The housing crisis has not even begun…

If you dig around the bottom of the oak tree long enough, even a blind squirrel will stumble across an acorn. I was doing my normal morning reads of blog entries and reports on line and came across the best overview of why the housing market has probably NOT reached bottom. The information is vital for anyone that wants to understand what the future might hold. No one has a crystal ball. Everyone can grasp that a train travelling at 100 mph will destroy whatever may be in it’s path that is sitting still 10 feet away.

All the rosey reports from the administration and all the positive statements from the National Association of Realtors are not, I repeat, are not a light at the end of the tunnel.

I ask that you read this blog in total. I ask you because I believe that everyone has a right to all the information. I won’t even try to persuade you that one side or the other is telling the truth. I will merely present the facts that I have culled from different sources. I will leave you to ponder the post and at the very least be in the position to have a better understanding about what is really on those tracks.

Most people out there probably know somebody who is behind on their mortgage payments, looking for alternatives and likely also just finding out that their home’s value has dipped below what they still owe on the home. I know some within my own personal and professional circles Some of them ask me to advise them as a professional or a friend because all the data is very confusing. They are in a tough spot and don’t understand what has happened or if there is a way out of their dilemma. These are very tough times for the families that are behind in their mortgage or have no plans to sell but have seen their equity vanish overnight. The two most frequent questions asked are “when is this going to stop and where are we heading?”

The answer is up in the air? There are trends and information that give an indication of what is going on behind the headlines. These are a few graphs that show the trends nationally with regards to mortgage delinquincies:

This chart is by quarter – Single-family mortgages set a new record delinquency rate in the second quarter of 2009, according to a quarterly survey by the Mortgage Bankers Association. We all see the foreclosure process unfolding in our neighborhoods but the looming delinqency-to-foreclosure issue is far, far larger.

The Wall Street Journal on 8/3/09 reported the following quote: “While subprime mortgages sparked the first round of housing problems two years ago, now “troubles are lurking further up the food chain,” says Joshua Shapiro, chief U.S. economist at MFR Inc. White-collar job losses have accelerated while more adjustable-rate loans to prime borrowers are resetting to higher payments. ‘You put all that together, it leads me to believe that the next leg down on home prices is going to come from the top,’ he says.”

Now you might read that and say “yes, but historically those who are delinqent usually get their act together and come current on the mortgage after a while”. That WAS true, but not anymore! We call that the“Cure Rate”, that is the rate of delinquencies that go back to current. The Wall Street Journal reported on 8/24/09 about a Fitch analysis that found that the Cure Rate from 2000-2006 was 45% (which means about half of people fix their delinquency). However, as of July 2009 the rate had dropped to just 6.6%! That means that over 90% of delinquent customers are going to foreclosure. Please take a moment and consider the implication of that fact. Take a look again at the above chart…

The next thing someone will say is “well, that’s in those hard hit areas’ and not where I live”. Here’s the chart for all 50 states showing the same breakdown of delinquencies and foreclosures. Most states have a significant problem, especially compared to historical figures. The problem exists in the North, South, East and West. It exists on the coasts and in the middle of the country. It my friends is everywhere.

Now some may say is “aren’t those loans going to get ‘fixed’ by a loan modification?” I know several people right now who are applying for a loan modification but are waiting and waiting. I hope it works out for them…

In reality, loan modifications are hardly making a dent. Why arent banks being more aggressive in giving customers the option to extend their loan and/or reset to a lower rate? Why are they being SO difficult? The people I know don’t want to be foreclosed. They CAN make payments. They just need the terms redrawn to allow them to catch & keep up. Loan modifications are not helping us get this crisis under control.

It would seem that loan modification is window dressing on a house and senate full of no answers. What are the causes of all these delinquencies? Here’s a chart that is enlightening:

We hear a lot about adjustable rate mortgages being the culprit, but in reality it’s the loss of jobs and the tanking real estate market that’s the perfect storm.

You don’t have to ask why I continue to point out the negative equity problem. You might be better off asking your elected officials what their plans are to resolve this problem.

I have to thank Jeff Geoghan for bringing lots of this information to me in a post on Active Rain. If you would like to contact Jeff, let me know and I will point you in the right direction.

