In the trenches update

First, something to lighten the spirits of everyone:

Tales of homeownership:

If you are on a septic system, don’t drive over a waste line with a 10 ton truck loaded with gravel.  I did and just learned that PVC waste lines will indeed pancake.  The result is rather disgusting.  – SCrow

No one is lending money:  that is false.

Although the pace of transactions is meaningfully lower than what we have seen, the idea that no-one is lending money is not the case.   Our office is closing routine sales, closing short sales and refinance transactions.  The difference is that closings are taking longer, authentic underwriting is taking place and FHA is appearing to be very much the type of financing people are using.   And, yes, borrowers are asking for and receiving concessions.

Some of the loan officers (still in business) we have worked with during the last 4-5 yrs. have jumped from one firm to the other that is FHA approved.  FHA is the name of the game right now.

In the area in which I live (Snohomish and vicinity), we have had several sales take place over the last month  or so, and, among those, a couple properties closer to where I live sold for $750K and up.   So, there are some people who are snooping around and finding very good values for the current market we are in.  My guess is that if you asked, “why in the world would they buy in this market”, they would reply, “talk to me in 15 -20 yrs.”  And that is one of the primary real estate mindset shifts I’m discovering:  few are those who are not looking at a long-term horizon in their purchase.

There are some absurd decisions being made

The unique view from the escrow seat allows for a lot of discussion in the S-Crow household, some of it funny and some of it just remarking about how foolish some people have been.

For example, a seller purchased a home within the last year to flip it.   The seller made improvements and put it back on the market.  The seller then obtained an offer and the transaction moved towards closing.   Once escrow disclosed proceeds, the seller evidently did not like the net proceeds after expenses:  not enough (code for potential paper loss).  Buyer is ready to close and the seller refused to sign closing documents.  You’d think that a seller would know within a small range what the proceeds would be before putting the home on the market and wasting everyone’s time and money.  Result: highly probable legal action moved the seller to sign.

There are a number of people in our society (save the politics for another blog) that just refuse to take personal responsibility for stupid personal financial decisions.  This is an issue that Mrs. S-Crow and I argued a lot over in months past.  I’m starting to come to the conclusion that her analysis has more merit than my “it’s not all the borrower’s” fault mentality circulating in my head.  Some borrowers did put too much trust in the people guiding them along the way.  But, in the end, their signature is on the Note and Deed of Trust.

We are at the bottom, locally:  I don’t think so.

I have no data to back this up, but my anecdotal evidence of closings is the best I can come up with.   Based upon what I see in the refinancing realm over the last three quarters of this year,  I see some existing homeowners delaying the inevitable.   Refinancing costs thousands of dollars and there is a pervasive thought (I don’t know where some people get their information…either they are terribly not paying attention or someone is giving them false hope, which in many cases is more dangerous and damaging than being honest about where the chips are falling) that the market will turnaround within the next year or two.  Possible?  Anything is I suppose.  Likely?  Nope.

Real scenario:  It is not realistic that a borrower can purchase a home late in 2006 for $500K+,  now owes in the realm of $540K on the property and think that in two years time (2009-2010) they can have an equity gain to pay routine closing costs.   And this is in a development that was birthed in 2005 that has already experienced a foreclosure and another distress sale (as so disclosed by the very borrowers that were signing their closing documents!).   It is a classic example of a potential, not to distant, distress sale staring at me in the face.

Are the closed sales-price-to-list-price ratios accurate?:  a question for local agents.

For example, if you have a listed price at the time of the sale of $100K and the sale closed at a price of $95K, you would have a 95% list-to-sales-price ratio.  This is used a lot by agents to gauge how well priced a home was and another metric to show that homes in an area are selling on average, for example, about 97-99% of the list price.   Does the NWMLS use the ORIGINAL list price in this metric or the last posted list price?

What’s up with all the Steve Tytler negativity?

Steve was was of the severely few locals in the business of lending that was reporting publicly that we were going to experience lower housing prices.   Straight shooting integrity is what we need in this industry.

Questions about transactional things?:   Just drop me an e-mail as many recently have and in the past.  I may not have all the answers, but I’ll do what I can.

– S Crow

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About S-Crow

"S-Crow" (Tim Kane) is co-owner (with spouse Lynlee, LPO-Designated escrow Officer) of Legacy Escrow Service, Inc., an authentic independent escrow firm closing residential purchase/sale and refinance transactions.

13 comments:

  1. 1
    mark says:

    I can’t sleep and I’m bored!

  2. 2
    LeftOverpricedSeattle says:

    I think my problem with Tytler’s predictions is that he is basing everything on past performance “stair stepping” increases.

    I just don’t think that applies here.

    I think he’s got a wealth of great historical data to look at and draw conclusions from. The problem is, as I see it, he’s relying too much on past performance as his future indicator.

