Chico Area Update

Because the last blog noted a substantial discrepancy between local home sales and the figures reported by the National Assoc of Realtors I thought I'd continue offering you local MLS figures to make of what you will. These are March month to date (27) 2008-7. Greater Chico, 31 in 08 vs 79 in 07; Paradise Area 17 in 08 vs 30 in 07; Glenn County 12 in each year; Greater Oroville 21 each year.
There is no way I know of to give honest perspective to the foreclosure situation. It's a political year and so much of the "news" is a bunch of sound bites playing on the fears of the uninformed that it's difficult to know fact from fantasy. One of the economic advisers for a candidate just opined that the situation is so bad that people are walking out of loans that out value the home and are going down the street and buying a distressed property at a bargain price. Come on. A lender is going to let a credit risk that bad have a new loan? I don't recall whether this adviser works for the Bosnian sniper fire victim or the one that for twenty years didn't hear a word his preacher preached, but the ailment seems to be contagious. Foreclosure is a nasty business with no winners, but I don't believe it's happening to many deserving, responsible home owners, but rather to those who started with no equity and went downhill from there, or speculators who are not eligible for our sympathy, let alone our money for bail-out. As to the lenders who thought to profit from reckless behaviour, tough. They made bad decisions and can and should now suffer the consequences. Strangely enough, if a manufacturer puts out a bad product they must suffer the expense of correcting the problem. Banks put out some bad products. Let the cost of the recall be on them, not us. At a practical level, while the banks are jockeying for some government munificence, we find that they are surprisingly unresponsive in their loss mitigation departments to appeals for some work-out strategy that would benefit both lender and borrower. Phone calls and emails go unanswered, not returned when some contact can be made, and seemingly indifferent to the urgency of the problem. We know of this behaviour from Countrywide, Chase and Citigroup with clients of ours, and title company people tell us that this is industry-wide. Aren't those three companies frequently named as being in the most trouble? Why not put some intelligent people to work on the phones and get the problem fixed internally where it belongs?
The brighter picture indicates that for buyers, there is money available for loans, a huge inventory of homes to pick from and prices that should appear attractive. For sellers it will continue to be tough. A lot of competition for buyers and an uncertain future for home values. Best advice is to carefully consider the price and make the old place as sharp as you can make it and consider what you can offer by way of incentives. A positive outlook will help a lot.
As usual,
Thanks for visiting.

Local Counterpoint

The financial news this morning presents a mixed bag, but since the Wall St. reaction is reportedly somewhat reactive to the news from the National Assoc. of Realtors that Feb existing home sales were up 2.9% I thought I'd compare the local performance to those figures. Not quite the same. Feb of 2008 in the greater Chico area the MLS reported sales for single family residences totaled 43. For 2007 they totaled 74, a significant reduction. This year for March to date the MLS reported sales total 22, less than one a day, while for 2007 for the same 24 day period they totaled 73, an even more significant reduction year over year. This is not a viewing with alarm report, simply a reality check if you're selling your home. There are almost 400 homes for sale in this market area, so you need to be prepared for a wait while the buyers make their choices, and certainly you need to very carefully consider your pricing strategy. There is the additional reported factor in the the stock market bounce that Morgan is going to pay $10 a share for Bear Stearns instead of the original reported $2 per share. Why we consider a reduction in bad news as the equivalent of good news is a mystery. Maybe this is supposed to distract us from the real news that a major financial institution messed up big time and is costing a lot of people a lot of money.
On a different note. When a buyer shows up for your home we have some substantial resources available to finance the purchase, including some access to money for the credit challenged. Even some very good opportunities for refinancing for those with some equity. Call us and tell us what you need. Chances are very good we can help you.
As usual
thanks for visiting.

Economics 101

The calamity of Bear Stearns brings up memories of a long ago classroom in Long Beach, CA and my failure to pay adequate attention to a very good economics instructor named Duane Taylor. Maybe a little more attention then, would clarify for me now, how intelligent business people could become embroiled in the fiasco that is our current financial marketplace. This shambles in the credit markets would be more understandable if the companies were run by a bunch of people recruited from around the blackjack tables in Las Vegas, but they're not. These folks are MBA's with substantial training in the workings of credit and the necessity of supporting collateral for credit extended, so this kind of failure is really inexcusable. Bear Stearns, number two in underwriting mortgage backed securities, announced that in the last 24 hours there had been a substantial deterioration in their liquidity. Other traders and banks were reluctant to trust their offerings, so, no money. You and I would have this same explanation for our position if our last check bounced. Fortunately for the market, the New York Fed moved to funnel money to them through JP Morgan/ Chase, so saved by the bell for at least 28 days, and the market so far has survived this first shoe dropping.
If the government can manage to keep their hands out of this mess, let the miscreants take their hits, then the situation will right itself, sooner rather than later. If the government tries to fix a train wreck with band-aids then the end will be a longer time in getting here. There has been no underlying value to the mortgage securities, or at least not enough value, for some time. To believe otherwise is to ignore reality and conjures up many similes; "The emperor has no clothes", or from the biblical, "making bricks without straw ", and my favorite from Gertrude Stein in her description of her home town of Oakland, "There's no there there".
At a more practical and local level, our real estate market is really in the doldrums in Butte and Glenn counties, Chico and Orland particularly. Sales are down, inventories are high, and people who might buy are worried about the unknown. For those thinking of buying or selling now is as good a time as any if the reasons for doing so are valid. If selling, the value is probably as high as it's going to be for the near future. If buying, prices are down, generally realistic, interest rates are very favorable, and if you intend to live in the home for a fair period of time, you'll very likely make out just fine. Just remember, a home is not a speculative investment vehicle. If you believe otherwise then you're holding a ticket on cruise ship that has already sailed.
We need some help in our mortgage section. If you know of an honest, reliable, licensed agent that would consider changing employers, we'd like to talk to them. We do everything residential except FHA, plus commercial. Special products for CalPERS and CalSTRS and Calhfa for first time home buyers, plus other down payment assistance programs. Have them call me.
As usual,
Thanks for visiting.

