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So, I have been hearing a lot of talk lately about the housing market hitting bottom and we are on the rebound.

Well, I am not as optimistic and let me share with you why.

First, you need to understand that I am a true believer that the Community Re-Investment Act” is what caused the housing bubble, which ultimately led to the fall of the sub-prime market but, that is another blog of another time.

So, back in 1999, President Clinton signed into law the Gramm-Leach-biley Act aka the Financial Modernization Act, that President Clinton said, “establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act". As we now know…was an under statement.

This Act ultimately made it easier for banks to provide bad debt to un worthy consumers. In other words, this direct action on President Clinton’s part, as well as the sitting Congress at that time made NINJA (No Income, No Job, Accepted) loans and Sub-Prime lending the way most banks did business for the next 5 years.

2005 is when we started to see the first signs of the housing bubble burst and many argue that it was only 5 years of bad lending so, by 2010, we should be out of the woods….well, not so fast.

It wasn’t till 2007 with the regulatory changes by the Office of Thrift Supervision that changed the Community Re-Investment Act’s home purchase loan reviews that actually stopped the Sub-Prime, Bad Debt and NINJA loans.

So, in reality, the bad lending was from 1999 – 2007, or 8 years. In other words, here in 2009, we still have at least 5-6 years before all these loans are completely worked out of the system.

Not to mention home prices / value have dropped so significantly that HELOCS and A(+) debt is being called in, we have a credit crunch so no loans are being made, our bond market is tanking due to increase governmental debt, and interest rates are on the rise due to inflation.

We still got a ways to go folks…..3-5 years, at least.

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Comment by Carlos H. Silva Sr. on June 22, 2009 at 7:37pm
Had a conversation with a contact at Citi group and they are ramping up to release a substantial amount of REO inventory.
Comment by Craig Alexander on June 22, 2009 at 11:18am
You said it all my friend --- minimum 2012. Buckle down...it ain't over yet, and the fat lady hasn't even warmed up yet.
Comment by Sam Shueh on June 19, 2009 at 12:26pm
Overseas economists expect a long recovery in the US! Recalling the Japanese economy really did not recover after the 1980s. China which makes just about anything for the US has surplus capacity in sourced mfg(for US only). However, their gov't stimulus package is quite effective to boost stocks and real estate with construction projects. China A-stock in Shanghai has surged abut 50% in the last 6 months. HK Hang Seng index also jumped about 45%. Australia dollar bounced back as US $ is weak and other governments are reluctant to buy US T-bills and bonds. I used to download US gov't projection rates to show the rate of recovery and time frame. Apparently all the projections did not materialize. Now with all that overspending there is inflation causing a surge in interest rate.... This is once in life time to debate about the future as it is completely chaotic.
In the South Bay home prices in desirable areas seem to suggest that they have bottom out in Feb. I fear there could be a double or triple dip in the near future. I agree with the panel that this will linger for a long time. Lets all learn from each other such we can serve the industry we are in....
Comment by Henry B. Torn on June 19, 2009 at 10:25am
Just because we supposedly hit "Bottom" does not mean we will invariably bounce back up. Hitting bottom to me indicates that prices will for the most part stabilize and not continue it's downward trend. Instead of being a V shaped curve in my opinion it will be more like an L curve. Prices can remain on the 'basement' floor for some years with little or no appreciation. Again all of this depends on your particular market but on a macro level I think we have hit that "Basement" floor now.
Comment by Triantafilos Tsouridis on June 18, 2009 at 9:16am
3-5 yrs sounds good.. as long as home prices don't continue to fall this winter and they can control how many FC or REO home hit the market at once.. There is still time to get your investment property yet.. Lending and Rates are a large factor to any future appreciation also.. can only hope for the best..
Comment by Steve Adkins on June 17, 2009 at 5:44pm
Although I'm having one of the best years of career, I do not like how my business is coming to me. I do not think anyone really knows when or if the housing market will hit bottom. Few people really understand all the complexities of what created this market and what it will take to really get out of it.

To be honest, I think we will be dealing with a large number of foreclosures for years, maybe as long as 10 years. We may never see an end to the foreclosures.

Dang it Oracle Jesse, you are making me think after a long and trying day!
Comment by Joshua Jarvis on June 16, 2009 at 8:00pm
Jesse, I need my boost of optimism today, thanks! I'm really pumped now to work for 3 more years of this stuff. What fun... (doh! Left the sarcasm button on).
Comment by Frank Popeleski on June 16, 2009 at 6:59pm
I was at a Tampa Association of Realtors meeting nearly 2 weeks back and there was a GREAT presentation from the Federal Reserve Bank of Atlanta. They had one slide that showed the SPIKE in deliquency rates in PRIME MORTGAGES! We all have been expecting that. Coupled with this new extension on foreclosures hitting the street, I contend that Jesse is the 'Oracle' of REO and is right on the money.

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