Eye of the Storm

There was what I though a very interesting commentary in the very back of this weeks Barrons titled "In the Eye of the Housing Hurricane." It was from a Florida real estate broker who compares the current period to the eye and relative calm period between the front and more damaging backside of a hurricane.

http://online.barrons.com/article/SB120855860182527617.html?mod=9_0031_b_this_weeks_magazine_main

THIS IS EXACTLY WHAT'S HAPPENING IN FLORIDA'S housing and financial markets. We are in the eye of the hurricane, and the back half will hit us twice as hard as the front.

Recently, however, there has been a lull in the windstorm. Would-be buyers are returning to the market. Over the past few weeks, we've been seeing 300% increases in traffic at our open houses from a year ago. Builders and real-estate agents report that offers are up, along with traffic.

But this is not the end of the hurricane; it's still the eye. What the builders and agents neglect to report is that most of the traffic couldn't qualify to buy a moped. Nor do they report rising rates of pending contracts that fail to close. And they don't mention the damage being done by falling prices, which put more and more homeowners into negative-equity positions and make it more likely that more property gets pushed back to the lenders.

This is what I have been talking about with the disapearing credit. Just like Fed rate cuts it takes many months to work through the economy. He sees the second half of the hurricane the result of lenders who own the defaulting homes.

Almost nobody is reporting on how the inventory problem of 2006 has moved from builders to lenders, and how the lenders have no clue about what to do with the surge of defaults and foreclosures.

and

Commercial and retail property are also becoming casualties in the back half of the hurricane.

I found the whole article very interesting. How often do hear anything a real estate broker that is connected to logic and not just outright bullish? If you want to read it and don't have a subscrption let me know and I can email it to you.