There is no guaranty in the DC Fund

There is supposed to be $1,040,000 in the DC Real Estate Guaranty and Education Fund. Members of the real estate community support this fund through assessments at licensing. It is not a tax. It is a trust fund.

Welcome to the new version of Home Rule…It is Fenty Rule. (Sort of like the old days, when Mayor Barry would use the tax revenue at his discretion. He would pick and choose what bills to pay…law be damned.

Just when you thought there was hope….. He turned into a DOPE

The D.C. government has been hit hard by the same type of shortfall that every local government has faced.  There is not enough tax revenue to support budgets that are planned. Most governments have dealt with this by reducing services, altering vacations, freezing hiring, etc.  Fenty is on his own page.  Under his administration, the government cooling removed over $3,000,000 from a TRUST FUND.  Now I will admit, there is a side of me that wants to scream….

You ignorant bastard….. what part of trust fund don’t you understand????

Then there is the Board, you know the one’s protecting consumers…

The only thing missing is mask and a gun.

Right now, if you have a complaint against a real estate agent and think you may receive monies from the trust fund, well our boy Fenty has removed all aspects of trust from the fund.

Now, there is a provision that if the fund is empty, when you are paid, you will receive 4% interest on top of the amount that is determined you are due. Just wait…. just wait….just wait…..

Real Estate agents will be asked to replenish the fund….again.  A law suit has been filed. The mayor can not just steal trust fund money because he is incompetent when running the city. It is wrong. It is also no wonder that Washington DC is headed back down the road of being a laughing stock across the country.

If this bothers you, feel free to waste your time contacting the DC City Council (they signed off on the pilfarage as well).

If you live in DC, it might be time to consider moving to the suburbs.

Take me for a ride in your car … car …

This used to be the way people searched for a new home.

Mom and Dad would gather up their brood and walk down the street to the home with the for sale sign. Communities grew. Walking around town just didn’t do it anymore.

We progressed

Newspapers began to carry “homes for sale”. Sunday morning would be spent circling the possible choices. Mom and Dad would load the brood into the car and begin a journey from house to house.

Sure, there were real estate agents available. Back in the day, they had books filled with mimeographed pages. They kept the information about their listings behind closed doors and the general public did not have easy access to the homes that were for sale.

Early Real Estate Agent

Now this system came to a crashing halt when the internet opened the doors of information to anyone with a computer. Every listing could be found on line. As a matter of fact, there were hundreds upon hundreds of sites that offered the opportunity to view listings. Those sites still exist today. The majority of agents offer access to the MLS on their personal sites.

Seems like progress.

But a funny thing happened driving around looking at homes. There were more homes for sale than the most meticulous searcher could find on the computer.

If you wanted, you could have your agent ride around with you. If you agent was worth their salt, they could access information about homes you missed on your search.

This is 2009. We have just gone through a whirlwind of price adjustments. Most people looking for a home are not prepared to tour a house for 10 minutes and decide………this is the one…..let’s buy it. At least, I hope no one is still buying a home that way. Now, some agents will say, don’t worry, if we miss something, a home inspection will uncover it. Really, and how many home inspections do those agents think you want to pay for?

It would seem to me, that a lot of folks want to do the search on their own. They want to sort of wander and get a sense of a neighborhood and then see some houses. Some of them go to open houses. That decision limits them to touring homes on Sundays between 1 and 4 and limits them to the homes that are being held open.

What about all the rest?

This old dog has a new trick !

What if you could just stop in front a home for sale, dial a phone number and get all the information about the home? What if you didn’t even have to write it down? What if you didn’t have to go back home and search the web to find out the price, how many bedrooms or bathrooms or other info?

301-703-2698

301-703-2698

Try this on for size. Pull up in front of a home in my market area (DC, Montgomery County, Frederick County, Howard County, Anne Arundel County, Prince Georges County), dial that number 301-703-2698. Follow the instructions.

Pretty cool, huh?

There is a reason that all agents are not the same. There is a reason that if you look closely, you will see why my clients feel they get service that is above the standards in the industry.

Times have changed. You can text me at 301-537-4377. I understand your desire to have me around when you need me. I’ll be there.

In an industry filled with look alikes, JMac isn’t hard to find!

My name is John MacArthur. I am the Branch Manager of the Long and Foster Office in Olney, MD. I can be reached at 301-537-4377.

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