IF YOU THINK THAT'S BIG, TRY THIS

If you're in the real estate or related industry, you probably have a smart phone. Blackberry, Treo, something that accesses the internet, has a full keyboard, does it all. Many Realtors now have smart phones that are their Supra key.

Have you ever marveled at one of these little hand held devices and remembered what it was like fifteen years ago? How much like Star Trek are these little things?

They're going to get a whole lot more complex, and a whole lot faster than you may think. In another four years, what we'll be buying will seem far more like a Star Trek tricorder than what we're using now. You have seen the billboards for "3G wireless networks" - welcome to 4G.

Now, if you go to that linked article about 4G and can read it and understand it, you're probably a physicist or something. I looked at it a few times and boiled it down to this:

* None of the phones we're using now will work at all in about three years
* What we're just now starting to get used to - streaming video on our handheld, slow and clunky internet, navigation on our handhelds - is merely a baby step compared to the 4G devices that we'll see awfully soon
* The only thing that will hold a 4G device back is the screen size. There will be some 4G handheld devices that will have more computing power than the laptop I'm writing this on - and you can use it to stream movies, work at your desk, or in replacement of the stereo system and navigation system in your car through wireless Bluetooth-like technology and full sized monitors/keyboards.
* South Korea has already re-wired their wireless networks to 4G and is rolling out the products - this is not speculation, it is coming more certainly than the inaguration on January 20
* In another five years or so, your new car will have a video screen, and a power/cable plug for your 4G device, which will be the video/audio/satellite radio/navigation system/trip computer/telephone for your vehicle. If you rent a car, you'll have your normal and familiar functionality with you.
* No more laptop cases, no more lugging your eight pound device around. No more desktop computers. Monitors, keyboards and pointers (commonly called a mouse) with a power port will be the work stations of the very near future. This alone will massively reduce electrical consumption.
* You'll never have to miss your favorite TV program ever again!

Well, Lieutenant Uhura, get me Star Fleet on the comm!

What to do with this information? If you're challenged by your Blackberry NOW, take a class about them at HCC or something! The train is whistling to leave the station, and your competitors (who can handle this massive technology shift) will be aboard!

JUST ONE MORE THING YOU SHOULD KNOW ABOUT THE REAL ESTATE BUBBLE

I think I've made this clear before - this wasn't because of the current administration. It takes a Village, and in this case, we'll now be thinking of them all as Village Idiots.

We've talked about predatory lenders, greedy Wall Street brokers, and loose lending regulations. How about the tax code? For a truly perfect bubble, you need favorable tax treatment OR loose regulations - and we had them both.

If you've always loved Ayn Rand's philosophy as expressed in "Atlas Shrugged," you should consider this a full refutement of that philosophy by its grandest champion:

"I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."

Alan Greenspan, former Federal Reserve chairman

Big changes on the horizon

The Federal legislation that gives us SAFE (National Mortgage originator licensing) is going to go into effect on January 20, 2010. If you're one of those who won't be able to retain or be licensed after that date, now is the time to start planning your new career.

Virtually everyone who has a license now will have to re-test, re-qualify and be certified under the new standards, even though they are not as stringent as the Texas standards were already. Anyone who was grandfathered in at the beginning of Texas licensing will now have to pass the state exam for the first time.

These standards will apply to EVERYONE, whether employed by a Federally chartered bank, mortgage bank or mortgage broker. After January 20, 2010, anyone that's working with you originating a loan will be licensed to the uniform standard.

Can I have just one more hit off the credit bong, please?

Well, the Fed has thrown up their hands and said "Here, just take the damned money!" They've depressed interest rates again to a level that is almost as low as what we were seeing three and four years ago.

How low? Try an average of 5.19% 30 year fixed. That means that some lenders are offering 30 year fixed loans in the high 4% range.

Well, whoop it up, right?

Not exactly.

Here is a short list of people/scenarios which can no longer get loans:

* Stated income
* More than four mortgages including husband and wife together
* Non-warrantable condos
* Condos that are not FNMA/FHA compliant
* Neighborhoods with more than 10% foreclosed units
* Credit scores under 680 (FNMA) or 580 (FHA)

I'll tell you, this list is going to have people bellowing "oh, but I know I can do such and such."

And, they may be right. They could have very well done so. However, it's going to take the right borrower, the right property and the right lender to get those things done. If you're looking at a scenario where the proposed borrower is one of these things, get a back up contract at the very least. If you're a borrower with one of these situations, find a TERRIFIC mortgage broker and get fully approved FIRST.

It's nice to get one right -

A few years ago, I predicted that mortgage rates had fallen about as low as they could go - at the time, they were slightly below where we find them today - about 6.00% 30 year fixed.

I didn't realize at the time that the dedicated Ayn Rand supporter Alan Greenspan would push interest rates down further and keep them there for several years - creating an environment we now call the "real estate bubble."

So, I was right that interest rates in 1998 were about as low as they could go - naturally. It was an artificial push to move them lower. Still, I was wrong that "now is the time to buy or refinance, as rates won't go any lower."

Last I checked, 4% is lower than 6%. I blew that one.

However, a few weeks ago, I suggested that the end of consumer or non-owner occupied loans for high rise condos would put an end to the projects that had not yet come out of the ground.

I shared that opinion with a few Realtors and other friends, and they all nodded and rather gave me that "you're thinking too much again" look.

This morning, on the front page of the Houston Chronicle, we have validation de-lux.

When will all of the anti-Ashby high rise signs come down?

Whither the market goest

I watch with amusement the new lenders entering the market as the old reliables vanish. Every few weeks, another new mortgage banker steps forward and says that they can lend to those with sub-580 credit scores, or that they can do "liar" loans - stated income or no income documentation.

A few weeks later, that new mortgage banker sends out an announcement that they're no longer taking new files.

Any efforts to recreate the E-Z credit atmosphere of the past is doomed to fail. There just are no investors willing to take the risk. For the next several years, if not decade or more, loans will be made to those who can prove their income and credit quality.

Incoming regulations to ensure against identity theft, to use only third party automated documentation of income and bank deposits, and further restrictions on access to consumer credit will soon produce a totally new way of taking a loan application - you'll swipe your driver license.

The revisions to the Patriot Act plus other legislation mandate standardized state driver license record keeping and forms, and over the next few years, your driver license will be replaced with one that's just a little chunkier - it will contain an RFID chip - meaning that someone with an RFID reader could examine your name, address, driver license records, etc. It also means that your driver license will carry access to all kinds of secure databases. IRS records. Credit bureau records. Criminal background history. Voting records. Bank records. State unemployment/income records (which are updated weekly or quarterly and provide instant access to exactly how much you do earn).

Taking out a mortgage will instantly become instantaneous, as all of these databases populate into mortgage software, drive through the FNMA/Freddie Mac automated underwriting system and "presto!" You're nearly done.

