Archive for August, 2008
Warning! Warning! This Is Not A Drill…..
August 6th, 2008 Categories: Real Estate News
Hmmm……things are starting to get a little dicey.
Warning signs are fluttering all over the place.
Is inflation just around the corner? And what is happening in the world of mortgages?
The following 2 abbreviated articles have been taken from the August 1, 2008 This Week Magazine regarding Freddie Mac and Fannie Mae.
Article #1: Fannie and Freddie Make Mortgages More Expensive
The financial troubles of mortgage lenders Fannie Mae and Freddie Mac aren’t just a problem for the federal government, said Ron Lieber in The New York Times. They’re a problem for any home buyer shopping for a new loan.
The two organizations, now flirting with insolvency, have come to play a “crucial” role in the mortgage industry. They don’t just back mortgages. They also buy home loans from banks, bundle them into bonds, and sell bonds to investors. If banks can’t resell their mortgages to Fannie and Freddie, they’re likely to issue fewer and set more exacting financial requirements.
“The mortgage financing system hums along until Fannie and Freddie have trouble raising money to buy loans, or it costs them more to raise the money. And that’s what’s happening now.”
Article #2. Is the Worst Over for Banks?
To get a sense of the ragged state of the U.S. banking industry, said David Enrich of The Wall Street Journal, consider what now passes for good news.
When Citigroup, the largest U.S. bank, reported a $2.5 billion quarterly loss last week, analysts and investors actually, “were encouraged.” And when Bank of America, the second largest bank, reported this week that its second-quarter profits fell 44 percent from the same quarter last year, Wall Street greeted the announcement as a pleasant surprise.
The reason for the surprisingly upbeat reaction to the apparently horrible news is that analysts can see that banks are facing reality and “writing down their piles of bad assets.”
Unfortunately, it’s too soon to say the worst is over, said Eric Dash in The New York Times. A growing number of Bank of America’s credit card customers are falling behind on their payments, and defaults on construction loans are creeping upward. “The bank is also experiencing heavy losses from loans made to small-business customers.”
This recent measure of the price indexes for personal consumption expenditure issued by the Commerce Department shows that income and spending are decreasing significantly and prices, especially for food and fuel are accelerating. Disposable income has significantly decreased and wages have not kept pace with prices.
So red flags are fluttering and the Federal Reserve has a huge problem on it hands to get the economic ship upright.
Consumers are going to dig in and shortly there will be lots of questions asked (maybe never answered) by politicians regarding bio-fuels and the like.
It appears that no one gave thought to the impact on people, the economy and the increased cost and loss that many will suffer.
Your comments are welcomed.
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Ventura County Real Estate Doing’s for Week Ending August 2, 2008
August 3rd, 2008 Categories: Weekly Real Estate Activity In Ventura County
Yikes it happening Big Time.
The gauntlet will fall. It is just a matter of time.
Government is now growing closer to being the ultimate arbiter of how Americans (you) borrow, lend, distribute and deploy money.
Add to this the “fears” that we constantly listen to or read about:
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you can eat this but not that;
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in some places of the country people are being told what size home they will be allowed to build;
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we are being told that certain language and words are not allowed (but some peoples can still use various “not” words but “us” others can’t. You figure it out.);
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we are being told what automobiles will be driven;
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we are being told what we can wear and what not to wear;
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soon we will be told where we can live and with whom;
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and don’t breath because your CO-2 creates a problem with nature (earth warming);
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and it continues.
I must have fallen off the turnip truck but things are really getting out of whack. And you may ask “pray tell what does any of this have to do with real estate.”
In one word: Lots.
The elected and not elected (the gray forces who are always in office despite who is elected) peoples in Federal and State governments feel that they know what is best for all of us.
All of this is interesting and I suspect the talk we hear and the print that we read are the required preliminary steps to justify TAX INCREASES at all levels of government.
Due to governments short falls in revenue one should expect healthy increases in both real estate taxes, sales tax and other political “fees” that are slipped into the system. And it goes without saying that there will be significant personal and business Federal and State tax increases regardless of who is elected in November.
With inflation just around the corner interest rates most certainly will go up bedeviling everybody and everything. It is quite possible that we will re-live 16% home mortgage rates with all the help that Washington is giving.
This is government at work: they spend; we pay.
An aside comment. I either was told or read that approximately 51% or more of the working population in California are employed by some Federal, State, Regional or Local government agency. If true that is a lot of people and the prospects of an advancing economic economy may be stymied.
