The Decade Leading to Disaster

This article regarding the steps to disintegration from the New York Times helped my understanding. The six steps lead to our current financial crisis include (in order since 1998):

1. Unregulated trade of derivatives
2. Allowance of too much bank leverage
3. Unbridled Sub-prime lending
4. Failure of government to intervene 1 year ago to limit foreclosures
5. Failure of government to bail out Lehman Brothers
6. Misappropriation of first $350 billion of bailout money - sent it to banks instead of applying it to specific needs.

I liked this article...let me know your thoughts

Ben Stein's Money

I read this article about dealing with debt from the New York Times. I always enjoy Ben Stein's combination of humor, insight and realism. Here he talks about us all getting a better sense of valuing our money and preparing for the bad times. - John

And so it begins with the bailout...

I read this article on the first round of bailout money. While this is a disappointment to hear that Arizona banks (one of the hardest hit real estate markets) were overlooked, it reminds me that we need to embrace tracking this information and participating in the legislative process to make our concerns known.

This news is realistic and constructive

I just read this article on the real estate recovery in phoenix. They are not expecting a recovery in prices until 2012! But, the good news is that the Arizona economic engine (employment) is expected to be better than the national average. So, even though your house value will be flat, you live in a as good a place as any. Time to be patient and focus on the things that matter: friends and community. Enjoy each other and don't worry about becoming rich. But, also remember that we live in a fundamentally sound place. - John Hancock

Commercial Real Estate Falling

I just read this article from USA Today on the status of Commercial Real Estate. Whenever I read these articles, I also like to read the comments ....make sure you read those. Notice that regarding Phoenix, they quote Elliot Pollack..a leading economist here. Bottom line is that we are around 20% vacancy (focused on office and retail) and it will take about three years to absorb enough to merit new construction. This is an opportunity for investors to acquire property at 50 cents on the dollar.

Long Term Vision is Key

It's the new year. I found an article Arizona's Future Economy that is both realistic and constructive! Here's is the idea....think ahead 20 years and build sound economic clusters (i.e. biotech, energy, etc.). Don't try to legislate quick fixes. The research triangle in North Carolina provides a good example of what works. Let's do this together! - John Hancock

High hopes for Gilbert

You may have read in our "Real Estate News" section there are high hopes for Gilbert to finish ahead of the curve at the bottom of the market.

The research indicates inventory has hit an almost two year low, homes under contract are significantly up from a year ago, foreclosures and REO's are helping to keep prices down, creating demand and closed sales are up 9% for 2008. If this trend continues into the typical spring buying pattern, 2009 will be a good year for Gilbert.

One of these factors research cannot control is the foreclosure rate and the number of REO's that hit the market. For clarification readers should know what the difference between a foreclosure and an REO is. When a mortgage goes into default, the bank will notify the resident they have a 90 day window in which to reach a settlement with the bank before the home is offered at auction. This action is known as a Notice of Trustee Sale. Many times these homes will go to auction, but the price will be to high for anyone to bid, at which point the bank is obligated to take the property back, and thus it becomes "Real Estate Owned" (REO) by the bank. REO's will be a major player in 2009, with conservative estimates predicting them to be approximately 30% of the market.

Another big player will continue to be short sales, which are homes for sale below market and below what's owed on them. These are not necessarily in foreclosure, but the residents are asking the banks to take a lesser price sooner rather than later. These transactions take a lot of time and patience because the bank has yet to determine what price they will accept on these properties as opposed to REO's. REO's have already been reviewed by the banks and put back on the market for below what was typically owed on the property. It's predicted that Short sales could make up another 30% of the market for 2009.

If Gilbert can lead the valley out of the downturn, home values should stay relatively stable and increase faster than other parts of the valley. For more on what the future may hold for Gilbert, see our video interview with Joe Johnston on the main page of the website.

Kurt Sabel