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I'm Not Whining About 'Declining' - A Contrarian's View Of The Adverse Real Estate Market

One of my favorite real estate bloggers had a post featured today on the Active Rain Social Network. This real estate professional is smarter, more experienced and more widely-read than most of us on the network. The post was well-written, incisive and thought-provoking.

So I think it's only natural that I disagree.

Lenn Harley calls the "Declining Market" policies so much blather.

I'm having a hard time understanding some of the logic in the post and in the "Amen" chorus of comments. After leaving three long-ish comments, I decided to avoid hijacking her post and to post one myself. That will give Lenn and other smart people the opportunity to publicly humiliate me...or at least just educate me. So, let me try my hand at what Lenn calls Hard Core Real Estate Talk.

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First, let's go the post that started it...

The always excellent Janet Guilbalt posted about a deal that went sideways because the investor changed the guidelines to require another 10% down from the buyer of a $1,300,000 home. Then Janet says this:

"Fewer people who can get loans = fewer buyers = more unsold houses = declining values. And there you have it...what is really causing our industry to remain at a standstill."

Huh? Our industry isn't "at a standstill". Prices are dropping, foreclosures are increasing...that's not standing still.

That's a contraction.

Nobody was complaining when record numbers of buyers were qualified to buy. Nobody was complaining when houses would have multiple offers within one hour. Nobody was complaining when home prices were skyrocketing.

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Wait a second! Lenn might have offered something in the way of complaint as recently as last June:

"We need for prices to go DOWN. We need the housing prices to depreciate, deflate, lessen, lower, recede, slash, truncate, GO DOWN."

That's what's happening. The real estate market is like everything in life...it has seasons. There are times where the flowers bloom and there are times when the leaves fall. This isn't armageddon...this is just the other side of the hill.

Lenn reminisces in her post of the late 90's, when a Realtor could rely on any buyer that had good FICO scores. She then builds an arguments that people with great credit histories shouldn't be affected by the 'declining market' policies and lower loan-to-value ratios.

She's right...kind of. The FICO system has been a great predictor of a borrower's ability to pay since it was created...

BUT NOT ANYMORE.

There's evidence that LTV is the new FICO. Check out these quotes from Calculated Risk's recent interview of Wachovia bigwigs:

"...when equity in the home approaches zero, behavior changes..."
"their propensity to just default and stop paying their mortgage rises dramatically and I mean really accelerates up and it's almost regardless of how they scored, say, on FICO or other kinds of character, credit characteristics." (emphasis mine)

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I'm experiencing it first hand as the Hemet Home Loan Guy. I've seen ordinarily good people, even law enforcement officers, use their excellent credit as a free pass. Great credit is being used like medieval indulgences, Medieval Church selling indulgences and it goes like this:

Make an offer to buy the home across the street that is WAY less expensive than the model match you bought three years ago.
Get a friend or relative to sign a lease agreement saying that they'll be renting out the home you live in now.
Move.
Stop paying on your old house.

Turns out a high FICO pales in comparison to a good, old-fashioned downpayment in predicting a person's future behavior. Let's not be too wistful about a FICO score being the major criteria in getting a loan. That credit score system hasn't been tested by the sort of real estate downturn we're facing now.

That's why I am shocked when Lenn and her readers start turning on "The Institutions" for causing this mess. Like I said in my comments there, we're Americans...we like to let our institutions do our sinning for us. That doesn't mean we're not complicit.

Most of these same people would have cried bloody murder while the bubble was inflating if our institutions intervened, and if the government took action to stave off the rapid appreciation. (Most real estate professionals made enough money during the build-up to last an eight year recession...if they didn't blow it.)

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"I believe that the 'Declining Market Syndrome' is an obfuscation invented to give cover to lenders who suffered massive losses through loose lending standards."

If Lenn really believed that then she would lend out her own money to high FICO, high LTV buyers. Yes lenders suffered massive losses through loose lending standards. Cutting back is what ALL of us would do if careless spending got us in a heap of trouble. Anybody have a better idea?

american eagle To twist one of Lenn's passages:

THE INSTITUTIONS HAVEN'T FAILED ME.

Congress didn't fail me.
Fannie Mae didn't fail me.
Freddie Mac didn't fail me.
The mortgage companies didn't fail me.
Wall Street didn't fail me.

Nobody has a responsibility to throw good money at risky investments. Janet's example is sad, but an exception. Most of the declining market value guidelines have been publicized well in advance and most people aren't buying $1,300,000 homes. And if they are, I can't feel all that bad that they have to have another $130,000 in their savings account to afford it...otherwise, why are they buying a $1.3 million dollar home?

In most California cities, the declining policies are very simple and make sense:

5% reduction in total Loan-to-Value. If it was 100%, now it's 95%.
The appraisal must include 2 recent comparable sales in the last 90 days.
The appraisal must include 2 active pending sales.

Do those changes seem like Draconian laws bent on destroying our economy, or does that sound like 'makes-sense' investing aimed at protecting consumers?

To top it all off, FHA doesn't even have a declining market policy...and has even increased their loan limits!

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The slowdown is not just a season, it's a healthy and good season.

Here are the benefits of the current real estate market contraction:

Houses are affordable again for first-time buyers
Investors can rent a home at a profit
The fly-by-night real estate 'professionals' are quitting in droves
The real pros, who care for their clients for the long haul, are gaining market share

I'm not saying it's easy. I'm not saying there aren't some awful stories out there of fraud, mortgage deception, and people losing their homes.

Heck, I'm upside down on my house, too!

But I'm NOT complaining. Real estate has been good to me. And to the smart money investors that held off for the last several years. And to the simple folk that just couldn't afford until now. They are out there and they need my help.

It's a great time for real estate.

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Joey Aszterbaum is the Hemet Home Loan Guy and a member of the Active Rain social network of real estate professionals. To buy or refinance your home in Hemet, Riverside County, or California visit www.HemetHomeLoans.com or call 951.571.5751

Posted by Hemet Home Loan Guy, Joey Aszterbaum on 05/03/2008 10:16 AM

Comments (87)

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Originally posted at: Hemet Mortgage & Real Estate Blog: I'm Not Whining About 'Declining' - A Contrarian's View Of The Adverse Real Estate Market

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87 Comments on I'm Not Whining About 'Declining' - A Contrarian's View Of The Adverse Real Estate Market

MAY

2008

Joey,

I thought is is brilliant. We just love to take a stand and blame everyone around. As realtors (agents, etc) we are not saints, too.

I am too damn tired today but I will come back. I am bookmaring it. And flagging for a feature

MAY

2008

Jon: Daytona Beach, eh? You ought to be tired. Thank you for reading. See ya later!

