Equity and Protection Act. Fed officials are expected to demand that lenders document a person’s income and ability to repay the loan, and they may well restrict practices that make it hard for borrowers to see hidden fees or refinance with cheaper mortgages.

It is an action that people like Mr. Gramlich and Ms. Bair advocated for years with little success. But it will have little impact on many existing subprime lenders, because most have either gone out of business or stopped making subprime loans months ago.

Unfortunately the economy may already be spiraling into a recession, so these fixes come to little and too late. It's a shame.

The Results of a Real Estate Study

There is an interesting article in today's Seattle Post Intelligencer about the results of a real estate study undertaken by Redfin. They compiled data to determine what's the best way to sell a house in this market. Here are the highlights:

TACTICS FOR SELLING A HOME

# Don't shoot too high -- homes priced right to begin with often sell for more than those that have to come down from an unrealistic initial price.

# Price for the Web -- prices just over a certain threshold, such as $350,000, will be excluded from Web searches capped at that amount, cutting potential viewings by as much as 7.1 percent.

# Debut on Friday -- a study showed that listings debuting on Friday got an average of 7.7 percent more visitors in their first week than those hitting the market on Thursday, which was the worst day.

# Stay engaged -- studies show engaged sellers tend to sell their homes faster and for more money than typical sellers.

# Market online -- post listings to sites that do not get automatic feeds from multiple listing services. A study showed each Craigslist posting, for instance, generated 11.9 visits to a listing's Redfin page.

# Don't move -- a study found vacant homes were 9.5 percent more likely to cut their prices than occupied homes.

# Wait to sell until nearby foreclosures are off the market -- a study found a foreclosure cost neighboring sellers an average of $5,000.

Good News in Some Markets

It's not all bad news all the time, it just seems that way. I did find a list of ten housing markets that are still thriving. Too bad none of them are in California, which is where I am. 

Here are the top 10 best performing markets in the country:

1. Wenatchee, Wash.: 15.7 percent
2. Provo-Orem, Utah: 14.35 percent
3. Grand Junction, Colo.: 14.05 percent
4. Ogden-Clearfield, Utah: 13.95 percent
5. Salt Lake City: 13.37 percent
6. Idaho Fall, Idaho: 11.69 percent
7. Austin-Round Rock, Texas: 9.67 percent
8. Beaumont-Port Arthur, Texas: 9.44 percent
9. Asheville, N.C.: 9.44 percent
10. Billings, Mont.: 9.07 percent

It's good to see these markets continue to do well. My colleagues and I often discuss when we think this crisis will end. I had a friend tell me that she saw 30-yr fixed rate mortgages coming down. Those numbers might persuade people to come back into the market. On the other  hand, I do understand why prospective buyers are wary of sinking their savings into a house that might lose value. Still, in the long run, I know this crisis will end, and families will feel safe again buying the home of their dreams.

"Too Little, Too Late, and Too Voluntary"

That's how the NY Times editorial page described the administration's rescue plan for subprime mortgages. Paul Krugman has an excellent analysis in today's paper explaining why this might be the case. The plan does not really rescue very many people who were victims of predatory lending practices, but what it does protect are lenders. Krugman writes:

The Hope Now Alliance plan is entirely focused on reducing investor losses. Any minor relief it might provide to troubled borrowers is clearly incidental. And it is does nothing for the victims of predatory lending.
snip
Relief is restricted to borrowers whose mortgage debt is at least 97 percent of the house’s value — which means that in many, perhaps most, cases those who get debt relief will be borrowers who owe more than their house is worth. These people would be nearly as well off in financial terms if they simply walked away.

I see that "walking away" may become the the smart choice instead of the last resort. How's that for a plan? 

Anyone Who Could Fog a Mirror

Sometimes a quote just jumps right out at me. This one, for instance, summarizes my own concerns about the rescue plan:

Determining eligibility for a rate freeze based on just a few criteria, as the Bush plan proposes, "is to repeat the same type of underwriting shortcuts that got us here," the analysts wrote, referring to the no-questions-asked frenzy of 2005 and 2006 that gave home loans to almost anyone who could fog a mirror.

