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I watched C-SPAN last night.

Now I feel dirty.

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I think it should be obvious by our lack of self-promotion, but we ended up not putting anything together for BloodhoundBlog Unchained in San Diego. I can’t speak for Brian, but I’ve been wall-to-wall with work for months, and I haven’t had time for anything else.

I’ll go through the PayPal records tonight to make sure everyone’s money is refunded.

Meanwhile: If you see any NAR grand poobahs, be sure to kick ‘em in the shins for shifting all your November move-ups into December. Christmas may be good, Thanksgiving not so much…

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Robert Worthington is right.  Do you want to know how right he is?  According to Goldman Sachs, who ought to know about government intervention, the feds interventions into the housing have pushed home prices 5% higher on a national average than they would have been otherwise, Goldman Sachs estimates in a report released late Friday.

The government over the past year has slowed the pace of foreclosures through moratoria and the drive to modify mortgage terms to keep more borrowers in their homes. It also has pumped up demand for housing by giving tax credits to many first-time home buyers and by driving down mortgage interest rates. As a result, home prices in some areas have risen in recent months, particularly for homes that appeal to investors and first-time buyers. Bidding wars for the more attractive bank-owned homes have become common.

But these artificial props won’t last forever and may have created a false bottom in the market. “The risk of renewed home-price declines remains significant,” Goldman economist Alec Phillips writes in the report, “and our working assumption is a further 5% to 10% decline by mid-2010.” - WSJ

If they’re right, rather than a healthy market heading into 2011, what do you think we might actually have?  We could be looking at falling home prices, rising interest rates and a government whose currency is faltering.  Does it sound like a double dip?  Will you be happy that the functions of the market were tampered with once you realize the misery has been extended, for years? Remember to say thanks to the NAR, thanks to the NAHB, thanks to the Feds and most of all, thanks to us realtors who supported the larceny.  But, at least you may have universal access to a health care waiting list.

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In effort to stem public outcry the government today announced that they were limiting the salaries of the top 175 executives for companies that have received federal bailout money.

Will this be the event that causes the best and brightest our country has to stop being exactly what we need in this time of economic strife? Will the best and brightest stay with the companies that so need their talents for a fraction of what they could earn on the free market OR will they do what capitalists have done previously? Will they leave for bigger paydays and more options to earn what the market will bear? I am betting that the majority will follow the opportunities that present themselves in the form of job offers from companies that are in better financial shape and can offer a better financial package. Perhaps one without government run healthcare too. The companies that are in trouble will be forced to struggle with 2^nd tier talent to help guide them through the upcoming months. I also predict that we might see a company fail as a direct result of this short sighted action.

This to me seems like the first step towards the very thing that Ayn Rand described in Atlas Shrugged. The thought that this might actually become something other than a work of fiction scares me. What will be next? Will I have to share my commissions with agents who are not working because I am making too much money (A guy can dream now right?) Will our countries talent be wooed by other countries that need our intellectual capital to continue to grow?

While it is disheartening to see reports that the bailout money was used on executive pay and bonuses it is even more troubling to see that our government has decided to step in and force businesses to act and think like government agencies.

Today is a very sad day for the cornerstone of America our capitalistic system.

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Approximately a month ago, I was getting a client approved for a mortgage with mortgage insurance and while going over the details of what we needed to document the deal, the customer deadpanned to me, “Where do I go to get the bloodwork done?”    My response, “Nah, we don’t need that —- yet.”

The report below is actually from England but it now appears that the government is going to start requiring mortgage lenders in England to ask questions about how much their borrowers spend on tobacco and alcohol.

Now, if you ask me, I think that tighter restrictions in terms of downpayments, debt to income ratios, credit scores, job histories, cash reserves, etc. all make sense.   But whether my neighbor spends more or less on alcohol than I do, I can’t see what substantive difference that makes in our ability to repay our mortgages.  (Hint - I’m not the one who spends more on alcohol.)

The pendulum is swinging too far in the other direction in some areas and not far enough in others.

Tom Vanderwell

Homebuyers face questions on alcohol and smoking under new mortgage rules - Times Online

Homebuyers could be forced to provide detailed information about the amount of money they spend on alcohol each month to qualify for a new mortgage under a new clampdown on reckless lending.