    I think that reliance is what will eventually make him too optimistic on the declines.

    What I would like to see from Tytler is whether he is pro or con on the bailout package in its current form and whether this “so called” credit freeze that comes with a failure of passage changes his predictions.

    He’s got some insight and I, for one, would be interested in hearing his thoughts on that.

  3. 3
    Matthew says:

    S-Crow,

    Thanks again for the insight.

  4. 4
    Ray Pepper says:

    I’m sorry..I just saw an advertisement for Gastric Band NW flash by on the Bubble and forgot what I was gonna post……………Oh Yes……….S-Crow I don’t follow this Bubble site as close as you but how did you get to post a story? Are you an advertiser? A partner?

  5. 5
    S-Crow says:

    Ray,

    I’m a closet computer hacker and I took over Tim Ellis website. (it’s ok Tim, you can laugh).

  6. 6
    AndySeattle says:

    Great write up S-Crow… you captured quite a few different thoughts that had been rolling around in my head lately. It’s reassuring to know that others are thinking the same things.

    Specifically around personal responsibility and the average person’s mentality that they can follow the formulas of yore… Buy your house, live in it for a couple of years, and expect to move up. I can’t wait until they realize that the timetables have shifted.

  7. 7
    Ray Pepper says:

    Ok I will hold off that line of questioning. I keep offering the News Tribune stories on Real Estate but it appears anything from me is as caustic as The World Savings pik-a-pay Cosi Loan or the Wa Mu 40year pay option Arm. I tend to “offset” their real estate advertising revenue on Sunday when given a platform.

    Anyway you will be happy to know the NEW 500 Realty Shirts are almost done and are about to be unveiled at the Home Shows this month. Come and feel the warmth and security they offer! But, you must mention any blog to get one. YES, even RCG!

  8. 8
    Sniglet says:

    It’s great to hear the news from the trenches. Would any other real-estate professionals who hang out on this blog be willing to post their observations as to what, if any, changes they have seen in the market over the last month? Are things pretty much the same in September as they were in July?

    Are buyers now more eager to snap up a good deal, what with declines, now than in July? Is it just as easy to get financing today as in July?

  9. 9

    We (Redfin) recently blogged our sale to list ratio for MLS defined neighborhoods in greater Seattle area: Burien, Skyway, and Delridge Houses Sell Above List.

  10. 10
    Thomas B. says:

    Dumb question… if money is available for lending, then why do we need a bailout? It sounds like the credit market is doing just fine.

  11. 11
    EconE says:

    “Does the NWMLS use the ORIGINAL list price in this metric or the last posted list price?

    Good luck getting a straightforward unspun answer to this one from an RE agent.

  12. 12
    Civil Servant says:

    The really valuable piece of data would be a comparison to the original posted list price from the *first* time the property was listed. This morning a house in Highland Park that had been on my Favorites list then pulled from the market turned up again on my daily e-mail, this time on account of the relisting’s first price cut. (Redfin apparently tracks by both street addresses and MLS numbers, which is so so great.) Original list price in May was $490K — now $350K, down from the “original” $385K. The two different MLS numbers obscure situations like this.

    The house in question is just one example. I have seen a number of such relistings where the asking price has in the interim come significantly down.

  13. 13
    Steve Tytler says:

    S-Crow,

    Thanks for sticking up for me!

    As you mentioned, last Fall I was the only local real estate columnist to predict that home prices would fall an average of 10-20% this year (depending on the neighborhood) while most of the others in the newspapers were saying the market would simply “slow down” with little to no appreciation.

    I would have thought that Bubble readers would appreciate me sticking my neck out in print, but many seem to think that I was not bearish enough.

    Well, just look at my predictions for this year and compare them to everybody else … I’d say the market is doing exactly what I expected it to do.

    As for the mortgage bailout bill, philosphically I am totally opposed to it because those of us who pay their bills on time and don’t borrow more than we can afford are going to be forced to pay for the irresponsible people out there who got rich pushing “liar loans” and negative amortization “Option ARM” loans and all their customers who got loans that they never should have had.

    But on the other hand, I realize that we are on the verge of a collapse of the entire worldwide financial system. The govenment had to do something to try and get the credit markets under control.

    However, the bailout bill is just a bandaid on a compound fracture. I think the financial markets are headed for some very rough times over the next few years.

    I would not be surprised to see the stock market drop another 40-50% over the next two years because of this.

    How this affects the real estate market remains to be seen. If the flood of money from the government to bail out the banks causes inflation — as I thinnk it will — then real estate could actually benefit because real estate values generally go up in an inflationary environment.

    But the wild card is how many people will lose jobs because of the recession. That could make the housing market worse because of the number of “distressed sellers.”

    So only time will tell.

    I plan to publish my predictions for next year’s housing market in my column in about a month.

    Steve Tytler
    Everett Heral Real Estae Columnist

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