Market Insight From A Frustrated 25 Year Industry Veteran

I was at a real estate forum a couple of weeks ago, and the topics being discussed seemed as though they must be similar to those being discussed in local communities all over the U.S. I, personally, can vouch for encountering many of the same situations while making calls to get answers for friends I am assisting who are looking to buy in the State of Nevada, as well as when serving my regular client bases in Oregon and California.

There are still many positives to be found in our current real estate/ credit market, but some of the happenings taking place behind the scenes make me wonder if some of the players in this "game" of Real Estate have taken their eyes off the ball when we are here at the bottom of the ninth.

The impressions I came away with from the Oregon Homeownership Forum held on May 20, 2008 here in beautiful Southern Oregon, like the weather itself that day, reflected not only blue skies but some thunderous storms as well. Attendance was at the maximum, with industry professionals looking to gain some insight into what the heck we're facing in our current real estate and credit market. With only roughly an hour to cover so much, the speakers participating in this forum only touched on some highlights on some issues, and as seems to be the norm these days, each opportunity was counter-balanced with challenge.

Opportunities (The Good News) Challenges (The Bad News)

* The Rogue Valley Association of Realtors * With 340 homes sold in the Rogue

currently has roughly 1,100 members. Many Valley from February 1, 2008 - April

professionals are riding out this market 30, 2008, just over 100 homes per

downturn with the anticipation it will be short month, 90% of these licensed

lived when the wall of "irrational pessimism" professionals have expenses that

comes tumbling down and "pent-up demand" greatly exceed their income.

jumps down from the fence to take advantage

of so many buying opportunities. * Funding for many first time home

buyer programs have either run out,

*The State of Oregon's CashAdvantage or as in the case of the State of

program will likely be re-funded in Fall 2008, Oregon's CashAdvantage program,

and the State's Down Payment Assistance been redirected to other areas of the

program by early 2009. The City of Medford's State who have experienced flood

down payment assistance program funds will related losses. Qualified first time

next be refunded when Community Block Grant home buyers will not have these

funds from HUD are allocated, probably in 2010. resources available to them for the

Spring/Summer buying season.

*Fannie Mae announced they will not apply the

Declining Value Area 5% loan-to-value to their *MGIC, when asked if they will be

high LTV programs for low-to-moderate income adjusting their criteria to match that

borrowers. informed the forum attendees that

they have no intention of doing so,

AND will be further tightening their criteria

as of June 1^st. These changes also

affect Oregon Soldiers eligible for the

State Veterans' Home Loan.

So what does this all mean? Well, to me, it means there are a lot of priorities that need readjusting! JacStats.com shows that as of May 1, 2008 there are 2,392 active listings in the Rogue Valley - the Good News is, that is 10% less than we had in May 2007... the Bad News is it will take roughly 21 months to sell through this inventory at the current market pace. The Good News is prices have finally come within reach of First Time Home Buyers in the low income ranges who would be able to buy with the down payment assistance programs... the Bad News is due to lack of foresight and planning, there are no funds available in the programs we use here in Southern Oregon! If the programs First Time Home Buyers are using are taken away or under funded, how does the Seller who wants to move up sell their existing home? At the present time, Sellers can't get an equity line to draw on their equity to purchase their move up home, and rents in the Rogue Valley are too low to accomplish much in the way of debt service anyway. I know - even with putting 20% down on the income property we purchased in 2005, we run a $500+ per month negative!

Banks and Lenders are teetering on the edge. FDIC is staffing up to handle bank closures they anticipate to be at the level they last saw in the early 1990s in Texas. Each merger and closure further eliminates the necessary market competition borrowers need to keep pricing in line. Although a great deal of the blame has been laid at the feet of mortgage brokers such as myself, the lid is coming off as more details come to light on major banks who are restructuring their management and faulty business practices can no longer be ignored so heads finally have to roll. These are the entities you want to borrow from? Who have major losses to cover that will be passed through in their interest rates?!?!

So, let's regulate the mortgage brokers who originate more than half the real estate loans out of the market while banks/lenders continue to merge or close... eliminate pricing competition! Mortgage Insurance Companies can reduce losses while they "criteria tighten" themselves right out of business because there will be no loans for them to insure! Take the entry level buyers out of the market so the rest of the market can stagnate! Set up a snowball effect for the foreclosures that come as values drop when the only sales comparables determining market values are from distress sales - job loss, divorce, foreclosure!

In my old black and white world, it seemed as though keeping our eye focused on bringing about means to successful, sustainable homeownership is a pretty basic concept... kind of goes hand in hand with only buying something if you have the money to pay for it, or could prove you are a reasonable credit risk. "Collateralized Debt Obligations" and the like belong in the riskier stock market world, not the lending world. With incomes not keeping pace with housing prices, maybe the world of Ozzie & Harriet is not where we live anymore, but a happy median is certainly obtainable.

It really isn't all doom and gloom here in beautiful Southern Oregon, but we DO need to adjust our priorities. Year over year, a 10.5% median value decrease in resale homes and 19.4% for new homes isn't all that bad when the 5 year average still reflects a 40% overall increase in values for our area. Growth predictions for our area are still great, and demand will again drive supply. I can almost see that light at the end of the tunnel and just hope we turn that corner soon - and don't do anything really stupid to extend it out!

The Good News is there are still tools available to help the Southern Oregon First Time Home Buyer on the road to homeownership if you know where to look...the Bad News is time has become of the essence.

See you at the closing table!

Karen Cooper - OR/CA Mortgage Consultant - ww.Quality4Loans.com