Stop the mortgage bailout on NPR Wednesday

I just received an update about the stop the mortgage bailout initiative. Tune in to NPR tomorrow to hear more about it.

"Hi all. ?Thanks for your efforts against the bailout. ?We have good news; as a direct result of all of your hard work, the media is finally starting to wake up to the reality that there is side to the bailout other than the cheerleading that is currently the mainstay. ?

Tomorrow morning, on the national news radio program "Morning Edition," NPR will air a piece that includes interviews with Stop the Housing Bailout, Patrick.net, and Seattle Bubble. ?We are also in contact with the New York Times, and hope that an article will be forthcoming about our efforts to stop the bailout.?

Please continue to post about this issue. ?And -- as we will be encouraging folks to do on the site -- please contact your local media outlet to pressure them for more balanced bailout coverage!

Best. - M.?

http://www.stopthehousingbailout.com"

The No Bailout Poster Child

CNN recently ran a story about the middle class getting pinched "From $70K to food bank, one family's struggle"

"When she was laid off in February, Patricia Guerrero was making $70,000 a year. Weeks later, with bills piling up and in need of food for her family, this middle-class mother did something she never thought she would do: She went to a food bank."

"Guerrero is estranged from her husband and raising her two young children. She's already burned through her savings to help make ends meet, and is drawing unemployment checks. She has had to take extreme measures to pay for her interest-only mortgage of $2,500 a month. In fact, her mother moved in with her to help pay the bills. Guerrero even applied for food stamps, but was denied."

On the surface it seems like a story of a middle class family falling through the cracks and getting pinched by the housing crash.

But dig deeper and you see that this was just another example of a family living way beyond its means, and finally getting caught.

According to this blog, "On the surface, this does seem like a true unfortunate soul. However, when you poke the story with a stick and say, 'boo', well, lets' just say Guerrero doesn't warrant much sympathy.

The 2,948 square foot house in question was purchased from her estranged husband's parents in August of 2002 for $202,000. By August of 2006, she and her husband refinanced this home a couple of times, finally winding up with $649,999 in debt loaded onto the house. That's close to 450k in cash out refi action in 4 years, 100k a year....and what was purchased with this so-called equity? If you watch the video that accompanies the story, Guerrero makes mention that she took off her Tiffany bracelet and left her Coach handbag in her car when she strolled into the food bank. In the photo, she is also surrounded by a sea of granite, so the 450k more than likely financed some pricey remodels as well Tiffany bracelets and Coach handbags.

Patricia Guerrero is not deserving of any sympathy because at 70k a year and being in the mortgage industry, she should have known she couldn't afford a 650k loan...even if the husband that bailed was making 70-80k himself. They may have used some 'liar loans' (stated income, no income verification, etc) to make the loan fly on paper, but in reality they bit off way more than they could afford. "

I'm sorry, but they really don't deserve to keep the house. They've basically already sold it, pulling $450k out if it, and for what? Looks like a nice kitchen remodel, a tiffany bracelet and at least one coach handbag.

This woman needs to stop looking for her bailout and figure out how to provide for the kids. It's obvious there were no savings, so maybe it's time to sell the house and find a cheap rental, or sell the bracelet and the coach bag, or god-forbid find a interim job to cover some of her expenses. I'm tired of people looking for a bailout. Own up that you made a bad decision and figure out how to get out of it. Cut your expenses, figure out how to get some income, and don't make the same mistakes again.

Portland median prices continue to fall

The latest Case Shiller data for December 2007 was released today. The median Portland home price fell 0.6% from November to December, from 183.65 to 182.47.

Year over year growth slowed slightly from 1.3% to 1.2%, but is surprisingly still positive.Don't forget that this data is backwards looking, and almost two months old at this point. Given today's economic indicators I expect things will continue to get worse.

On the bright side I do believe that Portland is weathering the storm for a few reasons.

1. The urban growth boundary prevents the overbuilding that other cities have seen.
2. We have a lower than average foreclosure rate than other areas, but we are certainly not immune from risky, 100% financing.

The real estate fallout spreads

I had dinner with a customer last night who works for a major US retailer.. He mentioned that they had done some analysis recently looking for potential growth areas to target this year, and as they were analyzing the overall real estate segment, two sub-segments showed major declines recently. Realtors, and mortgage brokers.

The fallout from the popping of the housing bubble is starting to spread into my day job.

