Engineering the Market

The banks and the federal government are both doing the same things to make you think the market is improving. Notices of Default are at 47%, so I’ve read. The number of Bank Owned properties on the market is down. Average sales prices are up. We’ve bottomed out the Market!

Look around before you buy into that media hype. They are doing what they should have done 3 years ago. They are finally going into short sales. The short sale move will drive prices down at a much slower pace and should help avert another massive price decline.

The pace of homeowners not able to make their house payments won’t change but the way it is reflected on public records will. This will continue to bring good news as the media reports over the next several months. It’s much harder to track short sales and loan modifications. Defaults and foreclosures are public record and easy to track.

For a true picture of the conditions in the Market Place, watch unemployment rates (now at 15.1% in the Inland Empire), watch for layoffs in the public sector- government workers, teachers and the like. Also, watch the Public Pensions for new developments; they have big problems to deal with.

Watch the “walk aways.” This new term is for people who have good jobs, money in the bank, and can’t qualify for a short sale. They just make a business decision to walk away from the home and the mortgage. This can only work where they have a purchase money mortgage (no home equity line of credit, no cash out refinance).

Let me say, I like short sales as the best effort to help solve the housing crisis. It is our best hope.

It’s time for some Smart Engineering.