The View from here, June 2008

Well.....still going.

Dallas Fridley, our regional Economist wrote a stellar review of our Real Estate Marketplace. You can find it here.

Dallas does this stuff for a living, and though we are drawing slightly different conclusions, I'm thinking his data set is the county at large, while I'm allowed to be a bit more selective.....(read: I'm drinking my own kool-aid, and focusing on just the immediate Hood River City and surrounds)

Dallas is spot on with Wasco County, and the strength in average sales price in Hood River County, which showed impressive gains in May. (up 4.6% YTD) That's probably seasonal, and the total units sold is still down, but so far, so good.

There's been a RASH of deals this last week, and when I looked at listing numbers, a number I thought was going to explode, I found that it was, actually.....down. Not by much, mind you, but at least, I think we are not having that compounding effect of swelling inventory, and waning closings (read the "overhang overhang" comment from last month)

I wake up one morning, and I think "This is the inflection point" I wake up the next morning, and think...."uh oh" I never can tell what indicators will jump out from day to day.

I will say that the Buyers keep coming in, and people are still buying things, so, if we are selling at 2004-2005 levels in terms of units, and our total volume is only slightly off in the City of Hood River and immediate surrounds....well,

I seen worse.

Talk to you next month. June 28th. The inflection point. (As bad as the Sub Prime fall out is going to get until sometime later next year, when the second wave of it comes due, assuming workouts and bailouts haven't softened the blow.)

What worries me now? food, water and energy. That kind of impact, however, tends to strenghten us, in an area that has it's own food, water and power....

Inventory Check...........

298 in the Hood River Market as of this morning........As I recall, that's over 100 units more than our historical average.....30% ish overhang......

hmmm......Soft sales cycle, inventory building up.........

Why is it I always get to call it in June? Hang on, the next three weeks will be telling...........

Good Reads for June-

Fortune has a great article about shifting builders styles over at KB homes. Good Read, and a decent overview about the shrinking of the american home and a return to the value of a home as a rent vs. buy decision. We've been pushing that for years, but now, finally, it's getting some press.

NYT also had a great article on the delinquency rate across the Nation. the NW and North Central states all clocked in a nearly normal historical rates (under 3%) while the rest of the country.......awash in rates over 7%.

7%! Are you kidding me! That's crazy. I must be living in a thermos.

Here's the link to the NYT article. It's worth it.

http://www.nytimes.com/2008/06/06/business/06mortgage.html?scp=2&sq=delinquency&st=nyt

Here, WITH FULL CREDIT TO THE TIMES FOR THE GRAPHIC! Is the Graphic from the article......

The View from Here, May 2008

Hmmm....We've been having some bouncy times lately, and my numbers are a bit rougher this month than last. Still, doable and improving.

There is so much punditry out there right now, and alot of doomsayers, but I'm just not seeing it as apocalyptic as they do. (Rick!)

I've been reading about Portland's "Dead Cat Bounce" meaning their sales numbers, while increasing are still waaaay off from last years, and the rate of improvement is slowing thus....a top in the market for Portland that is much lower in previous years. So I took a look at our market. Here's a couple of things that are immediately apparent.

Mid Columbia Region
1. Number of closed sales are down.
2. Total sales volume down 48%.

Hood River County
1. Number of closed sales are down.
2. Total sales volume is the same.

City of Hood River
1. The Number of closed sales are down.
2. The sales volume is the same.


So there you go, split decision. (Well, not really) The same volume is being split among fewer transactions. One person points to the 20% year over year drop in closed sales(in the last two months, 35% YTD) and the other, promptly points to the dollar volume closed.

The City of Hood River, however, is hanging tough, County, same story. So why is the Region down on dollar volume? Here's why:

Skamania County? Wipeout. Klickitat County, Wipeout everywhere else except White Salmon and Bingen, which got brutalized, but survived by comparison.

I repeat, flight to quality in Hood River. In Hood River, if it's priced that same as last year or lower, and you LIKE THE PROPERTY AND ARE WILLING TO DEAL WITH ITS IMPERFECTIONS.......

BUY IT.

See you next month. Lots of action and things shifting around. I expect we'll see a relative increase in performance in closed sales, and dollar volume in Hood River City and County, as well as an EXPLOSION IN LISTING VOLUME.

