Walnut Creek, Pleasant Hill, Concord and Martinez combined median sold price by month.

This represents a minor drop of about 6% over last year.  Looking at the chart, it’s apparent that it’s trending upward.  That means the bottom has been and gone.

After a summer of noise with the debt ceiling, an agreement was reached last night.  The mortgage market responded with ridiculous rates this morning.  A fixed rate mortgage with Bank of America is at 4.250.  Ridiculous.

So, let’s recap.  Prices are low, but the bottom has been reached.  Money is cheap.  Dirt cheap.  Now is the time to get off the fence.

I lost my job in the title business, but not before I studied and passed my real estate license.  I started as a buyer’s agent for a big REO guy.  I have a gift for being in front of the wave.  I found REO work to be soul sucking and after two years moved to a traditional business model.  The point being, I’ve seen a lot over the years.  And I saw this coming.  There’s a part of me that truly hates sales people.  And business.  Because the business model of more sales and more sales is what brought this country to it’s brink.  We forgot that sometimes the best sale is the one you don’t make.  A skilled, ethical Realtor knows the difference.

Unfortunately, we all lost our way from about 2001-2006.  The sales arm whittled away at the standards of the operation and compliance arm and sales were made for the sake of making sales with substandard lending standards.  Next, because the banks were caught flat footed as the market tumbled under the stress of the mortgage meltdown they hired a bunch of under paid under experienced staff who’s primary contribution to the process was the ability to sign their name.  And that’s blown up in their face.

We would like to think that the banks carefully reviewed each file and made rational, informed decisions on each home they took back.  In truth the right hand rarely knew what the left hand was doing and I think if they had someone who could sign with both hands they would have considered that a boon.

I’ve said since day one that any attorney could attack any foreclosure on behalf of the displaced homeowner and prevail.  Yes, I said that every single file has something wrong with it that could cause the foreclosure to be overturned in court.  When I was working for the REO guy we had two pulled back because the homeowner filed litigation.  Both prevailed.  And we were just one little company in one little town in this country.  In both cases the borrower was working on a modification where the bank had lost the documentation numerous times.  Five in one situation, nine in the other.  If it were the insurance business the claim would have been for bad faith the bank’s behavior was so egregious.

The banks have done a horrible job and the latest “robo-signing” scandel is just another example of how bad they really did.  But at the end of the day, in spite of all that’s going on, you still have to pay your mortgage.

Last month I sat in a presentation by Matt Vernon of BofA.  He’s the Executive in charge of REO’s and Short Sales, for the whole bank.  He laid out their go forward plan which was to, in order, modify the loan, if that failed short sale or deed in lieu and only if the borrower was unresponsive or the home was seriously not moving would they resort to foreclosure.  They expect this to be in full swing by Q1 2011. I figured out the answer before Matt was asked.

BofA is the largest consumer banking company in the country.  If they foreclose and act heartlessly today when a borrower is in trouble, that borrower will end all of their banking relationships with BofA and may never return.  BofA would be shutting the door, in an economic downturn, to millions of customers who, in a normal economy, would have never found themselves where they are right now.  Good people in a bad situation.  BofA recognized this and is positioning themselves to be the kinder, gentler big bank.  Why?  Because they want to salvage the banking relationship with minimal damage to their bottom line.  It is better to work out a short sale today and get the loan in three years when the borrower is back on their feet than to behave like a bunch of robberbarons.

I think their strategy is brilliant.  I think they will use the robosigning scandel as an excuse to implement this new policy.  It’s the time out they needed to catch up.  And while you still have to pay your mortgage, short selling will be much easier.  While the media will make a big deal calling this a “foreclosure moritorium” the truth of the matter is that most of the big banks have suspended foreclosures over the holidays for the last three years.  This is just a different way of ending up at the same place.  This should be the break that a lot of homeowner’s need.  This holiday season may end up a great time to buy a short sale and a better time for drowning homeowners to get out from under the mortgage that’s killing them.

“Is your house on the market?” No. 

