Reader Sightings: 5838 NE 14th

A reader sent this in:

"Listed at $270K, bought for $305K in 2006… ouch.

5838 NE 14th Ave, Portland

More details"

I also like Trulia's new feature that incorporates Google Maps into the page, which makes it easier to see if there is an ugly monstrosity next door.

I swear I'm seeing more and more short sales these days. I know they make up about 5% of the local market, but it seems like there are more out there.

Tracking the NAR's Spin and Lies

This chart is a brilliant view of the continued spin from the NAR, and how often it has been wrong. I understand the are trying to encourage people to buy and sell, but at some point if you are continually wrong you lose credibility. I know they lost my attention respect a long time ago.

It's ever funnier (or scarier) when you put this chart together with the recent news that Lawrence Yun (the NAR's cheif economist) was named as one of America's top economic forecasters.

And just so we're all on the same page, I'll believe we will have hit bottom when we see the sales decline plateau and start increasing, and inventory stop increasing. Prices will rise after that.

And don't forget, two data points is just a line. Three is a trend.

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"

Would you buy a house from this Realtor?

Here's another incredible story of a couple about to lose their house, and the amazing part is that the woman is a Realtor and should know better.

A larger than life mortgage.

The analyst kicks in at about 2 min 45 seconds into the story, and basically lays into them.

The cliff notes version:

• Couple buys house in Livermore CA for $1.5M
• Couple elects to take a negative amortization ARM, and only pays $2800 a month
• Full mortgage payment is equal to 70% of their gross income
• Couple racks up an additional $100k in finance charges on $1M loan, which is added to principle
• Principle reaches 110% of original loan value and bank requires them to pay full monthly payment.
• Payment jumps to $8000 a month
• Couple freaks out, asks to renegotiate loan at 2% for 40 years!
• Bank offers 5.75% for 38 years, or a $6000 payment
• Couple still can't afford mortgage at a rate most would be thrilled with
  

Again this couple wants us to feel sorry for them, but in the video she admits freely that she didn't read the loan paperwork. I also believe they were speculating, as even if they refinance to a 38 year fixed loan (as the bank offers) they still can't afford the mortgage.

I'm scared to think of how many customers she offered "advice" when she obviously has no clue what she's doing herself.

The value of this house has now fallen about 30% to roughly $1M, so they're looking at foreclosure, but vow to "fight it". Right.

I swear, I couldn't make up stories this crazy. I'm just not that creative!

Trying to Get Away

We're in Seattle for the weekend, enjoying a few days away from weekend chores. But I can't seem to escape the real estate hoopla.

On the front page of the Seattle Times today was this story:

http://seattletimes.nwsource.com/html/realestate/2004329266_homesales05.html

A few excerpts:

"Last month King County saw 37 percent fewer houses sell and prices fall 3.3 percent compared to March a year earlier. The real-estate market was no stronger in surrounding counties, the March sales-activity report released Friday by the Northwest Multiple Listing Service shows.

But here's the riddle: With buyers edgy and more homes for sale, why aren't prices dropping more? In fact, after being essentially flat since November, King County's house prices actually ticked up $10,000 from February to $439,900.

The reason for the relatively modest year-over-year price decrease, real-estate economists say, is sellers' unwillingness to cut prices. Economists call it "stickiness.""

The article focuses on "stickiness" and offers a few insights into why prices haven't dropped yet, including emotional ties to the house, and owing more than the house is worth.

"A study by economists Karl Case and Robert Shiller, who also author the S&P/Case-Shiller Home Price Indices, reveals just how strong the reluctance to discount is.

It asked sellers: "If you had been unable to sell your home for the price that you received, what would you have done?"

• 37 percent said they would have "left the price the same and waited for a buyer."

• 28 percent said they would have turned their home into a rental rather than sell for less.

• Fewer than 5 percent said they would have "lowered the price until they found a buyer."

Realistically, however, some sellers cannot lower their price, observes John Kilpatrick, president of Greenfield Advisors, a Seattle economic-analysis firm.

They're the ones who bought recently with little or no money down or the ones who refinanced the equity out of their homes just as prices slumped.

"The price is sticky because oftentimes they owe more than they could sell the house for," Kilpatrick says.

These sellers feel they must hold firm -- or take their home off the market and wait for conditions to improve.