Great post and information Joey!

I am also glad that home prices are declining. Here in Idaho, it has gotten so an Idahoan on an Idaho income could not afford a home in Idaho. Well at least not in the areas they were most likely to find a job! In the greater Boise area, I feel we need to get back to 2004-2005 prices for our economy to really make sense again. It's easy for me to say, because I've owned my current home for 5 1/2 years, and I know many people will suffer losses. However, it needs to get back to the point that home prices are affordable.

Pam: I think prices will land somewhere around where they were in mid-2003. If you make your payments and can wait, you're okay. If you pulled out all the equity to buy cocaine and a yacht, then yes, you're screwed. We need to ask ourselves...who really benefited from the jump in equity? Did it really improve anyone's life in a significant way?

Good Lord Man, back to freaking back!?! Are you kidding me?!? Joey Aszterbaum, the last two contributions by you have been amazing!!! I dare for one savory second ANYBODY to deny that. As far as the Feature that Jon Zolsky mentions, that should be an afterthought with this post. A Gold Star is almost a No-Brainer....once again.

I've only been on the lending side of things for 7 years, but here is my take. You give me a crap-load of money to lend, I'm lending on capacity to pay & collateral...no particular order. Wait! Damn right there is an order, collateral comes first because that's my retribution in case things go bad. As far as Credit & Credit Scores, they've become too convoluted. Too difficult to truly understand and lend under. Don't get me wrong, Credit is and always will be a barometer...a character trait to lend upon or against, yet I'm of the opinion that portfolios perform when Common Sense is head & center. I'm no Doctor but I'm prescribed/subscribed & subsidized. Okay, well maybe not the latter thing but I'm the former because Joey Aszterbaum is the proverbial Bomb.

You completely missed the point of my post.

I have no objection to and welcome home prices coming down. I've objected to agents and sellers who pollute our market with overpriced homes for over a year. When prices are too high, buyers stay home.

Now that prices have come down and are continuing to do so, buyers who do try to buy are rejected, not because of the buyers credit or their assets or contribution to the transaction. Buyers are being rejected because of an arbitrary and futuristic projection of the future value of the area in which the house is located.

The coveted low LTV is not based on reality. It's based on a fabricated futuristic model.

I'll go further. This model of requiring a higher down payment in geographic locations is a form of steering. Buyers seeking homes in one location can buy with 5% down. Buyers seeking homes in another area will need 10% down. As fewer and fewer homes are sold, the contraction will accelerate.

Fact is: Buyers have what they have. They don't have 5 or 10% more.

Housing prices are declining and that's a good thing for the market. OR IS IT? If houses in the declining areas can only be purchased by buyers with large cash reserves, that makes them move-up neighborhoods. However, if the buyer's contingency is in a declining neighborhood, the likelihood of it selling is reduced by the higher amount of cash needed by buyers.

I'm coming to the conclusion that this "declining market syndrome" is a form of social engineering and that is not the governments business. How much of the public's home buying decision making do we want to put in the hands of lenders and appraisers??? How much do we need Fannie Mae, a corrupt institution that was a contributor to the housing crisis, telling the public where they can buy a home????

Very well written post Joey. Most of this stuff is over my head so I'm going to sit back and learn a thing or two.

Joey - My goodness...tell us how you really feel! I love this post and how simply stated it is. I agree that the guidelines are where they need to be. I agree that FICO is a big part of it but like you said....so is LTV. Don't you just love it when customers want to buy a house with no money out of pocket. So...you want us lenders to lend you let's say 300k or so and nothing from you? How is that an investment? Maybe that is why so many have also SIMPLY just walked away from their homes. They had no vested interest in the property.

Parked to learn more....Jason you sound like Randy on American Idol !

Jason: So I'm Joey Aszterbomb and you're Jim Mortgageson, right? When do we put out our rap record?

Bryant: Got to talk to your lady yesterday. She's just not as fun in real life as she is online. KIDDING. It was great to meet her. This is a discussion worth having, so we will ALL learn a thing or two. Thanks for joining.

Missy: I know. How am I supposed to respond to that? Blush? Deny it? Jennifer has some competition today. Okay that's mildly funny but mostly wierd.

Naoma: That's exactly it. People have been trained (I'm not complaining, the market is what it is) that a credit score is a form of entitlement. "You have earned platinum status..." "You deserve...." This is marketing power at work.

Homeowners know that if they walk away, their credit will heal, maybe in as little as four years. Heck...if property values rise guidlenes will get so loose that it won't matter anyways. Or have the lending institutions learned some lessons going forward? But they'll still loosen it up, that's for sure.

Lenn: I'm so glad you arrived. I'm not so sure I did misunderstand you...unless this disclaimer clears things up:

Lenn IS NOT unhappy about lower prices, she's unhappy with LENDING POLICY.

But that lending policy is exactly what we should expect, and it's a factor in bringing prices down. These are the equal and opposit forces from when real estate prices were going up. Let me explain.

Four years ago, you list a home for $340,000.
Ten offers come in, most of them over $340,000.
The appraisal supports $345,000 based on recent sales AND active, pending sales.
The person who offered $360,000 needs to come in with $15,000 extra to make up the difference between the appraised value and the sale price
Now there's a new comparable sale to support higher values in the area.
Lenders get the idea and realize that 100% financing isn't 100% for long...heck, 103% financing!+

Here's my major disagreement with you, and I think you make it clear:

"I'm coming to the conclusion that this "declining market syndrome" is a form of social engineering and that is not the governments business"

The government is NOT setting these lending policies. These are publicly traded companies owned by stock holders and investors, even Fannie and Freddie. There has been, to my knowledge, no government action except the LOOSER guidelines for conforming loan limits.

The Declining Market / Adverse Market guidelines have EVERYTHING to do with economics / the market and NOTHING* to do with government. (*obviously government is connected to economics, but you get my point)

In Fact, FHA is the only loan that is directly impacted, and I emphatically state that FHA has no declining market values.

A strain that I hear in Janet's post and in the comments on your post is that loans are being denied in the middle of escrow and turning these deals sideways. Let me address this:

Lenders, when they change their guidelines, post it at some point in the future and follow through on the commitments with locked loans as long as they close on time.

I have seen loan officers spin their own mistakes by blaming the Underwriter or the Investor (or brokers will say, The Lender). They'll tell the Realtor this to get off the hook.

I believe, in most cases, it is the Loan Officer or the Mortgage Brokers' fault. They just aren't keeping pace with the changes. You said in the comments on your post that the guidelines are a moving target. That's true to a point...but NOT once you're in escrow (with very few exceptions).

