The Wall Street Journal ran an article yesterday procaliming that The Housing Crisis is Over.

Now that takes some guts.

Back in October of 2005 I had a client (a referral from a good friend of mine) who wanted to list and sell his house up in Dublin Ranch because his soon-to-be Fater-in-Law, a financial planner from the Rocky Mountain region, was convinced that the California real estate market had topped out and it was time to diversify. Smart guy. Really, the only one I know who was calling the top right as it was approaching (and no, I’m not counting the ogres at UCLA or anyone else who predicted the bubble would burst for three years before it actually did).

The basis of the latest WSJ prediction on the real estate market has some merit in my opinion.

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

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I need to get up a post about how positive I’m beginning to feel about the real estate market and the summer that’s to come. Now I’m not going to over-do it - I’m not going to call for a full-blown recovery or bang on the GTTB drum just for the sake of being positive. But with the way the first part of the year has gone, I’m glad to share some encouraging news.

(GTTB: new web-moniker for overly-optimistic NAR types - “Great Time To Buy” - get it?)

1. The secondary market has finally figured out pricing for the new Jumbo-Conforming loans we were so excited about a couple of months ago when the economic stimulus bill was passed. Check with Brian at greenmortgagegroup.com for the current rate, but I understand they came down yesterday at 6% for a 30 year fixed. This is great news in jumbo markets like Pleasanton and Dublin, where it’s just opened up the market for a whole group of buyers that were forced out by the mortgage meltdown last summer. Read the rest of this entry »

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My optimistic side has taken over the blog for the moment, and wants to convince the rest of me that we’re on the downhill side of the mortgage meltdown mountain that the real estate market and the US economy have had to climb.

A couple of things have happened in the last week that have convinced me that we are really in the second half of this market.

First, Standard and Poor’s came out and said that the end of the write-downs is in sight. I’m choosing to hang my hat on this prediction, although I know it’s certainly a subjective analysis. But when I compare it to my calendar, which says we’re at least a year and a half into this mess, it makes sense. In another eighteen months we’ll be three years removed from the blind lending that created the problem, and the banks should have a handle on what’s left to come down the pike.

And the Fed has finally stepped in in a meaningful way.They’ve opened the discount window to investment banks, they’ve financed JP Morgan’s bailout of Bear Stearns and essentially indicated to the market that they’re going to be the safety net that insures (buys) these garbage loans. Is there a price to pay for that? Sure there is (they’re printing money and lowering interest rates in order to facilitate this increased liquidity - creating serious inflation concerns, but that’s a post for the economics blogs).

Add to the recent news the simple fact that buyers are back, financing is coming back, and the prices of these foreclosed properties are getting low enough to make sense again - and I think I can see a light at the end of the tunnel. As the saying goes, I just hope it’s not the oncoming train.

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Sure, the softening real estate market is driving prices way down in some areas, but the fact is it cuts both ways. There are some markets, and some investors, that are going to benefit significantly from the current environment.

I have buried my head in the sand for a long time in regard to prices in my hometown of Brentwood. Working primarily in the Tri-Valley, it was (for a time) a luxury I could afford. But then I met Rick and Paige,  buyers referred by a good friend, who had already set their sites on Brentwood, and I got the opportunity to take a look at my neighborhood through my Realtor eyes.

First of all, I can’t even begin to describe how fun it was to “sell” my town. The neighborhoods, the schools, the development plans - I realized how much a part of the community I am, and that I should be doing much more business here.

But then it hit me: these prices make sense again! Sure, my equity has evaporated, but that’s OK ’cause I’m not going anywhere.

On the other hand, for those investors who were going out of state to Arizona and Nevada, even New Mexico and Georgia looking for investment opportunities, your trip has just been cancelled! Follow me here… Read the rest of this entry »

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We all want to understand how we got into this current real estate market, and there’s no single easy explanation.

However, I read a great piece about “cash back at closing” that goes a long way towards answering that question. And it’s not the obvious piece about predatory lending or misleading consumers or folks who simply overbought. It’s not that conspicuous. And yet it’s really at the core of how the “frothy” markets of the early 2000’s did us in. And it points back to the question of ethics, or how you do business (or live your life for that matter).

Click on this link to read the piece. Let me know if this makes sense to you.

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Just as every part of the Real Estate market is experiencing monumental change, there’s something very familiar going on in the background.

It’s true, the sub-prime fiasco we’ve experienced is unprecedented. And affordability rates are at all-time lows. Meanwhile, technology has changed the whole buying/selling experience. There are record defaults and foreclosures on the horizon, builders offering unheard-of incentives and bankruptcy rumors surround the country’s largest lenders.

We’re in uncharted waters for sure…or are we.

Sure, it’s different this time, but the bottom line is we’re experiencing another market cycle. Just keep one eye in the rear-view - we had a fierce, long-term seller’s market (’01-’05) followed by a bumpy, volatile transitional market (mid ‘05 - ‘06) and now we’re in the full-blown buyer’s market (’07 - ??).

How long is it going to last? Who’s to say? NAR just changed their prediction from ‘08 to ‘09. The Fannie May guy says 2010. I heard one analyst say that prices have to come down another ten percent. I guess that depends on where you’re at.

