When you're a hammer

When you're a hammer everything looks like a nail and as real estate people we see the world through a distorted lens. Some of the news of late has implications that are broader in consequence than simply affecting real estate and mortgage people and companies. We're talking about the apparent decline and fall of the sub prime mortgage market as we have come to know it. The media is keeping people pretty well informed about the demise of many major players (lenders) in the sub prime business, and for those of us in the mortgage business it's obvious that it's worse than the reports in many respects. The immediate public impact will only concern those who are candidates for that type of financing, and many of those shouldn't be trying to buy homes anyway. The broader consequences are sociological and economic. Realtytrac.com, a foreclosure reporting company, just sent me an email describing January 2007 as reporting more notices of default filings than at any time in their reporting history. Bad news for the people involved. Bad news for the housing markets. How did this come about? Simple greed. Greedy real estate people pushing for whopping commissions, greedy appraisers stretching to accommodate the greedy real estate folks and the equally greedy mortgage brokers and bankers, and the greedy mortgage lenders, concealing the weakness of the loans they were making and putting into the investment pool. The clucking noise we hear is simply the sound of those chickens coming home to roost. The actual blame probably lies mainly with the lenders. If they had adhered to reasonable underwriting standards none of the other issues could have reached such proportions. Appraisals should have been reviewed, loan applications should have been carefully validated, and a great number of loan programs should never have been promulgated, programs designed to reach out to those who could not qualify under conventional guidelines. No responsible person could have believed that the price of homes was going to continue on an upward spiral forever, yet many sales and lending strategies used that premise as a supporting argument. "Buy this today and even if the payments are too high you can refinance in 6 months with the increase in value for bail-out." "Take this loan today and refinance when the interest rates become variable and home values have gone up." These strategies were used by supposed professionals on the naive and unwary, frequently first time home buyers. Here's a link to a site for some realistic reporting on the mortgage market situation, http://mortgageimplode.com. Suggest reading link by Pollack.
Just so this doesn't come off as a negative view of the world, some other thoughts. Chico sales are moving along nicely, ahead of last year. Listing inventory is fairly high, but off it's maximum by considerable. Interest rates are very favorable, and all things considered it's a very good and very healthy real estate market for most of us. Just had a business expo in Orland and the turn-out was good, attitudes generally seemed to be up-beat. Keep noticing that the predominate advertising strategy in print media is lots of pictures of agents, lots and lots of agents. There is some mention of properties, but mostly pictures of agents. We're going to keep on treating the sale of homes and the negotiation of mortgages as a business. It's not that we don't photograph well, we just don't think anybody cares.
As usual, thanks for visiting.