This is going to make the private mortgage broker about as modern as the dodo bird. The analogy there is quite apt, only those that move quickly and strongly toward adopting these expensive technological changes will be able to compete with the new Super Banks - Chase, Wells, BofA. The private mortgage broker will only be able to work on self-employed persons and credit tiers that are beneath FNMA/FHA/VA standards - and then only with a handful of mortgage banks.

Choices will be extremely limited, and consumers shopping around will find it much harder to compare.

If you're in the mortgage business now, and you're committed to staying in the mortgage business, I suggest you start setting aside capital to secure access to this developing technology and data subscriptions, or start planning your early retirement.

Fannie and Freddie, and nationalized housing lending

I think that a great number of people have no earthly idea who or what Fannie Mae and Freddie Mac are, or how that affects our national housing market, the economy, nor the national debt and our economy's relationship to other countries.

"Oh, Fannie Mae was bailed out? What is that.. " and then, cease reading after the first or second paragraph.

Our national debt just doubled.

So, two pieces here - first, a very well written discussion of how Fannie and Freddie got to where they are; compare this to earlier discussions of the housing bubble and how it was created.

A quick excerpt:

The accounting scandal was so large that even Fannie and Freddie didn't know what was in their portfolio. They failed to register with the SEC for at least eight quarters.

If you're at all curious about what that means for you, I recommend you read the article.

What does this move hold for the future, though? My good friend Jillian Sorensen of Franklin American must have arisen before the roosters this morning to put together a marvelous synopsis of what may be coming. It is designed for mortgage professionals to read, but it gives a clear picture of what we don't know but may expect:

As you know, in a truly historic event yesterday, Treasury Secretary Paulson and Federal Housing Finance Agency Director Lockhart announced that “FHFA has placed Fannie Mae and Freddie Mac into conservatorship.” The government (FHFA) will now be managing Fannie Mae and Freddie Mac for the foreseeable future.


Below are some thoughts on this historic event…..


Overview


To stabilize and to stimulate the housing and financial markets, the Federal Government is taking the following key steps.

· The GSEs will be allowed to increase their MBS portfolios through the end of 2009
· Treasury will be initiating a program to purchase GSE mortgage-backed securities (through December 31, 2009)
· Treasury has established a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac and the Federal Home Loan Banks


We believe that Treasury Secretary Paulson and the Bush Administration determined Fannie Mae and Freddie Mac were unable to perform their housing missions at a time when they were most needed because the GSEs were trying (unsuccessfully) to address safety and soundness issues associated with raising capital. As a result of this plan, Treasury has indicated that the GSEs will now not be under any pressure to sell assets.


In the short-term, we expect mortgage liquidity should improve. Rates should decline as the risk spreads built into the GSE pricing (due, in part, to fear of potential GSE failure) should be reduced if not eliminated. The extent of the decline will depend on what happens to Treasury yields in the coming days.


Without capital constraints in the near term and based on Secretary Paulson’s comments (see below), we believe the new Fannie and Freddie will likely rollback at least some of their price increases and loosen underwriting requirements to some extent. It will be curious to see the MI reaction to this government intervention as their tightening of guidelines will now be “front and center” in the effort to expand mortgage financing availability.


We also believe Secretary Paulson’s call to examine the guaranty fee structure could lower those fees across-the-board. It will be interesting to see if the government-controlled GSEs will implement a Ginnie Mae-type flat fee structure and at what level.


On a longer term basis, there will be a “heavyweight” debate next year and beyond about the future size and structure of the GSEs (e.g. public or private entities). That debate will not occur until the new Congress and Administration take office next year.


Why did Treasury/FHFA take this action?


It appears to us that Treasury/FHFA lost confidence in Fannie Mae and Freddie’s Mac’s ability to support the housing recovery while, at the same time, addressing their safety and soundness responsibilities by preserving and raising capital. Below are some of Secretary Paulson and Director Lockhart’s remarks which lead us to this conclusion.


Director Lockhart said:

(bold and italics added)


“Their market share of all new mortgages reached over 80 percent earlier this year, but it is now falling. During the turmoil last year, they (the GSEs) played a very important role in providing liquidity to the conforming mortgage market. That has required a very careful and delicate balance of mission and safety and soundness. A key component of this balance has been their ability to raise and maintain capital. Given recent market conditions, the balance has been lost. Unfortunately, as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt. Today’s action addresses safety and soundness concerns. The result has been that they have been unable to provide needed stability to the market. They also find themselves unable to meet their affordable housing mission. Rather than letting these conditions fester and worsen and put our markets in jeopardy, FHFA, after painstaking review, has decided to take action now.“


Secretary Paulson said:


“I attribute the need for today’s action primarily to the inherent conflict and the flawed business model embedded in the GSE structure and the ongoing housing correction”. He added that he has “long said, the housing correction poses the biggest risk to the economy”.


“Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner” and that “the primary mission of these enterprises will now be to proactively work to increase the availability of mortgage finance including by examining the guaranty fee structure with an eye toward mortgage affordability”.

Comment

We have all seen the steps that Fannie Mae and Freddie Mac have taken to preserve and raise capital throughout this year. These measures have included raising prices on mortgages and tightening underwriting guidelines. As everyone is also aware, they have been aggressively trying to put back loans to seller-servicers who, in turn, are going back to originators.


Secretary Paulson in particular appeared to conclude that GSEs cannot serve two masters (i.e. its housing mission and its shareholders) during the housing crisis.


What does this mean?

To state the obvious, we are in uncharted waters. This plan is not a “silver bullet” that will address the underlying problems (i.e. record mortgage delinquency and foreclosures) that caused the need for this unprecedented action. MBA’s National Delinquency Survey last week indicated that over 9% of all mortgages are either delinquent or in the foreclosure process. While the new GSE approach to mortgage availability will increase the number of potentially eligible borrowers, it will likely not have any significant impact on affordability (borrowers must still qualify and make downpayments) in those markets where house prices increased the most during the “housing bubble” until house prices and borrower incomes are in line. With this as a caveat, below are our immediate thoughts.


· Short term goals

Two of the immediate goals of this action are: 1) “to increase the availability of mortgage finance” as Secretary Paulson said and 2) to lower mortgage interest rates through the Government guarantee of GSE debt.

· Long term objectives


On a longer term basis, the Government’s action yesterday raises the fundamental question about the government’s role in housing going forward. Secretary Paulson deferred the discussion of this question and the “flawed GSE business model” ( i.e. serving two masters ---public and private objectives) to the next Administration and Congress.

In this update, we will focus on short-term impact since the debate about the GSEs’ future structure and size will depend on who wins the election and the make-up of the Congress.

Short term Impact

For the housing industry, the short-term impact of the Government takeover appears to be positive.