From this LA Times article. Will the cure wind up being worse than the illness?

The Plan

I've read a lot of the news articles about the plan. Interestingly the rescue really is not going to help many people, most estimates are perhaps 350,000 out of 1.8 million. The battle now seems to be between those who argue about the stinginess of the plan versus those who believe the chips should just fall where they may. The more I read, it seems this plan may just make everyone angry and not really offer much of a solution to anyone. I'm not sure I know what a good plan would entail, but I have to admit that I like that it doesn't rescue investors and speculators. At least they made that distinction, and it was a good one.

Rescue Plan Part II

It does look like the administration has come to an agreement with lenders to offer relief to some sub-prime borrowers. It's going to take a while to sort all of this out, and there are going to be a lot of people on the other side of the restrictions who are going to be very unhappy about not getting any relief at all. Of course the mortgage crisis meltdown is becoming a political football in the race to primary elections. Suddenly everyone has a plan. From my perspective, there's still going to be pain for a lot of families. There are some people who argue that the market should just sort itself out, while others argue that the government should get involved and assist in making sure there isn't an economy-wrecking meltdown. I'm waiting to read the fine print on the fix.

The Rescue Plan

What's interesting about US Treasury Secretary Henry Paulson's efforts to stave off a foreclosure epidemic is how the plan was outlined the other day. It divides subprime borrowers into four groups: borrowers who can afford their mortgages now but won't be able to after the adjustment; borrowers who can afford the adjustment; borrowers who are already behind on their payments; and borrowers who can refinance into a fixed rate loan. Here's where it gets interesting, only the first group will be helped. The other are largely left out. Even more interesting is that it is being reported that homes that were bought as investments--as opposed to owner-occupied-- would be excluded. I have to admit I was surprised to read that "more than 50% of the increase in delinquent mortgages are actually investor-related."

It seems that half of the mortgage crisis meltdown was generated by investors trying to buy into a hot market. Unfortunately, as the frenzy cooled down, it put a chill into my livelihood and my ability to assist the families who have been most hurt by the crisis and who won't be helped by the rescue plan.

Real Estate in the News and on Blogs

I've been reading other blogs and getting a sense that the economy is looming large on everyone's mind. Why this is particularly interesting to me is that real estate and the mortgage crisis is at the center of the maelstrom. I read a comment that someone left on a blog, it was about elderly parents who had fallen for mortgage enticements. The house that they bought in the 70s for $25 thousand dollars and had paid off, was now mortgaged to the tune of $150,000. They were struggling to pay. Today Paul Krugman does a fantastic job explaining how this crisis happened. It was predictable and obvious.

Local Landfill Doing the Right Thing

Here's a story about a piece of Simi Valley Real Estate that really makes me happy. One of our local landfills has been certified by the Wildlife Habitat Council for its contribution to wildlife habitat conservation. The Simi Valley Landfill and Recycling Center is 297 acres of varied grasslands, open valleys, and canyons. There are eight owl boxes and five raptor perches. One of the jobs of the owls is to provide rodent control to the landfill without the use of poisons. I'd say that is a very grand idea.

Looking for Answers

While searching for answers to some of yesterday's question, I found this in today's New York Times editorial, "The Bush administration has been far too slow to respond, with some officials apparently worried that helping today’s troubled borrowers might encourage future borrowers to take on too much debt. That misses a critical point: much of this crisis can be traced to lenders’ failure to vet borrowers and the government’s failure to regulate the industry. And it misses an even bigger point: unless something is done quickly, whole communities, not just people who lose their homes, will suffer."

I would like to add that lenders could go a long way in helping solve the problem if they would be more inclined to negotiate short sales before a house goes into foreclosure. There are going to be losses, that goes without saying, the question is can the crisis be directed in a way that does not wreck families and communities?

How Did We Get Here?

I've been in Simi Valley real estate for twenty years. There have been lean years, especially in the early '90s, but there have also been excellent years. Real estate was reliably good until this year. I have to admit 2007 has been the roughest times I've ever experienced. I remember reading an editorial by Paul Krugman a while back, in which he said, "Americans make money from selling houses to each other through money borrowed from the Chinese." That is quite an observation.

