Now is the Time to Buy!

by Gerri Willis

I couldn't blame you if you had completely written off the housing market.

After all, it's been six years since the market was at its peak. And since that time, prices have fallen nearly 35%. 8.2 million homes have gone into foreclosure. Collectively, we owe $700 billion more than our homes are worth.

It's been the single worst housing crisis ever. Even the depression didn't take down so many middle class households. And, still, there's an overhang of unsold inventory sitting on bankers' balance sheets. Some families squat on properties that they long since stopped paying for, waiting for the sheriff's knock on their doors to evict them.

And yet, there are signs this market is mending.

True, some cities and regions are still fighting declining prices, but in other places, prices are firming, even mending. Denver, Phoenix and even Detroit are posting small price gains. Existing home sales in February were up 9% from the same month a year ago.

To be sure, fully a quarter of the homes bought in February were purchased by investors, but who can quibble with the details of who's buying, when you know that purchases will eventually raise prices for everybody?

Demand is also spiking from international buyers. The Chinese have become the second biggest group of offshore real estate buyers because outsiders can see what we Americans can't - the housing market won't stay in the dumpster forever, and that buying low and selling high is a strategy for success in any market.

A turn in the market has been predicted by far more sophisticated housing analysts than me, but I am encouraged by what is going on in the jobs market.

This week's ADP hiring numbers show what we've been waiting for - a strong jobs report that shows payroll expansion beyond just the smallest of companies. More and more mid-sized and large companies are hiring.

The government's monthly rate and payroll expansion numbers have posted improvements for three straight months.

At the end of the day, it will have to be jobs that bring us out of the housing mess because the only thing any banker respects when it comes to handing out mortgages is a steady and consistent paycheck.

I think we may well be at the precipice of that recovery. Prices overall probably won't rise this year, but they could next year, or the year after that.

Housing is too big and important a market to write off forever. The number of people who have made their fortunes from the industry or simply bought their primary home at an opportune time and hung on for a rising tide of prices to lift their fortunes are many.

In short, it may well be the time to start looking for that first home or second or third to grab the best price possible.

Don't believe me? Look at what happened to the people who exited the stock market after the 1997 selloff and never came back. They've missed some historic gains.

Much of life comes down to timing and in the housing market the clock is ticking down to a more normal market where you'll pay more for that dream house. The choice is increasingly yours: wait and pay or strike early and get a bargain.

Where's the Moral Hazard?

by Gerri Willis

Brace yourself.

There's another homeowner bailout on the horizon.

After months of investigation and negotiation, the nation's Attorneys General (most of them anyway) have agreed to a bailout that may cost as much as $25 billion to be paid for by the nation's largest banks.

And, like all the housing bailout programs before it, it will make the market worse, not better. That's my expectation.

It fails on another count. It's not fair to the millions of homeowners who pay their mortgage each and every month.

More on that in a moment, but here are the basic details of the plan, which are still being worked out... In other words anything can happen.

Number one: it sets aside billions for loan modifications and re-fi’s for people whose mortgage was botched by loan servicers.

Number two: More billions this time as direct payments to homeowners who lost their home, and were hurt by loan servicers. This is what the pros are calling mortage reductions.

Number three: not all the AGs have signed on. Two big players California and New York say the settlement isn't big enough.

Here's what I say. The vast majority of people "harmed" by the bank loan servicing departments were actually simply allowed to stay in their house for free - longer than they might otherwise because they had stopped paying their mortgage.

Harm as a term here is fantasy land.

It's like saying I was hurt by an unexpected windfall of cash... And, look. I understand the banks didn't process their loans correctly (the robo-signing, the document forging) all of that was wrong and in this settlement, the banks are paying for it.

The problem is the "injured" class here got in over their head in debt and is getting away with that error scott free.

Two wrongs here are not making a right.

And the Attorney General plan isn't the only bailout coming.

The President in his State of the Union wants to give homeowners whose homes are underwater $3,000.

Ultimately, his plan is to take that money from mortgage investors.

All of this might make a lot more sense if there had been a program that had actually righted the market.

But none have.

More foreclosures are expected this year than last year.

And the two currently on the table promise to make things worse, not better.

Less than a million homeowners have gotten permanent reductions on mortgage payments under the home affordable mortgage program.

The administration initially projected HAMP would help up to four million stay in their homes.

Housing prices continue to fall - home prices in major markets are down 33% on average from their peak in 2006.

Meanwhile, the national median price has gone nowhere but down.

The new home market continues to falter.

Homes sales are running at a rate of about 4.5 million a year.

There were seven million a year at the top of the market, and a good market is considered six million in sales a year.

Banks aren't going to start writing mortgage loans en masse until they feel like the penalty phase of the mortgage crash is over.

So far, they've been subject to multiple investigations.

Countless hearings have been held on Capitol Hill.

Looming beyond this has been the prospect of a huge expensive settlement, which is what we are seeing today.

Not only will this program likely increase costs for legitimate borrowers as banks seek to pass on costs of the settlement, but all these "free" re-fis and write-downs only means fewer bank personnel available for legitimate loans.

It's time to be realistic.

The housing market is the ultimate too-big-to-bail market.

The government and even the banks don't have pockets deep enough to turn the clock back to 2006. We should stop trying.

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