So Cal Real Estate News

Maybe it’s not going to get as bad as we’ve been thinking?

Seems like I woke up to nothing but good news today.

Let’s start in Tokyo, where this week Alan Greenspan, apparently fleeing the U.S. for his own protection, proclaimed that the housing bottom isn’t that far away.

The former Fed chairman told a banking conference there that he expects the drop in U.S. home prices will probably end early in 2009 as housing inventory is reduced.

Here’s the really good news (if you’re a homeowner, at least. Greenspan thinks “…it is very likely that home prices will stabilize well before that.”

Greenspan said that in spite of apparently taking off his rose colored glasses, because he also thinks that the damage from the subprime crisis won’t be fully apparent for months. He also called the current credit crisis the worst in 50 years.

A bottom this coming winter has been the most optimistic of our “most likely” scenarios. In fact, the ongoing increase in Southern California foreclosures had us thinking the bottom’s more likely at least two years off (see yesterday’s update to our most recent projections post).

We’re not saying we agree with Greenspan, who we think had a lot to do with getting us into this mess (see “How We Got Into This Mess” for details). But he does have an awful lot of experience, access to more data than I can imagine, and a lot more credibility than Gary Watts.

Then I go to check the O.C.Register’s Mathew Padilla’s “Mortgage Insider Blog” to discover he’s finding signs that the bottom might be behind us. Now that’s the most optimistic scenario possible!

He sites two specific “signs:”

1. “Our local superstar investment manager, Bill Gross of Pimco, has been buying mortgages.“
2. Goldman Sachs CEO Lloyd Blankfein said the credit crisis is “closer to the end than the beginning,” and that the U.s. economy “will be on a growth curve again” by the end of the year.

Again, we’ve got two credible sources, but sources who may well have their own agendas.

Meanwhile, the Senate passed their version of the “Foreclosure Prevention Act” by a lopsided 84 – 12 vote. On first pass, we think the bill, which will probably be modified significantly in the House, does some things well, others poorly, and others not at all.

Overall, we think it’s a step in the right direction, and we feel the bipartisan support is significant, as well as the fast action. Here’s a link to today’s L.A. Times‘ article on the bill.

But foreclosures are still on the rise.

Like we keep saying, nobody really knows what’s next.

But today things look a little brighter than they did yesterday.

Maybe.

P.S. For something more uplifting, you might want to check out our next post, “A little perspective.”

Apparently the majority of the Federal Reserve’s Directors were afraid things might get a lot worse when they approved last month’s 3/4% rate drop, according to minutes released today from that meeting.

Here’s the top of the AP’s report on it:

Worries about a deep recession–not a shallow one–drove Federal Reserve policymakers to slash interest rates again last month, according to minutes of their closed-door meeting.

Even as the Fed battled in almost unprecedented fashion to stem a widening credit and housing slump, some Fed members fretted over the possibility of a “prolonged and severe” business downturn.

It was in that environment that they voted–with two dissents–to cut this important interest rate by three-quarters of a percentage point, to 2.25 percent.

That action capped the most aggressive Fed intervention in a quarter-century.

Some Fed policymakers thought that such a widening recession could not be ruled out given the further restriction of credit availability and “ongoing weakness in the housing market,” according to the meeting minutes that were made public Tuesday.

That doesn’t mean we will fall into a prolonged & severe recession. In fact, it means policy makers are doing all they can to prevent one. But it does mean that’s one possibility that must be considered, as we’ve been saying for months.

To us, it’s just more evidence that nobody really knows what’s going to happen next (See last Friday’s “A Change In Our Projections?“. Maybe “What to do when nobody knows what’s next“)