Vito Boscaino

Talking About a Housing Revolution: Predictions for the Sector

I generally agree with everything that you said. I believe you hit on the key unknown factor, the question being exactly how big is the "Shadow Inventory" gorilla standing in the corner. With new foreclosures increasing in number month-by-month, added to the deferred foreclosure inventory that has not been processed into the marketplace, plua the "Normal" seller withheld inventory when added to the impending increase in foreclosures due to the recent job losses and upcoming rate resets, the cumulative number of potential empty homes that could hit the market over the next eighteen months could be staggering. Until there is some transparency and visibility to the size and expected timing of the flow of these properties into the market - I think that many buyers and investors are going to wait this game out. That implies to me that the late 2010 timing for the bottom of the market might be realistic, or it may be early. I certainly do not see a bottom any sooner than late 2010.

Vito Boscaino
Managing Partner
North High Realty, LLC
Dublin, Ohio
www.ServingColumbus.com

NAR Existing Home Sales Report - and Spin

As a real estate professional in the Midwest I concur with your analysis and your spot-on critique of the NAR. The "glass-is-always-almos... spin from the NAR and our local Board of realtors is nauseating. My concern is that in looking at the May statistics, one has to consider that the foreclosure (REO) pipeline had for the most part been turned off by the banks. With foreclosure rates rising month-by-month and the pipeline of inventory continuing to grow, when will the banks start to unload this product into the markets? Even though many experts are trying to suggest that we have hit bottom, my gut tells me we are getting ready to hit the edge of the next cliff. Throw in higher interest rates on top of this along with continued job losses and I believe the industry will continue to decline well through 2009 and at least the first half of 2010. As well, there are many sellers who have simply decided to "sit this one out" for awhile. At the first sign of market strengthening we will see a step-up of "normal" sellers who have had their plans on hold for awhile. All-in-all, a lot of continuing pressure from high inventory levels, low buyer demand due to a lack of confidence in the economy and the fear of "trying to catch a falling knife" from a home values perspective, and rates which will continue to increase, and the near future looks very foreboding.

Vito Boscaino
Managing Partner, MBA
North High Realty, LLC
Dublin, Ohio 43017
www.ServingColumbus.com

High End Home Market Still Has Further to Fall

Since high end homes are typically not held for investment income purposes, I don't think you can extrapolate "implicit value" based on the cash flow being generated. The reality is that he was very, very lucky to find someone to rent this home as other posters have commented. Whether or not Geithner invested in this property and assumed that he would generate a "return" is a question only he can answer. Based on the timing of his purchase though I would imagine that in 2004 he saw more upside opportunity on future value for the home then he did downside risk. The one takeaway that we can observe here is that if he was attempting to "time the market" and exit that property at the peak of the market, he overshot and held onto the asset too long. I guess my question would be what does this activity tell us about Geithner's ability to predict any kind of economic or market activity? My takeaway would be that he is probably not the sharpest tool in the shed.

Short Housing for the Long Term

As a real estate professional I agree completely with the assessment here. The market is very soft, and in fact has gotten softer in the last couple of months. Job losses create further job losses, and this trickle down impact is just starting to be seen in late payment rates and defaults. Banks are trying to hide repo's anywhere they can as a means to try to put the best light on what must be horrendous capital structures for many of these institutions. With financing costs begin to increase (a logical outcome since the Fed can only manipulate the markets so long to try to artifically depress rates) buyers will face further pressure and sales rates will continue to decline. This is definitely a snowball still working it's way down the mountain, certain to turn into a much worse avalanche before this situation starts to settle down and trun around.