* Mortgage rates should decline
* Liquidity should be increased
* GSEs should loosen standards (somewhat)
* GSEs should reduce fees including guaranty fees
* Some housing experts feel house price may stabilize sooner and the level of further house price decline will be moderated as a result


Potential Impact

* There could be a mini-refinance boom if the rate decline materializes.
* Hedging of servicing portfolios and pipeline problems will have to be addressed


There are many questions to be answered in the coming days and weeks:
(Here are a couple)

* How will the MIs react (mortgage insurance companies)?
* Their underwriting and pricing policies will be “front and center” if the GSEs take the actions we expect
* What will the new Fannie/Freddie management’s policy be on buybacks? Will they be more reasonable? If so, credit policies may relax!
* On g-fees, will the GSEs pursue the Ginnie Mae approach (uniform g-fees across the board)?
* What will be the new GSEs do with respect to lender relationships (preferential pricing, etc.)?

So, now all loans that aren't held in portfolio are either directly funded or directly guaranteed by the US government.

It CAN be done!!

Contract effective date - August 4, 2008
Full loan application date - August 5, 2008
Contract closing date - September 3, 2008
Actual closing date - August 22, 2008
Actual funding date - August 22, 2008

New construction, inner loop, FHA purchase.

Brickor Mortis

brickor mortis n. Falling house prices have caused property website Rightmove to coin a new phrase. "Brickor mortis" is the paralyzing condition caused by sellers refusing to lower prices as they don't accept their home's value has dropped. Buyers won't buy as they think homes will be cheaper in the future-or because they can't get a loan. -"Revealed: Middle Britain will be hardest hit by falling house prices" by Becky Barrow Mail Online (United Kingdom) July 18, 2008.

Susan's First Rule of Real Estate Sales - "if it hasn't sold in 75 days, it's priced too high."



If you're working mostly in areas where properties get snapped up nearly as quickly as they hit the market - great!

One could call this a schizophrenic marketplace, where lots of "spec" properties that have gone up and sold in the last five years are not selling, and other neighborhoods are like wildfire.

What's the difference?

Well, yes, it's location (location location, I had to do it.) It's also the difference between neighborhood characteristics - how well the neighborhood has been kept, the ethnic diversity in the neighborhood and whether it's primarily new construction.

My Realtor friends are telling me that they are encountering a lot of "brickor mortis" when they consider advising clients about making an offer - properties are listed higher than the comps will support, and yet the listing parties are dead set on the value that they've established. While that strategy may work in the 750,000+ arena, it's a great way to sit on a property for months or longer in markets where homes are just commodities.



How do we deal with this market schizophrenia? By advising more aggressive pricing in lower neighborhoods - offering down payment assistance and closing cost programs in more diverse neighborhoods, and working with clients on understanding that whimsy will inhibit the sale of their property.

In my own experience over the last two weeks, I've seen a well priced house in the Southwest languish in a diverse and transitional neighborhood until a recent sale of a foreclosed property came in nearly 20% lower than the asking price of the subject property. I've talked to a well educated non-real estate professional who was convinced he knew the market and was just dead wrong about all of his assumptions. And, I've seen a friend taking his time thinking about which properties to visit in the neighborhood of his choice, and in less than 24 hours, every single property on his list went from "available" to "option pending."

There is no blanket way to deal with this market. Focusing on your core strengths, educating clients thoroughly, and doing your research and homework are the only things that can be relied on. It may be time to focus on your consulting relationship with the client and speaking to them more in terms of what you're seeing the market doing and how it affects them, than just agreeing to their assumptions and wishes.

Credit where credit is given

Today, we're going to talk in broad terms about credit - business and personal credit. This is a summary for everyone, not a detailed discussion.

First, if you're not aware of it, there is a pending settlement in a lawsuit against TransUnion - if you've had a credit account since 1987, you're entitled to participate in it. You have a month to get in on the settlement. You'll get either nine months of enhanced credit review and access, or six months and the possibility of getting a cash distribution if there is one. Either call the settlement hotline at 866-416-3470 or go to the very easy website at http://www.listclassaction.com.

Second, this is an article you MUST read. Written by a lady who worked for credit card companies for years, it explains how late fees can be assessed when you do everything right, and how to save hundreds each year by being pro-active.

Third, I've been facilitating the Dave Ramsey Financial Peace University course at New Vision now for about a month. If you don't know Dave Ramsey, listen to one of his radio show podcasts here. If you do know Dave Ramsey, but haven't ever thought that you need his methods, you're probably wrong.

I've always thought of myself as a guy who knew how money worked until I took this course. I thought I knew how budgeting worked. Uh, wrong-o. His budgeting techniques make perfect sense not only from a math standpoint, but from a spiritual/metaphysical standpoint (although that's not his focus.)

I can see very clearly how these are skills that would benefit substantially everyone - save for a few friends of mine who have these skills down pat.

So, if you have any lack of peace about money at ALL, click here, find the nearest Financial Peace University course and spend the hundred bucks and thirteen weeks to take it. And, pay attention to it! Maybe take it twice.

Last piece - again, I've been working with small business people who need financing to grow their business and be flexible, and their tax returns are so focused on avoiding paying tax that nothing is available to them.

I've seen someone with terrific credit in this situation, and a bunch of someones with not so terrific credit.

To have business financing (that you'd be attracted to,) you must have provable cash flow AND proof that you pay your obligations on time.

PLEASE don't be fooled by "consultants" who offer to set you up with shelf corporations and existing credit histories to get you hundreds of thousands of unsecured financing.

They want up front fees, and the unsecured financing market is largely gone.

Get with me if you have questions on any of these items.

Who will buy my my sweet red roses??

OLIVER (sings)

Who will buy
This wonderful morning?
Such a sky
You never did see!

Who will tie
It up with a ribbon
And put it in a box for me?

So I could see it at my leisure
Whenever things go wrong
And I would keep it as a treasure
To last my whole life long.

Who will buy
This wonderful feeling?
I'm so high
I swear I could fly.

Speaking of flying high - here in Houston, we have at least five new high rise residential towers in various stages of completion. We have others, such as the heavily attacked Ashby high-rise that have yet to come out of the ground.

Who will buy?

To get a loan, these new restrictions apply -

* All condo loans now require a minimum of 10% down payment
* Investor owned properties now require a minimum of 20% down payment
* Any condo project requires a minimum of 55% owner occupancy
* No non-warrantable condo loans are permitted

Okay, what does that mean?

Condos, especially newly built high-rise condos, cost more money per square foot than do traditional structures. Now, a potential buyer will have to make a significantly larger down payment for a high-rise condo than for a traditional structure.

That limits the appeal of high-rise condos.

There are NO LOANS available in new projects until those projects have met FNMA or FHA standards for owner occupancy and sales.

If the condo developer goes with sales to investors (who can't get loans either) and they don't fill the building up with at least 55% buyers who live in the condo, they'll NEVER get loans in those buildings.

Thinking about the ranks of glittering new high rise condos in Miami, New Jersey, Delaware, Houston, Dallas and other cities .. I keep hearing the plaintive, hopeful song of the vendor as she tries to attract attention across the busy marketplace ...

"Who will buy my sweet red roses?"

