Northern Virginia Bits Bucket 9/30/2008

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Of Pots and Kettles

At the risk of getting into deep and serious "doo" here, does anyone else know exactly what Pelosi's talking about? I mean beyond generalities . . . anything specific here?

At the beginning of a floor speech urging support for the bill, Pelosi denounced the $700 billion price tag as "the costs of the Bush administration's failed economic policies -- policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision, and no discipline in the system."

I've been studying the housing bubble for about four years now, and I'm trying to remember which party backed Fannie and Freddie all these years and refused to support or vote on regulation and oversight of same. Think . . . think . . . .

We're still settling on the house tomorrow. Please pass the Pepto.

Northern Virginia Bits Bucket 9/29/2008

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Northern Virginia Weekend Bits Bucket 9/27-9/28, 2008

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Smaller Banks Carrying On

I wanted to write a piece on this based on my great experience with a small local bank (Virginia Heritage Bank) for our current mortgage loan. I'm happy to report that the Washington Post has done it for me.

Three cheers for the little guys:

"Banks throughout the United States carried on with the business of making loans yesterday even as federal officials warned again that their industry is on the verge of collapse, suggesting that the overheated language on Capitol Hill may not reflect the reality on many Main Streets.

The industry is resilient despite the struggles of some members. Washington Mutual, a troubled Seattle savings and loan that was among the nation's largest mortgage lenders, yesterday was seized by the government and sold to J.P. Morgan Chase.

At the same time, many smaller banks said they were actually benefiting from the problems on Wall Street. Deposits are flowing in as customers flee riskier investments, and well-qualified borrowers are lining up for loans.

'We collect money from local savers, and we lend it in the local community,' said William Dunkelberg, chairman of Liberty Bell Bank in Cherry Hill, N.J. 'We're doing fine. There are 9,000 financial institutions out there, and most of them are small and most of them are doing fine.'"

"The Federal Government Doesn't Bail Them Out"

"Fannie Mae and Freddie Mac are not in a crisis . . . the more people in my judgment exaggerate a threat of safety and soundless, the more people conjure up the possibility of serious financial losses to the treasury -- which I do not see -- I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios -- and even if there were a problem the federal government doesn't bail them out -- but the more pressure there is there than the less I think we see in terms of affordable housing".

Then ranking member, now Chairman of the House Financial Services Committee, Barney Frank, in September 2003.

Northern Virginia Bits Bucket 9/26/2008

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The banks sure are busy buying and selling in Fauquier County. This is the most bank activity I've seen all year in the property transfers' section.

Northern Virginia Bits Bucket 9/25/2008

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Our Big Spenders to the North

Thanks, Cara, for the link to this article from the Washington Post:

"In the year since Maryland launched a series of foreclosure prevention programs, the state has helped just 88 troubled borrowers get into new loans or keep up with their payments, at a cost of about $17.9 million".

Hmm -- the math on that is $203,409 per borrower. Except I am sure each homedebtor did not receive that much . . . but some bureaucrats stayed employed.

"State officials say their efforts have been hamstrung by borrowers who wait too long to ask for help or are disqualified by low credit scores. Negotiations with lenders to expand the programs have stalled. The 'big-picture lesson we have learned is that we can't refinance our way out of this problem,' said Raymond A. Skinner, secretary of Maryland's Department of Housing and Community development".

Nope.

Northern Virginia Bits Bucket 9/24/2008

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There They Go Again -- Washington Post's Inaccuracies

Hattip to Contrarian for the link in today's Bits Bucket to this article from the Washington Post today entitled "A Sense of Resentment Amid the 'For Sale' Signs". It was an unexpected read for me -- the writer lends an ear to those who think bailing out irresponsibility isn't a good thing and who are also unsympathetic to underwater borrowers.

But I think this statement from page two is inaccurate:

"Prince William County is one of many ground zeros in the subprime mortgage crisis. Pick up a pamphlet on home sales in the county, and you will come across an ad saying "Foreclosures R Us!" Pictured are dozens of homes being sold for what seem like bargain-basement prices, some under $200,000. But there aren't many buyers -- because no one knows what anything is really worth, or whether the market is anywhere near bottom".

They picked the wrong county for which to make that observation. May I remind them of some Prince William County market statistics (they are posted here on the blog on the 10th of each month):

August 2008 -- YOY sales up 116% to 1,000 sales with 5,600 active listings,
July 2008 -- YOY sales up 103% to 1,012 sales with 6,105 active listings, and
June 2008 -- YOY sales up 91% to 976 sales with 6,473 active listings.

No buyers here. Move along!

9/23 Update: Thank you, Richard Starr, at the Weekly Standard Blog, for getting this information out to more readers.

