Needing To Sell Your Home in California? Do It Now And Be Aggressive!
Yes, California and especially here in San Diego it can feel like paradise most of the time and yes there are deals in the housing market which you can find that are 40-60% off of the peak prices in 2006, but is now the right time to sell, buy are things going to get better or worse? Even though I believe it is always the right time as I don't believe in timing the markets, there is reason to look hard at the influences affecting our economy and our housing.
Let's talk about the Dow. With the volatility and decline in the Stock Market this past couple weeks to levels today under 10,000, some including myself believe this to be just the beginning of a major pull back (not to be quoted but I wouldn't be too surprised to see a DOW 6500). T2 partners predicted over a year and a half ago we would see this previous rally as the "Mother of all Head Fakes!" and predicted another major downturn in both housing and stocks.
Consider the changes in bank accounting practices. Last years repeal of the mark to market accounting rules and the reserve requirement changes have lead to basically a flood of free money for the banking industry. Since they are not freely lending, they have been pouring money into stocks, thus leading to the 60+% increase in the stock market.
Banks used to have to value their loan portfolio's to market values every quarter and since they can leverage these holdings, now by up to 900%, when values declined, many of these banks became insolvent overnight and was the reason the FDIC was feverishly shutting down banks. Since late 2006 383major U.S. lending operations have "imploded" http://ml-implode.com and why the accounting changes have lead to the Stock Market levels they are today. Just as cheap and easy money did to the housing values, the stock market is being artificially inflated. Banks can now value the loans they have on many of these upside down homes to some arbitrary value if they consider it a long term hold over 18 months. With a higher value they can go leverage more from the treasury at 0-.25% and why these banks are now flush with cash and have paid back Tarp funds so quickly and why some now have shown such huge profits. Meanwhile these "Toxic" assets which have been sitting on their books like a ticking time bomb, non preforming for over a year can soon be liquidated at trustee sale.
A problem these banks face is that when they liquidate the asset, the actual value is realized and they now have to cover their leveraged positions. These banks want to take advantage of this current housing enthusiasm and lack of inventory to dispose of these properties. The current low levels of inventory and artificially high values created by the intentional reduction of inventory and purchasing credits used to stimulate the economy through the housing market have created the perfect environment for banks to quietly dump properties. Some of these banks are pulling their money from the stock market early ahead of the pack and why we are seeing such volatility.
There are so many homes in default right now, roughly 7.1 Million of the 51 Million mortgages or roughly 14% and unlike in the past where 30+% were able to cure a default over 90 days, today less than 5% are able to cure. If you think it through, our latest consumer spending gains are fueled by those 7+ million households not paying there mortgage payment.
Inventories are starting to increase off of record low levels in California roughly 219,000 homes for the 540,000+ agents trying to sell them. The Banks have been stepping up their foreclosures this past month and some estimate by the 4th quarter will be 5-7 times the current levels all while underemployment in California is in the 20+%. Combine that with state budgets needing to be rained in leading to more layoffs you would expect the unemployment figures to rise.
What does this all mean? More distressed homes on the market, lower prices, more upside down property owners, fewer home owners able to squat in their homes without making payments at the same time big money flees the stock market. Could be the perfect storm for an ugly 4th quarter 2010.
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