Good Grievance: Your Emails And My Replies

Good Grievance!!


Ok, I want to take a little space here to respond to a number of complaints you readers have been sending to the RealtyCheck mailbox. Don’t get me wrong, I love it that you’re riled up, I love it that you disagree, most of all I just love it that you read all this stuff, so here goes:

Mortgage Meltdown”
In our ever-undying efforts to make TV oh-so-fun and viewer friendly, we at the RealtyCheck are always looking for ways to brand whatever the topic-du-jour is in the market. Problems in the subprime mortgage sector have plagued the beat for several weeks now, and in the headlining we’ve referred to it as the “Subprime Mortgage Meltdown.” You get it…mmm…a lot of alliteration from anxious anchors in powerful posts (I stole that from Albert Brooks in “Broadcast News.”) Anyway, one of you wrote in that we are using the term “meltdown” for all mortgage sectors, and while that is entirely possible, I do want to put it here in writing that I try only to use it to refer to subprimes, which, like it are not, are in something of a meltdown. More than two-dozen out-of-business subprime lenders will back me up on this. If others at the office here are using it for the entire mortgage market, then I hereby officially apologize and will do my best to keep it in check.

Now would someone please explain to me why the word subprime is always underlined in red as misspelled on my Microsoft Word, but it’s how all the fancy newspapers spell it, no hyphen, no space??

A Numbers Game
My you are a skeptical folk out there. You don’t seem to believe any of the experts, not the National Association of Realtors, not the National Association of Home Builders, and definitely not the U.S. Department of Commerce. Trouble is, these are the organizations that track housing and give us all those numbers that get all the Wall Street folks in a tizzy and make them buy or dump all that GE stock in my 401K. (GE is the parent company of CNBC)

I’ve been getting several complaints about using the month-to-month numbers on new and existing home sales instead of the year over year. Let’s set the record straight. I use both, and here’s why: year over year sales figures show the real current health of the market. This tends to be the most dramatic number and factors out much of the seasonality, as well as strange weather blips. If you want to get a macro picture of the real estate market, it’s you best number. But the monthly number isn’t bunk either. While it can be severely affected by all kinds of strange factors, weather, bad words by a certain former Fed Chairman, a spike in oil prices, the month-to-month number does give you a micro look at where the market might be turning. These numbers are supposedly seasonally adjusted (whatever that means…ok I know what that means, but I don’t want to be a real estate geek), and if you use them for a little handy extrapolation, they can, in some cases be valuable. Again, I use both numbers in my reports, so there. As for prices, you have to do year over year comparisons, because the data simply doesn’t work month to month.

My Job
It is not my job to tell you exactly when to buy or sell your house. It is not my job to tell you exactly how long it’s going to take to get your house sold. It’s not my job to tell you exactly where your particular local market is headed. Some of you are starting to complain that I’ve somehow steered you wrong in your particular neighborhood, and you didn’t buy/sell at the right time. Some of you complain that I’m under pressure to pump up the market.

Wrong. Wrong. Wrong. As I’ve said before, my only personal interest in this game is to see a certain neighborhood in DC stay healthy, because I happen to live there, and I specifically don’t report on my neighborhood so there will not be one iota of a chance of a bias. It is my job to give you every possible data point I can find on your local region, talk to and air the opinions of buyers, sellers, realtors, and economists nationwide, show you what is selling and what isn’t, highlight new investment strategies and opportunities in the real estate marketplace, report the institutional numbers, whether you believe in them or not, bring national economic data into the picture that might have an effect on mortgage rates, home prices and housing inventory, report on the current state of lending, and put all of this stuff into some kind of user-friendly format that helps you understand what the house I’m talking about.

I am NOT, I repeat, NOT under any pressure from anyone in or outside of CNBC to pump or dump this real estate market. I am, at times, asked to participate in on-air panel discussions, and to offer my opinion on the state of housing, and I did, I promise you one responder, say over and over during the boom time a year ago that the experts say “prices are unsustainable,” but otherwise I report (I won’t say “you decide” because I don’t work for those people, but you get my drift).

This blog is different. I say what I want and what I think. This is opinion and observation and you can take it or leave it. Your call.

All that said, please keep complaining…my mother always says I would have been a much better lawyer.

Thanks to all the blog responders in the real estate industry...keep 'em coming!

"Meltdown", "Recession", "Correction"?
I am a Loan Officer in the San Francisco Bay Area. I have seen so much in the last 10 years and now there is a "meltdown". What was it called in 1992? A recession? What was it called in 1995-1997? A correction?

