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No. of Recommendations: 2
Sorry the poll was lousy. I could have chosen better words. In any event, yes, I am very biased. Mostly this is due to me approaching closing 600 transactions this year as an small escrow firm ...of which I would venture over 80% were I/O loans and worse. Oh, and another small detail....the clients debt loads were very heavy, not including housing expenses. Say, like, debt to income ratios of well over 50%.

Prime Example: just closed a client's transaction where they paid over $8500 in closing costs (NOT including a prepayment penalty on the existing loan we paid off.) Their comment: "so do you think we should refinance again when this two-year LIBOR arm (again with another pre-payment penalty)comes to adjust?"

Theses folks are already under water. Do you think the property is going to increase in value another 10-15% or so to cover another no-out-of-pocket refinance in 24 months? Do you believe they are going to pay off credit card debt, plus two SUV payments and reduce their lifestyle? Of course not! They will do one of three things: bankruptcy or foreclosure or short sale.

Increase in prices? I just don't see that happening. Only if rates stay below 7%, inventory STAYS VERY LOW and lenders continue on the path of destructive qualifying behavior, will you see pockets of increases. So, no, I think prices will decrease. The psychology of the market will exacerbate the problem and people will walk away from 100% loans. I believe our country is in for some difficult financial times. I hope I'm wrong, but I really don't think so.

Living under your means as a way of life is the furthest from scores of peoples minds. My business proves it. This market is way different than the last adjustment in Washington State in 1990. You didn't have all these hybrid loans and you also didn't have half our local Realtor base never experiencing a challenging market.

If real estate is due for a significant adjustment, it will affect the entire economy, construction jobs will be lost and ALL allied and affiliated service sectors, including mine, will suffer. If the perfect storm is approaching, let us swallow hard and get through it.

The hardest hit areas in my opinion: New England area, Florida, Texas, obviously California, Nevada, Colorado among others.

Please tell me my bias is only a dream.

Tim Kane
Legacy Escrow Service, Inc.
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