“Well, here’s another nice mess you’ve gotten me into Ollie.”

So we find ourselves in an epic mortgage and debt mess in 2009 that is truly a Laurel and Hardy-esqe situation. If only we could find the humor!

My first year selling real estate was 1977. The USA was emerging from a recession and the real estate markets were great. Folks clamored to own a piece of the rock and Mason County Washington was in the growth mode. The party lasted until mid 1980 when inflation exceeded reasonable limits and the Fed applied a high interest rate tourniquet on the economy stalling growth to break the back of spiralling inflation.

In those pre-fax and pre-internet days foreclosures were rampant in Mason County with Fannie Mae, Freddie Mac, HUD, VA and a handful of local banks taking possession of most of the foreclosed homes and land. The real estate market stalled completely. With interest rates topping out at 16.5%, I sold just 5 homes in 1984. The situation was bleak then but eventually interest rates dropped and happily the market returned to those that stayed the course.

Fast forward to 2006. In some areas of the United States the real estate market began to show signs of trouble. Home prices in some locales of our country reached inexplicable levels. Markets were driven into frenzy by speculation enabled by easy financing and it was rare when a buyer didn’t qualify for a mortgage loan. Only folks just emerging from a recent bankruptcy did not qualify. Similarly to 1980, home and land prices inflated at an unsustainable annual rate but the similarities to 1981 ended there with the Consumer Price Index (CPI) remaining relatively flat (in the 3% range).

In 2009 we find ourselves in a full fledged real estate led recession which has and is spilling over into all corners of the US and world economy. This recession is extremely complex in nature due to the creative and often abstract financing and leverage tools used to create this situation.

The Puget Sound Business Journal is currently running a series of articles which illustrate just how complex the current mortgage mess is. In the PSBJ article a Seattle area family is faced with a frustrating combination of joblessness, over leverage, a deflating home value, and two incoherent lenders that don’t communicate.

One promising option that exists in 2009 that was unheard of in the 1980’s recession is short sales. I will talk more about this option in later blogs. Short sales are where the lender and/or lenders accept less than a full payoff upon the sale of a home with excessive mortgage debt.

To our credit much is being done on a governmental level to right this failed financial mess. First, interest rates are hovering around 5% enabling home buyers left standing to take advantage of deflated home values. The federal government has taken extraordinary steps behind the scenes to insure mortgage financing is available to those that qualify. Gone are the days of 100% conventional financing to those with unverifiable incomes or credit scores below 620.

Secondly congress passed legislation which will facilitate thousands of homeowners that are currently not severely delinquent on home mortgages but facing future trouble to modify their home mortgages hopefully avoiding a short sale or foreclosure. See FinancialStability.com for details.

Finally congress passed legislation granting those buyers that have not owned a home in the past three years a whopping federal tax credit of up to $8000.00. That last move seems to have brought first time buyers out into the market. Sales starts for homes under $170,000 have picked up significantly in the Shelton area.

In addition to all of the government action mentioned above I believe there is another factor that is quietly at work that will expedite a recovery. That significant tool is technology. In this Blackberry age of lightspeed there is no denying the invisible role technology played in assisting us into this predicament but will play an even larger role in both assisting us back to our feet and preventing a  meltdown from occurring in the future.

Unlike the days of the 1981 – 1985 recession - money, records, information of every kind travel instantaneously from point to point. As witnessed by current government action, solutions, policy changes, even financial band aids can be applied in hours. Government will need to take great care not to abuse this access through overreaction to the daily problem du jour.

We find ourselves this spring at a unique crossroads. All home and property owners are affected by the tremendous changes taking place in the real estate markets. Experience has taught me that now is the time for financial prudence, and careful conservative decision making (not meaning politically here necessarily). Tough choices need to be made by all levels of government and property owners alike. Real estate will remain the largest investment most of us will make in our lifetimes and although the future is unclear history shows that recovery is on the way.

In summury Stan Laurel’s reply to Ollie in the appropriately named movie the The Fixer-Uppers (1935) was “Well, here’s another nice kettle of fish you pickled me in!”

Those of you that know me well understand that I struggle with being succinct. In the future I will make every effort to get to the point and keep the word count down to a reasonable level. If I can assist you with your real estate needs please do not hesitate to give me a ring, send me a text, drop me an email, or simply drop by my office and visit with Kim, Bethany and myself.  We’d love to see you. -Keith

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