Foreclosure and Real Estate Blogs

Well, tomorrow’s the big day.  The Fed is going to be cutting the federal funds rate, the only question seems to be will they drop .50%, .75% or possibly a full percentage point.  These are certainly interesting times for rate watchers.  The Federal funds rate doesn’t have much impact on mortgage rates, but it does have impact on other parts of the economy and that’s where the Fed wants to provide some stimulation.

What happens, though, when the Fed exhausts it’s ability to drop rates to provide economic stimulus?  A full percentage point drop will put the federal funds rate at 2% and according to the government, we aren’t even in a recession.  If this non-recessionary economy continues to worsen, that leaves the Fed with only 2% for future adjustments.  Is that going to be enough?  Who knows.

A lot of the U.S. economy is driven by consumer spending.  With the home equity ATM closed, it’s highly unlikely the U.S. economy will be able to spring back quickly no matter what changes the Fed brings about.  2010 is a good possibility for the end of this non-recession, but I also wouldn’t be surprised if it went so long as 2011 or 2012.  Just make sure anything you buy either cash flows or is at a very significant discount or you’re willing to keep it for awhile.

“The mounting crisis has forced Mr. Bernanke, a former professor of economics, to discard the sanguine view of the nation’s economic health that he expressed last summer. He has also abandoned his skepticism about the need to calm financial markets and set aside his concerns about the “moral hazard” of bailing out big financial institutions.”
From the NY Times

Why is gold rising in price?  Gold is a classic hedge against inflation.  Why are people concerned about inflation?  Because the Fed keeps cutting interest rates to stave off recession.  Why is there a threat of recession?  Because the Fed allowed Wall Street to binge on crappy mortgage lending practices.

The party’s over, so now who gets to support the big Wall Street failures?  The taxpayers.

“The Commerce Department said yesterday that retail sales fell 0.6% in February; sales excluding the volatile auto and auto-parts categories fell 0.2%. The declines reflect a sharp slowdown in consumer spending, which accounts for more than 70% of U.S. economic activity, as Americans grapple with high gasoline and food costs and declines in home values and other asset prices.”
From the Wall St. Journal

Interesting points from the article include some pretty pessimistic viewpoints from the surveyed economists with a majority believing federal funds will be used to help alleviate an unsteady economy.  Some elements of humor include one economist stating that these economic issues came to be under Ben Bernanke’s watch.  Bernanke might have to take the heat, but that’s just because Greenspan retired knowing what was coming.

The Anderson Center for Economic Research is predicting recession for 2008 in both California and the U.S.

” Much of the recent increase in consumer spending has been financed by households cashing out a portion of their home equity gains by refinancing their loans. But total home equity cashed out is estimated to decline by almost $60 billion in 2007.”

But that’s not all.

“We are projecting an additional decline of $130 billion in 2008. The resulting negative hit on consumer spending will be considerable, especially when it is coupled with the impact of higher energy costs on reducing spending.”

The full report should be a “must read” for anyone considering purchasing a home, either for use as a personal residence or as an investment property. The days of just buy it and you’ll make money are over, the fundamentals are critical now and you have to consider the very real prospect of losing value.

You can find the press release of the report here.

Patrick.net has a strong argument about why there should not be a governmental bailout of the borrowers and subprime lenders who got those borrowers into their overpriced homes.

I’m not going to duplicate their thoughts, but visit the site, read the article AND contact your representatives and let them know how you feel on this issue.

For no readily apparent reason, I’ve been thinking about Ray Kroc today. The story, as I remember it, had Ray Kroc living a fairly unremarkable life selling paper products and milkshake mixing machines up until his 52nd birthday, or so. He then saw something that changed his, and millions of American’s lives. He saw, and understood the implications of the local success enjoyed by the MacDonald brothers who were running a small local restaurant.

He came to an agreement with the MacDonald brothers, took their basic idea and expanded it nationally to become the fast-food chain know as McDonald’s.

The growth, and profitability of McDonald’s wasn’t a smooth instant success story. Individual stores fared well, but the corporation didn’t receive enough revenue to be truly called profitable. Where did the profits kick in?

When McDonald’s corporation started purchasing and leasing land to their franchise owners. Leverage, which is one of the strongest benefits of owning real estate, was one of the major reasons McDonald’s corporation switched from an “average” company to an American success story.

