Real Estate Blog

It finally happened. The GSEs are no longer private corporations. The bailout is finally here.

I called this bailout on October 5, 2005 and was teased or ignored. History teaches us we forget history.

I have been lamenting (whining) for the past several months that nothing has really changed since last summer when the credit markets imploded. Sure, we had the stimulus plan and the housing bill become law, NY AG wrangles a deal with the GSEs to change the way with mortgage brokers, appraisal management companies are involved in the mortgage process. The housing bill created the FHFA which was a new and improved OFHEO, which was in charge of GSE oversight.

GSEs have been taken over and we are in bailout mode. Its fair to say this is the worst mortgage crisis in history.

Why the GSEs were doomed

They had an unfair advantage over competitors because they were protected by the federal government. Thats the very same government that was forced to bail them out. It makes a strong argument for promoting fair competition.

You can’t serve two masters:

the investors who put up capital and a government that wanted to help the housing industry and extend home ownership. In the end, they failed to serve either one very well.

The irony about the GSE set up is that was consistent with most members of the mortgage pipeline. Appraisers served the mortgage broker and the lender. Mortgage brokers served the borrower and the lender. Banks served the investors and their shareholders.

Fannie Mae continued to play with their spreadsheets even after the accounting scandal.

Fannie Mae did not have a grip on their accounting practices, OFHEO/FHFA was ill equipped to keep them in check, or they were simply incompetent. Remember FNMA kept revenue off the books in the original accounting scandal a few years back so they would not draw attention and be able to show better results the following year. Now they didn’t meet capital requirements to offset their mortgage market exposure.

The proposal to place both mortgage giants, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies’ debt might not be repaid.

Despite all the confidence telegraphing by Lockhart (OFHEO), Mudd (FNMA) and Syron (FHLMC), few really believed the GSEs had a grip on the extent of the situation. After all they were part of the process.

They hold or back 5.3 trillion in US mortgages which is about 50% of the mortgages out there. The GSEs accounted for about 80% of new mortgages being issued since last summer’s credit crunch. With investor confidence fading fast, the Treaury department could not let the last pillar left in the mortgage market crumble and it appeared to be headed that way.

What does this mean to housing?

Its not clear until this all shakes out, but probably not much initially.

However, if the investors see the faith and credit of the US in action and this brings them to the table, it may eventually bring more liquidity to the credit markets and that may bring some of the risk down, lowering rates or tempering their rise. However, housing still has a lot of shakeout with foreclosures and inventory, but at least this is a step in the right direction.

It’s actually the first constructive step towards recovery. If we are going to pay through the nose, it might as well be towards something positive, as painful as that is. The stimulus plan and the housing bill are painful, but don’t do anything about solving the financial crisis.

“I would view it as the beginning of the markets recognizing and accepting the reality of our financial problems, which is the beginning of fixing them,” said Mr. Rosner, a managing director at Graham Fisher, a financial research firm.

In other words, perhaps there is hope credit markets will get a grip in the next couple of years.

An aside
It has always been my observation that Freddie Mac was the step child of Fannie Mae. It stemmed from my appraisal background. Freddie Mac let Fannie Mae design their forms. Freddie Mac was essentially created after Fannie Mae to provide competition for it yet it nearly always let Fannie Mae take the lead. Even its stock price seemed to mirror Fannie’s. But Freddie didn’t get into hot water in the accounting scandal and Freddie Mac was agreeable to the Treasury take over before Fannie Mae because they had more of a handle on how short their capital was. In fact one could suggest that when it counted, Freddie Mac was the leader all along. Of course, that doesn’t matter any more.

Inter-office announcement
Its a time for change: I win the office pool on the WAMU bet. Good grief, he should get an award for outstaying his welcome.

Original post:
[GSEs Get A Seizure] It’s About Time

The Real Deal magazine’s New Development Forum at Lincoln Center was sold out at the 3,000 capacity venue last year. For lack of a better description, it was fun.

So this year, I was more than happy to help spread the word (all 3 seconds worth). The ad is running hourly on CNBC on Time Warner Cable and on NY1.

Since Publisher Amir Korangy knows how to pack content into his magazine, there’s no doubt he’ll pack ‘em into Lincoln Center for another sell out. He lined up a group of interesting guests and with the housing and credit markets in turmoil, this event will prove especially informative.