Back to the national picture.
A recent article by Jon Markham (via MSN Money) entitled, “Is Market ‘fix’ Tomorrow’s Crisis” suggest yes. David Kotok of institutional fund manager Cumberland Advisors told clients this week, the “seeds of the next crisis are being sown right now” as a set of presumed fixes create unexpected consequences. He is making reference to the Freddie Mac and Sallie Mae fixes that Washington has instituted.
Hazarding a guess, Kotok suggests the next crises may emerge in federal guarantees as private entities are let off the hook for their obligations. Beware of stresses that the new era will place on the Federal Deposit Insurance Corp., which is responsible for faltering banks’ deposits; the federal Pension Benefit Guarantee Corp., which is responsible for making good on companies’ unfunded pensions; and the Securities Investor Protection Corp., which is responsible for making good on brokerage customers’ cash losses. No one really knows whether they have the funds to carry out their missions.
But we may not be alone. Here is a headline from the Guardian (a British newspaper): ” House prices continued to fall in July, recording their largest year-on-year drop since the property market crash of the early 1990s, figures from Nationwide building society showed today.”
Overseas real estate is slightly behind us in the scare headlines. The Unites States press are now beginning to show that real estate is becoming positive, ever so slowly.
Back To What I Know…..Ventura County Real Estate.
Looking at the monthly summaries it is evident that from month to month home sales continue to increase; days on the market for sold homes is decreasing; the average list price and eventual sales price for sold homes continues to decrease; the variance between list price and sales price has flattened; and inventory has dropped dramatically since the beginning of the year (from 15 months to 5.8 months).
75% of homes sold last week in Ventura County were below $ 500,000.
Not shown in the chart above and a pattern that is just now developing, it appears that sellers are beginning to increase home prices.
Again the numbers are small but when one includes the multiple offers that some properties are now getting it appears that Ventura County home prices will now start to rise.
Sellers will now expect more for their properties.
So it appears that the downside of the market has been set and completed and over the next several weeks the overall market will start showing property values rising.
It is expected that Ventura County properties will appreciate approximately 8% in the next 12 months.
National economics can put a dent in the growth pattern for Ventura County but the overall economy has to really take a hit before it is reflected in the County.
We do have one thing in Ventura County which very few people have. When things get out of sorts we can always take time to walk the beach.
Your comments are welcomed.
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What The Rich Think Of Real Estate.
August 2nd, 2008 Categories: "Say What? Just Some Real Estate Talk
A recent survey was conducted by Coldwell Banker of affluent homeowners focus.
This survey consisted of 305 U.S. homeowners whose primary residence were valued over $ 1,000,000 ($2,000,000 in California) and who have investable assets of more than $ 1,000,000. The average annual income of respondents was $ 754,000.
Summary points of the survey.
Real Estate Prices. 85% of the high end homeowners surveyed in 2008 were optimistic that real estate values would increase significantly to moderate over the next 5 years. The 2007 survey figure was 67%. A sizeable increase from prior year.
Primary Home Dream Locations.
When asked about where they would build their primary dream home:
- 27% indicated an island location;
- 22% indicated a rural location;
- 18% said suburbs;
- and 18% felt that some foreign country would be their dream home location.
Second Home Locations.
When those surveyed were asked about locations for a second home the replies were:
- 45% near a beach;
- 23% near a lake or river;
- 23% in a warm climate;
- and the other responses were in the mountains, near a ski resort or in another country.
Must Have Home Amenities. The must have amenities in the home that the affluent either have or plan on getting were:
- 86% either have or plan on getting a designer kitchen.
- 74% either have or plan on getting a customized home entertainment center.
- 57% either have or plan on getting an indoor gym/fitness room.
Surrounding Home Features: When the respondents were asked what surrounding features they wanted around their primary residence:
- formal landscaping (77%)
- water views (43%)
- swimming pool (38%)
- hot tub (35%)
- boat dock (17%)
- putting green/golf course (16%)
- and some stated a tennis court or basketball court.
Other points of the survey.
The living room was the primary room that is used to impress house-guests and entertain.
Lastly the survey also noted that 17% would move if they could obtain a specific zip code and 80% stated that they move to keep up with friends. So location is of extreme importance to the affluent.
The basis for this article was the 2008 Coldwell Banker Luxury Survey. In addition review my article http://www.venturacountyretalk.com/2008/03/15/when-luxury-items-become-necessities/. I do think that the InterNet will influence many home luxury items in the very near future.
Your comments are welcomed.
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