Financials

After the Fed meeting and the decision to leave things alone for this time, stocks got a bit of a bump, but for the things that matter to the mortgage market, nothing much changed. Rates remain favorable, but qualifying for them is tough and not likely to get any easier any time soon. FreddyMac dropped their dividend enormously and advised they now believe housing prices may drop another 20% rather than the 10/15% previously announced. Since they couldn't foresee the problems they got themselves into there is no apparent reason to believe their crystal ball has improved now. What is true is that if mortgage lenders believe a decline of that significance is in the future, then why make a loan on an asset that is going to decline in value? That's why home loans are tough to get. For people needing cash and believing the equity in their home may provide a solution, the potential for disappointment looms large. Equity lines of credit are not readily available for houses. There is a bright spot for business real estate and it is a resource for raising cash. We have a major bank that is offering credit lines to $500,000 at prime, guaranteed at that rate for 6 months. A really good deal if you own commercial real estate. When money is a problem we can be a good solution, since as brokers we can tap into many sources.
In Orland, a major developer has just sold off 50 lots in the subdivision to CHIP for the building of low end housing. The people who have purchased homes in that subdivision already are a long way from pleased at this move. Whether the developer bonded the completion of the project to the city and made them the beneficiary, no one seems to know. We'll find out. Another developer lost his project to the bank in another part of town. Don't know it that one had a completion bond either. The impact on prices in Orland has been severe, and there are probably some opportunities for alert buyers, but that is whistling past the graveyard. Good news for a very few and bad news for everyone else is not a good thing. The Chico market is dramatically different. Not nearly as bad but certainly prices are still in decline. The next shoe to drop in home mortgages will be the recasting of option ARMS. Countrywide was a major initiator of these diabolical notes and they were sold indiscriminately to people who should not have been offered them. (I know that's a preposition). There are bankers and observers forecasting a 48% default rate on these notes in California. December 2009 is the peak recast period, building slowly from right now, so we'll see.

As usual
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