The Perfect Storm

Hello All,

It is Labor Day weekend and I hope everyone is enjoying a little time off. I, however, am not. As the saying goes, "duty calls". Something has come up and I will be working everyday until further notice. On non-working days, like today, I have a couple of hours of work and briefs to attend. So, while not a full work day, I have to stay close to the barn which eliminates even day trips into the surrounding area.

I realized that Germans love sitting in cafes and beer gardens in the summer because summer is a relatively short season here. Today is cool with scattered showers. Summer is giving way to fall and the tables of the cafes will soon be moved back indoors. The summer festivals will give way to Octoberfest, and Octoberfest will give way to Christmas festivals.

So, how does all this tie into "the perfect storm"? It doesn't.

As you all know, the economy has been in the dumpster for a while now. About 18 mos ago, the perfect storm existed with banking, spending, credit card debt, home equity loans, and speculative home buying. This led to the biggest collapse in home values any of us has ever seen and many respected financial institutions, which have been in business for almost a century, are no longer.

The stock market also experienced a huge pull back and unemployment is as high as it has been in decades.

As a result of all this, interest rates have been lowered by the Federal Reserve in an effort to stimulate the economy and housing foreclosures have driven down the overall market prices. In areas that had the biggest run ups (Las Vegas, S. California, Phoenix, Florida) now have the highest foreclosure rates with many properties being sold for half of their selling prices only 3 years ago.

This, is the "new perfect storm": historically low interest rates and an over supply in the housing market. Slowly, people are dipping their toes back in the housing market to take advantage of prevailing market conditions. Count me and my ever lovin' wife, Jodi, as having our toes in the water. We had a contract accepted on a home in the small town we live in now, Sneads Ferry, NC.

The house was built in 2006 just before the market peaked and is in, what was supposed to be, a planned community development. Many of the lots were snatched up by greedy speculators thinking they would make some fast, easy, money. I've come to realize that making money is neither fast nor easy. A handful of houses were built and many of the lots are for sale.

As is the case with all planned communities, the first thing the developer does is build a nice entrance with beautiful landscaping leading you all the way to the sales office. To impress potential buyers even more, a community clubhouse was built and tennis courts are situated next to it. That is about as far as they got before the housing crisis hit although a pool is promised but I doubt it will ever be built.

Back to the house. It was built in 2006 by one of the development builders to demonstate the work he is capable of. It has never been lived in. The price of the house was recently reduced and a couple had a contract in on it that same day. We were heartbroken. We requested that our offer be submitted as a back-up offer and the realtor said that our offer was so laughably low that it would not even be considered.

Well, the couple with the contract backed out of the deal and the realtor representing the seller/builder contacted us to see if we still wanted to submit our laughably low offer. This time, I was laughing and we went from there. We had to move a little on our offer, but they came down a lot more then we came up. Patience and persistence paid off.

We feel like we got a really good deal and a 4.875% interest rate to boot. All these exotic ARMs and 80/20 mortgages for 110% of the properties "appraised" value was one of the factors that got us into this mess so, needless to say, I am a 30 year conventional loan kind of guy.

Jodi loves the large screened back porch and the country style front porch as well as the fact that deer can often be spotted on the property. She probably will not love it so much when they eat all the flowers she says she is going to plant.

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I can picture us growing old together there.

That is about it. 4 Bed Room, 2.5 Bath, 2600 sq ft. We close on 1 Nov, just before I get back.

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Cheers,

Michael