Finding the Positive

This week a number of people have asked me to foretell the future. Instead of the question I am generally asked which is, "How's real estate?" now I am asked something like, "Has real estate bottomed out yet?" I usually blunder out avoidance-like comments such as "That depends where you live, or some areas have fallen more than others, or some areas have had greater appreciation than others." In any case, my answers were a well-calculated conversation stopper. The questioner leaves with nothing tangible and is unsure of my opinion, and yet with the impression that I sounded knowledgeable. I wormed my way through the rest of the week, hoping to avoid the subject altogther and felt intellectually inadequate and emotionally uneasy about our economic times.
Then I read Blanche Evans' March 7th article in Realty Times which listed the opinions of reputable housing crisis prognosticators. For the most part, the article described a grim picture and an ominous future with references to the Great Depression of 1929. Other than a few geographical exceptions, real estate was overvalued throughout America and due for a great correction, the most overvalued location, Bend Oregon, from where I am writing today. Likewise, new construction was due for a big hit as well, with sales according to NAHB to be off 22%. With such dire predictions, I went into survival mode and decided to reread passages from a favorite college text of mine, William Leuchtenberg's Perils of Prosperity hoping to find a better understanding of how to survive financially in the wake of crisis. Likewise I reviewed the events of the Panic and subsequent depression of 1893-1897. The same theme reoccured. Poor financial planning, deficit spending and amazing greed spelled the demise for millions of people who had little direct involvement or had shared in the blessings of the time.
Of course policymakers today understand the past. Fed chairman Bernanke has repeatedly confirmed his commitment to do whatever is necessary to prevent the downward spiral of housing, which could lead to massive unemployment and fortunes lost.
What seems to be the best hope for avoiding a catastrophe is creating the spin that the worst is over. We have hit bottom, and that this is really a great time to buy. In this way consumer confidence is bolstered and the trend is reversed. Banks make lending easier, FHA bails out subprime loans, and investors are given incentives to back real estate securities and, like the post depression song, happy days are here again.
Alexander Pope in Essays of Man wrote, "Hope springs eternal in the human breast, Man never is, but always to be blest." It seems like fabricating optimism in our world of great marketing is a preferable alternative to turn the economic tide than participating in some new war. Many argue that the Spanish-Ameican War was our saving grace in 1897 and that the beligerencies in Europe and WW2 did more to resolve the Great Depression than all of FDR's New Deal.
There is a lot to say for optimism. Scientists have even isolated a place in the brain where optimism resides. I have more confidence in it today than in political solutions. Give Pope, poetry and the spin doctors a go at it. What's there to lose?! Lee

A Scan on Scam

This week I read several articles about scams as a result of the housing crisis. The first concerned itself with people who preyed on distressed homeowners by offering, at a fee, to negotiate with the lender to save the property from foreclosure. In the end, some homeowners either lost the property anyway or were milked for a service which could have been done for free with a simple phone call to the lender. In some cases the scammer actually ended up with the deed.

Likewise I enjoyed an article by Ralph Roberts, a renowned real estate agent and author, who listed a series of new and innovative ways in which sellers were funneling money back to buyers in order put home purchases together without regard to lender disclosure or, in some cases, state regulations. The result was that some people were able to buy homes who otherwise couldn't qualify, but the lender was duped. It is easy to take the high moral ground against such activities in which allegedly innocent parties are duped. Yet, it is worth mentioning, people are continuously taken advantage of legally as well. What is to be said to those people lured by flowery letters offering teaser interest rates on loans, especially on credit cards, and then later shocked when the small print of a subsequent letter revealed that the borrower was now subject to usurious rates? Were these people not also, to some degree, scammed? Of course those with power rationalize that such loan offers are a result of good marketing and included full disclosure. In fact, the product offered even fulfilled a demand in the marketplace. Such actions are viewed as good business, whereas other similar actions outside the legal system are considered sneaky and a scam. These devious ideas can be refined and often become legal once those in power find a way to make a buck on the idea.

It is difficult to sort out the knights from the dragons, the innocent from the guilty, the gullible from the stupid. This economic time is really no different from any other. Perhaps this housing crisis reminds us, in some poignant way, that there have always been those that are fed snake oil and those that feed it. Like the barker at the sideshow says, "Step right up, ladies and gents, see for yourselves." Lee

Better by the Dozen!!

630, 634, 638 Alameda, Astoria OR 97103

$1,095,000.00

Twelve units featuring bay and river views. All units are well maintained & upgraded. Located near Smith Point with wonderful bay and river views. Decks, covering parking, storage and private laundry facilities enhance each unit.

For more info & photos go to AREA Properties website. Contact Laurie Duey @ 503 791-6518 or Sandy Calvert @ 503 791-2682.

See my other Clatsop County and Astoria Investment Properties on AREA Properties website.