My company is a direct lender. I'm NEVER had a deal fall out of escrow for loan officer negligence. NEVER. It's bound to happen sometime, I'm sure, but the plain truth is that I'm in one of the most adverse markets there is.

Now, I'm a direct lender who sells home loans on the secondary market. I'm thinking that Janet is a mortgage broker and that she performed her due diligence.

In that case, it was the wholesale account executive who blew it by not keeping up with the guidelines or by not communicating the urgency of locking in the loan. In other words, it was the loan officer that failed her.

Not the institutions. This is how capitalism works. It's not always easy, but it makes sense. I'm not saying the institution don't need improvement or are above the fray...I'm just saying that they're OUR institutions and we're all complicit.

The Market is US.

JOEY - There's plenty of blame to go around for the state of the real estate industry, but the only one that I'm willing to point fingers at is the mass media that thrives on negative stories and uses sweeping generalizations to scare people out of the market. You and Lenn are both very intelligent, and you both have strong opinions. This is not something that I want to get in the middle of, but I think that the dialog between you and Lenn is great.

Anway, the only thing that stands out for me is the California requirement of two comps in the past 90 days. In a slowing market, what happens when there are no direct comps in that time span, or longer for that matter? I'm not arguing the point; I'm really just curious to see how the banks are handling that situation.

As I am sure you are aware that some lenders are starting to take off the 5% hit for declining markets. I agree this is a healthy time in the market. Time to shed some weight and get back on a more realistic track!

Here is the deal. Prices are going to keep falling for a a while in a lot of areas if financing stays this tight. I know it was too loose before...but something has to happen to even things out.

Nice posts and it seems to have drawn a lot of interest. Good job look forward to reading more of your posts

The last recovery that I experienced (late 1980's-early 1990's) was much the same as todays before things got better- homeowners, seeing the futility of selling their present properties, engaged the "renter", purchased the new home, and let the old house go. It's nothing new. What I do see as a marked difference, IRRESPECTIVE of the cause of the disastrous market, was that as things settled, lenders did NOT make it extremely difficult for homeowners to purchase homes. There was no "declining market" status, wreaking havoc with the creditworthy buyer seeking to purchase a home, and there were no surprises of increased downpayment demand from consumers. The banks, while exercising a closer eye to purchasers, did not (in my experience) decide to "cover" themselves with a future occurance; they remained more diligent with respect to EXISTING ratios, and standard (per the loan program) down payments. Were they a bit more discriminating with documents that were attached to the loans? YES. But they did not make an effort to rewrite the course of real estate downswings by changing the ratios (28-36 remained the baseline) or changing the requirement that they be "covered" by insisting that buyers (through a "declining market" designation established to mitigate their own risk) come up with funds that were outside of traditional (and time-tested) requirements. The current knee jerk of the lending side of real estate is contributing to a quagmire that, left to it's historical devices, will correct itself over time, as it always has. The current MO of lenders is simply adding another negative dimension to a problem that is nothing more than a market correction (albeit, a bit more disastrous). Just an opinion, and likely a simplistic view of a complicated subject.

Joey,

Don't hold back.....tell us how you really feel.........(another great post.....keep them coming....)

Interesting and thought provoking post I will have to check what Lenn wrote on her post as well.

Great informative post and comments! It is nice to read an intelligent debate. In this case there are more then two sides to the adverse real estate market. Keep em' coming!

Joey. If the government isn't involved, the Fed would have no power to set interest rates (not mortgage rates). If the government isn't involved, they wouldn't be able to appoint political hacks to chair Fannie Mae. If the government isn't involved the bond market would have no connection to mortgage interest rates. The government and tax policies are involved in everything we do.

You haven't adequately explained the geographical discrimination for declining markets.

I have not read though the comments, but will make a comment just a little later. Crazy husband is wanting to go out on his boat and be a crazy wakeboarder and pretend he is 20.

I am here to defend my client who you have no sympathy for because he SHOULD have that extra money.

This client is moving from St. Louis where he had a 7000 sq. foot house that is on the market for $600k. Seriously, Joey.He accepted the job fully aware he would be taking a huge step down. He has a wonderful relo package, and equity and reserves for a 20% downpayment. He can afford and qualify for the payments.

But the point of the post was that the area he wants to buy in has NO CHANCE of declining...so why are we penalizing these areas and this client? In case you would like to check on the city it is Alamo.

It is a huge deal to come up with the extra $130,000 when you are coming from another state. The alternative is to live in a $800k fixer or move back to St. Louis. He is so frustrated he is thinking of moving back. Do I have sympathy for him? A resounding YES!!!!!

Just because someone wants to buy a million dollar home does not mean he automatically has deep pockets or is over extending himself.

Joey WOW you just blew me away!!!! This is Superb and Brilliant, I am bowing down to you my friend!! I think you hit the post dead on and there are always the BLAME GAME but its common sense, lets not focus on things we can't control and focus on things that we can control as Stephen Coveny puts it right. I wrote a blog before too where we became too spoiled with 100% and 103% financing there is no accountability left for saving up a down payment, lenn stated that borrowers don't have the extra 5-10% down well we still have options like DAP'S. Referencing Janet's remark above, YES we do have sympathy for your client but your client has to realize that times are changing, we CANT change that, hes been marked as a red flag and from a lenders stand point its protecting their losses, they want to see more Accountability and investment from the borrower its not like 4 years ago where this was no problem...but rewind back 15 years ago and this topic would of never came up he was required to put the additional 20% down, no questions asked.

Janet, With all due respect-I don't really feel SORRY for your client. There are plenty of people who would like to live in a bigger home, but when push comes to shove, we all just buy the home we can AFFORD to get into. So he decides to stay in St. Louis-oh well. I know that means you don't make a commission, and I feel your pain there. The reality is, 99% of Americans would like a bigger house. Do you feel equally as sorry for all those billions of people? As for buying in a market that has NO CHANCE for decline, I think the last few years should have taught us all that no one has a crystal ball to predict the future.

We live in a Capitalistic Society. Under capitalism, he who has the gold makes the rules. Plain and simple. My husband and I have done some hard money lending. I absolutely would not lend to someone that didn't have AT LEAST 30% equity or MORE! If they don't like my terms-they are not obligated to borrow money from me. Same thing goes with the banks.

The lending guidelines had gotten WAY TOO LEINIENT over the past few years and it's high time they tightened up!

I agree. I can not go anywhere without someone telling me about their housing woes it seems. Heck, I have agents in my office that don't want any listings because 'they don't sell'. What? The ones priced right do.

