Mike’s Real Estate Show

  This week on “The Real Estate Show”, 1350AM, KSRO, 9 to 10AM: Yes, College Football is in the and on the Air! And as usual we’ll have the “biggest Blow-out” of the weekend! It’s usually a Super Big Ten team playing Northen Idaho Tech! I just had to turn my head from the Cal score!! Number 9 and falling!

The affable Mr. Pete Phillippee  is in studio to discuss qualifying for home loans and what the current “slide” in rates means long term to us all. If you wish to get a hold of Pete call him at: 707-521-4400(office) or 707-481-2737(cell)

  Lou Barnes column for this week starts out:

The two-month-long bond rally has hit bottom. It’s been fun: From a peak at 5.24%, the 10-year T-note made it to 4.73% yesterday, which has taken mortgages from just below 7% to just below 6.50%.

Lou continues on here and aptly describes the current “flavor” of loans being made. Locally we are starting to hear the ugly phrase, “Short-Sales”. This means the homeowner, after all costs of the sale, may need to bring money into escrow to close the transaction. That’s if you’re a Seller who has the funs to do that! If you can’t then you are “short” (equity versus the loan balance) at the time of “sale” or “Short-Sale”. If you’re a buyer and get into this type of situation ask yourself why? With some 2800 listings on the market why full with a transaction where the lender who is “short” is going to be dragging their feet or have a don’t give a damm attitude. Go find a motivated Seller with out this issue!!  Here’s the rest of Lou Barnes column: 

 

Speaking of bad bets….
     I have argued that the most likely outcome for superheated housing markets is the historically modest retreat from top prices followed by a long, long flat interval. The over-leveraged and imprudent will be exposed, both borrowers and lenders, but declines in excess of 10% from prices actually paid (not asked) will be unusual.
     One event could make the Bubblers correct by accident: at the moment that a market going into distress needs credit the most, credit tends to disappear, turning distress into disaster. Coinciding with this five-year bull run for housing has been the easiest credit and lowest defaults ever. Soon, both default and credit will begin to swing back toward center-line, and — feeding on each other — may cross over.
     The default model is easy: flat prices combined with high leverage beget foreclosures. If you haven’t got any equity, and you get in trouble, you can’t get out. Credit is tougher to evaluate: so long as the borrower makes the payments, it’s a good loan, right? Uh-uh. In this cycle, I’ll bet that trillions of dollars of bad loans have been made, but looked good because doubling prices protected the borrowers. If your home doubles in value, you really have to work at it to get into foreclosure.
     The first-time-ever grease on these easiest-credit-ever wheels: a nouveau Wall Street product: credit derivatives. You’re worried about making 100%, interest-only, stated-income loans? Let us help: we’ll hack up the risk into little pieces and sell it all over the world. Many takers. Many, many, many takers on both sides of the trade: the purveyors of bad loans getting rich, financing people really not qualified to buy a home but who want to get into the party; and the buyers of the risk also making a fortune because prices are rising so fast that all credit bets pay off.
     Trust me: when the Street discovers big demand for a new product, it will manufacture more. How much more? Junk mortgage lending, “sub-prime”, is in 2006 running about $700 billion per year. What happens to housing if this source of credit dries up?
     I believe that mortgage credit mispricing is widespread, and not just for junk loans. 95% financing for A-rated borrowers has been a standard product for 35 years. Until 10 years ago, the feat was accomplished with mortgage insurance; now it’s done as an “80-15-5,” second-mortgage piggyback, because the monthly payment will be about 10% lower than with MI, despite the higher-rate second.
     MI companies have known their default risk to three decimal places, like all insurance providers. If the piggyback lenders are so much cheaper, they either know something about default that MI providers haven’t discovered, or they are kidding themselves, abetted by Street operators and their default derivatives.
     During market extremes, bet on self-deception. The credit pendulum will swing.   
(All articles © Boulder West Financial Services, Inc.)

Also on the show this morning is Keller Williams Realtor:  Fannie Kay Fannie is one of our office leaders in our Keller Williams office and has a unique story and many, many clients who are raving fans!! She can be reached at: 707-206-4515(office) 707-481-2764(Cell).

We also are going to talk about the latest medium home prices and sales activity from the California Association of Realtors. Below see the Medium pricing for our “Northern Wine Country”.Though not SonomaCounty specific, it gives a good “trend” number. No the downward swing. You can click on the highlighted areas to go to the California Assoc. of Realtors article on home pricing.

Northern Wine Country
 $629,790 July 2006
 $637,870 June 2006  
 $639,670 July 2005

This and your questions on our hot-line: 636-1350. Hope to talk to you soon and Post a comment to the site. We want to know your listening and reading!