At this point, I'm focusing inward on those areas that are the places that will thrive. Close in, Hood River. Right now, much else is a waste of resources......Expect the trend to continue as well, because no one, and I mean no one is lending to buy raw land or large tract, or other similarly unique properties.

Market Stats from April-

Well, it's a faaaast moving market out there, not in terms of deals (though that is improving) but rather in terms of perceptions, motivations, and friction. Buyers perceive the market to have much more softness ahead, but can't explain why people are still buying properties, Sellers have motivations that are all over the map, but if they are pressured to sell, they are doing everything they can not to let on, the ones who everyone knows need bailing out, unfortunately own homes that are being highly penalized on the "quality" scale, therefore selling at a massive discount that may still not be enough. (mapped out over time, these properties make a divot in the scale....)

We are not at a capitulation point for many of these people, but signs point to late June before the next true buying opportunity comes around. July, for once could be the buying opportunity of the year, when you think about it......

This months stats are pretty bloody, but there's still some strength in the Hood River merket. Closed numbers are down, Average price is up. (We need a housing land trust!) May's numbers are going to show a huge jump in listings, which will mean more inventory overhang, and continuing downward pressure on prices. Here's a stat for you: We are down 100 units closed this year in the Mid-Columbia market Last years we were at 315 closed, yet, and this year 213....

So. Not so hot, but not the gaping Maw either. Next month, we'll be talking about the dead cat bounce.......

Market Stats from March!

I think the most telling item in this months market highlights is the caption under the Summary chart. It reads; "Due to the vast difference between the counties in the mid-columbia region, the area propert on page 15 provides summary information on each individial county"

Which is another way of saying......"there's some dogs in there, look out!"

The First Cut
At First cut, things look pretty rough. 14% decrease in new listings, Closed sales down.....ready for this? 46.4% and Pendings down 34%. For the quarter, Pendings doen 31.5% and closed ar 30.9%

See the upward tick?

The Finer Measure
Lets look closer at the Hood River County. Overall in Hood River County, Pending Sales were down 5.9% in March, and 26% for the Quarter. (Big uptick) Interestingly, while the other numbers look similar (bad, but not doing horribly) there is an interesting note......and that is that 9 of the 12 closings in March, and 23 of the 34 closings this year to date, are all in downtown Hood River. That looks like a flight to "quality" to me. (Quality being defined in a defensive aspect, like, safety, or value)
Around the region this thought seems to play out in this first quarter. Most of the outlying areas got absolutely pounded. Some of it is seasonal, but if this trend continues, it could hurt the outlying areas alot this year. Shorthand? If you want to live Rural, make an offer.

Lending Horror stories! (And Private Money to the Rescue!)

Ever heard the one about the mortgage broker who blew the financing so that they wouldn't have to honor the lock?

Or how about the one where the lender went bankrupt at closing?

....Or, how about the one where the bank approved the loan, then pulled back at the very last minute, while the parties were sitting in the closing, waiting for documents to be e-mailed in?

Yes, these, and other horror stories are making their way around the offices these days. while some of them will surely become urban legends, we have been noticing an uptick in alternative mortgage strategies. Here's a list of a few of them. (These are actually, very very similar to pre-1998 best practices, BTW, for people who can remember Real Estate from back then.)

1. Find a co-signor. This one is a classic, and becomming back in demand. By co-signing with a family member (usually parents) a young buyer gets to get the credit score of a sibling or parent, and then makes the payment. This was a very common arrangement in years past, and we are seeing it come back.

2. Private Money. Sound Exotic? hardly. It isn't exactly at the bargain basement prices of some mortgages, but you'd be surprised how many people are out there looking to lend money against a Real Estate Asset. Be careful when doing private money deals, because things like remedy, and evidence of payment, etc. can all hurt you alot. Best to get a lawyer to help out, but once everyone is on the same page.....well, these things tend to work out pretty well.

3. Your local bank! Yes, your local bank used to be the only lender in this area, and it is looking like a return to that time is a-comin. get to know your bank manager better. You know how you used to complain about not ever being able to speak to a human at those large mortgage companies, well, now you can speak to a human, only problem is, that human now knows alot about you, so you'd better make sure your payments are current!

The View from here, April, 2008

So it's been tough. Last couple of months have been quiet, and the newspaper hasn't helped. I left for vacation a few weeks ago and I didn't want to look at our income statements until I returned, expecting to see red, flowing from the pages......

