The Real Estate Broker's Corner

The last three weeks have been extremely volatile in both the financial and housing markets. The CEO of Wells Fargo Bank says this is the worst housing market since the great depression, echoing what the CEO of Countrywide Lending (America's #1 Mortgage lender) said a few months before. There are quality buys out there, there is just no buying public for the non -conforming market. I think it is likely to get harder for buyers and sellers alike.

Bank of America closed its wholesale mortgage operation. That means if you want a Bank of America mortgage, you go to the branch. The Attorney General of Massachusetts wants to make it illegal for a mortgage broker to charge a fee based on "rate spread". In other words, the MA AG has decided she wants to put mortgage brokers out of business. In her view, banks and credit unions are the right (and soon to be only) source for a mortgage.

Is this good for the consumer? Any time we try to protect consumers from themselves, we usually disturb the supply & demand equilibrium. Generally, that is not good for the market. The high quality borrower won't be affected, but thousands of marginal borrowers who might have had a mortgage broker shop around for them will now face limited choices. That may put some of them out of the picture. The ongoing impact of all this on the housing market is this; there will be less buyers for more property.

Also notable, the quality of the property on the market is still poor. Poor quality property generally requires reduction for sale, and this "comps down" the market. I viewed a single family foreclosure the other day that I felt was truly worthless in this market. I wouldn't have taken ownership for free. Teardown costs would have been significant, and I would have been left with a substandard lot. Easier to buy a quality lot without the teardown.

Many deficit condominiums are in the same boat. Three bedroom condos in a ratty neighborhood in Fall River selling for 75k? Why buy when you can rent? (with none of the liabilities of ownership)!

I have a house right now that is available for lease. The time isn't right to sell it, I would never get my price, but its a property that is worth holding. It's a great location, nice house, and the rent I am asking is $2500 a month. I thought I might have a problem renting it, because $2500 is "a lot of balloons". I put it on the market a week ago. I am showing it to two applicants this weekend. They both said there just aren't that many good properties for rent. Three years ago, these people would have been buyers for the property via one of many Alt-A or subprime mortgages. Today they are renters.

_______________________________________________________________

Saw an eighty (80) acre parcel go under agreement on Division Road, list price was 875k, and I imagine the sale will be for something less than that. A little different from the 60 Acre parcel that was on the market for 3 million 18 months ago.

________________________________________________________________

There are still some surprises out there price wise, and by that I mean "You really got that much for THAT HOUSE?", and some people will hang their hat on to that one sale as justification for overpricing. It is why I like to use the replacement costs analysis to temper the high end of a price range.

_________________________________________________________________

The building codes are going through some major changes, to be effective 1/1/08. I am talking with a builder to try to get specifics, but the quick version is this; new wind engineering requirements will reduce the size of most new construction, and make the two story entry a thing of the past. More on this as I get it.

_________________________________________________________________

Do you know anybody who's business is booming, going gangbusters? Are your neighbors telling you how great things are? Is everyone flush with cash, and getting ready to buy a new benz? If you do, then we clearly live in different neighborhoods. I see some (very few) people doing well who have a wealth structure that makes them impervious to the economic conditions, but for the most part, most people are working harder to stay in the same place, and they have little confidence for the future.

_________________________________________________________________

A money market fund had its share value go below 1.00 yesterday. That is one of those asset classes that the guys at Fidelity say is "Risk Free". When you see this happen, you know that the unwinding of our subprime debt picture is not over yet.

_________________________________________________________________

If people have to pay $100 for a tank of gas to get to work, will they be able to pay the mortgage?_________________________________________________________________

A mortgage underwriter I know said he had a million dollar mortgage go into default, but the lender wouldn't foreclose. They would rather add the late fees and wait out the market to a point when they might recover more at a sale. You think they are in a rush to make anymore jumbo loans?________________________________________________________________

I will post local conditions after Thanksgiving. Speaking of Thanksgiving, I hope you all have a happy one. I also hope that you will remember our service men and women who are away in distant lands. Be thankful for them.

On Thanksgiving Day in 1986, when I was in the Army, I walked into a bar in Seaside, California. I didn't have any money to go home on leave, and everyone else did, so I was alone. The place was empty, except for the bartender, who was not high in the outward charisma department. Soldiers are not always looked upon kindly at the clubs around a military base. I didn't expect much from her in the way of service or conversation. 

When I sat down and ordered a beer, she smiled and said "I thought I was going to have my dinner alone." She served up my beer, and then said" You want some Thanksgiving dinner?" The dinner turned out to be a Stouffer's frozen turkey dinner, (did she plan on eating two?). I ate the dinner, watched some football, drank a few beers, and went back to the base. She was nice. She didn't have to be. There was nothing romantic, just an act of sharing, what my folks would call a "Christian Act".

The kindness of strangers always moves me. It is a bright and unexpected light in what can be a dark, unkind world. The kids in uniform are in the darkest of places. So if you get a chance to be nice to one of them, do it.

I can promise you, it will be remembered.