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[The Real Deal Magazine] Will Own Lincoln Center

A study by Michigan State University, one of the best schools on the planet (ok, it’s my alma mater), found that:

Advertise Here

Good landscaping can increase your home’s value by 5% to 11%

“Most lawns should be cut between 2 1/2 and three inches high,” says John Stier, professor of horticulture at the University of Wisconsin’s turfgrass extension program and playing-field consultant for stadiums in the National Football League and Major League Baseball.

It’s essentially like decorating the interior of a house. Sellers should present a home in a neutral manner so the buyer can envision moving in.

The marketability may be enhanced because the property has an edge over competing listings. This may translate into shorter marketing times, a higher price or both.

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[Weedless Green] Grass Gets You Higher (Property Values)

There is a lot of controversy, inconvenient truths and discussion about going “Green” (no, not Favre signing with the Jets). One of the key elements of discussion is the economic impact of climate change.

The Federal Reserve Bank of San Francisco’s economic letter, discusses a paper on Regional Variation in the Potential Economic Effects of Climate Change by Butsic, Hanak, and Valletta.

Here’s an interesting chart in the Fed posting covering the increase in temperature:

The continental US has a 100 degree F range of temperatures on some days. The impact will be greater in areas already on the edge of tolerance.

One of the key bases for variation in the potential impact of climate change across geographic areas is the starting point from which climate change occurs: climate warming may have little or no impact within a range of temperatures, but the impacts may grow rapidly as temperatures rise above that range. This nonlinear or “threshold” pattern implies that climate change effects will be most pronounced for areas that are already near critical temperature boundaries. This principle is best illustrated by some examples from recent research on the potential economic effects of climate change.

Shifts in agriculture production are most pronounced, not much impact on mortality rates. The article zeroes in on winter sports and it’s impact on resort housing.

Some markets are hurt more significantly than others. My take away is that the issue can’t be looked at as a matter of degrees (no pun intended) of impact. There appears to be some sort of tipping point to which the study suggests market prices are hurt significantly in different regions depending how stressed they are by temperature ranges already.

ergo, coastal flooding

The rest is here:
When A Cloud Is Over Your Neighbor’s House, Go Skiing

House, France, Renovated 18th and 19th C olive oil mill with separate guest house. … 2.670.000 EUR

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18th C Olive Oil Mill

I turned on the TV this morning to catch an update on the hurricane in New Orleans, hoping it was better. Thank goodness no deja vu, the storm appeared to be less intense than originally feared. I flipped the channels and saw Geraldo Rivera holding an anemometer counting off the wind speed. It reached 70mph, and thought, this is simply perverse.

Despite all the coverage and worry, the FDIC has reported only 10 bank failures so far this year. Granted, there were only 3 in 2007, 4 in 2004, 3 in 2003, 12 in 2002, 4 in 2001 and 2 in 2000, but from all the coverage, I would have expected 50 by now. Of the failures this year, Indymac was the only biggie.

The watch list has grown from 90 to 117 and Indymac wasn’t on the watch list.

The Federal Deposit Insurance Corporation, or FDIC, insures bank deposits of up to $100,000 at nearly 8,500 of the nation’s banks and also keeps a watch list of banks that it considers in trouble.

Thanks to a collapsing housing market and a weak economy, a growing number of banks are struggling to stay afloat, with not enough cash on hand to cover losses from bad loans.

At the beginning of the year, 90 banks were on the FDIC watch list. There are now 117, FDIC chairwoman Sheila C. Bair announced at a news conference this afternoon. That is the highest number in five years, but some analysts expect the list to grow even more in coming months.

This is supposed to be one of the biggest financial catastrophes in US history, no? In the 1980s FDIC removed nearly 2,000 institutions and S&L from the face of the earth. I remember the unbelievable stuff we saw as appraisers, performing workouts for RTC and FDIC in the early 1990s. Incredible stupidity abound.

Because it’s not all about the traditional banks…

It’s about the investment banks and the investors. Banks were able to shift the risk to third parties via securitization.

Read more from the original source:
[Storm Track] Bank Failures Are A Category 2

House, France, House with view up to the sea … 1.325.000 EUR

Excerpted from:
House with swimming pool and nice garden

Perhaps one of the most misused phrases in the history of literature is the reference to a quote in Shakespeare’s play “Henry VI”, “First lets kill all the lawyers.”

The line is from The Second Part of Henry VI, act IV, scene ii, line 86; spoken by Dick the butcher, a follower of Jack Cade of Ashford, a common bully who tries to start a rebellion on which the Yorks can later capitalize to seize the throne from Henry.

The plan would be to take away the rights of common citizens but that would only work if they “killed all the lawyers.”

