I have been writing about the market for months saying we are bottoming. What we needed was a price and interest rate line to cross, along with plenty of mortgage money. Well, it looks like we are there and past through the bottom, over the winter here. Let's look at why.

1. Many markets like Southern California, Florida, Nevada, Arizona, which amount for the bulk of the foreclosures have dropped over 50% from the highs. In some cases 60%.

2. Markets like Bergen County New Jersey, North Jersey in general and many metro area suburbs have decline less than 20% or there abouts and have been declining in volume for about 3 years. They had a big run up yes, but no where near the amount of the areas in point 1. There wasn't the same amount of area to over build in the Bergen County North Jersey area. The towns that had some major building are still resolving, but resolve they will, here and now.

3. The Major Cities like New York and maybe Boston somewhat have only been in a decline for a lesser time. They are the money centers and held up longer. They also benefited from the dollar decline to international investors. They had run up too far for too long and will probably stay flat or down for a while yet.

4. Interest rates went under my 5% barrier. This is a psychological barrier for many buyers. Once under decisively they are hooked. It is the old last low areas that people wanted to finance at, or even did.

5. Mortgages are now for real, since the fed mone, has been buying mortgage paper like it is going out of style.

6. The last key was Jumbo's came back again. With out the securitizing, jumbo's dried up. Well they came back at normal rates, just a little high on the spread but much better than the past. This will help the higher markets other than the speculative in point 1. Markets in point 2 and 3 need the jumbo's.

7. Extreme pessimism had been reached. Almost every one was or is a real estate bear.

8. Super aggressive Federal Reserve and Treasury, making money come out of every crack at some point. I keep saying if the money comes in, it will happen. I almost felt battered by it for the past 3 months waiting for the data to start supporting my position.

Market projection are done with faith in your beliefs. Everyone who knows me has seen I put my money where my month was and started 4 more new houses this quarter. I have been trading to long not to feel the misery that this bear was and is giving off. I think the bear is at least going into hibernation and maybe he is going away for sometime.

Some places like Atlanta need a major intervention, this will happen too. If any investors had the savvy they would be heading there right now. I am trying to get a group together my self. There is big money to be made there if you get there before the fed dose.  I am not getting all caught up in this, it could fall apart abit latter in the year seasonally, along with selling presure. However, the real key is the dollar and our overseas investors for our Treasuries, hang in there with us.

So, on the back of Florida's home sale volume going up for the 5th straight month.  Southern California home sale volume is perdicted to be up about 100% this month, along with a possible price rise. Nevada volume is up and Arizona is picking up . Yes, they were down alot, maybe as much as 60%, but it all starts with smoke, then there is fire. People will buy and in force when things are right. Let's remember a lot of people are out of work, maybe 9%, but that leaves 91% working. Buyers smell a deal and that is what they are getting, great deals with great rates!

You know, we are all tired of the bear now and what to smile more, laugh more, play more and just not worry so much.

We will go over the other markets in Trader's Desk Signals post soon.

If you are a seller, you have a chance to move on. Let's get busy selling real estate, if your a buyer, then get step up, this a one of those great times to buy!

Being a lonely Bull this winter has not been fun. It is no fun to be on the other side of everyone else. Now, I think I am going to get some company. Today's existing home sales, reported by NAR were up 5% nationally. It's a start!

Richard

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The Federal Reserve lowering the Funds rate helps everyone. It lowers many home equity loans and business loans which look at the funds rate to set their index rate. It should also lower home mortgage rates although since the crisis started the yield risk spread, availability and willingness to lend effects the rates too.  

Interest rates are coming down. Mortgage rates are coming down for real estate, finally. The Fed buying agency paper from Fannie and Freddie to provide funds to loan for mortgages. Sooner or later it will stick. It takes a bit of time to turn the Queen Mary and that is what they are doing.

However, one thing I learned about monetary policy is that when it is altered, it take a certain level of critical mass and time and then suddenly it will take affect.

It will happen!   The actions of investors entering the market a speculate along with low rates and finally available funds will pull this real estate market together. Yes I believe investors will start to buy up properties and turn them into rental for speculation, when the money flows.

Homes will sell, new homes will sell, real estate in general will sell. It's all about money!

Richard

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P.S. Cars will sell too!

Rental Shortage needs to be tapped!

The real estate market is inside out in many parts of the country. People are leaving their foreclosed homes and need a place to live. Rental rates are raising due to demand. The Treasury and Federal Reserve must set up a Fannie and Freddie package for investors with down payments. This will allow people to use their credit and down payment money to buy these foreclosed homes, get them off the market and make property available to qualified renters.

The credit worthy buyers are not the foreclosed persons. They can only rent now. You need a credit worthy buyer with capital to take the inventory. This will provide rental housing, which is needed and help solve our over all problem.

To understand the problem, it is dynamic, as it goes through different stages, the needs and solution change. The combination of this type of program, with the same 4.5% loans from government back sources and the 4.5% program for user buyers, will stem the drop in prices and turn this around.

There is still a problem for qualified user buyers to get loans. Along with declining appraisals. This will not stop until enough of the properly applied resources are brought to bare. Fannie and Freddie must be allowed to be this conduit to get this done.

New home sales are down and rightfully so while the weakness in the markets continue. Many jobs are lost and unemployment is rising. As soon as this get done people can go back to work. The buyers of these homes will do fix ups and help the economy. Remember the most important thing to capitalism is capital. The capital must be applied, no differently then how troops are strategically placed in a battle field.

Let's get this battle over and go on to a peaceful time.

Richard

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I have been reading many different ideas about the problems in our Real Estate markets.

