MARKET UPDATE: Week Ending 03/14/2008

Market Direction:
Rates are: FLAT
Rate Volatility: MEDIUM

Interest Rate Trends:
Long Term (4-6 weeks): UP
Short Term (1-2 weeks): FLAT

IS NOW A GOOD TIME TO BUY IN TAOS???

Phew, what a week! I’m sure anyone who picked up a paper or watched the news knows what a wild week we had in the financial markets. Gold over $1,000, Oil hits $110, The Dow swings 400 points, Bear Stearns bailed out (temporarily), Carlyle Capital insolvent, IMF warns to prepare for more, the Fed swaps Treasuries for dubious securities and Fed Funds Rate will likely be reduced 0.75% - 1.00% on Tuesday (March 18)…. It seems Chicken Little may indeed have reason to believe the sky is falling.

BUT, the sky has fallen many times before and I prefer to look at times such as these as rife with opportunity and lesson. Attitude is everything, as they say. So with that perspective, let’s look at what we can do today within our present set of circumstances.

Question: Is now a good time to buy, especially in Taos?
Answer: Absolutely and unequivocally yes!

“Now” is full of knowns. “Later” is full of unknowns. NO ONE can predict what the mortgage market will look like “later”. The mortgage markets are seizing - and damage has clearly spread from the subprime market into the prime market.

This past week, Freddie Mac announced no more 100% loans, Fannie Mae will be close behind. They’ve both recently added ‘hits’ - or pricing adjustments to rates - for credit scores under 740. As much as 2.00% depending on score and loan-to-value. 720 is the new 680… I’ve jokingly said this in the past few months but it’s now a reality.

Property type may well see changes too. The first to see these effects will be condominiums - oversupply in many markets may result in additional downpayment requirements. Many of our sales are in condominiums.

Whatever mortgage products are left, expect them all to get a complete makeover. New minimum standards will apply to everything. RESPA & HUD are already making new recommendations, affecting things like appraisal requirements, new disclosures, increased oversight & regulation. All good intentions I’m sure. Some will help while others will only exacerbate the situation of tightening credit.

So… “Is it really a good time to buy?”

Yes, not because prices have bottomed out around the country, but because we have no idea what the mortgage products will look like this fall, you can’t buy if you can’t get it financed. And don’t forget to take into account the already undervalued nature in local real estate. How many reports do we need to see before we realize a new age is dawning in Taos? Think back to Aspen twenty to thirty years ago: who wouldn’t want to have been in on that? Do you hardcore skiiers realize the market that just opened up now that TSV is allowing snowboarders? It’s a good time to look at real estate.

It’s going to become tougher to do a Purchase Transaction. It’s going to come down to who you trust with your referral, who can close the loans, who understands credit scoring and repair, who will make it happen, who has weathered the storm and turned difficulty into opportunity. Let the action speak for itself.

I wish you all a prosperous and joy-filled week.