In the wake of the subprime crisis, there will be plenty of opportunities in litigation, foreclosure and bankruptcy actions over the next several years. We are all (or at least I am) screaming for action on going after those that overstepped rule of law.

But what about those who were hurt who can’t afford legal advice? With so many law firms working with financial institutions in the wake of the crisis, there is a potential conflict of interest.

That hurdle is “issue conflict”—the potential conflict of interest for any law firm that has lawyers representing banks, savings and loans, and other financial institutions.

But the need—arising from the subprime mortgage debacle and exacerbated by skyrocketing food and fuel costs as well as rising layoffs—is great. Mark Schickman, a partner at Freeland Cooper & Foreman in San Francisco who chairs the ABA’s Standing Committee on Pro Bono and Public Service, says one in every 160 homes is subject to foreclosure.

“It’s almost a losing battle trying to provide legal services to the poor,” he says. “Every time we think we’re making headway, something like the foreclosure crisis comes in and pushes us from the goal. Pro bono attorneys are coming out in droves for this. It’s really heartening.”

In the ABA Journal article Prime Aid, Subprime Crisis there is already a surge in such activity.

In April, the Association of the Bar of the City of New York’s standing Committee on Professional and Judicial Ethics issued an informal opinion (PDF) regarding homeowner representation by firms that represent financial institutions.

The Federal Reserve Bank of New York and the City Bar Justice Center are sponsoring a pro bono legal services effort called the Lawyers’ Foreclosure Intervention Network that pairs homeowners at risk of foreclosure with attorneys and certified law students.

It’s an encouraging development as well as good public relations effort for the legal profession.

I’ll have to crack open that dusty copy of Hamlet.

Here is the original post:
[Shakespeare On Subprime] “First Let’s Kill All The Lawyers”

House, France, Property with guest house and sea view … 4.800.000 EUR

Original post:
Provencalian property with panoramic sea view

It’s 48 hours of market report nirvana!

Guess what?

1. Home prices are falling. [shocking]

2. And prices during the spring market didn’t fall as much as the winter. [informative]

This is all very new and helpful [sarcasm].

Here’s a recap

• NAR’s existing home sales report was released yesterday. Interpretation not to be relied on based on past spin. Headlines don’t match content.

• the widely followed Case Shiller Index (bad news version) (good news version) who has not been able to kick start the trading of housing derivatives. Excludes, co-ops, condos, most foreclosures and new development.

• the GSE fueled OFHEO Home Price Index (good news version) (bad news version), issued by the agency that, ironically, was neutered by the GSEs during the housing boom for their mantra of creating “affordable housing.” Excludes new development and condos.

• the Commerce Department’s new housing start stats, which has some of the wildest and widest margin of error ever thought possible. This does not factor in cancellations, which in some markets have been as high as 100%.

Here’s a thought. Mortgages are more expensive and less accessible than two years ago. Until that changes, I wouldn’t expect real, measured improvement. Improvement will come eventually. Let’s deal with the situation at hand rather than all the focus of calling the turnaround correctly.

What especially drives me crazy has been the viewpoint that things are getting better based on rising activity and/or prices in the spring in certain markets. It’s called “seasonality.”

View original here:
[Bullish In Technicolor] Housing Prices Show More Weakness

The research for this monthly market report is provided by Brad Rundbaken, of Diversified Resource Group, LLC, a real estate appraiser, consultant and investor with a stock brokerage background. He analyzes the Charleston real estate market using the Charleston-Trident MLS and inserts a lot of extra analysis on the national housing market. In fact, he crams it in there and he’s not afraid to share his opinions. He was terminated by his former employer (an appraisal firm) once he started publishing his market stats in 2006. However, honesty pays and he tells me his new venture is thriving.

Brad also runs a great blog. Here are the areas he covers and his methodology
…Jonathan Miller

View the entire report

Here are some of his observations pertaining to the overall Charleston market.

• The average sales price dropped 6.6% in the Tri-County region compared to the prior year quater.
• Q2 2008 sales are down significantly at -33.5% compared to the prior year quarter.
• Due to economic weakness and tighter credit conditions sales have slowed by 33.5% and inventory has grown 11.3% since last year in the Tri-County Region.
• Days on market has also increased by 31% since Q2 2007.
• The Tri-County Market spring quarter did not live up to expectations of many local realtors and experts. Many are being quoted that it will get better next year. Based on what? Higher interest rates and a economy in a recession?
• As inventory continues to rise the % Diff Sales to List Price has increased the most in Charleston County. This increase in the Discount can be attributed to buyers getting better deals on the higher end of the market which encompasses Charleston County in such areas as Mount Pleasant and the beaches.
• As I have stated before there is a “shadow inventory” that is not transparent in the MLS statistics that is very worrisome. I have seen months inventory in the years after completing Market Analysis Studies for developers.
• The CMR is very concerned about the high end of the residential market. These are the most risky loans to banks and inventory continues to build to extremely high levels.
• The CMR predicts the average price per square foot will continue to decrease in many areas until the credit markets get back to normal. It is important to remember that many upgrades, discounts and closing costs being paid by sellers often do NOT show up in the Market Matrix. Real estate often has visibility issues with regards to the true price trends. An appraisal or Market Analysis should provided more transparency if done properly.