I think it is important for us all to focus on the solution. The market got overheated and out of line by inappropriate use of capital. The capital has been removed, which as you all can see has not only hurt the market but our whole economy.

 Let us review these facts:

Overbuilding which was accommodated by unqualified purchasers of homes started the problem. Over pricing, by having too much capital in too many hands which was not normally available caused prices to accelerate and rise to high too fast.

The laws of physics tell us, you can not sustain a rise without more capital and more people to use it.  It also says when the supply of capital and people lessen an equal and opposite reaction will occur until it is interrupted by more of the original fuel, MONEY, mortgage money, at a very good rate, not without qualification.

The offset is there are people, there are always people who will step up, but the incentive of a low fix rate that will really get approved, if you have dissent qualification.

Right now even good credit worthy people, are not getting mortgages.

I say to my fellow Realtors, builders, real estate investors, real estate buyer and sellers, we must step up and let our law makers get this done.

We need government provided, through Fannie and Freddie, loans at 4.5%, to normal qualified buyers. This will work. We could be doing better if people could just get mortgages, imagine if they got good mortgages that made them want to buy!

We must let our lawmakers aware of our interest in getting this done!

I see people denied mortgages that should not be denied mainly because the lenders don't have the capital to lend. Let's not waste our time thinking it will fix it self. The Banks are keeping the money to themselves. People are no longer trying to buy in many cases because they have been denied.

It is our lives!

What do you think?

Richard

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This real estate market is waiting for a reason to do something. The reason has arrived in interest rates. Deals are starting in our market and they are all price points. There is a pent up demand and if the financing comes and stays the property is going to sell. We are at a sweet spot where values are coming down to meet the bids. Seasonally we are where sellers give in. If the Fed gives the money Fannie and Freddie to put out at 4.5 % look out. It won't cost the tax payers anything. The Fed can borrow almost 2 points lower.

This will cause the mortgages on the property sold to be closed out and the institution will can get their money out to pay off the mortgages to the extend of the sale.

I blogged on Nov.16,2008, If there is a solution, I think this is it, tell me what you think! about this process the government could do.

They are going to do it!

The point is to have fate and get your self ready for a different real estate market! Even if you think it is too good to be true. I have been there before. It is not supposed to make total sense. There will be variables that will surface that we are not aware of now.

See you on the Dark side of the Moon! 

Richard

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It is what I been waiting for the Fed commits it hand. I don't agree this is the right way. I believe they should of funded Fannie and Freddie to loan 4% loans, but hopefully this will work. The issue is that the money that goes into to buy the paper must go back into the lending pool.

Today they posted the 30 year rate under 5%, 4 7/8 and better on 30 year fixed. This will turn most markets, if it holds. Get ready the last time I seen this in November was 1993 and Dec. 1993 was the best sales month of that year for us.

Get ready for a busy time, people will respond and buy. Interest rates drive it all, except for employment, but rates going down will create jobs.

I'm up and will start more new houses and keep my men working!!!! Santa Claus is not dead!

Richard

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The past few days Short term Treasury Bills and LIBOR, both over night and longer have eased.

The Treasury Bills are going up in yield, meaning the flight to qualityis backing off. The LIBOR interbank rate has been back off. This means banks are starting to lend to each other. This is what we need to get loans out to people needing credit. It will help to ease up mortgage loans for qualified buyers. There has also been some execution of mergers and acquisitions, many groups and companies are able to raise money through debt. 

Confidence has to come back and is indicated better by these changes. Corporate executive need to see these improvements so not to plan layoff and make it worse. Our loan rates for mortgages will have a chance to ease as these changes take effect. Availability of mortgage money will increase as the market fells more confidence.

While we have been dazed by the financial markets, and watching the Presidential campaign other things have been improving.Crude oil has more then half itself from July highs. If you have been following my blog I called it at the top and predicted this decline. This is taking a weight off everyone. I have always felt that good things come from bad and this is one of them.

The last important indicator is gold has drop over the past 7 days. This is showing that the fear is weening. A little time and continued work by the world financial governing bodies to keep the system liquid, we should be able to see the changes in our real estate businesses.

There are many people that what to buy but are nervous, when their fears subside, we should see the market pick up readily.

Maybe one more good thing may be is that we will try to keep our feet on the ground from here on. We can't get caught up in the times and must question extremes in good as well as bad.

Let's sell Real Estate, 2009 will be a good sales year.

Richard

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Largest Banking Branch opening boom I ever seen leads to bust!

Over the past few years, all around Northern New Jersey we have seen banks being built. I suppose it is the same else where. So many Banks, it leads you to believe, how we lived without them. Population has not gone up much to create a greater demand, so there must be another reason. I have said over and over, every time something booms so much it leads to a bust.  Then the financial crisis came. Were all these banks being built, showing the disease that the banks have? 

Let's try some ideas.

They wanted to grow to get market share and not be left out.

This is a reasonable idea.

They wanted to grow to create a bigger critical mass to sell at a premium to a bigger suitor.

Possible for upstart and smaller banks.

They wanted to grow to be too big to buy out.

Possible for bigger banks.

They wanted more deposits desperately, because they learned how to leverage them up to create big profits and bonuses etc., using securitization and derivatives.

Very likely, deposits are king and they wanted them.

Was it because they could grow and everything seemed great to grow.

This is also possible, sometimes things follow the obvious.

Nevertheless, It was and is unusual and I intend to ask some banking executive what they think was and is the reason.

I feel that there is a correlation here between optimism and the reality of the situation. While banks thought things were good, they were leading to the worst times in almost a century. Why these Bankers were's paid so much money to be wrong, I could not tell you?

What do you think?

 Richard

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