Pierce County September Real Estate Market Update

I received an email this morning in response to my commentary on the market, and thought that it was useful to this community to share the comments of the writer, as well as my reply:

Hi Jason,

I appreciate your efforts to inform the public about current events. I have been lending for 22 years in fact 20 years ago rates were over 10%. FHA is alive and well. The events today do not have an impact on HUD or most of the investment community related to the origination or delivery of residential loans. In fact it will not have an impact on the conventional loan for residential lending.

There may be some impact in the bank to bank lending practices due to lack of trust or transparency but please I beg of you do not confuse the issues and do research or better yet stick to real estate.

The public gets it. There is nothing to hide. The credit markets are in turmoil BUT there is lending going on just ask your own mortgage division but to draw a line to say less money to loan for the public is just flat incorrect. What resource did you glean that from? What money will be cut off and how or to whom?

The difference between lending today and twenty years ago.....nothing. The difference between today and a couple years ago....no more exotic loans meaning you simply have to prove you earn an income to make the payment and the events today or tomorrow will not change that -  in fact things (and this will become more apparent over the next six months) will be getting better in the credit markets -  in fact Lehman was one of the hurdles that needed to get out of the way. They (Lehman) blew it and it is sad to see the 158 year old company go away but this is not an event that will diminish my ability to lend to folks to buy the homes you wish to sell so you should quit "de-motivating people" and start motivating people.

I don't know how long you have been in the business but I hear people say money is tightening up and for those of us that have been around a long time notice it is getting back to "normal" so I am simply asking that if you are going to take on the pundit roll please for your sake and mine square up the facts and put them into context including historical context.

Today oil went below 100 per barrel that means an increase to the consumers cash flow. Both fuel and food prices are easing. That's good news and that happened today while the stock market dropped 500 points and while that was going on so did rates....YIPPPEEE! (Can ya feel it?)

The way I see today's market is simple. This is the market the real wheelers and dealers have been waiting for. Low rates and low prices and my investment clients are buying and you should be on the soap box telling your clients about this perfect storm. You should be telling the first time home buyer that they will never be able to buy a home at the price it was 20 years ago but the rates 20 years ago were 10%. Ten years from now here in the Great Pacific Northwest where I was born and raised the house that is purchased today will be worth double in ten years and you can take that to the bank.

Thank you for your indulgence and have a great forth quarter. I sincerely wish you well and take my comments in the spirit intended and that is friendly. I am passionate though if you couldn't tell!

Best regards,

Kirk W.

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My reply:

Here are some real facts Kirk - since August of 2007, I was not able to place 10 buyer-clients in homes because a 620 mid-score was no longer good enough. That translates to roughly $78k in potential revenue. Not a lot to some, but quite a bit to me and many other Realtors in WA and around the country. The number of homes sold at the end of August in Pierce County is down 36% from a year ago. The median home price in Pierce County is down 11% from a year ago. Subprime products went away and alt-a and conforming loan risk tolerance was adjusted, and had a real impact on my business and the real estate market at large. If you deny that, there's simply no reason to continue the conversation.

I know that there is lending going on, increasingly with FHA, and that hundreds of homes per month are selling - our market has not seized up, thank goodness - but fewer homes are selling. I know that oil closed below $93/barrel yesterday and that eventually that will make it to the pump and grocery store, thank goodness. I know what happened to Treasury rates yesterday and the effect it had on mortgage rates, although rates have been and will likely continue to be as volatile as Wall St. I know that a home purchased today will be worth more in a few years and that this is the best time to purchase a home in many, many years when considering the price of homes and the cost of lending. And I have been advising my clients that while they may not get as much for their home as they had hoped, they can make it up on the purchase of their next home, and come out a winner in this market.

However, I do believe that the upset on Wall St. will cause further reassessment of risk tolerance by mortgage-backed securities investors and the secondary mortgage market, and then by lenders, which will affect the potential buyer pool. We simply have a difference of opinion. And if posting my opinion makes me a pundit and not a trusted advisor and Realtor in your estimation, then so be it. The great equalizer is time, and it will show one of us right, and one of us wrong. I'm willing to be either in the public forum.

I'm passionate as well, about cutting the spin that so many Realtors spew without thought, and providing consumers with the facts. If we assume that consumers are dumb, we lose. If we provide them with facts so that they can make informed decisions, they win, and we win. Now, part of my commentary was opinion and not fact, but I'm willing, and hoping to be proved wrong with time.

Respectfully,

Jason Mook