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Saturday, April 18, 2009

Bits and pieces and random thoughts...

There is a lot going on in real estate lately as the various players try to figure out what the government is doing and what that will mean to them. It's sort of like watching a peewee soccer game, as the entire group of kids just runs around the field chasing the ball, instead of playing a position. All the players, lenders, investors, buyers and sellers and even Raltors are chasing the Federal Bailout ball around the field and it is going in seemingly random directions.

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I saw an article in Business week this week in which Alan Greenspan is reported to have said " I have been going for 40 years or more with very considerable evidence that (my ideology) was working exceptionally well." Why anybody listens at all to that clown is beyond me. He, more than any other single individual, led this country down the garden path to ruin that it is now experiencing. They should also have his testimony where he said "I was wrong." Of course, even in that testimony he continued to defend his position as being largely correct. The Greenspan quote above was in a story titled "What good are economists anyway?" That is a valid question that was not well answered in the article. I think the role for economists is best saved as economic historians. They can look back on events that have transpired and, with great Monday-morning-quarterback insight, pontificate in learned terms about why that happened.

The most misleading self-proclaimed aspect about the profession of economists that they would have us all believe that it is somehow a science. It is at best a black art. People who are meteorologists have done a decent job of creating weather models that will predict with reasonable probability what the weather will be like in 2-3 days. Many economists claim to have created models for the economy, yet none could forecast what people without a high school education could have told them about the impending collapse of the economy.

As one looks back on the body of testimony that Alan Greenspan made before various Congressional committees it is just amazing that all of those people sat there lapping that drivel up as if they somehow understood and believed it. I would end watching every newscast snippet thinking – the guy used lots of big words to essentially say nothing.

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We are still running about 70% foreclosed houses as a percentage of total sales in this area. Now, a second, maybe bigger wave of foreclosures is starting to hit, now that the institutions that paused in their foreclosure processes to allow the government programs to be announced have resumed with foreclosures. A big change is that job loss has replaced toxic ARM mortgages as the biggest single reason for foreclosures. It sure looks like we’ll be in this foreclosure inventory glut for the rest of this year and into next.

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There are still programs that will give buyers 100% mortgages and even beyond – up to 106%. A program under the USDA (yes the same department that inspect our food supply) is set up to encourage rural development by allowing borrowers to get 100% loans to buy houses in rural areas. You may be surprised at what areas qualify for these loans. Go to http://www.rurdev.usda.gov/ and click on your state to see if your area qualifies. FHA also has loans available for more than 100%, which are to be used primarily to buy homes that need fixing up (most foreclosure homes). There are lots of rules and requirements for estimates on the work that needs to be done, but it is a great program for those willing to work their way through the process. You can get up to $25,000 to make improvements on the home that you are buying. Go to the FHA site for more details - http://fha-home-loans.com/home_improvement_fha_loans.htm for articles, a FAQ section and more on that. The biggest confusion seems to be around the definition of a first-time buyer for eligibility purposes for this program.

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As I reported yesterday, things are picking up in real estate in the Milford area. Some of that is just the natural spring bounce that we always get, but some is likely from pent-up demand in the market. I’m starting to get a few more buyers who want to look at normal,. owner-occupied houses and not just at foreclosures. That’s a good sign.

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