Scott Johnson

We are running out of inventory... no doubt about it and there is still a gap between willing buyers & what existing potential sellers would want for their home..

As of today, there are 17 active listings in the Granite Bay, California zip code, at any price. Obviously that is subject to change, and does daily, but about a year ago there were nearly 200 - mostly foreclosures.

With the banks winding down their REO inventories, we can expect a few things to happen:

1.) A lot of asset managers will be looking for a new line of work (I actually like asset management people, but if there are no more REO's... )

2.) Prices are going to increase. Lack of supply compared to demand means prices go up.

Every now and then... a little snow in Granite Bay!

Gaines Shows Interest in Supporting Constitutional Convention Ballot Measure

I'm not so worried about the financial problems... they should be able to figure that out... it's called cut the spending. Instead of declaring "financial disaster" and killing the state employee's salaries... use the same stance and cut the "big ticket items"... like education, health & human services, and other piglets suckling at the pig until things get better.

Repealing the California constitution and re-enacting a new constitution is an end-round for 2 major defeats the liberals have had:

Proposition 8 - Banning Gay Marriage in California
Proposition 13 - Locking Property Taxes at 1% of original purchase price of the property

For years, the Libs have been trying to repeal Prop 13, blaming it for all of their financial woes in the state, yet spending has increased 80% in the last decade, and Prop 13 has been there for a long time... we don't have a revenue problem, we have a SPENDING problem. California spends something like 25 times the average state's budget... and enormously larger than Texas, Florida, or New York, all of which are close in size.

The Fed made two significant moves in the last 24 hours. Yesterday the Federal Reserve announced the unprecedented move of offering major companies access to their discount window, to borrow directly from the Federal Reserve (truly making them a lender of last resort), and bypass the major banks.

The major banks continue to hoard cash and will not put it back into circulation, no doubt frustrating the Federal Reserve. It may be time to call for aggregious penalties for member banks that borrow from the Fed (whose motivation is to stimulate the economy), but only put those proceeds into their own coffers.

Today the Federal Reserve Board of Governors voted to reduce the Fed Funds target rate from 2.00% to 1.50%. So far, this has only moved mortgage rates a net 25 bps in price for the day, or a rate adjustment of about 0.065% to the end customer.

Sales in August in California were up 86% in August from a year ago. Prices were down about 40%... but at least we have people in the showroom so to speak.

The Housing Bill, which was supposed to fix the real estate market last July, only takes effect now, starting October 1, and authorizing the FHA to start refinancing an enormous number of homes.. Inevitably, we are seeing a bottom now - finally.

So where do we go from here? Do I see a real estate boom coming? Heavens no.. but at least we should see regular movement in the real estate industry again. It doesn't help those that are under water... although we have new programs for that now... but it does end the awful cycle of foreclosures.

Here in Sacramento, we are regularly selling homes for basically under $125,000 that were in foreclosure at the $240,000 level. At $125,000 with your basic FHA or VA loan, the payment works out to be around $750. There isn't much of a reason for the young kids to start moving out of the apartments and into a home of their own.

I personally think we will see this in a tidal wave, and it should absorb everything on the market very quickly.

We will then see prices rise, as the foreclosures are no longer in stock, and the existing home owners won't have an interest in selling.. as the values will still be low compared to what they paid for the home, we should see a period, after the foreclosures, of very, very tight inventory for a year or two.

- Scott