UPDATE - Important news about condo and investment property loans

Do you remember when you were in fourth grade, and you confidently volunteered the answer to an important question in class and got it wrong?

That's how I felt all day yesterday.

After having some push-back from other mortgage professionals through the Realtors I've been talking to, I dug in and hauled out the new FNMA guidelines, the release notes to the new underwriting system, and read them. Thought about them, and read them again.

On the face of it, one would think I was wrong in my gallop through the countryside yelling "The British are Coming!" (I really wanted to write "gallop through the Countrywide," but it's a bad pun.)

On the face of it, we frequently take away poor or partial impressions. On the face of it, the Fannie Mae regulations and release notes say that they will make loans to non-owner condo buyers, and to cash out equity from non-owner investors.

However, the regulations suggest that for the first time, Fannie Mae's underwriting system is going to LAYER risk factors - rather than just taking the biggest one. Their announcement notes that condos are an increased risk, cash out loans are an increased risk, duplexes, triplexes and quads are increased risk, and investor loans (meaning, someone who's not going to live in the property) are the biggest risks of all.

So, if they're going to stack risk factors - then, condo + investor is risk plus highest risk. Triplex + investor is risk plus highest risk. Cash out + investor is very high risk plus highest risk. The loans that I was speaking of two days ago are now rated as very high risk, and "compensating factors" will be required for those loans to be approved. Sky high credit scores. Deep reserves (12 months plus.)

As I thought about this, I reflected that the Fannie Mae guidelines now say that they'll accept a "level" approval for these types of loans, but I know of almost no lender who will do them, even with these compensating factors present.

That suggests in addition to the underwriting uncertainty of average borrower + risk + high risk layering, the lenders themselves may choose to not do any of these loans. Which is what we've started to see. Lenders are backing away from anything they are less than certain can be sold to Fannie Mae immediately.

From the perspective of someone thinking of buying, selling or marketing property - what this means is you really have to be associated with a lender who is completely on his or her game. Pre-approval letters are meaningless; closings are all that count.

Think of it like the big car dealer ad in the weekend newspaper. They SAY that they have the loaded Camry for $12,999 ... but when you get there, they never do. That's how you should view pre-approval letters for any transaction that is for an investor purchase of a condo, a 2-3-4 unit property, or what we used to think of as a sub-prime loan (no social security number, etc.)

So, I'm still galloping through the Countrywide (I couldn't help myself, I'm sorry) yelling "The British are coming!" If you have a contract, a scenario or are going to make an offer and you're just not sure whether it will fly, call me. We'll give you our best game.

Condo loans and investment property loans

Loans on condominium properties for persons who will not owner occupy are no longer available at any loan to value.

Equity loans on investor owner (non-owner occupied) are no longer available at any loan to value.


Condominiums that would not be owner occupied have only access to local bank financing on commercial terms. Equity loans on investor owned properties are now only available through local bank financing on commercial terms.

On any residential investment property purchase, a minimum of 20% down payment is now required. On any condominium owner occupant purchase, a minimum of 10% down payment is now required.

Significant changes regarding corporate ownership of investment residential property, number of investment residential properties that are allowed and credit standards for investment residential property loans have also taken effect.

For a brief presentation and "cheat sheet" on these new requirements, please contact Douglas at 713-524-1850 ext. 220 or at dhord@douglashord.com

horny for foreclosures

I was talking to my favorite Realtor (tm) today, and she was frustrated. She's working with a client who insists that they're only interested in buying a foreclosed property.

Now, in markets other than Houston's, that's probably a great strategy. In some sub-markets of Houston, that COULD be a good strategy. But, overall, it's a deeply flawed strategy, and this article will explore the reasons why.

Here in Houston, several years ago, an elderly woman lost her home at the monthly foreclosure auction to the Homeowner's Association for unpaid HOA dues of just over $2100. The winning bidder won the title rights to her home - three bedrooms, nice big lot, garage, good condition - for that pittance.

The point of this isn't that someone got a steal on this poor woman's house. The legislature quickly gathered itself to change the law such that this sort of bargain would not again present itself. The HOA reversed the sale, the woman didn't lose her house, but the event made national news for weeks.

Since that time, the foreclosure auctions in the major Texas cities have been PACKED with out of town "investors," looking to score the same kind of deal that was so heavily bemoaned on the news.

Point #1 - in Houston, the foreclosure auctions are heavily populated with out of area "investors," who find Houston prices to be low by national standards, and who bid up the auction values to near market rate.

As is the case everywhere, Houston has had an accelerated pace of residential foreclosures. So far, we've avoided the big layoffs that have been announced around the country, as employers scale back for the expected ongoing slowdown (which is a self-fulfilling prophecy, if you think about it.) We've had a couple of large, local mortgage employers fold up their tents, but overall our employment is quite stable.

Nevertheless, there are more and more foreclosures on the MLS here in Houston.

Foreclosures are marketed, generally, by private local Realtors who have contracts with some of the large mortgage servicing companies. The properties are secured, trash hauled out, basic yard maintenance done, and then a sign put into the yard and usually, a MLS listing with one quickly taken photo.

The cachet of "foreclosure" does all the marketing for them.

The servicing companies that are the owners of the foreclosed properties have different pricing models, but all operate in a similar manner when offers start to come in - they hold and review offers, sometimes rejecting all offers, and usually during the first 90 days of the marketing period, always reject any offer that is below the listed price.

Offers that are contingent on financing, that ask for repairs, closing cost contributions, home warranty contracts are uniformly rejected.

When your offer is accepted, you have a very short time to close, and you'll bear substantially all of the closing costs. You won't get a property condition disclosure, a lead paint disclosure, or any sort of notice about the condition of the property. You don't even get a warranty deed, you get a special foreclosure deed that only conveys that interest in the property that the foreclosing lender received.

Point #2 - when you successfully buy a foreclosed property, your closing expenses are higher, the property condition is not known to you other than your own inspector's report, and you're buying the deferred maintenance, move out damage, and vacancy damage that the house has incurred.

If you're buying the property to "flip," you are looking for the BBD - bigger, better deal.

Based on points #1 and #2, your basis in the newly acquired foreclosure is higher than you may like, and your costs to improve or rehab the property are a big question mark. Still, let's assume that, based on pre-sale data, you look like you can flip this and make some money.

With the lending/credit crunch, all lenders have taken a hard line on appraisals. A minimum of three comparable sales are required, two of which have to be within a mile and support the proposed sales price. All have to be within the last 90 days.

Your purchase at foreclosure is an excellent comparable sale for what your property is worth.

Your appraiser is going to want hard data on what you've done to increase the property value. Your sweat equity won't count (any more.)

Point #3: Buying a foreclosure to "flip" isn't a sound business model in the Houston market today.

So, I sound like the Boy who cried Wolf - you've, after all, been to a seminar, known a friend who was flipping property like crazy in Florida, and you're just convinced that I'm wrong.