9/23 Update: Kudos to blog reader Ace for noticing that the Washington Post now says there are buyers in Northern VA:

"Home sales in Fairfax County rose 10.7 percent last month, the county's first double-digit increase in a year and a half, according to the most recent data from the company that tracks local real estate listings.

The flurry of sales activity suggests that prices have dropped low enough to lure buyers to the Washington area's largest county. But the uptick in sales is not widespread throughout the region, and unemployment data for August show a steady slowdown in the region's economy".

But wait, here's another opaque statement:

"The trend contrasts sharply with almost every other county in the region, except for Prince William and Loudoun counties, both of which have been devastated by an unusually high share of aggressively priced foreclosures. Sales in those counties have been climbing for a few months as buyers have been snapping up deals".

I wonder which other counties in which region? Are they referring to the whole state? In August, sales were up in Arlington, Fairfax, Loudoun, Prince William, Culpeper, and Stafford counties, and only down big (19%) in Alexandria City (a small area) and down slightly (5%) in Fauquier.

Northern Virginia Bits Bucket 9/22/2008

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Buying

Here's some blogger news -- we (spouse included) are going to closing on a house this week in a neighborhood west of Gainesville (exurb country, but we don't commute). It's a bank foreclosure. After it sat on the market for about four months, we offered 10% less than their reduced asking price (it started out with an asking price 20% higher in April) and our offer was accepted. There were a few reasons for our decision to buy:

(1) The payments will equal the cost of renting;
(2) The house is priced 40% lower than the lowest price in the neighborhood 3 years ago when we looked there;
(3) We haven't owned a house in 3 years so we qualify for the first-time buyer tax credit of $7,500 (really an interest-free loan);
(4) We're fatigued with renting and some of the issues it brings;
(5) We like the neighborhood well enough and already know several families there.

We decided to go with an FHA loan from a smallish local bank. The seller (bank) is providing the rest of the closing costs (in essence, we are financing them). Of our own cash, only 3% is going down. Our interest rate is 6.0% with no points.

Perhaps our situation is somehow unique, because stories like this one from the AP don't jive with our relatively easy transaction:

Government rescue package will do little to help more homebuyers qualify for mortgages

"KANSAS CITY, Kansas (AP) -- By late Saturday afternoon, only three prospective homebuyers had visited the open house Valerie Morrill was hosting. The Prudential real estate agent recalled a year ago, she'd see 10 to 15 people during an open house in this midtown Kansas City neighborhood.

She said the government's efforts to bring stability back to the economy and the credit markets may help but she's seen no immediate improvement.

'It's just the buyer pool is so low,' she lamented. 'Eighteen months ago, you needed $500 to buy a house.' Now, all the special rates and government programs are gone, leaving buyers facing a 10 percent down payment. 'You have to have money and nobody has money'
. . .
'People want to buy. The problem is you can't get them qualified for financing because the lenders have tightened up so much that only people with the highest credit ratings get approved,' [flipper Marc] Montalvo said. 'We haven't seen the interest rates fall and the qualifications become more realistic.'

In the first quote, lamenting bygone days of $500 down is ridiculous, and it's what got us into this mess to begin with. While FHA's 3% is also risky, it's still available to buyers the last time I checked and is far less than 10% that Valerie says is necessary. The latter quote from Mr. Montalvo makes no sense at all. Interest rates have been falling and indeed are still at a historic low point for mortgages. And qualifications are finally realistic (our lender asked for our paystubs, W-2's, and bank statements -- standard stuff). I don't want the housing market to ever go back to "Stated Income, Stated Asset" loans, if that's what he means by realistic, because of the terrible economic aftermath that those have brought us.

Back to the buying news -- feel free to agree or disagree with our decision. I do think the Northern Virginia area (especially the exurban part) has been experiencing some "clearance sale" exuberance, and the current buying spree could easily fall apart with the rest of the economy. But the market at this time is at least up on volume, which does help keep some local people employed. I called a local service company this week, and the lady I talked with said she was going to closing this week, too. I think there are some people who are feeling good about affording a house again. (With a caveat that foreclosure pricing is generally the most affordable at this point).

Bailout Plans

I haven't been covering Wall Street (Q&A from WSJ) events here but have been keeping up (as much as possible) like the rest of you with various financial MSM reports and news and opinions from bloggers like Calculated Risk.

Our poll finished here, and many of you seemed weary of any more plans to bail out homedebtors or freeze foreclosures. Here are the results of last week's poll:

What's Your Opinion of the Democrats' Plan to Freeze Foreclosures for 90 Days?

A Benefit to the Economy 2 (2%)
A Good Humanitarian Move 4 (4%)
Pandering Before the Election 43 (50%)
Detrimental to a Housing Recovery 26 (30%)
Bad Idea for Other Reasons 10 (11%)
Votes: 85

Of course, this is rather old news by now and I haven't heard much said on the topic in the last week.