I returned, and got up the nerve to look at my numbers and compare them with last year, bracing for the worst and............

They were EXACTLY the same as last year. Sales are up, closings are exactly the same, and while my costs are a little high.....really, alot better than I had thought!

I'll have to admit, I was expecting so, so much worse! Mostly, I was really bummed about my call that there was a bottom a few months back. I really do sense it, and I think that while we will be dragging along the bottom for a fairly long time. Most models indicate that the bulk of the mortgage resets, etc aren't until june, but with all this intervention, I think the worst of it has passed. (and been shifted back to the public in general, including those of us who weren't profligate borrowers, but that's for another posting)

For those of you who are waiting for the bottom to fall out, let me say this, you missed it. If the bottom does fall out at this point, you most certainly wont be buying anything, because most likely, you wont be able to obtain any kind of financing. Short of a major disaster (now under 20% and falling, thank you very much) in this marketplace, or the total implosion of Real Estate lending in it's entirety, we are past it.

That said, it's going to be rough rough rough for a bunch of years.........

See you next month!

This is a test of bloggers mobile blogging

Look out..........

"Underwater Lock Down"

...Ok, My phone rang immediately upon that last post with a disgruntled Blog reader. This is what an "underwater Lock Down" is.

In Hood River, your average person buys, or owns a house. They get caught up in some of the market run up hype, but not in the way you might expect. Usually, they take out their new found wealth in the form of a refinance at the higher valuation, but they do not sell. Many of them don't do sub prime but some do. (Figure more than 50% don't) and here's what happens.

Market corrects, but the total negative impact on these people is that their payment is high and they've lost money....but only if they sell their home.

They decide that it's easier to sit tight and pay a couple hundred more dollars a month and wait for the market to recover.....so, they drive their cars a little longer, go out to dine a few less times per year, and generally trim back a touch....but they don't sell.

What does this mean to Real Estate? The these houses do not come to market.....which is effectively a return to the Real Estate market of 1996-2001.........general upside pressure, limited inventory, very little speculation.....

More or less................

Mid Columbia Market Report......

Maketing report came out last week. The Highlights.......

Average Home Price in Hood River County is...Ready for it? $384,000.00. In the City of Hood River (Downtown) it was $403,000.

Yeow. Pricey. ("Spendy" is the local parlance) We are still having affordability issues, especially in the procurement of Land. A Couple of us are trying to start a land trust, but it too, is an uphill battle. Good thing about it though, is once you get something in there, it really is like money in the bank, earning interest....social and financial.....

Days on Market has gone waaay up, to over 120 days. That's a loooong time, and expect that number to improve. It will be interesting to see what happend to the Average Sales price when the "Underwater Lock Down" starts to happen. My bet is that it will impact consumer spending more than it will impact housing prices, expecially in this area, and have a supporting effect.....

But then again, maybe not. Hey, What the hell do I know?

The View from Here, February 2008

Wow-

I hear there's another wave of writedowns in the offing. That would be unfortunate. I can't see it coming from more foreclosures, but rather from the compouding effects on both the investment banks and the insurers....Most people think this is the impact of September/Octobers delinquency rate, and if that's the case, this all wont be over until well into the Summer (height of the resets is January 08) With the freeze in effect, and other government intervention, who knows. It really is like a Hail Mary pass at the moment isn't it?

I read this week also, that there were 8.8 million people who were going to be helped out by our government's latest mortgage bailout, and that this number represented only 10% of those who were considered underwater. (Owe more on their house than it's worth.)

Now that number scares me. 88 million people are underwater in their homes? Impossible. That's got to be like 40-50% of the entire home ownership in America......If this is the magnitude of the problem, it looks completely different, but not what you'd first expect. It's kind of like "home owner mobility lockdown".....(i.e. It's cheaper to stay put than it is to move and take the bankruptcy.)

Even with all the recent shenanigans in Hood River Real Estate, a majority of the home owners are still sitting on equity (unless they refinanced and took money out)So once again, Hood River is not too hot, not to cold, and in playing the long game, looks pretty good overall.

That, combined with rising value in resource lands, makes for a decent spring.

I cannot wait until I can stop writing about the Sup-Prime Mortgage market.......

See you next month. I'm still bullish on the Market, but my timeframe has expanded a touch. No strapping on of shoes (see last post) until Spring of 2009.........