Finding Foreclosures:

If you are out looking for a new home, there are many things in the neighborhood or area that you want to look for. These include, of course, low unemployment, job growth, jobs in the area and a location close to urban areas (which increases demand because of urban sprawl). Look to see if a Home Depot or Target is moving in. Where do I recommend? Here are a few areas:

1. Idaho – around Boise and Idaho Falls. While I was laughed at earlier this week and told that “all four viewers” would call and complain, Idaho has a 2.7 percent unemployment rate and a five-year job growth rate of more than 18 percent. Median household income is above average. It’s a little boring, though; not necessarily right for the young and single. Prices are about 70 percent of what they were two years ago but have been stable now for months.
2. Salt Lake City and Logan, Utah. I’ve been bullish on SLC and Boise for the past year. Both have a 2.8 percent unemployment rate and a five-year job growth of more than 18 percent. Lots of biomedical and high-tech companies are moving in, and there are lots of call centers, too.
3. Key Largo , Florida. Not as battered as other areas of
   Florida, it still saw a more than 30 percent price decrease but is relatively stable now. I still like
   Palm Beach as well due to the numbers of boomers moving.
4. Las Vegas, Nevada. I get beat up for this pick, but look at the facts. It has a 12 percent year-over-year increase in population, and retirees are moving here in droves. The deals are all over the place because of still very high foreclosure rates. Vegas also has a low unemployment rate. Prices dropped 19 percent in one year leaving some great bargains!
5. Phoenix, Arizona. After experiencing a one-year drop in prices of 18 percent after another year of 22 percent, prices are low, low, low.
   Phoenix is the fifth-largest city in the country by population, and it continues to grow. Many major companies such as Motorola, Boeing and Intel continue to create jobs. The city retail sales tax is 2 percent. It’s an inexpensive state to live and work in. Also, boomers will continue to create demand.

Yesterday I received a call from a friend on Wall Street who sat on a conference call announcing a major change from Wamu, advising its withdrawal from the wholesale side of the mortgage lending world.

That’s to be expected, given the recent pressures in the lending industry, specifically as the mortgage broker becomes more irrelevant each waking day.

The big surprise comes from the fact that Wamu has chosen to shut down its entire retail lending operation. Of course, you could stop at a branch and have a 19-year-old open a checking account, help you with your safety deposit box and write a mortgage while he or she is at it (presuming the teen knows how to spell “mortgage”).

Seriously, this announcement–effective immediately–essentially puts a nail in the coffin representing the riskiest mortgage program in America. For the investor community, the program generated tremendous cash flow and investment opportunities for those who understood its complexity. For the everyday homeowner, it was used as a way of stretching the affordability factor, and now it’s gone.

We suspect the elimination of the program will allow for greater stability in the mortgage markets, resulting in a flight to quality for many consumers who, blessed with an ounce of equity, will be able to refinance into more favorable terms in a more conservative, 30-year-fixed program.

I further suspect in the short term that those who became accustomed to $1,400 payments on a $450,000 mortgage will simply walk away, realizing that the ability to refinance will still result in an increased payment compared with the deferred payment that failed to cover the minimum interest payments.

I’m interested to see what impact that will have on lenders such as Wamu that control a huge portfolio of those toxic loans.

Great time to buy from a value perspective, but I feel for any borrower who lives close to one of these homes that has become a ticking time bomb. Of course, I feel even worse for the employees at Wamu who just had their legs kicked out from underneath them because their CEO failed to plan ahead.

Bill Nazur