Saturday, August 04, 2007

Doomed October Real Estate Figures

June 21, Bear Sterns hit a brick wall. In the last 6 weeks, the real estate finance markets have tightened up. No more easy loans. Home owners are looking at June Housing figures which are 30 days behind today’s date and the purchase date is 30 to 90 days behind that. These homes went into escrow 8 to 16 weeks ago and have been in the sold category for less than 4 weeks.

Notice one thing, the effect of the new lending standards has not even shown up in the real estate statistics. Even if we did a 30 day escrow, the June 21 contract signing would not show up in statistics until September 1. So in effect real numbers for the new lending criteria will not show their effect until October 1, or later (30 to 90 days from now).

If we examine this more minutely, you find that the home owner trying to sell is three months behind the curve. The newspaper figures for home values are a tad bit stale. The number of house sellers has increased, and the people that qualify as buyers have decreased considerably.

The October housing statistics should start to reflect the new lending standards. I would expect to see a very substantial drop in home purchases in San Diego. A lot of people won’t be able to qualify for a home loan. They don’t earn enough to afford the monthly payments; of course that fact didn’t seem to bother anyone a month ago.

Now as of last night, Wells Fargo has announced that its Jumbo rate has now jumped to 8%. So now you can buy a McMansion and they will super size your interest rate (what a deal!). This is a take out order; the current seller gets his lunch and a free ride to the poor house without lifting a finger. Notice that the words “free” and “lunch” were not next to each other.

1 comment:

Anonymous said...

Excellent point, real estate stats don't look so gloomy, not great either but they are way behind. By October/November the effect of lending standards finally being brought back will have crushed demand to the point where even the TV types will have to admit the problem. With the Chinese threatening finally to dump the dollar and the stock market swinging easily 150+ points in a session a stock market/dollar crash will finish off the optimists for this economic cycle, no more Cramer or other stock touts on TV for a while, no more reale estate "No money down" infomercials either. It will be poverty row for many people unfortunately.