My clientele has always been everyday folks who were looking to sell or buy a home. Sure, a home is an investment, but most didn't buy as investments, they bought a home to live in and raise their families. My clientele grew by referral. Family members telling family members. I know there have always been real estate investors, people who gambled in real estate hoping to catch the wave of buying low and selling high. Even TV shows caught the fever, with shows like "Flip this House." But that always seemed like big business, not what I was doing at all. In fact it seemed unrelated. I felt insulated from the big money and big investment aspect from real estate. I sold homes and dreams to families. They sold ideas and income to investors.

Then things changed in a very big way. When did the mortgage industry start to hype and sell low-interest loans to anyone who could sign on a dotted line? When did stated income become the norm? When did the economy get fueled by people cashing in on their "equity" to buy vacations, cars, and toys? But not only when did these things happen, why did they happen?

How did we get here? My livelihood seems to be tangled up in something mishandled and mismanaged by people who thought flipping a house was the new dot com. All the news I read says this could go on for several more years.

Holding On

LIfe as a real estate agent during the mortgage crisis meltdown has me on the phone quite a bit. Don't get me wrong, I'm not really accomplishing anything but I'm learning how to sit still for 45 minutes at a time, phone in hand while one of many banks ponders its losses, and keeps me on hold. They never come to the phone. I even fax them while I'm on hold and ask them to please take my call. I'm one of those blinking lights. Are calls really taken in the order they were received?

On Monday I missed a call on my cell phone. It was a bank with the first mortgage. I've been trying to reach them for a while to talk with their loss mitigation specialist. Her voice mailbox is full. I googled her name, the city she calls from, the financial institution she is associated with-- guess what-- not even google knows who the heck she is.

Behind the scenes, behind all the news and headlines about the numbers, the losses, personal lives, and congressional fixes are people like me on the phone all day long trying to talk with someone about a short sale.

Blogging in My Own Words

Someone very kindly pointed out to me that it is not okay to just copy other people's words off the internet and put them here on my blog. That's what I've been doing when I should have just been using just a few words and then directing you to the original site. It had only been my intention to convey interesting news here that has an impact on real estate. There is so much of it lately, it's hard to keep track of where all of it is coming from. So, I will concentrate on stories and news that's particular to Simi Valley Real Estate and perhaps write more anecdotally from my own daily experiences.

A Day for the Environment

Last Sunday I spent the day helping Guacamole Productions put on a benefit for the Ojai Raptor Center. One of the benefits of being a volunteer is getting up close and personal with the feathered stars. Look at the face on this one:Or the magnificent spread of wings on this beautiful red-tail hawk.
Then, of course, there's this kind of up close and personal moment with a legendary star and all-around good man on earth, Jackson Browne, who tirelessly gives of his time and energy in pursuit of peace and a healthy green planet.
We all must do what we can to help. It's Blog Action Day on behalf of the environment, let's all get busy to do our share for peace on our good earth.

My Other Love

It may seem that all I do is Simi Valley Real Estate, but truly my other love is providing assistance to Guacamole Productions at their benefit concerts. If you are reading this on Sunday, I am in Ojai, California getting ready to help at this event. What a great combination, Jackson Browne and rescued raptors. I'm not sure it gets any better than that. I'll get back to real estate tomorrow.

Anecdotal Evidence

This is the scene from my sister and BIL's house on Saturday. They are selling their home FSBO. Their house has been on the market since August, and they were having an open house. They advertised in the local newspaper, both print and online, and they have a tile ad that runs in the newspaper's online addition everyday. They put signs up on the corner at the highway, on the little road, and on the littler road to their house. They picked a busy weekend in the nearby town of Port Townsend. It was the annual Wooden Boat Festival which brings an estimated 20,000 visitors to their sparsely populated county. The weather was spectacular, not a cloud in the sky. Truly a perfect setting for a successful open house.

They had one couple come through, and they didn't even take a cookie.

My Introduction

I have been a real estate agent in Simi Valley, CA for nearly twenty years. I have a website with all of my real estate listings here. If I can be of any help in your search to find or sell your home, please contact me.

My motto is: Experience isn't expensive, it's priceless.