Tuesday, January 5, 2010

Winds of change

Anyone else starting to notice a change in the tone of the media regarding the health of the market. For the last few months it's been all about recovery. But the last few weeks there have been more and more reports focusing on more pain ahead, double dips, the failure of HAMP, what happens when... etc. etc.

Today we say headlines of 16% decline in pending sales in Nov (oh my god the sky is falling). Heck it was even down in the West which has been the strongest area for months. Is this really news. I don't think so. It just shows that earlier strong sales were pumped up by the looming end of the tax credit.

Another headline today talks about a 30% to 40% chance of us entering into another recession this year. Does anyone really believe we are out of the recession? Maybe somewhere is but California certainly isn't.

I'm also seeing a lot more articles talking about the impending interest rate increases. These same predictions were made last year too and rates fell to the lowest levels in a 100 years. Personally I do think they will go up once the Fed stops buying the MBSs but if that has a cataclysmic effect on the market I suspect they will start that program back up again before the year is out.

The market this year could very well go something like this. Jan through March is busy as buyers rush to close prior to the end of the MBS program and the impending rate hike. April is busy too as buyers rush to get a deal prior to the end of the tax credit. May hits, the interest rates are up, the tax credit is gone and the market slows. Inventory starts to build as sales slow and foreclosures mount due to the HAMP trial period mods ending. The market starts to sieze up again in a repeat of 2007/2008

Once the prices start to fall again this is where the government will come up with another hail mary plan. Something along the lines of 2% or 3% rate mortgage mods through Fannie and Freddie. Now that the government has removed the debt cap Fannie and Freddie can write as much bad paper as they want. There's really only one reason I can think of for removing the debt cap, and that is to prepare those entities to take on gargantuan amounts of debt.

7 comments:

tim said...

LOL. Winds of Change. Listening to the Scorpions are you?

Marco said...

This site is amazing. I folow other sites and recently was in escrow in two, yes two, houses in Rancho. To be honest, I am trying to buy low-end real estate. Live in one, rent another with a long-range plan.

First things first: I have never seen more incompetent realtors in my life than in RC. They're amazingly inept. Walked away from the first house because the realtor said that I had to pay for estimates for repairs that were needed based on the home inspection. Pay for estimates for a home I don't own and was undecided about buying.

The next one had a concrete roof with structural damage. I was told that I would be credited $1,000.00 if I signed an indemnification agreement and release. These are well known real estate agencies and I understand that realtors may be desperate right now.

Anyway, I will go back to buying without a realtor. Suffice is to say, I think your opinion is spot on. I see a 10% plus decline next year and beyond.

Tyrone said...

Winds of change?

Perhaps. I keep a percentage of my assets in gold and silver to divert the winds of change if they happen to be blowing towards total meltdown. Probably won't happen, but I sleep much better.

golfer_X said...

I'm investing in Top Ramen. That shit lasts forever and starving realtors consider it a delicacy.

dkla76 said...

Im looking for a home near corona this yr. With all the tax incentive and fed pumping money into real esate, im sure spring time will be hard to find a bargain. but then after that interest rate is likely to go up. so which way is better? summer to fall is ideal buying time for me.

Martin Burtin said...

Marco: If someone comes to a house, yours or not, to do an estimate of repair on your behalf because you requested it be done, you rightly should pay for it. Someone wasted their time and gas to help you, pay them. Just don't pay for the repair itself, unless you own the house.

dkla: There is not a lot of inventory lately, but that should change in a month or two. Interest rates are good, tax incentives are good, so if you find something priced well you may as well try buying it, but there is a lot of competition right now looking for those well priced properties.

Christina said...

Marco and Martin:
Contractors do not charge for estimates especially in this market!!! At the commerial level with multi-million dollar bids, companies spend 100's of hour putting together a bid and will loss it to the lowest bidder. That is how the construction world works.

Sorry that a realtor misinformed you. It pays to be a well informed home owner or know an Interior Designer who can work with you and get you the necessary estimates.