"There's an old saying, 'Price drives everything.' But I'm not of the opinion that sellers are at that point yet. They're resistant," says Paula Fortier, the broker in Coldwell Banker Bain's Bellevue office.

Adds Mike Skahen, owner/broker of the Seattle real-estate firm Lake & Co., "Sellers are kind of stubborn, but the ones who are realistic are getting their homes sold."

He cites the recent sale of a North Seattle house originally listed for about $695,000. It sold three price drops later for $578,000.

Then there's the seller who thinks the condo he bought last year is worth 10 percent more. Not only will buyers not bite, but Skahen says agents may not either. "We've been known many times not to take listings where the sellers won't be realistic," he says.

While this many seem bleak to sellers, Kilpatrick, who holds a doctorate in real-estate economics, senses the situation is only temporary.

"The good news is homes are still valuable commodities," he says. "Prices are depressed, but I suspect as this shakes out -- and I suspect it will shake out in 2008 -- you'll see the market rebound.""

What seemed to be missing from the piece is what happens to those houses that are worth less than the mortgage. If the owner has an ARM that resets and they can no longer afford the payments, but they can't sell, it goes into foreclosure. A year later the bank owns it and will likely fire-sale it for 20% or more off, driving down prices.

Or if the builders can't sell but need cash to function, they'll have no choice but to drop prices to unload the properties.

So I really doubt the market will rebound in 2008, and I'm surprised to hear this from a PhD. in Real Estate Economics. More and more foreclosures are coming on the market and they will drive down prices at least in Portland and I'm sure in Seattle as well.

If I'm wrong, I'll buy him a coffee, but I don't predict a rebound until at least 2009 at the earliest.

Free Fall Friday - All of Portland?

At least one Realtor blog is now predicting a decline in prices for the Portland metro area in March. "Portland Home Prices Finally Fall in March"

I have some doubts about his methodology, but I give them props for going on record as predicting a decline, and I imagine they will soon be run out of town by the Portland NAR.

More (un)worthy subprime fallout victims

My wife pointed out another article on CNN about a couple that's been affected by the subprime fallout, Careers vanish after subprime 'free fall'.

"We're still both in shock that it could go from something so good to so bad so quick," said Kent, 59. "New Century in 60 days went from top of the heap to out of business."

The two didn't say exactly how much money they made at their last jobs but Kent admitted they each had six-figure incomes.

Today, they're trying to get by on his unemployment benefits of about $450 a week, which covers only about an eighth of the basic payments they owe every month."

"Their home equity line, mortgage, health and life insurance premiums alone cost about $10,000 a month. Still, they are trying to hang onto what they call their dream home with a view of the Pacific Ocean where they live with Mysti's 11-year old son.

Kent estimates the mountainside home in San Clemente, Calif., which they bought in 2005, is worth 20% less than it was a year ago. And in the current market, he said he's not sure he could sell it for even that amount.

"We've used up most of our reserves, cashed in her 401K," said Kent. "We're going Mach 1 into a wall. When we run into it, then we've got to decide what to do next."

Despite their financial problems, the Copes have worked hard to protect their credit rating, staying current on bills. And they've made cutbacks: trading in Kent's Corvette for a Suburban and getting rid of the gardener, for example. But the couple also has learned that it didn't need everything it used to spend money on."

I lived in San Francisco and was laid off when the the dot-com bubble burst and felt the pain of going from a comfortable salary, to unemployment that doesn't even cover your rent so I know that frustration. I had to wait for my lease to expire to find a cheaper place to rent, but I was able to sell my car, found a free place to stay in exchange for work, and sponged off my girlfriend (now wife) for a few months while I enjoyed a relaxing summer looking for a new job.

But their cutbacks? "And they've made cutbacks: trading in Kent's Corvette for a Suburban and getting rid of the gardener, for example." They ditched the gardener? And sold the 'vette for a Suburban? That's economizing? How about selling the Vette and sharing a car? Or at least buy a corolla, or anything that gets more than 10 MPG.

I'm also amazed at the number of people who are cashing in their 401k's to prop up their extravagant lifestyles. I've already given up any expectations of seeing my social security in 30 years, but after bailing out the banks and the homeowners who overextended themselves, in another 20 years I'll be bailing out the homeowners who sucked their retirement dry in exchange for an ocean view and granite counter tops.

I need to stop reading the news, this is getting depressing.