Comments on: Shifting Lending Tides – Who Cares?

By: Jon Spears

Jon Spears — Sat, 07 Apr 2007 03:40:15 +0000

Great post. As an Austin-based mortgage company (www.mylendingplace.com) it’s refreshing to read a good, accurate post.

By: Phil Hoover

Phil Hoover — Wed, 28 Mar 2007 16:36:44 +0000

Couldn’t agree more.
We have a party for five years and now we have the requisite hangover.
We will all live through it.

By: Steve Berg

Steve Berg — Tue, 27 Mar 2007 16:45:29 +0000

Phil,

Not to oversimplify, but it all goes back to supply and demand. Demand has had an amazing run in SoCal (and many other areas) for almost 10 years. Prices finally got out of whack and are undestandably adjusting now. It may take a while to reach equilibrium again. But if you note the new home sales out yesterday, the West was up almost 27%, with all other areas of the country down. Now this doesn’t mean I think the “flushing” is over out here because it’s not. But there is some resilience showing.

You’re right about individual markets. Where there is an abundance of developable land and the presence of numerous national builders, the adjustment cycle will take longer. But I don’t think this is comparable to the S&L deal in the early ’90’s. That was in tandem with a national recession, which we do not currently have (at least not yet). Interest rates were also much higher (i.e., around 9-10%). In San Diego we lost over 75,000 jobs in 24 months. Not the same as what we are seeing now.

Lenders should tighten their lending policies. It has been ridiculous and now they and many others (buyers, sellers and agents) are all paying the price. But this will cool down a market that got ahead of itself. It may take the rest of this year or maybe even next year to sort out, but for the long run, it had to happen. People still need and want to buy and sell. They just need to be more careful. And those who shouldn’t qualify for a loan won’t. For the long run, a very needed and belated adjustment IMHO.

By: Phil Hoover

Phil Hoover — Mon, 26 Mar 2007 16:31:13 +0000

Lenders may lend, but they will lend on THEIR terms.
Countrywide, for example, no longer offers 100% financing and I have seen reports that 19% of their servicing portfolio is delinquent (not just subprime loans).
That sounds incredible to me, but if true, is shocking.
I had my first blown appraisal of the past 20 years last week because the comps simply didn’t substantiate what my buyer had offered.
The homeowners who bought over the past few years, and the Realtors who entered real estate in the past five years have never seen a down market.
The current scenario reminds me of the S&L crisis in the 1980s when it didn’t matter how qualified you were, lending standards became so stringent that it was nearly impossible (or not worth doing) to finance a property.
As you noted, Kris, when a seller can’t sell, they can’t buy their next home and that creates a cascading downward spiral.
The big unknown in all of this is how many foreclosures and REO properties we are going to be dealing with going forward.
If we have a glut of foreclosures, combined with negative press, that B of A report may turn out to be optimistic.
The stock market is reacting today to the latest new home sales declines, as well as the woes of the subprime lending industry and it is apparent that lending standards are going to tighten substantially.
I fully expect Congress to hold hearings on lending practices and the lenders will cover their behinds by tightening lending policies.
From where I sit, it still looks like most sellers are in denial and think everything is going to be just fine “next Spring” (now).
Call me negative, but I don’t think so.
I think we have a long ways to go to reach stability, and may never again see the kind of market we had with the flood of liquidity in the financial markets of the past few years.
The simple fact is that the Fed pumped real estate with cheap money in order to bail out the economy after the 2000 stock market collapse, and 9-11.
Things have changed.
Even if the Fed tries to reflate the economy and avoid a recession by lowering rates, we have too much inventory and skittish buyers awaiting a bottom before they will buy.
In Boise, we are seeing very selective buyers cherry-picking the properly-priced homes that are in top showing condition.
Everything else is languishing.
I think the smart buyers are cutting good deals and will be very glad they bought in Boise in 10 years.
I am very thankful I am in Boise and no longer in California.
We should weather this better here due to our lack of national homebuilders, affordability, and high quality of lfe.

By: Apella

Apella — Fri, 23 Mar 2007 21:59:30 +0000

Great Post! Reading about the sub prime from the eyes of Wall Street and seeing the effects first hand while in the trenches are two different things. BoA is huge and has a good lender view of what is going on they also have been putting into play counter measures like other big lenders.

By: richardcohenonline.com Blog » Blog Archive » More Than Sloppy

richardcohenonline.com Blog » Blog Archive » More Than Sloppy — Thu, 22 Mar 2007 22:55:49 +0000

[...] pre-qualifications (not to be confused with a true, legitimate pre-approval) are another matter. This blog post has it right, and everyone should pay [...]

By: Jeff Brown

Jeff Brown — Thu, 22 Mar 2007 17:51:03 +0000

We’re actors in a remake of Back To The Future Kris. Although I believe this will settle down to something like what we’ve had, because as my top mentor once told me – “Jeff, lenders lend, and it will be forever so.”

Until we get from here to there, we will be truly living in a time capsule.

It’ll be interesting to see just what real affect this has on the markets, especially the SD real estate market.

Great take.