It Ain't All Big Hair and Cadillacs

I admit my mind works a little differently than most - I like to write and talk about things that are current - so, in light of the past week’s recent events, I decided that I wanted to correlate last week’s LA earthquake, the current credit crunch and my recent trips to Costco into a meaningful discussion regarding real estate. Surprisingly, there is a high correlation.

I have a habit of sharing my addictions as many of you well know - caffiene - and yes, Costco - sad to say, I often find myself “dining-out” with the combo pizza, occasionally the chicken caesar salad, 2 hotdogs (for my dogs) and let’s face it - the 2 drinks are essentially free. Critical in today’s tough economic times.

You ask - how is this even remotely relevant? Well - after hearing the news regarding the quake, and the follow-up public service announcements locally on the radio questioning what my emergency plan is in the event of an actual emergency - have I made the necessary arrangements for 72 hours of provisions - bottled water, food, batteries etc?

I immediately thought - I need to go to Costco.

Prior to my almost twice weekly adventure - mind you there are 2 of us plus 2 dogs - I checked to see what I needed - a quick scan of the pantry revealed 36 boxes of Mac & Cheese, 24 rolls for toilet paper, 72 bottles of water, two 128 fluid oz bottles of Neutrogena handwash - fridge check - 4 gallons of milk, 36 eggs, 128 oz of mayo and 48 slices of Timberlake muenster cheese. Hmm - no batteries.

Off to Costco.

Being a Sagitarius, I am by nature an optimist, however, in light of my chosen profession, I am becoming intimately familiar with actual emergencies - the professional kind. I’ve negotiated some tough deals, fended off irrate clients - but the emergencies I am speaking of are realtor’s-life threatening. I Twittered briefly today with fellow “hound” Tom Vanderwell regarding Meredith Whitney’s interview on CNNMoney.com regarding the nature of the credit market. She has a fairly solid track record of getting her predictions right. I also recently read Crain’s Chicago Business and its article regarding the latest market statistics in Chicago - their real estate category clearly highlighted how the subprime mortgage fiasco directly affected the Chicago area.

After reading the Crain’s spread, I was unnerved regarding the following statistics:

1. Half of Illinois residents with a subprime mortgage have made a late payment
2. Nearly 80% of the 144,341 subprime mortgages in Illinois as of December, 2007 were in the six county area. Cook County represents 80,800 of the 144,341 of subprime mortgages held in Illinois or 56%.

Statistically, of the subprime mortgages held:

1. 59.6% are current on their payments
2. 10.2% are 30-59 days past due
3. 5.4% are 60-89 days past due
4. 8.0% are 90+ days past due
5. 12% are in foreclosure
6. 4.8% are REO or Real Estate Owned - they have been foreclosed and are currently bank owned.

75% of subprime mortgages issued in Illinois are adjustable rate mortgages. In Chicago and surrounding suburbs, 80% of these loans are scheduled to reset in the next two years.

These latest stats in Chicago, combined with Meredith’s comments regarding the still to continue contraction of capital available for lending due to the downgrading of mortgage backed securities, indicates to me that whatever buyers that are currently active in the market will continue to be pressed with fewer lending options. Yes - lenders are lending - but to a far fewer number of buyers.

Needless to say, the deals aren’t coming together quite as briskly - I’ve put off buying the “wants” versus the “needs” - and even though the 36 boxes of Mac & Cheese sounds like alot, I’m finding it complements the rotisserie chicken quite well. There are some that are saying that some markets are hitting bottom. Quite frankly, at the risk of sounding alarmist - I sense we are not yet into the thick of it.

Granted the recent Federal Housing Bill 3221is intended to assist in providing the necessary capital to keep the mortgage market afloat, however, until lenders work through the write-downs of the assets, i.e. the houses in various stages of foreclosure, I doubt the new Federal housing bill will truly free up money for buyers in the short term. No matter how well staged or well priced a property is, I don’t think it’s going to get any easier to sell. Dropping the seller assisted downpayments will hurt.

This begs the question - while counter intuitive to a market of historically low interest rates, will seller financing become an attractive way to sell real estate? I think for the sellers that still have equity and are in need of selling, it might be worth discussing. If the Chicago statistics are any indication, I’d say we’re in this pickle for at least a good 2 more years.

Needless to say - I sense that my life is going to get a bit more Mac & Cheesier. I’ve been praying alot harder too - I’ve been asking the Man upstairs to please send me cash buyers.

Ok - I guess I’m going to make another trip to Costco. May as well pick up some more Mac & Cheese and candles - for novenas. Does Costco sell plastic injection molders? I thought I’d pick up one of those and crank out a few Saint Joseph statues. I hear he’s been working overtime.

Ya know - I’ve decided that I want run for Congress - my dilemma: overcoming the paradigm that one aspires to move up and not - um - down. BUT! Just think of all the fun I’d have riding the train under The Capitol - sitting in convertibles waving at my constituents in parades, playing golf with my lobbiest “buddies” - Ahhhh - what a LIFE!

Honestly, though - I think the best part would be sitting in commitees and writing legislation. Imagine sitting in a big room covered in mahogany wainscoting, sitting in a cordovan leather highback chair behind the massive, hand carved desk with my BIG brass name tag in front of me -I might even have a microphone in front of me. My voice would boom while speaking down to the little peop - er - constituents - um - not MY constituents, but constituents nonetheless.

My esteemed colleague would be standing behind me whispering where the guys were going to meet up for drinks after the hearing while the pathetic homeowner in front of me goes on and ON AND ON about how some slick mortgage broker sold him a bill of goods and now he can’t make his mortgage payment. But I feign to listen because it’s only for a few hours and then I get to ride the under ground train with my buds ‘cuz tonight I’m drinkin’ and schmoozing with da bankers!

Just think about it! I’d get to drink single malt scotch while Jimbo Biggidy Big Banker throws his arm around my shoulder, pulls me aside - walks me out on the patio at The Capital Grille, hands me a cigar and tells me that those wacky Wall Street boys - ha ha - you know the type - custom shirts and suits from Hong Kong - well they really blew it. Look at ALL that hell they’ve caused.

Jimbo likes to talk in the third person.

Tommy - Jimbo’s bank is losing money. How was Jimbo supposed to know that people weren’t going to be able to pay for all of those mortgages? I mean housing always goes up - ha ha *slap on the back* right?

I mean - if I have to write down the value of all those assets - well -um - you see Tom, Jimbo and Marge won’t be able to host that ski junket in Vail this year - and we all know how much Tommy LOVES to ski.

Dammit! There is no way in hell I am NOT going skiing in Vail this year.

So Jimbo - let’s just say I get a few of my esteemed colleagues together - write a few rules and regs - make sure my boss covers your ass. You won’t lose a penny more on those declining assets - I mean, if you have to write them down to say - 85%, will that keep Vail in the running? Let’s face it - you can always foreclose - I mean who wouldn’t want to find a bargain?