FSBO BLOG

The Federal govt keeps talking about getting the unemployment rate down, and the past stimulus just doesn’t seem to work. That’s because all of the benefit went to banks and they are hoarding the money. In todays bad news about June/July US home sales you need to read between the lines. 30% of the sales were with cash (no bank involved), these are mainly investors buying at bargain prices. These investors then hire workers to fix them up, increase the value. This helps the unemployed and neighborhood values (which reduces the number of underwater properties).  These investors are begging to buy more and help the whole situation, but the banks won’t lend and the Fed Govt can’t figure out how to help. I’ll tell you how. I call it the ‘Theo Plan’. Raise short term rates charged to banks and use the proceeds to offer investors a 1% mortgage rate with 20% down to buy bank/FNMA owed properties. I sound like a broken record but this solves the following problems: 1.Unemployment 2.housing inventories 3.tax receipts to Fed & State govt 4.foreclosure rate 4.real estate, stock market/401K values 5.the list could go on and on.

as my good buddy that is a successful stock trader with 30 years experience tells me, you sell when you tell yourself “I can’t believe how much my asset has appreciated” and you buy when you tell yourself “I can’t believe how cheap everything is”.  Right now you’ve got cheap prices, historically low interest rates, record high affordablity and sky high pessimism. As soon as the banks change their philosophy and unload their inventory, Real Estate prices will jump like a coiled spring, if you can act now and wait out the banks, you will be glad you did!!

if  you are a small business, this according to Federal Reserve remarks this week. Maybe easing home buyer standards is right around the corner. Funny how bank executives have been claiming this for the past year, but we do not see it.

Regulators report that consumers keep improving how they manage their credit card payments, with fewer customers in July defaulting or making late payments compared with the previous month.  On-time payments have been rising the last several months for many major card issuers.  “Figures show continued improvement in Americans’ ability to pay down their credit cards” said Fitch Ratings. Charge-off rates—the share of outstanding balances that the companies have given up recovering fell in July.  Hopefully this good news will increase the pent up demand going forward and late this year and 2011 will be the start of the come back in real estate sales.

According to data from Equifax, one of the largest U.S. credit bureaus, the average credit score rose to 704 in July, a level not seen since the first quarter of 1998. This data is based on Equifax’s 200 million-plus files of U.S. consumers using credit. July also saw total consumer debt outstanding fall to $10.8 trillion from a peak of $11.5 trillion and the savings rate continue to move higher.  This pattern can also be seen in the banks balance sheets, they hold on to their cash (highest levels in 10 years) and do not lend.

Less debt, higher credit score, yet consumers continue to reduce debt and not spend. There likely is some pent-up demand for housing, but it will take improved consumer confidence and banks lending standards to improve housing sales.

Here is just one reason why:

New Fannie Mae mandates (FNMA LL-2010-03 Loan Quality Initiative) requires lenders to do a “credit re-pull” just prior to closing.  If this updated credit report shows any change, the lender will re-underwrite, ask for additional documentation, suspend or cancel the loan closing.

So if your buyer applied for a pre-approval letter (which is based on the ‘credit report’) weeks before agreeing to buy your property, then several weeks later you are ready to close, the closing may be delayed.

WASHINGTON (AP) –Government-controlled mortgage buyer Freddie Mac said Thursday that the average rate for 30-year fixed loans this week was 4.49 percent, down from 4.54 percent last week. That’s the lowest since Freddie Mac began tracking rates in 1971.

On our July 8th blog we highlighted new low mortgage rates and now a month later, still lower. Our prediction is that when the rates start going up, like a coiled spring, they will shoot higher and faster than you have ever seen.

and it ain’t pretty! A congressional briefing by Mark Zandi, Chief Economist of Moody’s Economy.com, and Yale Professor Robert Shiller showed these charts of the current situation in the housing market. Bottom line is that the number of ‘underwater’ homeowners is increasing. Now there is $2.4 trillion mortgage debt for homes in negative equity.

The final rules take effect on October 1 and registration as early as January 28, 2011.

The rules are part of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, also called the S.A.F.E. Act.  Mortgage loan originators will have to be fingerprinted and sign up to a central registry to do business in future, according to final rules issued on Wednesday by the Federal Reserve and other regulators.

Each day this week major banks reported profits beating the estimates and their cash to loan reserves are approaching all time highs. But today, Ben Bernanke said the outlook for the economy is “unusually uncertain.” This message is for Ben, “by loaning money to the big banks at close to zero percent interest, they will continue to report ‘record profits’, while not loaning or working to resolve the foreclosure problem.”  Ben, the facts are clear: Banks now own more the 2 million vacant properties and unemployment is close to 10%. Maybe a program for investors to buy those properties and hire people to fix up might help.

The Federal programs ‘Cash for Clunkers’ and the ‘First time homebuyer credit’ gave money from the Fed directly to the consumer and both of those programs were an immediate success. Giving money to big banks now for two years has produced very little. Ben, when are you going to wake up?