Hit The Reset Button
December 21st, 2008 Categories: Weekly Real Estate Activity In Ventura County
Let me off now. Something is rotten and it is all starting to smell.
What in the world is happening on the National level.
A few billion dollars here; five billion there; here a billion, there a billion……what are we doing? Does anyone know?
The logic appears to be that if we throw a lot of whatever against the wall (money, excrement) something will stick. It gives the appearance that something is being done and that will make people happy and feel good.
A lot of flim flam in the papers and other media. The story line being that a lot of people are being helped as well as a number of businesses.
Before pursuing that line of reasoning I found it of interest that countries such as France and other European nations whom have been described as Socialist are now becoming capitalistic in their approach and we in the United States are doing everything possible to become Socialist.
Well let’s see. Fixed interest rates are hovering around 4.5%. Strange how that happened.
Somebody in Washington states that interest rates will go down to 4.5% and low and behold within days they are at 4.5%. Just imagine if the individual stated 1%. Where would the rates be? Which suggests that if the markets are doing what they are supposed to do (supply and demand) why weren’t rates at 4.5% or lower previously?
Reminds one of gasoline prices. We are experiencing managed economics going sour.
Who is helped with these lower rates? We are being told qualified home buyers (and even some of these are not being helped) including first time home buyers. But there are not many of these people around.
Then another article tells us that of the number that have been helped to renegotiate there mortgage rate and principal, approximately 50% of those people are again behind in mortgage payments and are again flirting with foreclosure.
Hmmmm……that doesn’t appear to be the right correction. Or maybe its me. I must have fallen off the turnip truck and the “new” new math is beyond my comprehension. But none of what is happening makes much sense.
Here is an example of a real world situation. A Pasadena real estate agent told me last week that he had a buyer with a credit score approaching 800; his client was putting down nearly 25% on a property worth a little less than $ 500,000 and the buyer was refused a loan because within a quarter mile of the property being purchased were five foreclosures. The bank felt it was too risky an area.
The questions before the house are: Why do we have banks? What is their business? Who was first in line getting government bailouts? And who is putting the screws to the consumers? To direct you to the correct answer the first letter is “b”, I think you can add the rest of the letters.
Banks (me talking) appear to be holding onto the cash for the purpose of acquisitions and the like and have forgotten their business purpose.
Folks that would like to take advantage of the low rates cannot because they are upside down in property value (thank you Mr. Frank, Mr. Dodd, banks and appraisers who are now low balling property values in a a number of areas).
When looking at the Fitch Report (www.fitchratings.com) for the year 2009 the new home builders appear to be a sorry sight. With the exception of M.D.C Holdings, NVR, Inc., Standard Pacific and Toll Brothers other new home builders appear ready to be taken over (which will probably occur) or are ready to get in line for government bail out money. So the new home building sector appears to be in for a rough year in 2009 as suggested by the following listing.
–Beazer Homes USA (‘B-’; Outlook Negative);
–Centex Corp. (‘BB’; Outlook Negative);
–D.R. Horton, Inc. (‘BB’; Outlook Negative);
–Hovnanian Enterprises, Inc. (‘B-’; Outlook Negative);
–KB Home (‘BB-’; Outlook Negative);
–Lennar Corp. (‘BB+’; Outlook Negative;
–M.D.C. Holdings, Inc. (‘BBB-’; Outlook Stable);
–Meritage Homes Corp. (‘B+’; Outlook Negative);
–M/I Homes, Inc. (‘B’; Outlook Negative);
–NVR, Inc. (‘BBB’; Outlook Stable);
–Pulte Homes (‘BB+’; Outlook Negative);
–Ryland Group (‘BB’; Outlook Negative);
–Standard Pacific Corp. (‘B-’; Outlook Stable);
–Toll Brothers, Inc. (‘BBB-’; Outlook Stable).
Unemployment is heading upward, consumers are tightening their belts and not spending, the recession appears to be getting deeper (maybe the “D” word will start to appear. “D” for depression) and we are watching and listening to the Washington soap opera which is forever trying to blame others for their incompetence. State politics is in the same position.
Why it is that Americans as bright and innovative people hire representatives who are not bright is beyond me. It is what it is and fortunately we can change the cast of characters every two and six years in Congress and four in the White House.
Unfortunately the administrators that have been in place for too long appear to be the people running the operation. Congressional people are figure heads for the grey force.
Eventually when someone takes the time and follows the money we will know who was helped and to be sure the politicians will be a lot richer.
What kind of a legacy are we leaving the next generation? They most certainly will be over whelmed with the debt that they inherited.
Ventura County Level:
On the local level things are becoming squeezed. It is the same story as in prior weeks:
- Listings continue to decrease;
- Properties sold (especially in the price range of less than $ 500,000) have increased;
- The variance between list price and sales price appears to be tilting downward (but the numbers do not show it yet).
The squeeze is taking place and when the jack in the box pops all heck is going to break loose.
Within the County it appears that banks (and appraisers) are low balling property values in a number of areas throughout the County needlessly and they will continue to do this until a seller or a group of sellers sue banks, their officers and appraisers who work with them. Then it will stop.
This managed economics as stated earlier has gone sour and there appears to be too many cooks in the kitchen making different dishes that are at odds with everything else.
Unfortunately one has to clean out the whole kitchen and get things back to normal.
The cleaning processes has to be initiated by sellers who are fed up with current property value actions being taken and will constructively attack lending institutions who appear to be selectively low balling a number of areas within the County.
The common denominator is money and it does outpoint greed eventually.
The change made for Ventura County is the forecast appreciation for the County has been increased from 7.6% to 8.4% for the next 12 months. So if the numbers are right it appears that Ventura County will start seeing positive upward growth starting right about now.
Again if unemployment increases significantly and there is no new job creation then things could get a little uglier for the County. With pending layoffs at the State level, County, and local government levels one should see unemployment increase about another 1/2%. This will put a damper on the timing of when real estate prices start going up but as of today we should see a good appreciation in the County.
Comments are welcomed.