In a sweeping review of the mortgage market published today, the Financial Services Authority (FSA) said lenders needed to be far more rigorous about their financial checks of potential borrowers.

It said lenders should delve deeper into homebuyers’ personal spending including the amount they spend on alcohol and tobacco.

Spending on shoes, clothes and childcare could also be assessed under a new, industry-wide “affordability test”.

At present, the FSA does not prescribe rules about assessing a consumers’ ability to repay a mortgage and practices vary from one lender to the next.

Technorati Tags: Mortgages, Alcohol use

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In July of 2008, I wrote a piece as a guest post on Paul Kedrosky’s site, Infectious Greed.    I called that piece The Top 7 Things Every Home Buyer Should Know.   The piece got a lot of “press” and actually got me interviewed by the New York Times.    I was talking with the reporter who I’ve gotten to know at the New York Times about a month ago and we realized that it was almost exactly a year since he had ran the piece, “Considering the 7 Year Plan.”    He made a comment at that point, “It would be interesting to see what, if anything, has changed over the last year in your opinion of what a home buyer needs to think about.”     I agreed and decided at that point to do that.

So this is the introduction to what will be a 7 part series over the course of the next week or so.   I’m going to take each item, one by one, and look at what my view was in July of last year and then factoring in what I think has or has not changed over the last 15 months.

Here’s a hint for you – out of the 7 parts, I think that we’re going to find that at least 3 or 4 of them have changed substantially.

I’ll have the first one up in a day or two.

Thanks for listening in/reading what my thoughts are…..

Tom Vanderwell

Technorati Tags: 7 Things Home Buyers Should Know

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I don’t know if you’re familiar with Randall O’Toole from the Cato Institute, but he’s much better reading than Lawrence Yun.  I was just acquainted with one of his latest works entitled How Urban Planners Caused the Housing Bubble.

If you’re in real estate, it is a must read.  I live in a strict Growth Management state from a public planning perspective.  As a freedom loving individual, it is frustrating.  But this analysis not only talks about the costs of planning, but the volatility it introduces into the market and why.  It compares different policies of various states.

The correlation between planning practices and pricing volatility is uncanny!  Fed policy, the Community Reinvestment Act and other hair brained political practices can’t explain the phenomenon without the inclusion of growth managment into the equation.  The costs for growth managment are also staggering!  For real estate nerds, it is required reading!

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The worst thing that ever  happened to me was November of 2003.  I made, as a Realtor $57,000 in closings (without a team) in one month.  In early December, I added another $19,000 to that pile of money.  Because of my phone banging good times, I didn’t have expenses or marketing that created it, my willingness to endure rejection, and a booming economy created that opportunity.

I remember that number, those numbers because I added them and re added them.  It made me a big dude.  I was happy and proud about a $76,000 run in about 20 days.  Proved that banging the phones works, validated me as a person.   I was king of the world, at 27.  Hot wife, money in the bank, Acura RL in the driveway.  What’s not to dig?  (Heh).

Yesterday’s Awards Don’t Pay Tomorrow’s Bills

Well, the fact that you read your own press.  See, I took most of December off.  “I earned this break.”  I said as we went to Oregon.   Bought a new house on a stated deal, pissing $40k on a down payment (Because you know, I now make $60,000 a month, you know?).   Didn’t work in January because I had myself convinced that I was earning $60,000 a month.  I was that good, I could turn it on.  Get it?  I rounded up to a number I only did once, and didn’t worry because that’s who I was. (In my head).

Payments came due, and my money was gone, mostly on BS and needless luxuries, and maintenance for the rentals we’d bought.   But I didn’t worry, because … wait for it… I made $60,000 a month.

It was true.  I made nearly $60,000 a month…ONCE.  The rest of the year was just over 5 figures per month, with two months that were less than $3,000.  But my ego declared that I was a heavy hitter, banging the phones and making $60,000 a month.  It wasn’t till late February, only 1 closing on the year that I began to worry.   I had 3 crap listings, no buyers, and my customer service had become rake like.

But, a little success made me entitled.  I could, any day I wanted to, find a listing by banging the DNC scrubbed list I had.  I could find a buyer in similar fashion.