Portland Not Immune From Foreclosures

The Oregonian has an interesting article about foreclosures in Portland and how they are not only affecting low or moderate income homeowners (article link: Foreclosures move into tony Zip codes)

This confirms my suspicions that most of the foreclosures in Portland will be due to:

1. Speculators getting caught by the bubble bursting and having to sell for a loss

2. Buyers living beyond their means and buying more house than they can afford with risky mortgages

3. Owners tapping into the equity of their house to take out money, and not being able to keep up with the additional payments

I'm seeing more examples of #3 and #1, but I haven't seen too many examples of #2 just yet, but I think they will increase as 2-3 year ARM's reset.

Salespeople vs. Order Takers

The old saying that "a rising tide floats all boats" is true of all industries and this was certainly true during the real estate bubble. Almost every real estate agent looks good when the market is growing by 20%, but in a flat or declining market, the true sales experts really shine. A true salesperson can can continue to grow their business and close deals even as the market declines.

This year will differentiate real salespeople from the order takers. The real estate agents that know the real market conditions, know how to properly price and market a property, and know how to negotiate will survive the slowdown. Those that jumped in during the past few years for the easy money (the order takers), or those who have become lazy over the past few years of easy sales, are starting to find out if they have the skills to survive or if they were really just taking orders.

One reader (Neal) recently asked if I know of any good real estate agents. In order to remain neutral I don't want to recommend anyone, but here is what we are looking for in our ideal agent to help us find an investment property:

1. Knowledge of the neighborhoods we are interested in, their appreciation potential, as well as rental potential;
2. The ability to identify comparable sales for target properties;
3. Excellent negotiating skills;
4. An insider's network to help find deals that might not be on the MLS; and
5. The ability to see opportunities that we might miss.

Whether you are looking for a buyer's or seller's agent, make sure you interview a few different agents to ensure they have the experience and skills that match your needs.

Portland home price appreciation drops to its lowest level since Jan 2000

According to the latest data from the S&P/Case Schiller Home Price Index, the YoY growth rate for the median price of existing homes in the greater Portland area dropped to 1.9%, it's lowest level since January 2008. This is just the latest data point in a long slide that began in April 2006, and doesn't look like it will stop until it's well into negative territory.


Just looking at the chart should answer any the question "did Portland experience a bubble?" Yes.

Has it popped? Yes

Have we seen the bottom yet? Nope

Is it a good time to buy? If you plan to be here longer than a few years, it might be. I think I'll wait a few more months at least.

The data is located here for anyone else who is curious::

http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html

I'll be posting updates as the new data becomes available. Stay tuned.

The mortgage rate freeze is a bad idea

I'm sure I'm not the only one - outside of those who took out mortgages they couldn't afford - who thinks the rate freeze bailout is a bad idea. Ignoring all the potential legal issues with the plan, or the fact that it might be impossible to actually define who will be helped, this basically amounts to a bailout for those that made a poor decision.

I certainly didn't get any help 5 years ago when some of my internet stocks crashed. That's not nearly as heart-wrenching as watching little Johnny lose his house because his parents bought a house they couldn't afford with a mortgage that shouldn't have existed in the first place.

I hope the bailout gets tossed out in court. As painful as it might be for everybody, letting the market correct itself is the best way to go. If we don't get the bad loans off the books, we'll be in the same situation that Japan was in 20 years ago. And I'm sure nobody wants that.

Portland home prices will fall soon

Take a look at the latest S&P/Case Shiller Index for Portland. Although it looks like Portland is still in good shape, with 2.75% price appreciation year over year, if you look at the chart near the bottom of the page it's obvious that the trend is going to go negative soon.

This is also August data, well before the mortgage industry had it's major convulsions.

I predict price growth in Portland will go negative before March 2008. Anyone else care to make a prediction?

Introductions

Hello! My name is Ian, and my wife and I recently relocated to Portland from Stuttgart, Germany. We loved living in Germany, and so far we've loved Portland even more! When we arrived here in November we decided to rent a house so we could explore the different Portland neighborhoods. We were taking the risk that home prices would continue to rise, but we figured that was better than buying a house in a neighborhood that we didn't like.

And boy are we glad we didn't buy last year!

It's been a crazy 10 months as we've unpacked, settled in and started exploring restaurants in the Hawthorne, Belmont, Alberta, Hollywood and other neighborhoods. We've surfed real estate web sites, drooled over all the beautiful craftsman houses and bungalows in town, and tried to pick one neighborhood over the other. We've also been frustrated by the crazy price increases that Portland has seen in the past few years, and wonder if we'll really be able to find a house we really like, that we can also afford.

But then a funny thing happened. As spring sprung, houses started to pop up, and up, and up and suddenly in seemed like every other house in Portland was for sale. And then prices started to fall. And then the mortgage industry imploded. And suddenly there was hope that we'd find a good deal after all. So stay tuned for my "outsider" view of the Portland market as we try to find the perfect duplex to live in for the next few years!