Hood River Real Estate and Columbia Gorge Real Estate

…Lots of people are asking….”what’s the deal with Strategic Defaults? How is that going to affect me?”

Ummm….err…I don’t know?

I’ve been chewing through scenario after scenario, and for Hood River Real Estate, it kind of boils down to this…..This is going to be a symptom of a larger issue, (like employment outlook) and as such, it will hit neighborhoods differently.

Be sure of this, however, there is no such thing as a free lunch. Walking on a house while you can still afford the payment may sound nice in the short term, but it is again, one more example of short horizon thinking, and could lead you to a long period as a renter, with poor credit, and ultimately you might STILL owe the balance of your loan…..

However, right before I sent out the newsletter last month, This popped up in the NYT.

It outlines the issue, and a couple of interesting factors I had not thought of, and one of them is this….

Not paying your mortgage helps get you back on your feet again.

Ok, I’ll buy that, but like the old story goes, “be careful what you wish for….you might get it.”

I still think there is another phase of the bank crisis in this, as it’s a fundamental shift in the way the public at large views the trust/bond with their banking institution. Once that veil is pierced….the public no longer views the bank as having any power over them, and the bank wont trust anyone….well that’s a recipe for disaster in my book.

The bank pushback to that of course is the long term damage that will do to the individual borrower. There are literally a dozen scenarios of default….deed in lieu, judicial foreclosure, non-judicial, workout, bankruptcy….each version extracts a toll on your future ability to access credit….and in many ways, access to credit determines your standard of living (not in a jet ski/ATV in the driveway kind of thing, but more in a general, need to pay the bills kind of thing)

Did You Know?
As an example of some recently discovered pieces of the puzzle, consider the following tidbits:
1. Your debt relief in the event of a short sale is taxable income.
2. In many short sales, (and I think in foreclosures too) The issue of recourse is now in play.

• It depends on the state, and your documents, but in common instances, you could give up your house to the bank they could sell it for a loss, and then come after you for the balance (they can do this in a  number of ways, too)

Crazy eh? It’s never easy, and I return to the aforementioned axiom:

“There is no.such.thing. as a free lunch.”

OK, Now to Hood River Real Estate……….
Quality is great. Nice inventory, motivated sellers, few buyers, (still pooling at $300 and lower) but the financing is working, and I’d argue even better after the great starve-off of mortgage brokers. My last couple of deals have had total pros working the files. What a joy.

I’ve noticed that there isn’t as much attrition in Real Estate Agents…….yet. I have noticed that the sales have spread out among a laaarge list of agents, many of whom I know are operating out of less than formal locations.

Robert Reich wrote an article last month about the supposed “entrepreneurial boom” that is occurring in the United States. He basically said that wasn’t so much of a boom as it was a sign of desperation, of “basically unemployed” people trying to “do something,” anything to improve their situation……

A single Broker office, that does two deals a year is an example of that. Is this market headed that direction? Probably not, but it sure isn’t headed in the direction of the national chain either. As with all things, it will be a balance……

Hope you enjoyed the posting. Get out and enjoy the sunshine! See you next month!

Greece, Contagion and the words “Strategic Default”

Interesting uncertainty has quietly crept back into the market. I’m thinking that the heated buyers market that suddenly cooled had something to do with the tax credit, and the fact that everyone is waiting to get done with school, and into the Summer. I polled my brokers, and they are still seeing buyers show up, but everyone is early in the cycle, so it looks like summer buyers to me. I’ve been distracted with County Budgets and such, I’ve not been working the market like my brokers…..Who by the way, along with me, make up three of the top ten agents in the market this year. That makes 2/3 of our Brokers in the top ten……And our market share continues to grow……I’ll take it.

Couple other things happening in the market these days, the new phenomenon of “jingle mail” now has a slightly more serious moniker, (which means its becoming more widespread, and less novel) called “Strategic Default”

Now, there’s foreclosure, and it can be caused by a lot of things, not any of them good, but here is one that really, really scares me. SD isn’t a default because of a catastrophe, it’s a default because of choice, essentially, a business decision.