Fascinating Stuff

The news today is full of the governor of New York allegedly consorting with employees of a prostitution ring. Mr Spitzer, formerly known as the sheriff of Wall Street for his relentless pursuit of unethical behavior while the Attorney General of New York, apparently has another standard of conduct for himself. This is pretty much the definition of megalomania. It also describes political suicide. In the same framework of the sauce not necessarily being for the goose as well as the gander, three CEO's recently appeared before congress to explain why they were paid astronomical salaries while the shareholders they were charged with protecting were losing their respective shirts. One of them, Countrywide, is under investigation for loan fraud by the FBI. As a counterpoint to the discouraging behaviour of people in positions of trust, just a couple of days ago the news described a worker in a thrift store in Pomona who returned $30,000 she found while sorting donated clothing. Turns out the money had belonged to a woman recently deceased, and the family rewarded the finder for her honesty. The money had been in an envelope stuck into the corner of a box of clothing donated for charity. The finder reported there was never a thought of not turning in the money. Describe me as naive, but my belief is that this lady is a member of a very large majority, representative of most of us, and the other guys are beneath our contempt.
Real estate is relatively inactive. No Spring surge, or not yet at least. Prices are moderately declining still and likely to continue. Interest rates are moving in a tight range of low to mid 6%, and not likely to drop substantially. Mortgage money is available, lots of good programs, but underwriting standards are more rigorous. Essentially all that means is a prospective borrower should be able to demonstrate acceptable credit habits and the ability to service the debt, (make the payments). We have all kinds of stuff available, CalPERS, CalSTRS, 100% and down payment assistance programs for first time home buyers and others, even some loans for the credit challenged. All that plus commercial, which if someone owns a business may provide some cash from refinance if the home is already heavily burdened.
We're going to keep a positive outlook and assume most everyone is like the thrift shop lady, until it's proven otherwise. Watch for our billboard on the Esplanade near 11th in Chico this month.
As usual,
Thanks for visiting

LOCAL AND GLOBAL

That tired old expression says that all real estate is local and it's true enough, but we have reached a point where it is equally true that all economics are global. Much as it is suggested allegorically that the beating of the wings of a butterfly in the Amazon gives rise to the flutter of the leaves in the trees in our backyard, any small financial movement anywhere in the world can have an impact on the economy of geographically distant markets. The financial markets are making adjustments in the billions, largely the result of some very bad sub-prime decisions, but not exclusively so. Gamble fever created some very reckless behavior in other market segments as well, highly leveraged buy-outs and unrealistic valuations of business entities, etc. Whether or not it was global credit problems at fault, the fact of the local real estate activity is that for February, even with an extra day, sales of single family residences were just over50% of February 2007. We're coming into traditional season for an upsurge in activity. Be interesting to see what develops. Foreclosures continue to make the news, from Bernanke on down. Lots of viewing with alarm but solutions seem in short supply, and in this election year those solutions that are bandied about, almost uniformly call for the use of our money to bail out those who made bad decisions. It's probably a selfish view, but I think if you speculate and win, good for you and enjoy the proceeds, but if you lose, suffer in silence. A house is a home, not an investment vehicle.
Enough of that. We are now approved to originate loans for teachers, and government employees, (California), plus have taken on some new programs to assist first time home buyers and others with down payment money in short supply to get into a new home. These latter programs are NOT for poor credit or limited income applicants. We also have come upon a major investor through whom we can provide mortgage financing for those with damaged credit. Again, this is not a return to the nutty sub-prime days, simply someone who will take a measured look at applicants on a case by case basis.
Our perspective on the market in our local area, we expect home prices to continue adjusting downward, modestly in the Chico area, more significantly in the Orland and Oroville area. There is a large pool of homes on the market and an increasing number of foreclosed properties available also. Interest rates are moderately volatile, but at a low level, ranging in the low 6's for the most part. Some lower rates are available for some of the specialty products mentioned above. We still see people listing their homes with real estate agents charging 6% and it is baffling. Why anyone would pay $18,000 or more of their money to sell a home when the same service is available for so much less is beyond understanding. Spending wisely is adult behavior, and saving money simply makes good sense.
As usual,
Thanks for visiting/