Point #4: People who sell seminars are in the business of selling seminars. People who sell houses are in the business of selling houses, and not in the business of offering advice for free - they get paid when you close on a purchase. There are few resources out there that aren't deeply and personally invested in your concluding a purchase.

If you're looking for an investment property or even a property to live in, step out of the foreclosure box, and set some parameters for yourself. What price range? Flip or hold? What repairs and rehab are you willing to do? What will the market comparables actually support on a lease or resale? Run scenarios for cash flow and after-tax benefit. Assume a 2.5% to 4% annual appreciation for almost any neighborhood.

Once you've done your homework, share the results with your Realtor and let that professional find you a selection of properties that meet your criteria. Don't box them in with the mantra of "find me a foreclosure."

after splitting the sheets, lingering attachments cause trouble

Most folks, when it comes time to split the sheets, go through a predictable set of steps - marriage counselor, divorce lawyer, mediator, judge.

During this time, everyone is focused on dividing the sheets. And the debt, the mortgage, the cars, the house, the kids, and the unresolved anger, emotion, disappointment and communication.

There is one thing uniformly left out of this process - the creditors. Here in Texas, as with any community property state, the debt incurred during the marriage is generally considered to be the joint responsibility of the marital community, regardless of how the debt was incurred. If either spouse has ever had signing privileges, or was involved in the making of a debt, they're each 100% responsible for the entire debt owed. In equity (non-community) states, the rules are only slightly different.

Think about that for a moment - they don't each owe 50%, they each owe 100%.

In the divorce case, there is the name of the one spouse, the name of the other spouse, the names of all the children, if any .. but no where on the top of the divorce suit does it include "Countrywide Home Loans, GMAC, HSBC, Capital One," or "Citibank."

Of course, anyone can see that the creditors aren't on the lawsuit - but no one takes a moment to reflect on that the creditors are NOT affected by the divorce suit.

The divorce decree, crafted after months or years of tears, screaming, swearing and effort divides the debt. Each spouse leaves the marriage with some portion of the marriage community's debt, and the decree may (but likely doesn't) spell out that the debt is to be cleaved away from the other spouse. Armed with the Court's decree, the former spouse starts their "new" life, unaware that there is a time bomb in their credit report - the divorce isn't REALLY over yet.

Some lenders will allow the removal of the former spouse - send us a copy of the divorce decree, and we'll take them off. However, in the event of a default, the creditor hasn't given up the right to pursue the former spouse for their share of the debt incurred prior to the divorce.

On the mortgage, it is the very rare loan that can be modified to remove a spouse who is no longer in title. To get completely free of the financial obligation on that mortgage, the spouse who remains in title has to refinance - create a new loan that fully resolves and pays the old loan.

Bottom line - to free ones self from the marriage financially, not only must the asset accounts be split apart and separated, the debt accounts must also - and the only sure way to do that is to open NEW debt accounts, solely in the name of the spouse who is going to be responsible for that debt, and then pay off fully the debt that was jointly incurred.

When dealing with the credit cards and car loans, it's pretty straight forward - a few online or telephone applications, and a few days later, the new coupon book arrives. With the mortgage, though, the whole lending process must be re-created, and all of the customary fees apply. Title work, escrow, appraisals, credit, income verification, all of it.

Usually, in a divorce decree, a very short period of time is allowed for the departing spouse in title to the property to be made whole - paid out their equity.

One common error that lenders make is that the spouse who is departing in title and taking equity characterizes the entire transaction as a "home equity" loan. It is not.

The divorce decree creates a lien based in owlty (sometimes spelled owelty,) which is the lien to secure payment of that interest someone has in property as they depart title. Even many divorce lawyers are unfamiliar with the owlty concept - as well they could be - even the legal dictionaries are silent on the term.

The best definition I've ever found of owlty is:

The difference which is paid or secured by one coparcener to another, for the purpose of equalizing a partition.

If you're a divorce lawyer, and advising a client on resolving their debt picture after the divorce, try putting them on a track to completion by negotiating refinance/remaking of ALL the marital debt before or at formalization of the divorce decree. If either of the spouses cannot qualify to refinance or remake some portion of the debt, have the property settlement structured to pay that debt off if at all possible.

If you're getting a divorce, ask your lawyer about protecting your interests by having your divorce decree reflect a short time period for each spouse to either fully pay off the marital debt or to fully refinance it with new debt.

If you're a lender, be aware that if one spouse is coming off of title, it's not home equity, but owlty.

In the absence of these protections, a divorced person likely will find themselves uncomfortably challenged years after being "through" with the divorce process, when their credit is affected by ratings or balances associated with debts they thought were long resolved. These late rising concerns can disturb the financial peace of new relationships, interrupt new home or car purchases, and even bring on the necessity of bankruptcy.

All the King's horses ...

That's colorful and pretty! What is it?

That is a tableau of marketing trinkets that lenders used to give out. All of those lenders are now out of business.

They're all gone. I'm still here. The last man standing.

Does that speak to my stamina, or that I'm not able to get out of a burning building? Time will tell...


But, I'm still here!

Many of you know of my fondness for everything involving airlines. A term that has long been used by those who investigate airline tragedies is "event cascade," describing the collection of errors and flaws that produce the dramatic results - broken airliners, empty seats sitting under a stormy sky, and a picture of a plastic baby doll. Sometimes, I've wondered if every airliner has a plastic baby doll on board just "in case." You can't count on the passengers to always have one, but there it is.

Fortunately, we've been in a long period of safe airline travel. What has been drawing our attention of late, aside from the bright and meaningless carnival rides that is our election campaigns, is a pair of economic stories - gas prices and housing prices. Both seem to be headed in opposing directions, and there are a lot of rumors floating around to point out who's to "blame."

In the housing business, it's the evil, greedy "mortgage brokers." In the gasoline business, it's the evil, greedy "Big Oil companies."

When an airliner crashes, there are mistakes upon oversights, upon misjudgments, upon bad communications, upon ill fitted parts, upon weather.. without any one of these elements, the airliner may have made it home safely. In either the gasoline prices or the housing crisis, the situation is analogous - perhaps had it not been for one thing, we wouldn't be here. But, there have been a huge combination of things that brought us to where we are.

On the business of gasoline price, here is a terrific article in Salon magazine that explains away the many rumors of greedy oil giants, stupid environmentalists, peak oil and Chinese oil consumption to show WHY the price of gas is where it is. It's straight forward and rational, and worth a read.


On the business of the housing crisis, several more articles providing further perspective into just how complex this all has been, and how wildly different forces have combined to bring a housing bubble to burst in our country, but also in many other countries around the world.

First, how a huge increase in money supply developed world wide, and how it "pushed" the relaxation of credit standards that resulted in the housing bubble. Excerpted from a new book in Newsweek, this article blows away a US perspective on where money is "grown." This money pushed the credit markets around, much as an overloaded trailer pushes the car that's towing it.