Let me be critical for a moment. Strategic default is a symptom of denial. It says you care more about your standard of living than you do your neighbors, It’s like having a campfire in a national forest, in august, and then falling asleep while it’s still going. If this takes off, it could lay waste to whole neighborhoods due to markdowns, and that could take a long, long time to recover from… Have I made my point clear?

There, now that I’ve said it, let me turn the coin. Strategic default CAN be a reasonable option for people in the right situation, for the right reasons. Like I mentioned a few months back, when this first came to light, it doesn’t sound right when a person makes a decision to strategically default, but when a company does it, often times they are rewarded for making a “shrewd business decision” (I’d hate to be on the receiving end of anything being referred to as a “shrewd business decision” these days) I don’t think there’s much of a difference between the two except for perception.
What’s really unsettling here, is this. Where does this thread stop? (see Contagion, below)

And there’s more! Compliments of Realtytrac. (www.realtytrac.com) Guess where 50% of ALL FORCLOSURES IN THE US ARE? ….You have to go no lower than #5 to encompass the top 50%. Can you imagine how bad that must be? Even with decreasing numbers of foreclosures, it’s still a scary set of numbers. Imagine if the word CONTAIGION crept into the discussion. Strategic Default leads to neighborhood contagion of SDs…..

This brings a whole new light to the phrase “keeping up with the Jones’” Thank goodness I don’t live in California.

That’s it for this month, keep an eye on inflation, which, according to Paul Krugman might not be the right thing to look at. He says we could be more Japan than Greece. I think I might take that over rioting over enforced austerity measures……

This choppiness is looking all so May of 2008……….

(postscript- Volume has just shot up, way up. New listings, New buyers, most in the higher ranges……whiplash! Also, so very 2008)

Happy almost May!

Our weather here is still stuck in spring mode. I’m hoping it will get warmer soon, but who knows. My Web cam is still screwy. Time for a new computer, says my wife. A Mac!

What I do know about is how busy things have been. People are clued (or have clued, as this is the last day, wait, is that even a word?) into the tax credit, and Sellers and Buyers have sharpened their programs to get stuff moved. In fact, lots and lots of stuff has moved, though if you thought you were going to offer on a short sale and make it under the timeline, you woefully misjudged.
Last month, all eyes were on the quality of the inventory, and I have to say, there were some very, very nice properties that came (and went) to and from the market. We have written a number of deals that will qualify, and some of them have been very good bargains.

Lending and underwriting has also improved, and we are back around 30 days for a deal, perhaps a touch longer. Buyers have returned, however gingerly, to a position of “risk-taking” given they are well compensated, which is an improvement from a few months ago, where a buyer asked for such a discount as to make the purchase almost failsafe.

This STILL doesn’t mean prices are going up anytime soon. All the short sales that have gone under contract will only lead to a fresh set of underwater houses to come on the market. I suspect we’ll have a version of this for about the next year. I would have said two, but I’ve been really surprised at the speed that last batch cleared the market. They will have a dampening effect on the market however, especially in sieverkropp and the Westside addition near fox hollow.

The majority of the action is well under the $400,000 range, but some of the Summer buyers are coming up early to get a jump on things. I’ve gone from showing piles and piles of property under $300,000 to a bunch over $400,000 in just the last week. That’s a decent sign.

I’ve been noticing that as the market re-forms, there are different players this time around. I’m also noticing, that while conditions improve for some, hurt, and duration, and general stress abound…..There seems to be a lot of it in transactions these days…..

So, short term outlook? Weak until memorial day weekend, given the tax credit hangover and the upward pressure on interest rates. Probably a little firming through the summer, with what appears to be decent amounts of inventory clearing, and softness in the fall, firmed up in late October by the bargain shoppers, depending on interest rates, which could be the big, big uncertainty….
I’m always amazed by people who dare to wait until the last moment…..nerves of steel those people…..