So what’s it all mean? 1. Don’t sell unless you have to and 2. Buy if you can - because it will transition again at some point, and you know what comes after that…

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It’s Monday evening, and as is often the case, I find myself doing whatever I’m doing with Monday Night Football on in the background. I’m not a fan of either of the teams that are playing, but it’s the NFL and it’s in high-def. Maybe when my wife gets off the phone with her cousin it’ll get switched to Grey’s Anatomy or something, but for now I’m getting a little football fix.

Ron Jaworski, a former quaterback and current analyst/commentator caught my attention with his evaluation of tonight’s quarterback play. He borrowed the old real estate axiom of “location, location, location” to describe how a successful passer delivers the ball to his receivers in a way that allows them to make a play, while limiting the risk of an interception.

Well, being a successful, licensed, full-time, professional football fan - I can tell you with certainty that there’s another element to becoming a successful quarterback that Jaws has just omitted from his analysis.

Completing a pass in the NFL is about putting the ball in the right location for sure, but any coach or player will tell you that just as critical is the timing of the pass. A ball has to be delivered right on time in order to have a chance to be caught. The game just moves too fast - even the slightest hesitation leads to a missed opportunity, or worse.

Jaworski’s mantra should be “location, location, timing.” Which sounds like something my Dad said recently about real estate.

Of course, the location of a property is the one critical element that can never be changed and has the most significant impact on its value. But the other element of a succesful real estate purchase has to do with timing. Making a mistake with regards to timing can be the “fly in the ointment” of an otherwise sound financial decision. And the risk isn’t just in possibly buying at the top (apologies to those who bought in late 2005), but also in not buying at or near the bottom.

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There’s a lot of excitement brewing around the investment opportunities that are becoming available in light of the ongoing foreclosures and REO auctions in the real estate market. But be careful how you play this game, there are as many scams out there as there are opportunities.

Ever hear those ads on AM radio that promise to teach you a simple no-money-down, no-experience-needed, magical method of becoming a real estate investor at a three-hour seminar? Or the newest one, the guy who says he can teach you how to fix-and-flip properties for big profits - just like he does on TV? (My four year old daughter has figured out that what she watches on TV isn’t real, so why does this guy think I’ll fall for that?)

A friend of mine shared an article in Money Magazine with me that seemed to expose one of these scams. The article is about a training program that teaches investors how to make money on foreclosures. Granted, foreclosure investing is a complex business and there’s plenty to learn, but the article makes this training sound like little more than lessons in cold calling. And while this journalist found plenty of folks putting out thousands of dollars for the course, he didn’t identify more than one succesful student of the program.

It’s just a reminder, there’s no free lunch. Foreclosure investing is a profitable business (one of my best friends does very well at it). And this market is going to provide tremendous values in the form of REO properties and bank foreclosure auctions. But like anything else, if there’s an investment opportunity that sounds too good to be true, it probably is. So before you write a check to some “Guru” to learn how to make money in this real estate market, talk to someone who’s actually doing it. And if they make it sound really hard, then they’re probably telling the truth.

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I promised a piece on the real estate auction almost two weeks ago, so here it is. Fact is, I’ve had a lot of time and a lot of conversations to help me digest my first real estate auction experience, and I’ve boiled it down to the three elements of the day that really surprised me.

1. This is the real deal. Insurable title, no back taxes or leins, five percent down and a 30 day cash contract. Serious investors making real deals on bank owned properties. And they’re deals - serious deals. I saw several homes, nice homes that you or I would live in, sell for 100 grand under their already reduced list prices. No joke.
2. Emotion wasn’t a factor. I really believed that the purpose of the real estate auction was to create the emotion or the frenzy that would drive competing bidders to pay more for a bank owned property than they would on the open market. But that’s not what I saw. I saw sophistocated investors who had researched and valued these properties and were bidding on them in a very business-like manner.
3. It’s just the tip of the iceberg. I saw about 200 homes get auctioned a week ago Sunday. They were all in the Sacramento area and they sold from $50,000 to over $350,000. It took six and a half hours and three different auctioneers working in non-stop twenty-minute shifts. It seemed huge at the time. Then I recollected some of the  historical numbers that are being thrown around regarding foreclosures and sub-prime loans. And I realized, this is only the beginning.

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I made some new friends this evening, a really nice couple from San Ramon who were referred by a colleague. This couple isn’t the typical real estate client, at least not typical to me. They’re introducing me to the emerging world of real estate auctions.

We’re all aware of the real estate markets in California that are over-saturated with inventory, and we’ve heard plenty about the sub-prime mortgage meltdown that created this situation. Now comes the product, or the result of those markets: the liquidation of that inventory through public auctions.

Good or bad, these real estate auctions are going to be around for a while. Some industry folks I know have warned against the emotion and excitement that’s created by the auction process, suggesting that the event can drive prices up to and even beyond market value. Others, like my new friends, have had experience at these auctions and are certain that there are deals to be had.

The real estate auction we’re headed to on Sunday is being conducted by Hudson and Marshall and looks to feature over two hundred homes in the greater Sacramento area. My friends have picked a few houses that they like and they’ve scouted them out. They’ve done some research to determine what they think they’re worth and what they’re willing to pay. They’re looking at purchasing up to three homes - assuming they can secure the bargain prices that they’re hoping for.

So we’ll head up there on Sunday morning to drive by some more houses, and hopefully get inside to view some of the properties that we’re serious about. And then we’ll be at the Raddison by one o’clock to check-in and get our seats. What happens after that, I can’t be sure. But I can tell you this - it won’t be the last real estate auction in Northern California.

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