Tony Rand

Getting the Real Estate Crisis Right

Maybe you should call me Chicken Little. Example: The affordability index in 27 major metropolitan counties shows that borrowers left without the ability to lie about their income/assets nor the ability to accept a high risk negative amortizing mortgage cannot afford to own residential real estate. Realistically, all home price gains from 2003 will most likely be wiped out. So in many areas we will see home value declines as high as 50% to 60%. Most areas will be in the 20% to 30% range. Any area in which normal home price appreciation has been realized from 2000 will maintain a great degree of normalcy with a 1% to 7% reduction in values. This is my fifth market cycle, but for myself (and everyone else who has been in this business a long time), the characteristics of this perfect storm will bring more damage than ever expected...compare this fiasco to the S&L scandals of the 1980's and then add appropriate inflation factors for your region. At the end of the day, the recent inverted Treasury yield curve guarantees our recession. How the legislature, GSE's, HUD and all of the mortgage servicing entities handle recasting adjustable rate mortgages and loss mitigation of repayment impairment will only soften the overall blow to the existing market...not eliminate it altogether.