If you don’t know the story of Ray Kroc, I’d highly recommend searching his name on a search engine and reading some of the information about him.  Fascinating guy, I think everyone can learn something from what he accomplished.

There’s been a lot of activity and discussion about what the recent Ohio foreclosure decisions mean. The controversy appears to have started with a post on the I am facing foreclosure blog. You can read it here. While the presented interpretation sounds pretty dramatic, Calculated Risk had a totally different take on it here.

The short version of the issue boils down to whether a lender can foreclose if they can’t prove they own the note.  The Ohio judge pretty much said lenders need to follow the legal procedures.  That means the lender needs to be able to prove they are owed the money, then prove payments aren’t being made, then they’ll be allowed to foreclose.

Does this transform the world as we know it?  Hardly.  Is it another example of media misinterpretation and publishing for the sake of drama?  That’s my guess.

The absolute biggest thing I miss about urban life is trash pick up.
I can get to the theater if I want to drive for about 45 minutes, restaurants and movies are 15 minutes to half an hour, so I don’t really have much call to miss any of that.  I was never really big on large crowds or the “excitement” that comes from being around lots of people.

Ah, but trash pick up.  Sigh.

I have some really nice trash cans, real heavy duty with tightly closing tops.  They stay really clean because I line them with the big heavy duty contractor trash bags from Costco.  Here’s the part that sucks.  I get to haul those bags, full of trash, out to the truck, grunt it into the back, then drive about three miles to a transfer station where I get to grunt the trash bags into the big dumpster chute.  It was so much easier, and quicker, when all I had to do was roll the trash cans out to the side of the curb.

Funny, the things you miss.

This morning I woke up at my usual 4:30 A.M. , laid there for a bit and thought about the whole early rising thing.  I don’t always get up at that time, but my neighbors help make sure that I’m at least awake.  There are 6 houses in our little grouping of homes, 2 are retirees, 2 are self-employed, 1 is a bus driver and 1 is a Realtor.

The retirement crowd always seems to be getting up at that time, lights are going on but they aren’t making too much noise.  1 of the self-employed often leaves at that time so I can hear his car start, the bus driver is always up, but he doesn’t leave till a little later in the morning.  The Realtor is the only one who never seems to be up before 6:30 or so.

The biggest plus of getting up fairly early in the morning is the vast amount of things you can get done, assuming of course that you aren’t going to be using power tools to accomplish your tasks.  Nothing seems to piss off neighbors more than firing up a circular saw at 5:00 in the morning.

Using a computer, I can put in 8 hours of work by 2:00 P.M. and still have a significant amount of daylight left for anything else I may want to do.  I used the do the same thing working construction in my early twenties, we’d start at 6:00 and close the day out at 3:30 or 4:00.

So what do you give up when you go to bed earlier so you can rise earlier?  Television?  Reading?  Socializing?
Books don’t care when you read them, digital recorders provide television when you want it, so really the only thing that might be affected is getting together with friends.  It seems that most of our friends also follow a similar pattern of early rising, so that doesn’t affect us much, your mileage may vary.

I believe it was Benjamin Franklin who coined the phrase about early rising and although I didn’t really plan my early rising, I do sometimes feel wiser. 

“Countrywide Financial Corp., the biggest U.S. mortgage lender, fell 13 percent, the most since the 1987 stock-market crash, after Merrill Lynch & Co. raised the possibility of bankruptcy. “Effective insolvency” would result if creditors force Countrywide to sell assets at depressed prices or investors lose confidence in its ability to raise cash, Kenneth Bruce, a Merrill analyst in San Francisco, said in a research note today.”

Countrywide Falls; Merrill Cites Bankruptcy Prospect (Update4)

It’s a little scary when one of the largest U.S. residential lenders loses half their value in less than a year. What makes it worse for Countrywide is their cost of business is now increasing due to the higher rates they pay for funding. Will this continue spreading until there aren’t any more residential loans? No. But, I do believe this credit market is going to get a lot tighter, leading to a tipping point in real estate markets that haven’t yet headed south. No loans, or highly expensive loans lead to fewer real estate sales which leads to price reductions as the only way possible to move property.
Interesting times indeed.