Review the report for more details on the tri-county market area as well as many other market areas. Chocked full of data.

Read more:
City Of Architecture: 2nd Quarter 2008 Market Report For Charleston, SC

This quarterly market report is provided by Chip Wagner and Robert Headrick. I have had the pleasure of knowing them for a large part of my appraisal career. They are both very active in appraisal industry matters having held many leadership positions. Their respective firms have been covering the Chicagoland market since 1970 and as a result, they both have a wealth of insight. Their focus is on relocation, litigation and mortgage appraisals as well as slayers of appraisal myths. Chip and Bob author a series of market reports on the Chicagoland real estate market and Chip writes a column on our other blog, Soapbox called Chip Shots.

…Jonathan Miller

View the report

And their commentary…

What now?

In 32 of the 184 communities (about 17%), there was an increase in average sales price from second quarter 2007 to second quarter of 2008. Over 82% of the Chicagoland market has seen a decline in the average sales price.

Again, real estate is local, so some areas are doing better than others as we caution these statistics are macroeconomic data. And indeed, there are some pockets and many instances where prices have increased in the past year, but this is few and far between, not the norm.

Read the rest here:
Windy City Update: Chicagoland 2Q 2008

This quarterly market report is provided by Dr. Kevin Gillen, an economist at the Real Estate Department of the Wharton School and Fellow of the University of Pennsylvania. He analyzes the Philadelphia real estate market using the city’s real estate database through Hallwatch, a watchdog group. The results are published in a research paper called Philadelphia House Price Indices each quarter as a public service to the Philadelphia real estate community. Here’s his methodology [pdf].

Kevin does a great job parsing out the market and its a pleasure to share his results on Matrix —Jonathan Miller

Download the full report [pdf].

Read the Hallwatch article on the market: Philly real estate: fewer sales, higher prices in some areas

Here is one of the key points:

Although Philadelphia’s house prices may be resisting their continued declines, home sales continued their downward plunge this spring. Even though spring is normally the busiest time of year for housing transactions, only 4,546 dwellings changed hands under arms-length conditions this past quarter. This is a 25% drop from spring 2007, and a 42% drop from the housing boom’s peak in the summer of 2005.

More discussion concerning the report [Hallwatch.org]. Hallwatch is a private and independently maintained watchdog website that does a lot of in-depth, independent and investigative pieces on city politics, as well as real estate.

Source:
[Like Whipped Cream Cheese] Philly Real Estate: Fewer Sales, Higher Prices

Since the new iPhone and it’s 2.0.2 software came out, I have been lovin’ the new apps that have entered the fray. The power of GPS allows blending data and location into a nice neat package. And endless array of possibilities.

One of my favorites of the just released: the Trulia iPhone app (disclosure: I have been on Trulia’s Industry Advisory Board since its inception). But it’s not just for the iPhone.

I got a demo of the beta when I was at Inman Connect SF last month. I have to say, unequivocally, that the app is even better than “more cowbell.” Actually it’s incredibly easy to use, allowing me to see what is for sale in the immediate area, drilling down to property details and what open houses are available (inside joke: thanks so much for not calling them “open homes”). It also enables viewing the Trulia voices feed specific to the location.

Keep it simple, make it powerful.

In fact, I’ve really been iPhone App happy lately. I was turned on to two other apps by my friend Andrew, that I find myself using everyday (aside from “iSaber“) called Jott and Evernote. Awesome.

Proud father moment: My teenage son was out with a bunch of his friends and one of them pulls out an iPhone, exclaiming, “hey guys, check this out!” and began brandishing iSaber with it’s sound and light effects. My son looks at the kid and deadpans, “yeah, my Dad uses that one.”

More:
[iTrulia] Getting Mobile With Luke Skywalker, Etc.

House, France, House in very good condition with all comfort nessesairy … 155.000 EUR

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Quiet Villagehouse in Aude near meditteranan See