My mind still considered me a $60,000 a month dude, even though that was a lie.

And I refused to live in Reality, and so my love for the real estate business splintered mostly because I didn’t have any kind of honest accounting.

Meaning this: I had no clue what my expenses were.  I had no clue what my pipeline was.  I had no clue how many calls it took to make the phone ring.  I had no clue about anything else.  I was still money drunk on the  money I made MONTHS ago.  My skills were good but my work ethic atrophied.

And then when you’re broke–not poor–you have to dance a highwire act and surf the payables.  The energy it takes to surf the payables..isn’t to be triffled with, it saps strength and creativity.  So here’s the way to not do that:

1. Know–cold–what your monthly and daily business and personal expenses are.  With or without debt service is fine.  Mine?  $118.06 based on a 30 day month, and $177.09 based on a 20 day month (god bless the Midwest)  (Workdays, though that doesn’t have a ton of meaning)
2. Know what you need to earn that.  For me, now, it’s about 145% of that number: 5135.00.  This pays current state & local taxes & hits my IRS account for the minimum that they require.  This may be surfed a little, but not a lot.
3. Know what your 30/60/90 day pipeline is.    Written down each morning.
4. Know fast you get paid on your sales.  Pity the poor mortgage lenders that have to wait on W2s.    Keep track of how much and wen.
5. Always have your 60 day intake > 60 day receivables.  Then work on getting it to 30%.
6. Freak out when #5 isn’t met, and sell stuff. Look, I went bust resting on pseudo-achievements.  Resting on my past.  If I’d have paid attention to every 60 day period as if it was separate, Id have been fine.
7. Lower in any way you can your expenses, without being cheap. My leak was gadgets.  I spent too much.  Now I don’t.
8. Write down every debt you have.  All of it, excluding mortgage.  Know that number, cold.   Mine?  $61,000.   $10k to a business loan, $30k IRS, $2k remains on my car…20k student loans for GenuineWife.
9. Stop hiding if you’re broke. Phil Hodgen has been something of a priest to me in this area.  I gotta know how much, how many, how soon…every damn week.  You have to have someone or someone’s to talk about the money stuff.  Offense & defense is important.
10. Sales before service. Sounds cold, sounds harsh.  Necessary.  You need excellence in both areas.  My customer service currently is terrible, but will be dramatically better in days.   I’m fixing it right now with my friend Johnny B Truant, and the help of Digital Access Pass.
11. LIFO for debts.  Lifo changed my life. Really, if you pay the last stuff first, you get out of the habit of catching up slowly.  You separate the old from the new, and you run a profitable business.   If something gets out of hand, throw it in a separate column, but pay the new costs of running a life/business currently.

My results?

I left the mortgage business in May of 2008.  I left owing $79k to the IRS and being another $65k in debt.  I’m down to $60k total, throwing nearly $5k a month at it.    I’ll have the IRS retired sometime in the next 100 days.   I know this, because of where I’ve come from.

It mostly sucked.  Just like, most of the time, banging the phones mostly sucks.  But, what doesn’t suck is getting free of this mess.  What doesn’t suck is having options again, and not being financially fragile any more.

Next post is about making customer service and retention good, automatic, and customer-honoring.  Going from a rake to an unbelievable practitioner, using DAP.

Following the cut is some diggable music: Rhett Miller of the old 97’s explodes words.

Read more

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Can you really look at a buyer today and tell them that they are buying their home at a good price?  Sure, you can tell them how the price they are paying compares to what folks have been paying the last few months, or few years.  But that doesn’t mean that what you are seeing is the true market price!  The actual market price can’t be determined without a free market.  Right now, we have anything but a free and stable market in real estate.

Take the government’s free ice cream housing promotion, also known as the Homebuyer Tax Credit.  The issue I’m concerned about isn’t that it is going to cost taxpayers about 15 billion dollars if it is allowed to expire on November 30.  Nor is the issue that it has cost $43,500 that we, our children and grandchildren will somehow have to pay for each new buyer attracted into the program according to the NAR numbers.  The issue is it has artificially increased the value of homes in the market by $8000 and that will end on November 30^th, or sometime.

