So Cal Real Estate News

Pragmatists in the Bush Administration may be gaining the upper hand, according to “Bush Readies Mortgage Aid Plan,” in Saturday’s Washington Post.

According to the article, “The Bush administration is finalizing details of a plan to rescue thousands of homeowners at risk of foreclosure by helping them refinance into more affordable mortgages backed by public funds.”

The proposal targets at least some of America’s estimated 9 million “upside down” homeowners. Under the plan, the FHA “would encourage lenders to forgive a portion of those loans and issue new, smaller mortgages in exchange for the financial backing of the federal government,” according to the article.

This appears to be a modification of a proposal by Massachusetts Democrat Barney Frank, reminding us all that politics, indeed, does “make strange bedfellows.” (I’m available, Mr. Letterman. )

We think it could be a major step in the right direction–or a major disaster. As always, “the devil is in the details.” We just hope & pray that our employees in Washington (yup–we pay their salaries!) will finally put special interests, dogma, and party politics aside long enough to work for the common good.

In the meantime, if nothing else, it’s one more illustration of what we wrote last November in “How Low Will Prices Go?”–we’re in uncharted territory this time, and nobody really knows what will happen next! (If you predicted a Barney Frank/George Bush recovery plan, please let me know so I can get your input on my stocks & the Final Four next weekend!)

The federal government today took another step to help ease the housing requirement, reducing required cash cushions Fannie Mae and Freddie Mac by a third. That frees up over six billion dollars for them to make additional mortgages, which obviously helps real estate nationwide. Unfortunately, it also reduces the cushion they have when they might need it most (click for brief summary).

If it works, however, the need for that cushion might be reduced. To us, it’s more evidence that the decision makers in Washington are doing all they can to stabilize the real estate market. It may extend the spring mini-boom we’ve speculated about here in Southern California. It also might make this spring a good time for refinancing. Every little bit helps!

Today’s Los Angeles Times has DataQuick’s February closing statistics for the 7 county Southern California Region, & it’s exactly what we predicted: Sales up from January, prices down.

Unfortunately, what writer Peter Hong never seems to mention in the article is that this is old news, for 3 reasons: First, today’s March 14, & DataQuick’s reporting average closings during February, making the average sale date a month ago today. Second, that’s the date the sale closed, so those homes mostly went into escrow in late December and early January! Third, lots has happened just this week to address the underlying problems, most notably the Fed’s new program to increase liquidity.

The article does have a fair amount of quotes from a variety of experts, most saying this means things are a bit worse than they thought. Well, things were pretty bad in December, but they did pick up in January and especially February, so we still expect better news a month from now, when DataQuick reports March closings–which mostly opened escrow in January. And we’ll guarantee sales volume will be up. It’s really not that hard to predict what’s coming in on this month’s freighter if you talk to the guy who loaded it up!

We still think there’ll be a significant increase in closings through this spring, and quite possibly a modest increase in prices, but we also anticipate continued price declines as we move through fall and winter. The real bottom may still be a couple years away, but, as we pointed out here in our November piece, “How Low Will Prices Go?”, this is the most unpredictable downturn we’ve seen, and nobody really knows where it will end.

As Hong’s article eventually points out, DataQuick’s numbers are overly negative due to the preponderance of low end sales, where most of the foreclosures are. We’ve got lots more to say about this, and hopefully we’ll get more posted tonight. For now, I’ve got to get on the road and check on some units that burned last night. Now that’s a real “overnight” decline in value!