“Did you sign a listing agreement?” Only one day.  “Huh?”

I ran the property on the MLS and it was not on the MLS at all.  And I began to wonder “How would he short sale the house if it wasn’t on the market?” 

This out of area agent put this house on an out of area MLS for exactly one day back in July.  What he was doing was advertising the house on craigslist looking for a buyer.  He got one, did a one day listing and asked the bank if they would take the offer.  He was all about double ending the transaction, not doing what was best for the client.   If this guy was ethical or knew what he was doing he would know that banks want to see short sales on the market for a minimum of 10 days.  The “short sale” failed because the bank rejected it.  The family said the bank wanted $600k.  I doubt that was what the bank said.  I know the house is worth $525k.  I work that area.  I know every house that’s sold in the last year off the top of my head, more if I think about it for a moment.  This out of area agent did this family a huge disservice. 

But it gets worse.  I had checked for a Trustee’s Deed since that was all I could do without any of the paper work.  As of last Friday there was none.  On my way to the appointment last Wednesday I asked my title company to do one more check for me.  One of my old friends dated the property down by hand and found the Trustee’s deed recorded on Monday.

I had two choices.  One was to call the homeowners and say “Sorry, I can’t list your property because you don’t own it any more”.  Two was to drive to the appointment and compassionately explain to them that the Trustee’s Deed had recorded and they didn’t own their home any more.  I sat in horrible traffic for an hour to do the latter. 

I could see in the woman’s face that she simply wanted to cry so I tried to move as quickly and simply as I could through the explanation.  Before I went to Keller Williams I worked for one of the biggest REO guys in the area.  I knew what was going to happen next to this family.  I took the time to explain that someone would come to her door and offer her money to move by a certain date.  That offer should be at least the amount of two months rent in her property.  If she had any questions about that process, I would be available to explain it to her. 

I’m not going to make a nickel on any of this.  But it’s the right thing to do.  I just wish the out of area guy had done the right thing.  This family should have been able to short sale this house under HAFA.  It should have been relatively simple.  Yet he got in the middle trying to make a buck for himself and this family has now been foreclosed on.  He is what gives us a bad name.

When I get to the bottom
I go back to the top of the slide
Where I stop and turn
and I go for a ride
Till I get to the bottom and I see you again
Yeah, yeah, yeah

Helter Skelter -The Beatles

One of the burning questions that we hear all the time is “Have we hit bottom?” Have we? I don’t know. No one knows. We can guess or throw tarot cards or look into a crystal ball but we won’t know until we’re there. After we get there a lot of charlatans will say they predicted it. They didn’t. On the other hand, we could use the Potter Stewart argument. We’ll know it when we see it. The Philadelphia Enquirer has a great article quoting Robert Shiller. He is one of the founders of the S&P/Case Shiller Home Price Index. He says, and I agree, that when the inventory, which is very high, gets back to more normal numbers, we’ll be there.

I just said we aren’t at the bottom so why should you even look at property right now? Simple. Because your family just got bigger or your kids need their own rooms or you are empty nesters now or you’re relocating or downsizing. In the grand scheme of things, if you miss the bottom by 3%, so what? Is it worth gambling on the exact bottom to miss out on the right house? Over the period of years that you’ll own that home prices will fluctuate. That’s what happens in the market. Even if you bought at the absolute peak in 1991 before the market tumbled, the investment is double right now. So even if someone bought at the peak in 2006, in the long term they’re going to be just fine. Real estate should be regarded as a long term investment. Here’s the story:

Karl E. Case, one of the economists that developed the 20 MSA methodology, a widely used subset by Standard & Poor’s in the S&P/Case Shiller Home Price Index, thinks that the housing market may be near a bottom.

According to WSJ, in a paper presented this week before the Brookings Institution in Washington, Mr. Case argued that the relationship between incomes and home prices has neared a level seen at the end of past housing slumps. He also noted that of the 20 metropolitan areas covered by the Case/Shiller index, nine have shown prices slightly improving in recent months.