There was some guy on the news last night who claims he's starting a class action lawsuit against all the major lenders for losing the equity in his house...what? Are you kidding me?

How is it the banks fault that these buyer purchased homes they couldn't afford and then got foreclosed on. Yes, i agree it sucks that the banks were lending money to unqualified buyers but the buyers have to ultimately take responsiblity for their actions.

The people with good credit and the want and ability to pay for a home are being penalized for the sins of the past. Guidelines change and lenders realize homes are going back to the bank to MINIMIZE RISK.

I told people OVER AND OVER that were "waiting" for the market to correct that if they waited, they may NOT be able to get a loan product that fits their needs. So they waited, and now they cannot qualify without stated and don't want to put money down. Too bad for them!

"when equity in the home approaches zero, beahvior changes..."

I remember hearing that in Denver's real estate crash of the late 1980's. We were told that too many lenient lending policies made it too easy for people to walk away from their homes. Pendulums swing wildly from one extreme to the other - this is a market cycle and the pendulum has swung. When the lenders get their portfolios more balanced, when we might see it swing to more of a middle ground. Right now, they're trying to balance for the risky loans they're holding. In the last 10 years we were all exuberant and guilty of thinking that it might not really happen again - borrowers, lenders, appraisers, and even real estate brokers.

This blanket determination we've received (yes, from the government) that our area is "distressed" is hogwash. Denver is not distressed - some of Denver's suburbs and certain neighborhoods are distressed. Others are vibrant (maybe not gaining huge appreciation, but certainly not losing major ground), and some are still highly desirable.

Thanks for the thought provoking posts (and P.S. I grew up in Riverside and Laguna Beach:)

oops, when the lenders get their portfolios more balanced, THEN we might see...

Pam: So you make hard money loans and demand 30% down. But you think this client should make the same downpayment with a high credit score and plenty of assets and income. You think because our county is declining that he should be lumped with hard money borrowers? I don't.

Why does he need the same amount down as your hard money clients? Oh that's right, because he who has the gold makes the rules.

I am asking no one to be concerned or feel sorry for me and my lack of commission as a result of this situation. It is never about what I make. It is always about what is best for my client, so you don't need to "feel" for me, Pam.

You use the term "bigger". Bigger than he can afford....is that what you mean? Bigger than he can qualify for? He is already qualified and can afford the $1,300,000 house he wants to buy. He doesn't have the extra cash and Joey said he should have this cash if he wants a house this expensive. I disagree with this.

I feel sorry for him because he moved out here based on the belief he could buy a house with 20% down and then the rules changed and he now needs another 10% down that he wasn't expecting to come up with.

I apologize if my comment confused you, but it has nothing to do with people wanting bigger homes....or this client wanting a bigger home. It has to do with rules changing in the middle of a high stakes game that will have a very negative impact on him.

As for you comment about a crystal ball? Obviously, the bank agrees with you and not me or there would be no declining value issue to even discuss. The point of my post was that the bank made this decision based on properties that are in a whole different part of the county....that are declining and this was extemely punitive to the stable neighborhoods and people like my client.

I appears to be needed but the ride down is very painful for most of us and no one wants to see people going through what they have in the past couple of years but I agree we could not continue the growth and we needed a correction.We need to remember it for the next inflationary period that will come .

Adam: Bro...I love you...but I'm going to take you to task for just a moment. The main point of my post is that the mindset that this is a BAD real estate market at all, or that we need someone to blame, is one that just doesn't serve me or my clients.

The market is the market. If the media or the government played any part in this contraction it was years ago...when the home prices were going up. I'm just not a 'blame the media guy'. \

I personally don't have a problem with the media. They've given lots of time to all the organizations and leaders that believed it would be a blip or a soft market...and they certainly gave lots of time to "Flip This House" type programming. If the season we are in is Fall (rather than Spring and Summer), then reporting that the leaves are falling seems the right response.

I, for one, would like to hear Lenn's question addressed about the potential issue of steering. Or to use a term which gets little play these days, "redlining." I see the logic behind the "declining market" regulations, but it does seem to me that there are possible inherent conflicts with fair housing laws. Investors could find themselves with more than a financial mess if they become embroiled in a lawsuit with, say, a minority family, who can only afford to purchase in a lower income/less desirable area. An area sure to have been painted with the "declining market" paintbrush. Where the investor demands additional downpayment or junks the loan altogether. Does no one else see the ramifications of such a borrower being hammered for additional downpayment while the guy buying a house in suburbia with similar credit and assets is not? Sounds like a legal mess to me.

Team Newington: Yes. Like I said in my post, Janet's client is the exceptionl. The vast majority of people live in homes that are more affordable...which means only a 5% reduction in adverse markets where conforming guidelines rule. And, again...FHA guidelines have no adverse market policy. Thanks for visiting.

Chuck: Loose financing is often blamed. Are you saying that loose financing is also the cure? Houses are more affordable now than any point in the last 3 years (in my market) and only getting more affordable. Let nature take its course. Gosh...let people rent and save up some money. That's not a good or a bad thing...it's just the thing to do when you can't afford under the current circumstances.

Chuck: These things do work themselves out. That's great for some...not so great for others. Looking forward to your next visit.

Laurie: You're right. It's a market correction. If it appears more disastrous, that's just the corresponding correction to what seemed stupendous...the rapid appreciation.

What I don't understand is the idea that Lenders are making it extremely difficult. How?

5% more down...is that extreme? That's the case for most people (maybe not in high-cost areas, but most)
you have to have a 580 score...is that extreme?
28-36? Gosh...I'm writing FHA loans with as much as 45/55 depending on the needs of the borrower.
Conforming Limits are 125% of median home price...my guess is that's way better than the last correction.

I don't see it as a knee-jerk. I see it as common sense. My home depreciated $11,000 in the last 30 days. If you're going to lend on my neighborhood, that's gotta be a factor, don't you agree?

Julie: Thanks, but this is exactly why I can't 'keep 'em coming'...it's Saturday afternoon and my family is having fun while I respond to comments. That's why I love Lenn and Janet's blogs...they consistently put out quality. Me...I have a feature every few months!

Ryan: If you're not subscribed to Lenn, do it. Thanks for visiting.

Janice: Thanks for stopping by. This is a great debate....I'm itching to get responding to Lenn and Janet's comments, but I gotta stay in order. Some type of obsessive compulsive thing, I'm sure :)

JOEY - I don't think that blame needs to go around, but I think that in hindsight, there were mistakes made. It's always easy to look backwards and see how things could have been done to prevent the pain that we face now. A perfect example would be the dot com bubble bursting. However, I don't blame anyone directly, including the media. However, the media's negative slant and sweeping generalizations are something that I compete with on a daily basis.

