Maybe the Worm Has Turned

Maybe the Worm Has Turned

Like everyone else out there in the trenches, we’ve been watching carefully for signs that the recent unpleasantness has finally abated. I’m finally happy to say that, from my perspective, it’s possible the worm may have finally turned.

The most up-to-date data we have comes from Altos Research (www.altosresearch.com). This site tracks sales data for counties and cities all across the country on a near-real time basis (data is collected and reported on Fridays each week). This is a great site in that most other sources of information are weeks old. Even with the vaunted Standard & Poors Case-Shiller Home Price Index, you get their report at the end of the month, not for the preceding month, but for the month before that! When you’re looking for opportunity there’s nothing worse than old information (what ‘Revolutionary Wealth’ author Alvin Toffler called, ‘obsoledge’). With the Altos data you can track home prices on a weekly basis as well as inventory levels and days on market. This is extremely useful to track trends as they’re happening; way ahead of everyone else.

If you take a look at their data for some of the hardest hit cities like Sacramento (where it all started), Oakland, Ft Lauderdale, Phoenix and Kissimmee in Florida, you can see an unambiguous uptick in prices. All of these markets show a drastic decrease in inventories (as expected). Some caution exists in that there has yet to be a drop in the ‘days on market’ for the homes that are selling. However, this is most likely due to the fact that fewer people have been putting their homes on the market. One would expect this number to decrease as those sellers who have been waiting out the market bring the properties out for sale.

Even in a city like Las Vegas, the New York Times is reporting that home sales are up 35% over last year at this time. We have seen a great deal of activity coming from Las Vegas recently as people from all over the country are going there to find unprecedented deals. We’ve been getting a great deal of loan requests for rehabs and foreclosure buys in that market recently.

I have my own 'Street Meter' to gauge the activity that I see going on. I'm getting a lot of calls from borrowers bragging about the incredible deals they've gotten on homes. Once the word of mouth begins to spread on this bragging, the stampede will come shortly thereafter. The snowball has begun to roll down the hill.

There is one caveat to this rosy picture however. Lending continues to be tight. Even though lending has increased (as evidenced by the uptick in sales), it’s not where it could be to produce a healthy market. I initially expected lenders to come back to the market when they could see prices moving in the right direction. I was wrong. Most lenders still have problem properties on their books. Until they can clear these off, I’m seeing lenders and investors holding back. Most lenders are not in a hurry to add to their portfolio of 'bad boys'. However, once these can be cleared from the decks, I believe everything will be in place to bring lenders back to the table with confidence.

This could be further evidence that things will continue to gradually get better through the second half of 2009. I’m thinking positive that 2010 is going to be a great year.

Richard Sundvall
Senior Loan Coordinator