A Sign of the Times…and of the Future

So it is that a bank office in what was close by (but not in) Ground Zero of the Housing Bubble no longer advertises itself as the place to go for Alt-A, No-Doc, Liar-Loan mortgages.

Instead, as the photographic evidence (courtesy of sharp-eyed reader Chris Wagner)demonstrates, the Novato, California bank branch has been turned into a “Home Preservation Center.”

Novato happens to be on the Redwood Highway where it leaves behind San Pablo Bay and heads north to Petaluma and beyond, past the horse farms and rich fields of Cotati and other farming communities.

And this photograph, we think, is worth paying attention to, because, like all Bubbles and their aftermath, what happens on Main Street ultimately gets reflected on Wall Street.

Indeed, just a few years ago it seemed that every other building on our own Main Street was being turned into a bank. In the space of the few short years that encompassed the peaking of the Housing Bubble, HSBC, Washington Mutual, Wachovia and others all opened spanking new branches in our small New England town. And we already had plenty of bank branches here.

No matter: where once a small food market, a deli and a local store had sold basic necessities to people who could afford them, the new bank branches—along with the old—peddled mortgages to people who could only afford them if they a) lied about their financial position on their application, b) were charged a below-reality interest rate, and c) the Housing Bubble did not pop.

In hindsight, of course, our glut of bank branches turned out to be not only a sign of the times—but a sign of the future.

And by a curious stroke of coincidence, today’s Wall Street Journal tells us what the photograph from Novato says: the damage those bank branches did to the American home buyer might be mainly behind us.

Mortgage Increases Blunted

The struggling housing market appears as if it will sustain less damage than expected this year from a spike in the monthly payments on hundreds of thousands of exotic adjustable-rate mortgages.

The number of such loans scheduled to adjust to higher payments this year has shrunk. Lower-than-expected interest rates, coupled with efforts to aggressively modify loans, are likely to mute payment shocks for some borrowers. Many others already have defaulted on their loans even before their payments adjusted upward.

“The peaks of the reset wave are melting very quickly because the delinquency and foreclosure rates on these are loans are already very high,” says Sam Khater, senior economist at First American CoreLogic….

—Nick Timiarao, the Wall Street Journal, March 29, 2010.

What will become of all the new “Home Preservation Centers” if this happy “melting away” continues?We’re not forecasting a housing boom, but it does seem like a good time to buy: interest rates are low and so are prices. Those Home Preservation Centers could, perhaps, become “Banks” once more.

Perhaps, too, small town stores will make a comeback after years of being snuffed out by new bank branches. For this Novato location, may we suggest an organic food store offering great produce from local farmers?

Alder Lane Farm of Cotati comes to mind. We hear they have the best eggs in California.

Jeff Matthews I Am Not Making This Up

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