The bottom line is that homeowners are having a rough time when they try to deal with their lenders directly to get their loan modified. I’ve made some calls to lenders myself and can confirm that they are not working with homeown¬ers in a reasonable fashion. Until a national program is created it’s better to use a loan modification company for modifications. Congress is hammering Paulson over the way TARP funds are being used, especially in the case of PMC buying National City with these funds. There is gen¬eral fury about this in Congress! Increased regulation will be key in restoring tax payer and investor confidence.

The stock market fell again Monday and the bear market continues to drive indexes lower globally. A major issue on the table right now is whether to offer Treasury Funds to US auto makers… who are failing yet again due to econom¬ic conditions. Since auto makers have resisted retooling to build eco-friendly cars and trucks for at least 3 decades, there is valid resistance to bailing them out.

Real Estate lending continues to struggle in the face of a secondary MBS (Mortgage Backed Securities) market that is dysfunctional. Although bailout money has flowed into large lender’s balance sheets, they continue to horde the cash instead of increasing lending. Now the trouble has bled over into other types of credit, auto loans and other lines of credit are restricted. If you have a home equity line with an open balance you may wish to draw on the line and put the money in an interest bearing account to ensure that the available credit is not taken from you just when you need it. Call me for resources and analysis of your scenario.

The news keeps getting worse. The continuing slump in the housing market along with the failing credit market is exacerbating the serious problems facing the US and global economies. Marin County has been known as a bastion of “old money” and “security” that ordinarily weathers economic storms better than most. Unfortunately, that is not so in these very troubled times. For instance, back in 1991 when there was a world-wide recession, we saw home prices fall. Yes, there were short sales and foreclosures in Marin County but they were a rarity. Most Marin homeowners who tried to sell their homes during 1991-1995 were, generally speaking, not in a position where they had to sell. In fact they did not sell unless they received the price they wanted. Granted, there were fewer sales, but the homes that did sell did so for healthy prices. That helped preserve Marin County home prices. The fact is that during those years Los Angeles area homes lost almost 50% of value, San Francisco lost about 16%and Marin lost 3%.

Today, however, all of the ‘funky financing’ of the past 6 years – no doc loans, NINJA (no income, no job or assets) loans, 100% financing, frantic refinancing – has created a situation where many of Marin homeowners are “underwater”  and facing short sale or foreclosure.

For home owners wanting or needing to sell it will feel as though you’re selling your home in a “fire sale”. What will seem like dramatically low pricing to the sellers is exactly what it takes to interest the few buyers out there. How will most sellers fare selling their home in this market? 

The bottom line is that buyers have some really good opportunities to buy properties at greatly reduced prices and sellers must understand that this market is not for the timid seller. Sellers must be realistic about declining values and how pricing must make sense in this market. My advice to those who need to sell is to get an up-to-the-minute comparative market analysis on their property by an experienced, reputable Realtor and listen to his/her advice. Testing the market with high prices, by not being ahead of the declining value curve and by not putting 100% into making the home as presentable as possible, are death knells to selling your home.

Loan modifications are the big buzz as it becomes clear that lenders are not aiding home owners who need to mod¬ify their mortgages. After doing several weeks of research into how modifications work and the various methods modification companies are using, I’m pleased to announce that I’ve located two in particular that I can refer clients to. My favorite is a law firm who has been doing modifications for 14 years with success. Most importantly, the process this firm uses does not damage the credit of the borrowers involved and protects them legally. Fees run less than refi¬nancing and can be paid in payments over time if needed. Contact me for more information.

Last week it was finally announced that we are officially in a “recession”… BIG SURPRISE, eh? New stimulus plans are being worked on in Congress as the global recession worsens. Europe, and especially China, have all introduced rate cuts and economic stimulus packages. Today it was an¬nounced that US auto makers are going to get some bailout money as well. American Express has decided to become a bank, a trend among many financials.

How does this affect you? There are still jumbo loans avail¬able at excellent rates. Loans under $417,000 still have the best rates and easiest qualifying. It remains to be seen if the December 31st deadline for closing “agency jumbo” loans (those between $417,000 and $729,750) will stay intact. If it does then the new limits on January 1 for “high cost” areas like Marin will go to $625,500 on one unit prop¬erties for Fannie and Freddie loan products. One thing is certain. Unless the secondary mortgage market is restored to functionality real estate values will continue to contract.