So, that $250,000 home your client just bought and put a mortgage on is really only worth $242,000 when that market distortion is removed.  With an FHA loan, and a program to use the tax credit for a down payment, guess who is already upside down in their purchase?  Does this sound anything like the too recent past?

Our tax code is already heavily skewed towards home ownership.  With our government’s current spending spree and their desire to raise taxes, could the sacred mortgage interest tax deduction eventually be reduced?

While that is probably not the immediate threat, the current rulers prefer government solutions to allowing the private market to function.  Be it FHA or State Housing Programs for low income borrowers, a monetary policy of rock bottom interest rates and the mortgage interest deduction the programs and the proposals coming forth further distort the market.

This makes the biggest risk in a real estate investment strategy or even a home purchase predicting the future changes in artificial supports to the market and estimating their effect on the value of those investments.

Imagine a market without a Toxic Assets Program, Troubled Assets Relief Program, Homebuyer’s Tax Credit, a Interest Mortgage Deduction and a distorted monetary policy.  If you could do that accurately, you could really determine the market value of real estate.  Then you could tell that eager new buyer whether or not they are really getting a good deal in the marketplace.  Isn’t that what we should have learned from 2006?

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From now through October 31, 2009, I’m offering a copy of  Straight Talk About Mortgages – the Book available for free!

Why?  Because I want to.   That’s reason enough for me, how about you?

Click here to download your copy:

Straight Talk About Mortgages The Book

I’d like to ask two favors in return for a free copy:

1. Once you’ve had a chance to read it, let me know what you think of it.   Just send me an e-mail at tvanderwell@straighttalkaboutmortgages.com.
2. Take a minute, think of someone you know who might be thinking about buying or refinancing their house and send a copy of the book on to them.

Thanks, enjoy!

Tom Vanderwell

Straight Talk About Mortgages - The Book

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Want to know what Realtors can do to help resurrect the American economy? They can get the hell out of the way, that’s what.

Here’s my entry in the Al Lorenz/Don Reedy NAR tax-credit video contest.

Think you can do better? Please do. And tell everyone you know in the media to latch onto this with every tooth they have left in their dainty little lapdog jaws.

This used to be a free country. Whether or not it ever is again depends on what each one of us does now…

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Okay, so far this morning, the market has reacted in a very volatile but not significantly changed manner to the jobs report.   Essentially the jobs report came in pretty much where the market expected.  

So, did I call it wrong by recommending a shorter term lock and a long term float guideline yesterday?   I don’t think so for a couple of reasons:

1. We’ve passed the major economic hurdle for the next few weeks without any news that is going to significantly lower rates.   Between that and the fact that the new Reg Z rules essentially require locking in your rate at least 1 1/2 weeks before closing, it makes sense, if you are closing soon, to grab a rate and be done with it.
2. One of the “big guys” at PIMCO was on CNBC this morning talking about how this is a “sugar high” rally that is based on inventory and cost control and stimulus funding (isn’t that what stimulus is supposed to do?) but that it won’t last.    When reality hits, the stock market will adjust and the adjustment won’t be pretty.    That has two potential options:  1) It would force money into the bond market driving down rates, or 2) It could cause money to jump to cash (remember last fall?) and everything would be really ugly.   So I expect there is still some lower rate potential in the next 60 to 90 days.

Have a good weekend!

Thanks!

Tom Vanderwell

Mortgage Rates

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Maybe a dozen posts are gone from BloodhoundBlog, along with around 400 comments, 300 of them about forced versus open registration. We lost a couple dozen engenu pages as well, along with the photos that make them up.

I treated this as a simple hardware swap, but it turns out that our incremental back-ups were failing all week. I was insufficiently paranoid, alas.

Contributors, if you have copies of your posts, you can re-enter them. If not, they’re gone.

Everyone: You have my apologies.

