Diana Lewis

Its a great day here in Albuquerque. The sun is shinning and the wind is not blowing. The stock market was up over 500 points yesterday and today's paper said that sales of homes was up more than 5% over last month. It's a great day!

Interest rates are historically low as are home prices so why aren't buyers buying? Is everyone so afraid of this economy that they are fearful of a total bust. In the Albuquerque, NM, area unemployment is running still below 6%.

I guess there is still too much fear out there. How do we overcome it and get this industry moving again?

According to this morning's Outlook in the Albuquerque Journal, apartment rentals dropped 4 percentage points in the fourth quarter last year. It dropped from 95% in the third quarter to 91% in the fourth quarter.

Apartment occupancy predictable drops every winter but usually in a range of 1% to 1.5%. A 4 percentage drop occurs only when there is distress in the local economy. The drop is probably due to the rise in unemployment from 4.1 in September to 5.3% in December. The last large drop was in the winter of 2002 when the occupancy dropped from 94.3% to 90%.

These drops occur because people who are unemployed double up with other friends or family members. Construction workers and service sector workers move here when there are jobs and then go back where they came from when the jobs are over.

The average rent has slipped slightly from $688 a month in the third quarter to $682 in the fourth quarter. However, rents are still a little higher than the average of $675 a month in May. Rents are dropping all over the country, according to Outlook, particularly in areas like Southern California and Florida where single-family homes are undergoing significant erosiion in value. Home values in metro Albuquerque declined last year at half the national rate.

Dropping apartment rents and occupany is good news for apartment renters and may also be a signal to realtors that the value of homes is attracting more buyers. Fewer people are renting, more are buying, this is my hope not an opinion expressed in the Outlook article.

The government fix for housing is helping a lot of people refinance their homes (4,000,000+) at lower interest rates. This will help homeowners who are solvent lower their payments but not much help to those who are insolvent (unemployed, death, divorce, disease) etc. This could benefit the economy because it puts more disposable income in heir pockets but it doesn't do much for the foreclosure problems.

A family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 - making them ineligible for today's low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% - reducing their annual payments by over $2,300.

Before the real estate market can make a come back, we are going to have to get through all of the short sale and foreclosure inventory. Realtors are the best friends of banks and homeowners in trouble. Somehow we need to get this message out. I am seeing some signs since Fannie Mae said they will not negotiate commissions below 6% on short sale negotiations. We need other institutions to follow suit.

I am an investor/realtor doing business in Albuquerque, NM. Here is how I work as an investor. My methods are very helpful to realtors. When a realtor gets a call from a seller telling them they need to sell their home using a short sale, the realtor contacts me. Together we meet with the owner to let him/her know how I work. I offer to purchase their home using an option contract. The realtor does the listing and we proceed to market the home. In the meantime, I do all the negotiations with the bank and upon approval from the bank I close on the property and then close with the end buyer. There are several advantages to the seller by using me in the process. I get it done faster than normal because I am writing an offer on the home almost immediately, I am very knowledgeable about the short sale process, and if everything is right I may pay for all or a part of a deficiency judgement if that occurs. I save the seller from having a foreclosure on their credit. The BIG benefit to the realtor is that I pay a referral fee when I close with the bank and a commission when we close with an end buyer plus I do all of that negotiating with the bank. The end buyer wins because they have gotten a home with a great value.

I see this process as a win-win-win-win. The bank even wins because I have taken a bad loan off of their books saving them a foreclosure.