Next, a discussionof the credit market fundamentals that produced our situation, and how dealing with it as we've been dealing with it is not the answer. Points to note here, there are many similarities with the Great Depression of 1929-1938, and how the response of the Fed and the Feds is both inadequate and consistent with how the banking crisis of 1933 was exacerbated by nearly identical moves back then. Not for the faint of heart, this article took me a lot of stopping and starting to make sure I was comprehending what I was reading.

This article discusses how the structure of the banking system was changed after the 1933 banking crisis and then changed back during the 1990s. While the article has a definite slant, it has a clear and concise description of the political changes. Read even more about the Gramm-Leach-Bliley Act here.

More as it happens - just found another article on Gramm-Leach-Bliley, which is even more pointed than the first.

News regarding why our area shouldn't be a buyer's market

We've been battered and fried in national news about how awful things are in the real estate marketplace.

Fact: Houston home sales are lower than 2007, but still higher than 2005 and 2006 - which were both terrific sales years.

Fact: Foreclosures are up, but haven't hurt our values across the board

Fact: Houston's job growth is as strong as it could be - we're actually being held back by a lack of skilled labor.

Right now, we have sellers who are deeply committed to their properties, and cannot afford to sell at a substantial loss. We have buyers who are making offers that are 10% and more lower than the asking price on some properties, figuring that everyone is a distressed seller.

For instance, the patio homes in which I live have several units offered. The offering prices are very, very reasonable, but there isn't a sale. If the prices were reasonable in 2007, and the local economy hasn't declined, why should we think that the 2008 price, everything else being constant, is too high?

When you're counseling clients, whether buyers OR sellers, show them the recent sales information before committing to an offer. There is still enough activity that your client's lowball offers won't even be presented, and they will lose out on any opportunity to buy what they really want.

Use the information I've linked you to in order to show people that what they're seeing on CNN from Las Vegas and Florida isn't what's happening here.

Why your neighbor's foreclosure is bad for you

It's impossible to stay away from the news that foreclosures are up, and way up.

If one listens to any broadcast news, if one reads any print or Internet news or websites, if one just drives around, the word FORECLOSURE looms large.

It's very easy to assume that, when one has a steady job and pays one's own bills, this foreclosure crisis won't affect one's personal world. It's very easy, in that situation, to assume that those losing their homes to foreclosure are financially irresponsible, are too stupid to have properly read the contracts, or too greedy and bought way over their heads.

In reality, it will affect your world. I'm going to explain the foreclosure process, and why it will get far worse before it starts to get better, and how the increase in foreclosed properties affects everyone at the consumer level.

Pre-foreclosure

It all starts with missing a single house payment. "Missing" a payment means that you've not made the payment, and the new one is now due. Now, you owe two house payments.

So many reasons can presage the first payment going delinquent: medical bills, family holidays, car repairs, a brief job loss or change in job which delays payroll for two weeks, a DUI and the bail, attorney's fees and court costs that go with it. As a practical matter, the large body of people in this country are two paychecks away from financial meltdown. When your largest monthly obligation is your home, it's the one that feels like it will provide the greatest benefit by letting it go delinquent - meaning, that you have the most money to spread around by not making the house payment.

No one makes that decision thinking that they won't be able to recover. Everyone thinks they can pull it together soon enough.

Of course, once someone is behind a payment, the next one comes running up in no time at all. Now, they're two payments behind. They still think that they can catch up.

Then, they're three payments behind.

The foreclosure process

Here in Texas, we have non-judicial foreclosure, which means that a lender doesn't have to bring a lawsuit to foreclose, except for home equity loans. In many other states, a lender has to bring a lawsuit to foreclose and has to prove to a judge that there has been a default and that all of the rules have been followed.

In Texas, though, a lender has only to issue a notice of default and acceleration, and publicly post notice of their intent to foreclose on the first Tuesday of a given month, not fewer than twenty days from the date of posting.

Banking law and accounting rules motivate lenders to begin this activity after 90 days of non-payment. Usually, much more time passes before the foreclosure activity starts; of course, by failing to pursue default or workout, the lender can unwittingly create a situation where there is no easy solution other than foreclosure.

After the foreclosure sale

Once the foreclosure has occurred, the former owner becomes a squatter. In most states where the court has ordered the foreclosure auction, the Sheriff is sent out to evict the former homeowner. In Texas, and most other non-judicial states, a contractor is sent out by the winning foreclosure bidder (9 times out of 10 being the former lender) to request that the former owner vacate peacefully. If they don't, then they are evicted - a process that takes only about two weeks.

The lender, having foregone collection of payments, probably having paid property taxes for the former owner, having paid attorney's fees and court costs, now runs the post-foreclosure playbook.

The house, now sitting vacant, is offered for sale as is, meaning that any deferred maintenance or repairs are undone, and the house is offered at near a top market price and as a foreclosure. Yard work is minimal, and aside from sticking a sign in the yard, there is essentially no marketing done.

After a few months of unacceptable offers, the price is dropped to below market or the bottom of the market. This produces a sale, and sets the bar for neighborhood value at a new low.

Why this affects you

So, you're good in your home, the payments are current, your job is secure, everything's fine - why does this affect you? The common opinion held by someone in this position is that those who are suffering in the foreclosure mess are personally to blame, and that resources should not be deployed to help those people.

Here are the reasons why it does matter to you if your neighbors start losing their homes:

* Most people keep their homes only for five to seven years
* Divorce, job change, transfer or illness are the top motivating factors to sell
* Divorce, job change, transfer and illness are nearly always unplanned
* Most lenders now won't loan in a neighborhood with more than 10% foreclosures
* Vacant, un-kept homes begin to affect neighborhood values
* These value changes create an environment where only cash buyers can buy
* Most buyers of foreclosed homes hold them for investment
* Investment owners rarely, if ever, update or improve a property
* Renters (those who occupy investment homes) NEVER update or improve property
* You could find yourself unable to sell at any price

A little history lesson

Twenty-five years ago, the price of oil was lower than the cost to extract it from the earth - which, given today's prices, seems impossible. Houston experienced an "oil crash," and thousands were laid off. We had a foreclosure crisis here, and whole sections of the city became investment property.

Those neighborhoods have only just come back to an inflation adjusted sales price that matches what they sold for newly twenty-five years ago. After twenty-five years of deferred maintenance and upkeep, most of those homes will NEVER be owner occupied again.

So, it really does matter

If your neighborhood starts a cascade of foreclosures, your value could be stripped away from you, never to return. The real estate bubble will take fifteen years to recover from in terms of any rapidly appreciating real estate values. The idea of a property gaining in value due to market conditions is likely over for most neighborhoods and most parts of the country. Only in those few neighborhoods where foreclosures aren't rampant, and where demand exceeds supply will one see an increase in value. Even here in Houston, we have a buyer mindset that it's a buyer's market and that prices are too high - when they're not too high at all.

I hear Realtors now reciting the mantra that it's a buyer's market. It only is if we say it is. Effective and different marketing will get properties sold, coupled with appropriate pricing.

