Real Estate and Financial Markets

The real estate and financial markets are quite a mess right now. Just when buyer activity began to pick up in the first 2 weeks of September, the rapidly unfolding crisis in the financial markets quieted our lead generation momentum dramatically. The nation’s credit crunch had started to show some signs of relief recently due to an increase in mortgage applications with declining interest rates, and government bailout of Fannie Mae and Freddie Mac. But that glimmer of hope was dashed over the past few weeks as we all watched the U.S. financial markets stumble badly; Lehman Brothers filed bankruptcy; Merrill lynch acquired by Bank of America; Feds bailout of AIG (to the tune of $85 billion) and to add to the confusion, the Feds refusal to cut interest rates to 5 ½% as was expected. To make matters worse, our government is proposing to absorb all the bad debt of these mismanaged lending institutions rather than just loaning them the money from the Federal Reserve at 2% or 3%. Maybe we should just divide the $700 billion dollars amongst the 220 million tax payers so we can pay down some of own consumer debt. This would infuse and replenish our “cash-starved” financial institutions with the same $700 billion we are giving away to them anyway. Consequently, the banks can start fresh and make reasonable loans to qualified borrowers again. Real estate sales increase and smaller price declines mean fewer homeowners will be underwater on their loans. Thus, less incentive for them to walk away and opt for foreclosure. As for our local real estate market, September was our first monthly increase in total deed recordings since March 2008. Using the past 30 days of closed sale, we currently have a 16 month supply of homes, a 16 month supply of condos, a 56 month supply of commercial property and a 60 month supply of lots. Nearly 12% of out current residential inventory is either bank owned or short sale listings. Of the 116 residential pending listings, 49 are bank owned or short sales (42%). This shows that banks recognize the power of aggressive pricing. Bank owned property is not considered and asset for a bank to hold onto. Banks “covert bad loan equity” into liquid so they can get that cash working for them again. Lately, it feels we are in a giant housing auction. With all this said, we are going to “weather the storm”. It may take several months, “but this too will pass” and “business will be as usual”. Don’t let the fear in the media create fear in you. Until next month, Yours truly, Bob Angilella RE/MAX Big Bear
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