 Getting back to Marin’s real estate market, I’d like to talk a little bit about our condominium resale market. In my July 11 posting I pointed out that the sales volume of condos was down from 2007 by 37% and that prices were down 13%. As I’ve mentioned in previous postings, this market is all about pricing. Buyers can smell value a town away, and until they do they will be not be submitting purchase offers. Since July there have been deeper reductions in condo pricing, and the impact on voume has been substantial. As of November 5, 2008, there have been 423 condos sold throughout Marin County vs 444 for the same period of 2007. That translates into a 4.7% drop in volume over the same period of 2007. Quite a difference from the 37% drop I reported in July. What happened? Well, condo pricing went from July’s asking price of $416.91 per square footdown to the current price of $389.19 which is almost a 20% drop from 2007 prices. Apparently, in condo sales it took/takes a drop of about  20% over 2007 prices to generate prchase offers. Again, I’m talking in Marin County generalities with each town and each neighborhood within each town performing diffierently. However, as a generalization these statistics speak volumes in helping with condo pricing.

 Feel free to contact me for a information regarding Marin County condominium activity and pricing for 2007 vs 2008.

The idea of a second stimulus package is gaining ground in
the media and in Washington. In a testimony to the House
Budget Committee Ben Bernanke, Federal Reserve Chairman,
said congress “should consider including measures
to help improve access to credit”. He went on to state that
consideration of a stimulus is “appropriate”. Within the
hour the White House said the administration is “open” to
the idea. Several plans are being brought forward by Nancy
Pelosi and others.

Today stock indexes are fell today after an upward bounce
yesterday. The current bailout pushed forward by Treasury
Secretary Henry Paulson may be taking an unintended and
troubling turn. Apparently a number of banks who have
jumped on the “bankwagon” to get a piece of the $250 billion
advanced by the treasury are using the money to buy
smaller competitor banks instead of using the money to
recapitalize so that they can make new loans. With the US
economy in recession it’s a given that stocks will continue
to be volatile into 2009 as investors search for earnings.

Important trends for you relate to agency (Fannie & Freddie)
and FHA (HUD) loan limit changes on the horizon.
Right now “agency jumbo” loans to $729,750 are available,
but this limit changes on January 1 to $625,500. So
buyers should act now if they plan to get one of the larger
loans. You may want to tell your sellers about this change
also, since it can impact their pricing. FHA rates are higher;
this is essentially the new subprime. Mortgage rates went
down yesterday across the board and the LIBOR index has
dropped, good news for folks with ARMs that have already,
or are about to, reset.

World banking heads agreed that the global crisis demands
coordinated action. So Monday opened with coordinated
global rate cuts. But the amount ($250 Billion) that the US
plans to inject into our failing banking system is a pittance
of the trillions Europe is already injecting into theirs. This
leads some to argue that gains from the US plan will be
small. Combine this with the prospect of a recession that
lasts 18-24 months, and which some say could be “deep”,
and it looks like additional economic stimulus will be mandated
to turn the tide. I expect we’ll be hearing more about
a new stimulus package before long. The IMF says credit
loses will reach 1.4-1.6 trillion dollars.

In the local real estate market we seem to be experiencing
somewhat flat sales numbers, and continued lowering
of pricing as we seek a bottom. The LIBOR indexes rose
sharply in the past week, so folks with ARM home loans
that are resetting will feel abruptly higher rates, keeping the
refinancing of these notes into fixed rate loans extremely
important. Look for the stimulus package increases to loan
limits to become permanent as we approach year end
(when higher loan limits would expire).

What can you do? VOTE! Perhaps the most important thing
any of us can do is plan to vote for a president who will
bring solutions that work to the table. In the meantime FHA
loans continue to refi subprime mortgages while Fannie
and Freddie loans offer attractive rates. We may also see
more pressure on existing loan servicers to modify loans
voluntarily. The silver lining to this mess right now is low
inflation, thus low mortgage rates, allowing buyers to buy,
and refi’s to pick up speed.

Credit trends are showing tightening money (yet again)
due to the expanding freeze on credit that is rippling
through a variety of credit sectors. This condition has
spread to all credit sectors, including commercial paper. So
it’s more imperative than ever to ensure that your buyers
are pre-approved… especially buyers needing jumbo loans.