Northern Virginia Bits Bucket 9/19/2008

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Northern Virginia Bits Bucket 9/18/2008

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Northern Virginia Bits Bucket 9/17/2008

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Some good analysis at Dealbreaker, including the gem Morgan Stanley Has Had It Up To Here With This Bosh.

In Hindsight

Sept. 11, 2003

NYT: New Agency Proposed to Oversee Freddie Mac and Fannie Mae

By STEPHEN LABATON

"Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.

'The regulator has not only been outmanned, it has been outlobbied,' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. 'Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.'

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

'These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. 'The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'

Representative Melvin L. Watt, Democrat of North Carolina, agreed.
'I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,' Mr. Watt said".

Now we're all poorer.

Northern Virginia Bits Bucket 9/16/2008

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Northern Virginia Bits Bucket 9/15/2008

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Wall Street meltdown today.

(H/t CR).

"The collapse of Lehman, which listed more than $613 billion of debt, dwarfs WorldCom Inc.'s insolvency in 2002 and Drexel Burnham Lambert's failure in 1990."

Over the weekend, the Washington Post talked about how Fannie and Freddie bought off Congress (and where was the Washington Post all these years?):

"And when they couldn't massage, they intimidated. In 2003, Richard H. Baker (R-La.), chairman of the House Financial Services subcommittee with oversight over Fannie Mae and Freddie Mac, got information from OFHEO on the salaries paid to executives at both companies. Fannie Mae threatened to sue Baker if he released it, he recalled. Fearing the expense of a court battle, he kept the data secret for a year. Baker, who left office in February, said he had never received a comparable threat from another company in 21 years in Congress. "The political arrogance exhibited in their heyday, there has never been before or since a private entity that exerted that kind of political power," he said."

Northern Virginia Weekend Bits Bucket 9/13-9/14, 2008

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Northern Virginia Bits Bucket 9/12/2008

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Northern Virginia Bits Bucket 9/11/2008

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A Decade of August Sales

Standouts from August: Prince William County YOY sales up 116%, median price down 43%, inventory down to about 6 months'; Culpeper County sales up 100%, median price down 33%; Fauquier's sellers still can't figure it out; Alexandria City sales at a decade low but still a decent ratio on inventory.



Source: MRIS

Northern Virginia Bits Bucket 9/10/2008

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August's market statistics are due out today. Exactly when is anyone's guess.

Northern Virginia Bits Bucket 9/9/2008

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Northern Virginia Bits Bucket 9/8/2008

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World markets are happy today.

Fannie and Freddie To Be Put Under Federal Control

Read all about it at Calculated Risk. Under the "Mortgage Rates" entry below you've already started talking about it.

Washington Post: Fannie Mae, Freddie Mac to be put under Federal Control.

"The action would represent a major escalation of the government's role in private lending. The government would be assuming vast obligations it has historically disavowed, potentially using taxpayer money to make up for private business decisions gone wrong."

Northern Virginia Weekend Bits Bucket 9/6-9/7, 2008

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Mortgage Rates Tumble

Did anyone else notice that in the last few years, a common real estate advertising theme was, "if you wait until prices are better, mortgage rates will be higher so you'll lose"?

Mortgage rates fall across the board

September 5, 2008

"Rates on 30-year mortgages fell for a third straight week, dropping to the lowest level since mid-July. Freddie Mac reported that 30-year, fixed-rate mortgages dipped to 6.35 percent this week from 6.40 percent last week. It marked the third consecutive decline and left rates at the lowest level since July 17, when they stood at 6.26 percent".

Northern Virginia Bits Bucket 9/5/2008

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Northern Virginia Bits Bucket 9/4/2008

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Northern Virginia Bits Bucket 9/3/2008

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Northern Virginia Bits Bucket 9/2/2008

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"Political Sticking-Plaster"

From over the pond:

LONDON (AP) -- The British government unveiled a package of tax cuts and increased spending targeted at first-time home buyers on Tuesday in a bid to reverse the country's worst housing slump in almost two decades.

However, industry leaders and analysts say the financial incentives are unlikely to spur buyers back into the market, suggesting that the package is more about reviving Prime Minister Gordon Brown's flagging popularity.

As the OECD issued its most dire warning on the British economy yet, predicting it will fall into recession in the second half of the year, the government announced that it was temporarily scrapping the tax that borrowers are required to pay on house purchases at the lower end of the market.

Brown also revealed plans to spend 1 billion pounds ($1.8 billion) to help buyers hit by tighter mortgage lending criteria in the face of the global credit crunch, giving low-income purchasers a fee-free five-year loan worth up to 30 percent of a home's value.
. . .
Others said the measures do not go far enough to resolve the issue of mortgage funding.

"Today's proposals do not address the core problem, which is the collapse in mortgage availability," said Roger Humber, spokesman for the National Federation of Builders, adding that the package was "little more than a political sticking-plaster."