So Congress has crafted and passed and the President has signed the “bailout”.  Well I have been in this business for 35 years and lived through the market collapse and 20% interest rates in the early 80’s, the S&L debacle in the 90’s and the 9/11 disruption just a few years ago and one would think I should be able to comprehend what all they just did.  Most of it I think was constructed to try and reassure the financial markets whoever they may be. I see numbers like 300 billion for this and maybe 25 billion for that and another 4+ billion for affordable housing all of which is a big maybe predicated on a bunch of other things happening first like lenders agreeing to take 85 cents on the dollar before the borrower can use the bailout to refinance, and how hard is that going to be?

The only concrete parts of the legislation seem to me to be the increased loan limits, conventional and FHA permanently and VA temporarily, a new regulator for Fannie Mae and Freddie Mac, some reform I also don’t comprehend very well of FHA,  and a $7500.00 15 year interest free loan to first time home buyers in the form of a tax credit.

How is this going to impact the current housing market? Depends on how the consumer we all like to refer to so much perceives it.  The problem in the market today in my opinion is as much psychological as based on any real credible issues.

There is so much uncertainty, the stock market goes down 100+ points this past Monday and up over 500 points on Tuesday and Wednesday and then down 205 points today, based on what?  Oil is down dramatically all of a sudden, again based on what.  Merrill Lynch sells 22 billion dollars worth of their loan portfolio for 22 cents on the dollar and the buyer is likely to make a killing at whose expense i wonder.  No one even knows what these things are really worth but it is highly unlikely they are only worth 22% of their face value. 79% of loans have not gone bad, the number is maybe 15% so what is going on? No one can really say so here we are. The press is no help. I quit reading the financial pages because by the time I read them the news is entirely different. And the real estate news they report is months behind.  Take the front page of yesterday’s SF Chronicle for example, it reported a record drop in home prices in 20 major metropolitan areas in the country for May. This was on July 30, 2 months later and things change.  What good is 2 month old information? At least our little local Napa paper is now reporting week to week sales and month to date sales compared to last year so the information is current and useful.

So I’m ranting and raving because it seems like the crazies are running the nut house and the rational folks are being sucked along for the ride.

Anyway, people continue to buy real estate, the market continues to strengthen gradually and I’m speaking locally and over most of California even.  The lower end of the market is selling briskly, inventory is slowly decreasing. Interest rates continue to be in the 6’s, yet artificially high because the financial markets have decided every real estate loan is now a higher risk so borrowers are paying a premium.  Someone is making a lot of money on these investments now I suspect.  There is a demand out there. The need for shelter isn’t decreasing and not everyone wants to live in the cities and towns where the bulk of the foreclosures are, if they did there probably wouldn’t have been so many foreclosures in those areas.

So I’m sitting here wondering did the government panic when they started all these bail outs last year and that sent everyone else into a panic? Guess it doesn’t matter now.