It might be timely to remind your sellers that the ultimate
price of their home depends almost exclusively on the
eventual appraised value, NOT their listing price. Appraisal
reviews are more common now, especially in declining
markets. This means that the lender may lower the appraisal
value if they think the property is worth less than the
agreed purchase price. When you write purchase contracts,
or review offers, plan that the review could extend the escrow
period by a week or more.

FHA programs that promise to write down loan principle
are not proven yet. We won’t know until more of these
close in the next 3 months whether the borrower’s credit
scores are lowered by participating in these FHA loan programs.
I’ve heard that when lenders do a short sale or loan
modification the original lender may place a derogatory
mark on the credit report that is as serious as a foreclosure.
More on this later when additional data is available.

My best advice is to stay calm and keep things in perspective.
The stock market crisis only serves to illustrate the
relative strength of real estate as an investment. With pending
sales up nationally in August by 7.4% there ARE homes
being sold. Compared to a 33% loss in stock values real
estate here remains a solid investment.

Washington Mutual was bought by JP Morgan and Wachovia
was absorbed by Citi Group this week. Both WAMU and
Wachovia were prominent promoters of negative amortization
loans… so their portfolios were susceptible to huge
losses. You can expect more bank failures unless sweeping
legislation passes the house in the near future.

The senate passed the “bailout” plan, (which some call
the “rescue” plan) last night by a large margin. In spite of
this the DOW is down today as I write this by more than
260 points. The house will still need to pass this bill for it to
be made law. Calls for updated regulation of the banking
and investment sectors are increasing as politicians point
fingers and search for ways to ensure this crisis does not
repeat itself. With the conversion last week of major investment
firms like Merrill Lynch to banks, the era of investment
banking on Wall Street ended with a whimper.

How does this affect you? Well, the most pressing challenge
is that the credit markets are essentially frozen right
now. This makes it harder to get loans for any reason.
Although our Fed and the European equivalents are pouring
billions into the banking industry in attempts to get
banks to lend again, it is still uncertain that banks will
begin lending again at reasonable rates. The premiums to
get loans right now are steep, which translates to higher
interest rates for all types of credit, including auto, real
estate and college lending. The LIBOR indexes, upon which
many ARM loans are based, jumped this week… another
unsettling bit of news. The House will most likely pass the
Senate bill. One piece of the bill increases FDIC coverage
to $250,000 to safeguard people’s savings, and other sections
offer ways to ensure that CEOs and banks needing aid
eventually pay back tax payers. These welcome changes
should help to ease the current crisis.

The S&P 500 is down 27+ points as I write this. The DOW is
down over 200 points also, as investors sell in response to
breaking news about more US banking troubles, this time
focused on regional banks also. Yes folks. What’s happening
right now is unprecedented and extremely serious, not
only for the US economy, but for the global economy. The
good news is that this may not last.

To gain some perspective, consider the following from
analyst Barry Habib… “There have been 10 bear markets
for the S&P 500 stock index since 1957 (i.e., market drops of
at least 20%), including the current decline which is down
19.8% as of last Friday’s close from its 10/09/07 all-time
high. Of the 9 previous bear markets, all of which eventually
recovered and reached a new closing high, 6 of them hit
their bear market low during the month of October, including
the last 3.”

The big news for mortgages is that the Fed is trying to
create an entity that can buy troubled mortgage debt to
get it out of the general marketplace. I applaud this move.
Although tax payers may initially take a hit, it still seems
better to give the government control of this debt for 2
reasons; a) this gets the debt that has made investors nervous
out of the market so trust can be rebuilt and, b) this
may give the government the ability to change the terms
of these mortgages (like fixing them at a low rate) to keep
people in their homes.

How can you move forward? With stocks losing value, this
makes real estate in Marin an even better investment. Your
neighbors agree. Of the properties sold in Marin in August,
only 13.5% were foreclosures. Contrast this to Solano
County’s 61.3% , Alameda’s 32.5%; Contra Costa’s, 54.4%;
Napa’s, 39%; Santa Clara’s, 24.7%, San Mateo’s,16.6%; and
Sonoma’s, 41.6%. Marin values right now mean that there
are prime investment opportunities are out there.