The "assistance" so far offered by the government amounts only to tax breaks for large corporations. None of the "assistance" helps most homeowners facing foreclosure, because they're voluntary on the part of the lenders.

By adjusting the tax code to make it more beneficial for a lender to work with a borrower, even with one that has already gone through foreclosure, this crisis could be stopped dead in its tracks. However, that is remote and unlikely, as only the Realtors have the lobbying muscle to make such a demand.

And Realtors aren't generally willing to look to their future marketplace and make choices - they, like most people, deal strictly in the present day and hope that tomorrow will be better.

Transfer fees, HOA management and property values

This is a letter I used to reply to a friend's question about her HOA's practices:

Thanks for your inquiry about HOA management practices, standards in the community and how that affects HOA members. I'm glad to share a cohesive viewpoint with you; it is rare that opportunity presents itself.

HOA fees relating to real estate transactions are a common and expected part of the process. HOAs come either large (self-managed) or small (third party management,) and the issues seem to track with HOA organizations whether they are self-managed or not.

Most HOA fees are set out in the deed restrictions, and there are general standards.

In general, about $50 is routine for a transfer certificate - an administrative fee to modify the HOA's records that someone different has taken title to the property.

Also, in general, around $75 to $125 is routine for an HOA certificate on the FNMA form, as we experienced with your recent refinance transaction. This data is kept up to date by the HOA or its management company as a matter of course; if your community isn't FNMA/FHA approved, no one can get financed in your community. Plainly spoken, the HOA must keep this information up to date, every time it's request, it's on the FNMA/FHA approved form, and the fee that is charged for providing this commonly collected and updated information is preposterous. However, everyone does it, and it is expected.

An HOA can dramatically affect the viability of a community with its management style and fee structure. By taking an unreasonable time to complete a transfer or certificate request, an HOA manager can actually block a sale or refinance from being completed. By charging an unreasonable fee, an HOA manager can create a negative impression in the minds of local realtors, who will then consciously or unconsciously steer clients away from properties offered in a given community. There are some communities I've encountered in my fifteen years in the business, where a given title company or realtor won't do business with a property offered in that community so as to avoid the difficulty and delay presented by the HOA management.

Specifically in response to your question about the performance and response of your HOA's management company with respect to your recent refinance transaction, I have several opinions:

First, the time it took your HOA manager to complete their first reply to the request for an HOA condo certificate was unreasonable. Unreasonable speaks to the delay in your transaction - it took seven days from the initial request to the first request for fee payment by your HOA manager. Following fee payment, it took another five days to deliver the completed HOA certificate - more than two calendar weeks from the initial request.

When a condo certificate is requested, the loan is ready to go into underwriting. Loans in underwriting that linger tend to fall apart. Loans submitted with everything packaged and ready pop out of the system in hours, ready for the next step.

In my mind, a responsible HOA manager, focusing on what's best for the HOA's clients - the community owners - would prepare a blanket condo certificate and make it generally available on the community's website, replacing it only when the annual cycle came up, or when the data was significantly changed. That certificate could be offered without charge.

HOA insurance was referred out to the community's insurance agent, who was quick, responsive and effective. The turnaround for the HOA FNMA certificate should have taken no more time than did the agent's response time with the insurance certificate - those transactions are the REASON that the HOA manager is in place.

An HOA that is run effectively, with uniform enforcement of regulations, a clean and neat presentation of the community, a courteous, swift and reasonable response for routine transactions, can benefit homeowners in the community by supporting value appreciation. Specifically, an HOA that is well run and customer friendly will create an atmosphere that promotes Realtor preference and promotes members of the community telling their friends and co-workers that their community is a desirable place to live. The community in which I live enjoys such a reputation, and nearly forty years after its creation, inventory in this community is in good balance, sales occur quickly, and people are pleased with their experience.

An HOA management that is populated with people who believe that it is their job to be indifferent to execution of their primary function, and who focus instead on aggressive and subjective enforcement of HOA regulations create the opposite - a community in which members are disconnected, in which they are not proud and do not speak highly of, and which Realtors and the surrounding community begin to avoid. This is the Gladys Kravitz management style, in which the HOA structure is used to harass and punish neighbors for perceived or subjective infractions, and which subtly and negatively affects the community's value.

In the case of your HOA, owners there are in a refinance market where there is opportunity for homeowners to reap the substantial benefits of reducing both rate and term, saving them tens of thousands in interest payments and developing equity far more quickly. By dragging out the certificate process, and by charging each homeowner $175 for transfer and certificate "costs," the HOA management inhibits this transaction cycle. In fact, the HOA board should promote such a refinance transaction cycle, as a community that is populated by homeowners with more substantial equity has a much greater probability of thriving in a declining market. Foreclosures in the community are reduced or eliminated, and homeowners have far more flexibility to sell or take equity to manage their financial situation.

The HOA could, in fact, promote a refinance cycle by offering residents a copy of the certificate for free (since you've just paid for yours, it's already been done. The certificate would only need to be changed if there was an ownership change, or a change in the financial condition of the HOA) so, for the next forty-five days or so, the HOA could promote increased equity and viability of the community without cost to itself.

Someone in your community with a 7% fixed rate could save about $1500 a year or, could refinance to a fifteen year term, and keep their payment about the same, but increase equity at more than 100% faster than the thirty year rate would allow.

Never before has there been a cohesive, big picture sense that Realtors, HOAs, mortgage lenders and homeowners can actually manage the viability of their communities by simple, reasonable cooperation and a focus on that big picture. I can't say that it will happen now, but there is an opening for that conversation I've never before experienced.

I hope that this answer has helped you as you prepare for your board meeting Monday night.

Thank you again for inviting my thoughts on this issue.

Don't you just love the smell of regulatory napalm in the morning?

Read this terrific article about the developing re-regulatory "storm" in Salon magazine online.

Shopping in the Bargain Basement

Reposted from Hullabaloo

Fasten Your Seat Belts

by digby

Tomorrow should be an interesting day on Wall Street. JP Morgan just bought Bear Sterns for less than the price of the office building it's housed in and then the Fed cut interest rates another quarter of a point to try to cushion the blow.


The Fed approved the financing arrangement announced by JPMorgan Chase & Co. and Bear Stearns Cos. JPMorgan separately agreed to buy Bear Stearns for about $2 a share.

Fed Chairman Ben S. Bernanke is stepping up efforts to keep strains in financial markets from spiraling into a full-blown meltdown. Last week the central bank agreed to emergency loans to a non-bank, Bear Stearns, for the first time since the 1960s. Fed officials also announced a program to swap $200 billion in Treasuries for debt including mortgage-backed securities.

The Fed lowered the discount rate to 3.25 percent from 3.5 percent, narrowing the spread with the federal funds rate to a quarter point from a half point. From tomorrow, primary dealers will be able to borrow at the rate under a new lending facility, to be in place for at least six months, the Fed said.