In a nutshell, I will repeat something that I've been saying for a long time...REAL ESTATE IS LOCAL! Just because some markets are experiencing extreme drops doesn't mean that all of them are. I can prove it with my market reports and my knowledge of my local market. However, my blog, while well read, does not have anywhere near the reach that the media does, particularly our local newspaper that only talks about the sky falling, and never talks about anything good that is going on.

I don't think that real estate is difficult because of the media, but they are the ones that perpetuate the doom and gloom. Conversely, they also helped make the market soar with irrational exhuberance. Markets have always been cyclical, but the general public was never so exposed to so much media in the past. Think about when there was only network television and no Internet. We weren't constantly barraged by the media harping on any topic (good or bad).

I believe that the market is correcting itself, but it is doing so in a much more challenging environment because of the media and overreaction in general.

Lenn: Yes...the government action affects us. But do you really think the tail is wagging the dog? Like there's some type of conspiracy to depress those rare pockets of California real estate that, per Janet, are highly unlikely to decline?

Please give me an instance where the government is setting the adverse market policy. A

nd the whole thing is based on an exception: a borrower in a very high-priced area. Overall, the declining market policies make sense and will help to right the economy.

Yes, let's have compassion on the qualified folks that want a luxury home in a great neighborhood and are 'victims' of capitalism...but let's put it in perspective. 60% of the world is living on $2 or less per day. Buying a home and having a great mortgage are a privilige enjoyed by very few people in the world and the vast majority of them live in this nation. It's my job (and I love it) to write mortgages, make money and help people own homes, but just some perspective.

If someone wants to live in a high cost area and can't, that's not punishment. That just means they need to either save or wait for a better opportunity. A surfer doesn't complain that he's getting bad waves...he bides his time until the wave seems right. The wave isn't right for Janet's client...but the water is just getting back to the right temperature for the rest of America to dive in. That's my main point.

In regards to the geographical descrimination, I'm clearly no expert. I suppose that just like when the values were going up quickly appraisers had to go outside the immediate neighborhoods (within reason) to support the value, now they have to go outside the immediate neighborhood to show what's going on in the local economy. Is it always accurate? No. Is it accurate for the vast majority of neighborhoods? Yes. It's a numbers game.

Wow, all this makes my head spin, but could someone please explain to me the guidelines and or definition of "decling market". How are the lenders determining a declining market? Surely, if this is a standard method now of deciding if a buyer can obtain a mortgate, there must be set guildelines.

I just had clients who were told they could not get PMI because the home was in a decling market. They are only putting 5% down FHA, but I still do not understand. This just happened yesterday, so I don't have all the details yet. This home is NOT in a decling market. I have no clue how they arrived at this. Home values are pretty stable in the subdivision, with only one foreclosure.

So, what the hey???

Janet: Thank you for stopping in. I really admire you and read nearly every post you write.

First off, your compassion is right on. Everyone has their own circumstances and a huge part of being an awesome real estate professional is having compassion for our clients...viewing their experience from their perspective. That's why you sharing your client's story more in-depth is helpful.

I didn't say that I had no compassion on your client. I simply sad that it's sad, but it's the exception. Most people are not buying 1.3 million dollar homes. Your post makes sense and it's a real frustration, especially if there's that magical pocket where home prices are unlikely to drop.

But, to look at it from another angle...why would it be so bad if the homes in Alamo did drop in price? The pain your client is going through is that he has to buy a 1.3 million dollar home and put 10% more down. If that home was going for $700-800,000 it might not be much of an issue.

And, as a mortgage lender, I would really hope that he does have deep pockets. How in the world could someone afford a home like that without deep pockets? There are homes for people without deep pockets...maybe that should be considered when we say "is this person overextended". Still...and this is how I'd feel if I were the loan officer...an extra 10% when there's already 20% in? 20% is a BIG commitment...If he has the good credit, 20% down, fully documented income and reserves then we're conditioned to believe he won't default. Obviously this is different for high-cost homes than it is for home selling at or below 125% of the median price.

You seem very confident that homes in that area are unlkely to drop in value. It seems to me that if the economy is in a recession, home prices are dropping, construction workers are losing their jobs, the dollar is devalued...high-cost homes are only so insulated, but when they drop, it's not uncommon for them to nosedive...so 30% might make sense to a lender.

Here's my mystery...how was this loan denied? Was it already committed with a lender? Whose mistake is this? Or did the lender really change their rules or their geographic limitations in the middle of the transaction? You didn't mention if you're a broker or a direct lender, but I'm guessing that a wholesale rep told you yes and then their underwriter told you no. Care to share?

Justin: Thank you for visiting. Keep in mind that in some areas, especially Janet's and Lenn's, the type of client you're working with probably makes too much money to qualify for down-payment assistance...or the home is above their guidelines. Come back soon.

Pam: My crystal ball is in the shop, too. And about buying the house we can afford, what the heck are you talking about? We're Americans...we have a God-given right to buy a home that we can't afford. Geesh. :)

Susan: Thank you for your two cents. Or four cents. But with the value of the dollar and inflation it's really two cents, isn't it? :)

Renae: Always an honor to have you visit!

To say that people are being 'penalized' is a bit wierd, because prices are lower and rates are lower...what kind of punishment is that?

And to say that they have the ability is still wishing that it was 2006. If they don't meet the current guidelines, then they don't have the ability? Again..the market is just the market. It's not good or bad (or perhaps it's always a combination of the two), it just IS.

In regards to your warnings to your clients, that was very prescient. I had no idea one year ago that mortgage insurance companies would stop insuring cash-out refinances or investment properties. I would have urged folks like you did. Still...on the whole aren't most people going to be in better shape to buy or invest? And isn't it better for them to do so with a downpayment and when prices are low.

Thanks for visiting!

Gretchen: You used to live in Riverside...we have a vacation place in Longmont...

I think what you're describing is what frustrates Janet so much, that the policies aren't as 'fine-tuned' geographically as we could hope.

But what's the alternative? No policy? Trusting the appraisers to say what kind of market on a case-by-case basis? Huge bureaucracies in our mortgage companies and government to sort that all out?

The economy, especially the credit world, is hemorraghing. Declining markets may be a tourniquet, but maybe when our patient is stable we can prescribe a more precise method of treatment.

Keep up the great work in Denver!

Terry: I know that when real estate rockets up again I'll change my own personal behavior. I'll save money like mad and wait for the fall. I won't fall for the line that we're in a 'new paradigm' of constantly rising prices. It's not easy, but it IS. And I will help as many people as I can and capture all the market share while my competition sits around biting their nails.

