From One Extreme To The Other

Yesterday was an interesting day. It started out with a visit to a lovely home in Orange County.

I'm getting ahead of myself here, let me give you some background. I work with banks listing REO properties. Yesterday I had been out to check on a few properties that are about to go into foreclosure. The first home was the lovely home in Orange County. I went up to the door and sadly I met the tenant and got to be the one to deliver the bad news that the home he had recently leased was going into foreclosure. Each time I do this it's an adventure. Unfortunately, this time I was the bearer of bad news. Most of the time when I do this no one is home. After the sweet gentleman got over the initial shock we talked about how he could purchase the property. This one may might have a sweet ending.

Then I headed east....all the way to San Bernardino, with much trepidation of my husband, who strictly instructed me not to go alone, call him before I got out of the car and to call him again when I left the house. To say it nicely, this wasn't a great area. When I got out of my car I asked 2 men if they were the owner of the blue house. The homeless man, yes you read that right, asked me if I meant the blue abandoned bus and told me someone lived in the bus...No, I mean the house I thought. Then I went up to the door. Thank God no one answered. I was praying not to be greeted my someone with something long and metal. I left my card and a note asking them to call me. After I drove away I got to wondering if they even had a phone. I called my husband of course and let him know I was still alive. Then I called my guy at the bank and when he answered the phone he asked if I had gotten out of there alive. As you can guess I told him I'd pass on that listing. No one ever said being in real estate was boring.

On a more professional note, the feds lowered the interest rates yesterday a quarter of a point. Here is a great article on how the rate cut may effect consumers.

2008 Market Predictions

On Saturday I went to the hairdressers to get my hair done. The first thing he said to me is "What's going on here?" as he played with my hair then he added my hair has fallen out quite a bit since our last appointment. Then he asked me how real estate was going. What does this have to do with my hair falling out I wondered. After you read this you too will understand why I may be sporting the bald look by the end of 2008.

Anyone who knows me knows that I always speak the truth. That goes for my clients too. They want the facts and my opinion and that's what they get. To answer the question what's the market doing I'll pull out my crystal ball. Looking at all the facts and figures it looks to me like 2008 is going to be a tougher year in the market than 2007. I have two reasons for this opinion. First, all indications are that housing activity is continuing to weaken and house prices in general will continue to decline. Second, mortgage delinquencies and foreclosures will probably continue to rise for a number of quarters because the bulk of resets to higher rates and payments have yet to come. A lot of people that have bought houses in the past few years have taken out adjustable rate loans that are about to mature. I've had people tell me their payment has gone up as much as $1,200 a month! I've wanted to stop and pray for them on the spot. Each quarter from now until the end of 2008, the monthly payments for more than 400,000 subprime mortgages are scheduled for their first interest rate reset. That's up from about 200,000 per quarter in the first half of 2007.

Earlier this year, the typical reset was from 7 % to 9.5%, producing a 25-30% increase in the borrower's monthly payment. From here it can go two ways. First, the borrower can refinance and try to find a solution that they can live with. Or secondly, they'll go into default and eventually into foreclosure. The sad thing with that is we will continue to see more foreclosures in our neighborhoods, but what's even worse is when the guy down the street wants to sell his house for the normal reason he's competing with all the active foreclosures in the neighborhood. And I mean competing with pricing. None of this "Oh but, my house is so much nicer and I've got so many more upgrades". Buyers don't care about that. What they want a "good deal". They'll do their own fix up work and put upgrades in on their own time. This is what the sellers will have to deal with. It's been a tough year and I've told a few of my clients to take their house off the market or to rent it out. And I've told more than a few just to wait it out a while. It's been sad for them but it's the right thing to do. I can tell you what your house is worth in todays market but if that numbers not where you want it to be, sit tight. I'm not going anywhere, I'll still be here to sell your home when the market turns around. Now on the other hand if you want to buy property call me while I still have some hair left!!!