Obviously, anyone making specific predictions on the Housing sector should be regarded with some doze of skepticism. After all, the housing collapse led to rapidly falling home prices and massive defaults on mortgages, causing major dislocations in financial markets – the ongoing negative effects of which, in terms of write-downs, credit contraction and dilutive capital raises, continue to weigh heavily on both Financials and the housing market. However, considering Mr. Case’s authority in the field, his model of predictions, and expertise on real estate markets and prices, we can argue that while the economics has never been a controlled science, perhaps, there is some cause for optimism here.

At the same time, the Case-Shiller index’s most recent reading was 19% below its July 2006 peak, and many analysts, including Robert Shiller, the co-creator of the Case/Shiller index, say the decline is far from over since inventory of unsold homes on the market is still very high. The main basis for Shiller’s argument is that until that excess is absorbed, home prices will continue to be negatively affected. This has further fueled the debate of whether the deterioration in the Housing sector will continue, or if we are seeing the beginning of the end of the crisis. In addition, if so, if there is some sort of consolidation taking place at current levels.

Irrespective of these suppositions and as the debate continues, it would be naive and unreasonable to pretend that the housing sector, which has undergone the biggest speculative boom in U.S. history, will start immediately uptrending or come back with a bang. Instead, a slow languishing bottoming action is the most likely scenario.

I’m getting to ride again because Dr. Elkind at Integro got my back fixed in record time. The last time I injured myself like this, I was unable to bend over and tie my shoes for over a week. They couldn’t settle my back down enough to make the adjustments for over a week. I had to sleep on my living room floor because the bed was too painful. I was down for a month. This time I was back on the bike a week later, I deadlifted successfully yesterday, only 14 days after the initial injury. I thank Dr. Elkind and Active Release Technique for the remarkable results. It’s nice to have such a gifted practitioner right in our back yard.

Tonight it’s March Madness up at the Pleasant Hill Wine Merchants.  If you haven’t been up to this place, they know wine.  No, they KNOW wine.  And they’re really nice people.  Here’s their blurb for tonight:

Fri March 21 & Sat March 22 March Madness! Come and taste our best picks of the month Tasting Fee $10 ($5 Wine Club Members) Special feature Friday night only: Dechen Designs — Treat yourself to a taste of luxury with our high-quality, hand-woven Cashmere (pashmina) wraps from Nepal. Freshen up your wardrobe with our hot & trendy silk scarves with matching handbags from India!

Sunday March 23rd – closed for Easter Holiday

Heather Farms is having their Easter Egg hunt tomorrow.

Saturday, March 22nd, 10:15 a.m. Walnut Creek Spring Egg
Hunts, Heather Farm Park 301 N. San Carlos Dr. @ Ygnacio
Valley Road, and Larkey Park, 2771 Buena Vista Ave. Walnut
Creek, FREE  This hunt is divided into two parts, Preschoolers to
5th graders and disabled children will be at Heather Farm Park
and there will be another hunt for Preschoolers through fifth
graders at Larkey Park.  Note: Larkey Park is on the other side of
the 680 from Heather Farms.  Depending on how your kid likes
crowds, you might consider the Larkey Park Location.

Saturday, March 22nd, 8:00 – 9:45 a.m. (just before the Egg Hunt)
Walnut Creek Breakfast with the Spring Bunny, $5 adults, FREE
for kids under 12, There will be a pancake breakfast with the
Spring Bunny at the Heather Farm Community Center. 

My favorite brunch location is Patrick David’s in the Livery in Danville.  Don’t know if they’re doing a special Easter brunch or not, it’s best to drop a dime on them first, but if you go there be sure to order that warm chocolate souffle.  It’s possibly the best dessert in Contra Costa County, and I’m not a chocolate fan.  Scott’s in Walnut Creek has a special Easter brunch, call early, they’re always crowded and with good reason.

And we’ve got a decent weather report for the weekend so it’ll be a great time to take a hike around the mountain, or a ride or a run or a nice 18 holes.  Have a great weekend everyone!