Paul: I hope I answered some of that, but I'm no expert in 'redlining' either. I imagine it would be next to impossible in this type of market to say that a lending institution is making decisions based on any other factor other than economics. Especially in the types of high-cost areas Janet is talking about.

Some smarter person want to answer Paul's question more thoroughly?

Adam: You got to get WAY unlocal for me to get out of a declining or adverse market, so your perspective is needed.

I think it's also fair to say that I'm no expert in the areas that Janet, Lenn and you serve. Obviously things are different out here in Hemet, the last bastion of affordable housing in California.

Maybe we need a new paradigm. NOT ALL REAL ESTATE IS LOCAL. Because the major builders and major lenders are now national (or even multi-national) corporations, they're necesarily going to experience some type of McDonaldization.

It sucks, but there it is. Leaves room for some type of boutique lenders and builders with unique nitches, but when the real estate market expands rapidly, those would be swallowed up again, wouldn't they?

Good points. Thanks!

Ida: Time to make a phone call to the lender. First of all, PMI is private mortgage insurance. FHA has mortgage insurance but it's not private. If the lender said PMI it might be a mistake...or they might be fudging.

I don't know anything about HUD denying MI based on declining market, and, like I said, my market is declining like a true champ...on the receiving end of a knock-out punch.

I would interview another lender that you trust.

Hi Joey,

I understand what PMI is, and of course I will call another lender, but my question was; are there guidelines being used to define "decling market". For instance: if there are so many foreclosures in a certain area, that will determine declining? If so, how many? Selling price?

If that's the case, 90% of the country is declining, so what separates the difference from a stable market vs. declining?

Ida: Declining market is based on homes sold. Foreclosures are ABSOLUTELY affecting the market and causing prices to decline. The guidelines don't care whether it's resale or foreclosures...if prices are dropping, no matter how many homes are selling, then it's a declining market.

How that works in practice I'll leave to someone with more knowledge.

And, frankly, I'm very skeptical when people talk about how stable their areas are. Even if they are, how stable can it be when unemployment and prices are on the rise?

Joey: We are bankers and brokers. This loan was brokered. We sent it in and got it approved on a TBD. If he would have been in contract, he would have been protected under old rules. Since it was a TBD he was swept into the new lower LTV's. Yes, lender did change the rules in mid stream.

You are very right. Home values could drop in Alamo, and I have absolutely no way of knowing they will not. I have this opinion because in the Bay Area I have made the observation that areas with a high density of expensive homes with very little land left to build, are the areas that are not declining.

Example: San Francisco county is not considered to be declining.

Joey, although most people do not buy 1.3m houses, the impact is the same across the board. The guy buying the $300,000 house STILL has to come up with $30k more than he would have on the old rules. This might even be harder for someone in this price range. It still wipes out buyers.

You think it might even be a good idea for Alamo houses to plunge to 700k? Allowing prices to drop another 50% will wipe every lender off the face of the planet. I shutter to think....80% down and 20% loans? We don't need to bleed anymore than we already are. We need a transfusion.

Joey, while I might see the common sense in your response (thank you), it is contrary to how previous markets have "recovered". That the President encouraged home ownership and as a result, it's subsequent loose lending practices, isn't the QUALIFIED consumer's problem. People buy in high/medium/low markets based on their own situation- not one dictated by a lender that's been burned, and as a result, chooses a "future" approach as opposed to a "DO YOU QUALIFY" approach. If I were a selling consumer, and my price is adequate for appraisal purposes right now, THAT'S the buyer that should own my home. If the market (as is not anticipated) recovers unexpectedly, why (as a consumer) wasn't I provided the opportunity to BUY? Home purchases are simply not solely about price, and lenders should assume the position that people that can afford to own, should be able to without a "future" anticipation. Or have lenders forgotten that real estate is cyclical?

Edit: pretend that the debacle of a pulse=homeownership had never occurred. Even knowing that it has, how is this a qualified potential homeowners problem? Go to time tested ratios and ficos, and there will be more closings.

Janet: Okay...that background helps. Yeah...I don't want people's real estate investments to drop that low...it was just an example that, frankly, is the reality in a lot of the high-cost homes in Riverside County.

With the $300,000 home they wouldn't need an extra 10% down, would they? They wouldn't even need 20% down. FHA fits that scenario just right with 3%, and if we're going conventional, it's only 5% more (90%). Again, I think we're talking about different worlds because Jumbo Loans are the exception in Riverside.

Laurie: I see your point, for sure. Only disagreement is this: Buyers DO have the opportunity to buy. The rules may be different, but it's not much different than the last hundred years. 20% down used to be the rule.

And don't think that lenders won't change their guidelines just as fast when the market turns. I'm not asking folks to time the market...find a rock-bottom home and buy now, for goodness' sake.

But no one thinks the end is in sight. There are still a slew of foreclosures yet to happen...

Janet: I'm going to change my answer.

How bad would it be if the 1.3 million dollar homes dropped to 7-800k, really? The people who own the homes just hold on to them. The people who want them buy at a discount.

It's the luxury homes in the most desirable areas that will skyrocket in value in the next price run-up. How much was that 1.3 mil home worth in 1998? How much will it be worth in 2018?

The faster prices drop, the faster we get all this inventory off the market. The people in luxury homes with stated 103% option arms might walk away, but the best folks (maybe those that live in Alamo) have an investment in it and they want to live in that area, so they're not walking.

How does an area recover from declining if no homes can be sold?

Ida: When the price of buying a home is close to the price of renting, or the price of investing is close enough to the price of renting it out, then the homes will sell. The only way I couldn't see them selling is if your local economy is in the tubes and there's no way for someone to make a decent living. Then the rents will slide and so will property values. But the declining market policies won't have an affect in that situation anyways. BTW - Ask Broker Bryant...I think he's in one of the most adverse markets there is.

20% down was not the "rule", at least in the last 24 years. 10% meeting ratios w/good credit; 5% with exceptional credit. I'm OLD.

Laurie: Until FHA conventional required 20% down...then slowly conventional changed and PMI grew. But I'm not clear on the exact history.

Anyone care to post a link to the history of down payment requirements?

JOEY, it is all a season; isn't it!! Here in Houston we had a big bust during the oil bust. When I moved here in 1997 there were still people who were upside down from houses bought in the early 1980's. In talking to agents that were here back then mainly all they did was foreclosures. It sounds remarkably familiar doesn't it?