 
Further notice: We lost BloodhoundBlog.net, and I mean all of it. None of the backups of the database will restore, so it is gone for good. I’ve not been delighted with it, overall, for the past few months, so I think I’m not going to start over. If you had serious content there, I’m sorry but it’s gone. If you had an older Scenius scene running there (I had several), rebuild it at Scenius.net. Very sorry…

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My apologies for taking almost 24 hours after the Fed to get this up.   As I’ve done in the past, I want to go through what the Fed said yesterday and give some insights into what I think it means for the housing and mortgage markets.   You can find the entire FOMC statement at Federal Reserve.gov.    As usual, my comments will be inserted inside the statement and will be in bold and italics.   Here goes:

For immediate release

Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out. I think it’s important to notice that they didn’t say things are improving, just leveling out.   The Fed never uses any words without a reason. Conditions in financial markets have improved further in recent weeks. Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.  I think that what they mean by household spending is stabilizing is that people have slashed and burned their budgets down to the minimum and aren’t cutting back further.   However, if you look at the Retail Sales Report this morning, it raises a question of whether household spending is stabilizing. Businesses are still cutting back on fixed investment and staffing that’s a nice way of saying jobs are still being lost but are making progress in bringing inventory stocks into better alignment with sales. inventory in better alignment with sales – what that really means is that the jobs that “make things” are still being eliminated. Although economic activity is likely to remain weak for a time a time – that’s a nice way of saying we’re in for a long slow climb back, the Committee continues to anticipate “continues to anticipate” is that sort of like, “Please, please please, I really really want it?” that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.  They have had this sentence in there for a substantial length of time.    The longer that they put it in their statements, the more “hollow” it sounds.   Rather than being very confident, it’s starting to sound a bit more like, “We think we did everything right, now we just need to wait and see if the patient will recover.”   Oh wait, it’s 6 months and he’s still in a coma.

The prices of energy and other commodities have risen of late. However, substantial resource slack resource slack is a nice way of saying that we’ve got way too many production facilities and the demand isn’t nearly as high as the available supply is likely to dampen cost pressures – if there are 20 suppliers who are looking to make enough of something that could be done by 16 of them, the 16 that got the work can’t raise prices and the Committee expects that inflation will remain subdued for some time.  For some time – yes, it will.   In my mind, inflation and correspondingly interest rates will remain low for 12 to 18 months.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability we haven’t put any of our tools back in the box yet.  We’re ready to use them if they need to.. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, important words – this isn’t something new, it’s a restatement of what they have done, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. 

This is the only real change in the whole thing – they were supposed to be done in September but what they are saying is they will take the rest of August’s purchases and Septembers and spread them out through the end of October.  Now ask yourself, if they anticipated that the wind down of their purchases would have either a good or non-market moving effect, they would have finished up like planned in September.   But they didn’t, they said, “we need to spread it out over an extra 30 days to “mute” the impact to the market.   What sort of impact?   Let’s look at it this way:   If there are 20 buyers and 20 sellers, the demand and the supply is in balance.   If there are 20 sellers and suddenly 1 of the buyers, a relatively big buyer, says, I’m not going to buy any more, things get out of whack.   That means that most likely interest rates on Treasuries are going to go up.   And if interest rates on Treasuries is going to go up, what’s the most likely outcome for mortgages?   If you said, that they’ll go down, you’re wrong.

Now ask yourself, the Fed is buying $1.25 Trillion in mortgage backed securities from Fannie and Freddie.   What do you think is going to happen when those purchases are done?   Yep, higher rates again.

The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

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Our helpful friends at the NAR have apparently sent out press releases about the increase in home sales in the second quarter being a sign of a “recovery.”

I saw this on MSN today (yes, I look at MSN):

WASHINGTON - U.S. home sales grew in the second quarter in 39 states, another sign that the ailing housing market is finally coming to life.

Total quarterly sales rose 3.8 percent to a seasonally adjusted annual rate of 4.76 million, from 4.58 million in the first quarter, but were still about 3 percent below a year ago, the National Association of Realtors said Wednesday. - MSN Home sales grew in second quarter in 39 states

Don’t get me wrong, I’m all for a recovery.  I would love to see a recovery.  Did I mention that really strong sales would be great?  The issue for me is that sales that are still 3% below a year ago doesn”t look like a recovery to me.

Yes, sales are higher than the first quarter of 2009.  However, around here, second quarter sales are always higher than first quarter sales.  I would wager that third quarter sales will be above second quarter sales, as always, too.  But that doesn’t mean they will be above the third quarter of last year.

Help me here, what am I missing?  With help like this from the NAR, it’s no wonder folks don’t trust Realtors.

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