The investors and the lenders got what was coming to them this time. The lenders lowered the borrowing standards to the point of it being a joke. As lenders, we could not believe it. The saying was, "If they had a pulse and a signature, we can get them into a home"!

The lenders took a risk that the market would keep going up and up.....well, just like the Bay Area's famous DOT-BOMB of early 2001-2002, nothing keeps going up for no reason. The lenders and inevitably the private individuals that invested in these companies are going to take huge hits. What's the other saying, "Don't play the game if you can't afford to lose"?!

ALOT of my applicants are calling me to get out of Adjustable Rate Mortgages (ARM's), but they have no equity, have been late on their payments, or something else. MOST say they were 'unaware' of this possibility for adjustment, or were not told about the 3 year pre-pay, or the fact that their loan negatively amortizes, which adds principle monthly to the balance of the loan.

This was a GREED MELTDOWN! The banks made this market and now they are paying the price, along with ALL of us. Also, the homeowners were using their homes as ATM machines, with the encouragement of the lenders such as those relentless ads, along with E-Loan and Ameriquest.

What is also sad, is that the founders of these lender's such as New Century, will not face the same problems that those that ENRON did. I see nothing but further loses in the nationwide market and it may need to get worse before it gets better. The losers in all of this, as usual, will be the everyday person who wants to own a home and will now not only not qualify for the tighter loans, but with prices forever higher than 2-5 years ago, may NEVER own a home. Rik W.

Worst is Yet to Come
I'm in the Title industry in Maryland and your reports are very accurate, and the worst is yet to come. But everyone is fixed on Sub Prime and Alt-A, but I see the same thing happening in Prime. Here is an example (from the Washington Post)

Note this Paragraph: "They decided to buy the house, which was fairly easy because the Santoses had excellent credit, equity in the other house and money in the bank. The mortgage broker made things even easier by doing the settlement in their home ..." - Jim H.

A Natural Disaster?
I wanted to know where a normal mortgage broker in LA can get a voice. I have been a mortgage broker almost half my life and have watched CNBC every day for over 12 years now. There is so much bad news about us. I wanted to do a story on the many clients I have over the years in the subprime area that are paying on time for many years. They would not have had a house and raised a family without our help. I did not overcharge them in the process. The feds are the only reason for the problem in subprime industry. With 17 fed hikes in a row what else would you expect to happen? This year the indexes went from 1.5 to 5.2 so the new adjusted rates for these buyers is 9.5 instead of 6.5 that it could be. Why doesent FEMA announce this to be a natural disaster and give 5000 dollars to each homeowner. You have never seen so many displaced homeowners in any other natural disaster. Rose O.

Subprime Spillover
I would have to disagree with Ethan E. After the dip on the Dow in the last two sessions due to subprime issues,a problem does exist with the mortgage market. And this problem isn't going away. For the subprime problem could easily spill over into the prime market very easily. Never deny the existance of a problem like subprime which will effect the market again. Already the dow is down due to recent housing data and some publicly traded contractors with this real estate market; thier stocks have dropped.

That is the reality of the issue. Another fact is that subprime and high gas prices have affected the way consumer's spend their mony now. ChuckH.

Sellers are Only Half the Market
Most of the CNBC real estate reporting is based around how the sellers are losing money, how the sellers can't sell, how they are stuck in an illiquid market, too much inventory, how they took out "unfriendly" loans and did not think their investments forward for more than a few years.

Well sellers are only half of a market. It also takes buyers to have a market and their story is not being reported. I am a potential home buyer and I regard the current price weakness as good news. I may actually be able to afford to buy a house in the next year or so.

I might be able to become a homeowner because of investment mistakes others have made. Why does the government need to fix that? Is it right for Congress or the Fed to legislate risk out of investments?

Investments have risk, that is how the game is played. Look back to Enron stock or the dot com crash if you've forgotten about risk.

There is an index known as the affordability index.

I've never seen it mentioned on CNBC, but it should be. It really is the crux of the RE problem right now. Here in California only about 12% of the population can currently afford a house. The RE market will not recover until that index improves. Frank

Playing the Role of Cheerleader
Last week many financial reporters, playing the role of cheerleader mis-reported the existing home sales number. They used the February 2007 vs January 2007 number which is meaningless. In the first place, these are slow months of the year, so you are looking at a small difference in two small numbers. The error bars in both of those numbers is greater than the difference in the numbers i.e. totally useless.

If you want a more accurate indicator, then use same month comparison to previous year i.e. February 2007 vs. February 2006 Of course they didn't use this number because sales are down 4% compared from previous year.

Also, thanks for your excellent article on AltA. Robert C.

Questions? Comments?