I think because of that our prices have not had the dramatic rises like so much of the rest of the country. This time around we are doing okay. We are feeling ripple effects from the rest of the country but that's to be expected. There are just not as many buyers out there. I really don't have a problem with that either. I thought they were way too loose in the lending guidelines. I wonder if they aren't over compensating now but I expect it will swing back again. It is all a season. A time to buy and and a time to sell.

VERY GOOD POST!!

Wow, there are some great responses to this. I read this earlier before anyone had commented. I knew this would be provocative. I do think this declining market business is hurting more than it is helping! Someone needs to decide if they want to make things better or worse. With these conflicting actions (lowering home prices and rates versus labeling places declining), it;s hard to tell.

I know I'm late to this party, but my goodness My Joey! You rock!!! I've been planning to come by and see what all the hoopla was about when I got your tweet reminding me. So glad I did!

I completely agree with your very savvy and well characterized assessment of our current situation. I for one, appreciate the increase in home values in my area, but at this rate, it's getting impossible for families to afford family homes. And that isn't good for any neighborhood. I know that I would be unwilling to pay what my own home is worth today. But I could because I do have the 10-20% down that would be required. Which means I'm a qualified buyer - and the sooner qualified buyers recognize their purchasing power, the sooner we'll realize market strength and stability.

I'm thinking you should go into politics! I'd have your back ;-)

It's so exciting to be in real estate now...people are losing everything and people are making a fortune! What a ride...I'm loving it!

Excellent post, Joey. We were visiting Las Vegas in 2006. The front page of the Sunday paper that weekend showed the areas of Las Vegas and had the percentages of appreciation for each area.for the last 6 months. They ranged for the low teens to over 50%! I made the comment to my husband at that time that I would be petrified if I had just purchased a home that had appreciated 50% in the last 6 months. Well, many people did buy those homes. Are they upside down on them now? Probably many of them are. I know this is just one of the areas of the country that this occured in.

Did we really think that the buying frenzy could go on indefinitely? No! Should there have been some better guidelines for refinancing and taking out every dime of equity? Probably. Will the market heal itself? Yes, but it will take some time. Are homes still being bought and sold in this country? Yes, in every area.....

Keep up the great work!

Marchel: There are those pockets, aren't there? I understand that much of Colorado is stable, San Fran and parts of the Northwest. Certainly don't expect a crash in Texas...crossing fingers. Thanks again for being my top commenter!

Christy: I understand what you mean. Having tighter LTV and down payment rules does mean that we can't get that home off the market right now. But that's not HURTING us. Sure it hurts right now, but in the long run we don't want to prop up home prices artificially...we want them to be a fair market value based on value, not speculation. Thanks for coming back!

JenJen: It's good to have you in my corner. What is the trend in Portland? Do you have specific stats? I think it would be interesting to hear...

Bill: Yes...it's exciting. There are some awful stories regarding foreclosure, but I'd be careful in saying that folks are losing everything. It's blasphemous in real estate to say it, but it's really just a place to live and a credit score. If you go through foreclosure, learn and move on...but there's so much to be grateful for. In the meantime, one man's market crash is another man's real estate discount rack! Thanks for your visit...come back soon.

Eileen: Thank you for your words and encouragement. You may not have believed that the buying frenzy would last forever...but for every Eileen there were scores of people talking 'new paradigms' where values would never bomb out. I bought into it...I never thought the correction would be so swift and severe. But I don't think that's a time to complain, blame, worry...there's tons of opportunity out there. Buyers are buying. Sellers are selling. Focus on service, focus on revenue-generating activities. I hear folks on AR blame the media and the institutions, but then they still pile on the negativity. I know it's painful...I'm not saying to ignore reality. I'm just saying that every challenge has a seed of equal or greater opportunity.

It's time to grow.

MAY

2008

Janet I used the 30% amount because that is the amount required by your lender.....I actually require more and I charge much more than the going interest rate, so No I don't think your borrower should be lumped in with hard money borrowers.

Sorry I used the term bigger. I should have used the term more expensive.

I know that is extremely frustrating to people who are trying to plan a move for lenders to change their criteria. It is just part of the game at this point. I have heard of people SIGNING for loans, and then the lender deciding not to FUND.

Even though Real Estate is very localized, the lending institutions are not. The tightening of the belt will affect everyone, everywhere.

Joey,

I agree with Lenn. Instituting declining market conditions, in 2008, is like closing the barn door after the horse ran away. It's futile.

Let me start with Wall Street's premise, in 2000. They noticed that residential real estate appreciated 6% per annum, for 25 years, nationally. Based on that appreciation, they created alt loan programs. It worked. Money flowed to the most desirable real estate in the nation (Fla, NV, AZ, CA). That cheap money inflated those regions so that the appreciation rate was the equivalent of 15% per annum other regions, like Texas, Ohio, etc, lagged behind the 6% per annum.

The mistake was made in 2004-5. Fannie and Freddie should have been instituting "appreciated" market guidelines. The concept of "reversion to the mean" supposed one of two things: Texas real estate would explode or California real estate would drop like a rock. The mistake that was made was NOT in the "funny money", it was a falure to understand that real estate is granular and not mosaic. While they should have been cutting the LTVs, in 2004-5, they expanded credit. They made risky loans on VERY risky collateral.

Today, the best thing to do would be to cut LTVs in Texas, and other recently appreciated states and expand LTVs in California.

They have it all backwards and it's going to hurt the economy. Fannie and Freddie are not making poor investments by expanding LTVs in declining markets but they are doing just that in "appreciated markets".

Granular data (regional guidelines) ; the new buzz-phrase of lending- you heard it here first

FREAKIN BRILLIANT! i wanted to respond in a similar manner, but you did a much better job than I and my fire-retardant suit is at the cleaners.

>The FICO system has been a great predictor of a borrower's ability to pay since it was created...

FICO is a measure of a person's propensity to pay, not ability. FICO was never intended to be the sole primary underwriting standard.

The two sold comps and two pending comps appraisal requirement is not new. We are just going back to common sense underwriting.

Brian: I'm really glad you entered the fray. Thanks for taking the time.

I'd be lying if I said that I completely understood, so let me try to rephrase back to you what I think you're saying.

Alt-A was a great move and helped people buy good real estate.
At the height of appreciating markets Fannie/Freddie should have created LTV restrictions (I'm not sure I have this right)
They should expand LTVs and other guidelines in California right now.

I think I have a grasp on what you mean by granular guidelines (Confused? for more on mosaic v. granular).

I've had my laissez faire capitalist hat on...thinking the market is going to right itself naturally and that the major investors are just doing what they can to protect their bottom line.

If I get what you're saying, they'd do a better job of protecting their bottom line if the market was stable...so they need to intervene by loosening credit in the rapidly depreciating markets (CA, NV, AZ, FL) for their own good.