The actions are ``designed to bolster market liquidity and promote orderly market functioning,'' the Fed said. ``Liquid, well-functioning markets are essential for the promotion of economic growth.''

Investors expect the Fed to lower its benchmark rate by as much as a full percentage point, to 2 percent, when policy makers meet March 18. That would exceed the 0.75-point emergency reduction on Jan. 22, which is the largest cut since the overnight interbank lending rate became the main tool of monetary policy about two decades ago.


Paul Krugman wrote on Friday, before these actions of today:




I’m more concerned that despite the extraordinary scale of Mr. Bernanke’s action — to my knowledge, no advanced-country’s central bank has ever exposed itself to this much market risk — the Fed still won’t manage to get a grip on the economy...

I’m sure that Mr. Bernanke and his colleagues are frantically considering other actions that they can take, but there’s only so much the Fed — whose resources are limited, and whose mandate doesn’t extend to rescuing the whole financial system — can do when faced with what looks increasingly like one of history’s great financial crises.

The next steps will be up to the politicians.

I used to think that the major issues facing the next president would be how to get out of Iraq and what to do about health care. At this point, however, I suspect that the biggest problem for the next administration will be figuring out which parts of the financial system to bail out, how to pay the cleanup bills and how to explain what it’s doing to an angry public.


Like I said. Buckle up.

Things that make me crazy

Today's Houston Chronicle has an article that describes a declining Houston real estate market - again. While I find the reporter's work to generally be of acceptable quality, today's article is less helpful or reliable.

In fact, it skates along the ragged edge of "if it bleeds, it leads" journalism.

Several things about the article that bear sharp criticism.

First, the most prominently quoted Realtor is someone who has only been in the business a year. I know Realtors who have been in the business ten years who don't understand market fundamentals. She's advising clients not to list? Why is she given voice?

Listing and pricing property for a Realtor is part wizardry, part gut feeling and part solid research. My best Realtor buddy has what she calls "Susan's Rule of Pricing; if it hasn't sold in a month, it's priced too high."

There are several examples in the article that are designed to "show" that the property market in Houston isn't doing so well - that we're following the rest of the nation down the toilet.

Mais non, I say to you. Do you remember my article back in January about the appraiser whose seminar I attended, and that his position is that the worst housing value performance was in partially developed, new neighborhoods where the builder was still building?

Now, go back to the Chron's article - notice that each of the "bad" value examples are .. partially developed new neighborhoods where the builder is still building.

Now, a 1700 sq foot house in Timbergrove for under $300K? That's a steal, and no wonder she's getting a lot of traffic.

Let me give you an example - in 2005, I lived in a huge four bedroom house in Country Village. Great house. Needed a lot of work; probably more than ten years' deferred maintenance. The house was pending foreclosure, as the owner hadn't been making payments for a good long time. I made a short sale offer to buy the house; I did my research and determined that the house was worth a maximum of $235,000 in the next five years, and that work was needed - so I offered $210,000. They declined, and countered at $265,000.

I moved. Four months later, they sold the house for $195,000.

Now, a week ago, I found a glorious example of the identical floor plan from the same builder, about a mile and a half to the north of where I was. I looked up the listing, and they're asking $575,000. Okay, it's in terrific shape, but the SAME floor plan (with slightly fewer square feet) sold for $67 a square foot, and the one being offered currently is listed at $167 a square foot.

Here's one of the real issues in the real estate market in Houston, one that my Realtor friends are talking about. People are pricing their homes far too high, and then complaining about the market when they don't sell.

The house listed at $167 per square foot is on a corner lot to a primary surface road (big negative,) and is ONE HUNDRED DOLLARS PER FOOT HIGHER THAN THE MARKET. Even if one takes property condition and that it's a slightly better neighborhood into account, it won't appraise. Ever. And it will languish, extending the statistic with HAR for property time on the market, and the Chron will dutifully write about how everything's gone to hell in a hand basket.

If someone makes a financed offer on this property of which I speak, lending rules will now require that there be at least two comparable sales within a mile of the subject property that support value. Meaning, at least two homes within a mile have to show that the house is worth the price from the last ninety days.

The SMART Realtors, the ones who have a good business, are the ones who look for comparable sales BEFORE turning in a contract offer. And, the ones who refuse to list a house at an unsupportable price just "to see if it sells."

Through it all, our local media follows the national media trend and focuses on what doesn't work. Does anyone remember the late 1970s, when Houston (and, thereby, Dallas) had economies that were contrary to the national climate? Our reporters were touting our cost of living, our opportunities, and how exciting it was to be here.

We're again in a similar climate. I note that the Chron's article reviewed the opinion of a Texas A&M researcher about how people in Houston are "afraid to make a move, because of the possibility that the oil industry will be punished after the national election."

Uh, hello? Were any of you paying attention to politics inside the Beltway? They aren't interested in doing ANYTHING but hoovering up every free dime that the corporate lobbyists can shill out. Congress is unwilling and/or unable to do ANYTHING to make change happen, and you think that this is a valid point how?

Did Congress and this government set the price of oil today over $100 for the third day running?

Nope.

Have any of these people talked to people in the oil industry?

Nope.

In three weeks, Singapore Airlines begins non-stop service from Houston to Moscow and thence to Singapore to service the OIL industry. Our Sonangal Express flight operated by World is going to up-gauge to a 747 (according to a charming World employee who works that flight.) My friends in the oil patch are feeling fairly confident (albiet more poorly paid than before.)

I don't hear ANYONE holding back because of speculation that the oil business will be punished, save for a single expert at A&M.

Why didn't they ask Barton Smith?

Simply put, if you price a home consistently with other, similar homes in that neighborhood, it's going to sell. If your Realtor pre-screens proposed buyers to make sure that they have a loan, it's going to close. The Chronicle's own research tool shows that, in established neighborhoods, prices are moving upward consistent with the pace of inflation and sometimes higher.

If you "think" your house is worth a certain value, if you have something really unusual or out of character for the neighborhood, if you don't pre-screen borrowers for loan approval, you'll have trouble.

If you're thinking of selling your home, look for a Realtor with a successful history of business in the neighborhood in which you're selling. Take the small steps to make the house show as well as it can. Price it according to neighborhood trends, and not what you "need" to make on it, or what you "think" it's worth.

This ain't San Jose, California two years ago, folks. It's good old Houston, Texas, and we haven't had disco price increases outside the loop since the early 1980s.

And, thank God we haven't. It gives us a foundation of stability from which to move forward.

The start of something more .. commercial

Today marks the split of my commercial online blog from my personal online blog.

Here, syndicated and otherwise distributed, will be my various articles and observations about Houston, the business of doing business here and in general, and a straight story in street terms of just what's going on with our economy and how to interpret all of the flak heard in the media.

I'll start by re-posting old articles, starting from the beginning moving forward.

These blogs will also be posted in podcasts - you can subscribe either to the written or podcasted blog at your whim and risk.