Now my questions:

Congress expanded conforming loan limits for conventional and FHA. Is this the right direction?
How much investment does someone have to make in order for them to feel compelled not to walk away? 3%? 5%? What should the LTV guidelines be?
Do you think a 5% reduction (for conforming) is really having a sweeping negative effect? Don't you think, for most people, that FHA guidelines are loose enough to help people buy homes?
How can these large institutions practically implement granular guidelines? Or is that something to work on for the future?

I think I understand the concept, but if I owned a large, national mortgage investor I'm not sure I could create granular guidelines or leave it to local appraisers/underwriters. It sounds like I'd have to greatly expand my personnel and budget in a downturn on a prayer that it would help the big picture.

Don't get me wrong...the looser the lending guidelines, the more people I help, the more money I make. It's in my best interests as a home loan consultant to give away as much mortgage money as I can. I'm just looking at these large mortgage companies (which seem to be hemorraghing) and trying to view reality from their perspective.

I agree with Brian Brady. The answer isn't in punishing buyers or putting them out of the market because they want to buy where they want to buy. The entire matter is insane. Brian's argument is much more fact based and sophisticated than mine. But, the bottom line is - requiring more cash for this sick "declining market" syndrome will simply exacerbate all of the problems with moving real estate today

OAOT. FHA is not going to be the answer.

New construction cannot rely on FHA. Sure, I know folks want builders to stop building, but they haven't said how many folks they want to put out of work, starting with carpenters, concrete workers, heavy equipment operators, landscapers. appliance manufacturers, appliance companies, and, of course lenders.

New construction has to be project approved for FHA and VA and that means a % settled, amenities completed, etc., etc., Sure, the builders will can have a portfolio lender approve and then sell but without FHA, you've got the same appraisal, comp. problem.

Don't put the builders out of business, I like selling new homes.

So there.

Let me try this a different way; buy low and sell high.

Everything was low in 2000; that's why loan guidelines got loose. Wall Street's premise was that a 6% appreciation rate would solve problems.

Los Angeles got high, really high, in 2005 while Dallas lagged. If this were a "portfolio", we would "sell" LA and buy more of Dallas, in 2005. We'd want to reduce our exposure to LA while plowing the profits into the underperforming market. Remember, the premise 6% appreciation for a national average.

LA had hit 2010 predictive prices by 2005 while Dallas was still stuck in 2003. In 2005, we should have been cutting LTVs in LA, and rapidly expanding LTVs in Dallas. Instead, we lent money like it was 2000, on 2010 collateral (LA prices).

The problem? Wall Street was too correct in their analysis and didn't understand the fact that all markets appreciate at different rates

Lenn: "So there." That made me laugh out loud. I think all good comments should end with "So there." Seriously, you've been a real good sport and your comments have been great. Thanks for playing.

Brian: Thanks again for coming in here. You're understanding of this stuff is top notch and your feedback has been great.

FICO is a measure of a person's propensity to pay, not ability. FICO was never intended to be the sole primary underwriting standard.

FICO is a measure of propensity to file Bankruptcy; a technical difference, Bob but it is a difference.

The two sold comps and two pending comps appraisal requirement is not new. We are just going back to common sense underwriting.

the "funny" underwriting standards were common sense...in 2000. they still make common sense in some markets.

MAY

2008

OK I finally got a chance to read through all of these comments. Excellent discussion. This is all I know:

The average selling price in Poinciana for April 2007 was $210,000.

The average selling price in Poinciana for April 2006 was $122,000

That's a whooping 42% DECLINE in 12 months!!! And it's getting worse.

Folks in my area work at hotels, restaurants, attractions etc... By and large, they work in the service industry. Even coming up with a 3% down plus closing costs on a $120,000 purchase is out of the reach of must folks. Have you ever tried to save $6,000 when supporting a family on $10 per hour?

Poinciana was a zero down market way before before the boom. Folks bought here because they could use a USDA Rural Housing loan. It was called Farmer's home loan at the time. For years the builders advertised buy a house for $100 down. That was all that was needed for a USDA loan. In fact we couldn't do FHA in Poinciana until about 5 or 6 years ago. It was basically USDA or VA.

In this current market USDA is making a comeback and FHA is the loan of necessity. Now if the FHA decides to not allow Nehemiah and Ameridream we will really be screwed.

Of course the good thing about all of this is that our values desperately needed to come down. And they still need to come down. I expect to see the average selling price below a 100k soon. At that price folks will be able to afford a home.

I certainly can't argue with the "declining market" label in my area. Actually I believe the real label is "don't lend money in Poinciana unless you are absolutely forced to"

Bryant: So grateful you returned. If I get what Brian and Lenn are saying, it's that the lending restrictions should be looser for Poinciana at a time like this...that they should have been tighter when prices were appreciating well over 6%.

But from what you're saying, it sounds like a rapid depreciation might be what needs to happen anyways.

I was so confident in my answer before my post and now I just have more questions!

Thanks for your comment. And keep up the great work!

Joey, In my area values MUST come down. In all honesty the majority of the properties that were sold during our boom (late 2004 trough 2006) were investor bought properties. The potential owner occupant was priced out of the game. So as painful as it it prices need to drop further. BUT we could certainly use more loan programs for the average Joe that just wants a place to live.

This is a very complicated issue and it is normal to think we have a handle on it and then BAM more info and we have to start over!!!

I don't even know where to start. That is a LOT of information. But I agree with your logic. And playing the blame game serves no purpose anyway.

Lisa: I know. This is definitely the wordiest post I've written, with the wordiest comments, too. All in all, we want what's best for our clients, whatever the situation.

MAY

2008

Joey - This is very accurate for California, but here in Tennessee, our homes sales have slowed by 28 percent, but prices are up from last year. Except for having buyers coming in and making low ball offers (I think just to piss me off), it's starting to look like a normal spring to me.

MAY

2008

Larry: What's the future look like? For instance, that's how we owuld have decribed our situation before the foreclosure market hit hard. Do you have much bank-owned properties?

MAY

2008

This one is too close to 100 comments to die on the vine. Just read it again for the excuse to comment again. Great post. Flagged for feature ;)

Paul: Thanks. I should set a new goal..to have the same post featured 5 times.

MAY

2008

I wanted to add one more comment in the hopes that this baby will reach three digit town.

MAY

2008

Jason: Nice. You know, if I added a 'subscribe' button, then some of my good posts might attract regular readers. So far I haven't the time to figure it out. Maybe I should just add a post challenging folks to create a button for me....hmmm...

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