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From BoingBoing, here’s a Google document that explains the global economic meltdown – with stick figures. Mortgage holders of the world unite! You have nothing to fear but exotic derivatives.

The headline in this morning’s Honolulu Advertiser is another indication that the real estate market has changed. As I mentioned on August 13, the local mortgage lending market has been affected by the national mortgage crisis.

Perceptions alone can be enough to change a market

It’s more the perception of a mortgage crisis than anything else that is driving the changes in the local housing market. Subprime loans make up between 10 and 19 percent of the local market, compared to 20 percent of the national market. Interest rates on jumbo mortages haven’t changed dramatically either, according to the Advertiser. If sellers drop their prices, there may be enough interested, qualified buyers to support the historical sales volume.

Many small local lenders have shut their doors over the last few weeks, and some buyers are being asked for much larger down payments. In Hawaii, a typical down payment is 10 to 20 percent of the selling price, and that’s a problem:

Cash requirements, while perhaps relatively small in some Mainland markets, are amplified in Hawai’i where O’ahu’s median single-family home price in the second quarter was $665,000 — fourth highest in the nation. O’ahu’s median condo price was $328,000, topping the $223,800 national single-family home median price.

Borrowers with poor credit, and any borrower who wants to make a low down payment, are turning to local banks for mortgages, as more of the national mortgage firms scale back their operations.

Housing costs are a major factor when recruiting qualified IT professionals

Hawaii doesn’t produce enough skilled workers to satisfy the state’s needs. When companies, organizations and local government can’t outsource an IT position or service to the mainland, recruiters have to find prospects who can afford to live here. In the last month, that part of the applicant search become much more difficult. There are plenty of qualified IT professionals who could have moved to Hawaii earlier in 2007, but who cannot afford a mortgage here now. Rental prices and occupancy rates are still high in Hawaii, also.

It’s no wonder that Google is building new data centers in North Carolina and Iowa. The housing costs are reasonable in those states, and there’s plenty of available electricity and bandwidth to support these facilities.

Yesterday’s Honolulu Advertiser ran a story about the possible local effects of the subprime mortgage crisis.

The article ran above the top fold of the front-page, which was a surprise. For the last 5 years, almost every housing market headline I’ve seen in the Advertiser and the Star-Bulletin has been relentlessly upbeat and positive. Local residents and mainland investors have been snapping up old and new properties at a furious pace across all the major islands. International investors are also a big part of the local market, as Hawaii is still an attractive place to own a second home.

Of course, both papers have reported about our traffic woes. West Oahu is choked in gridlock, as local governments struggle to widen roads and add essential services, even as new housing developments continue.

I’ve been reading Ben Jones’ Housing Bubble Blog for the last 6 months. He posts quotes and discussion from mainland newspapers, and the bad news has been coming for a while. It’s well-written, and I highly recommend it.

The Advertiser’s article focused on subprime mortgages, but the implications are clear. This morning’s New York Times included a story about the tightening market for jumbo mortgages – home loans that are above FreddieMac and FannieMae limit of US$417,000. One New York buyer was quoted an 8% rate on a million dollar loan a few days ago. When he decided to accept the offer three days later, the rate had risen to 13%. This quote comes from the Times, and also appeared in the Housing Bubble Blog:

“In California, it has shut down the purchase market,” said Jeff Jaye, a mortgage broker in the Bay area. “It has shut down the refi market.”

If rich people are having trouble getting loans for mainland properties, the Hawaii market will certainly be affected. The Federal limit for conventional mortgages is 50% higher than mainland limits, so a jumbo mortgage in Hawaii for a single-family home starts at US$625,500. According to Bankrate.com, today’s quote for a Hawaii jumbo mortgage is 7.09%, slightly higher than the mainland rate of 6.97%.

A quick calculation reveals that the monthly payment for a minimal Hawaii jumbo 30-year mortgage would be US$4199.34.

The housing market has been a key factor in Hawaii’s economic growth during the Bush administration. However, during the last month I’ve seen more and more cars and trucks with temporary magnetic signs advertising home buying services. That’s a sign that refinancing is becoming difficult to find in Hawaii.

I’ve also seen balcony banners on at least 3 downtown Honolulu high-rises advertising units available for sale. It’s startling to see these sales pitches as I drive down the freeway, and it’s anecdotal evidence that Hawaii’s housing market is changing.

This article first appeared on my old blog at http://www.bloglines.com/blog/wsodeman?id=42

http://news.yahoo.com/s/nm/20060811/us_nm/speeding_dc

“I don’t want to get off on a rant here…”
Dennis Miller, 1995

Reuters reports on mortgage banker Francesca Cisneros, who has been issued 70 different speeding tickets by the Police Scottsdale Francesca Cisneros, resulting in over US$11,000 in fines.

Until recently, she had been ignoring the tickets, which were mailed to her after police cameras recorded her Honda Civic violating posted speed limits around the city.

One important aspect of security is verification, especially involving one’s identity. Traffic monitoring systems such as Scottsdale’s sometimes take pictures of the car’s driver, in an attempt to verify the driver’s identity.

Another important issue is non-repudiation. This is an important consideration in digital agreements and e-commerce, as both the buyer and seller must pledge that they will not break their contract.

Driving is a good example of a social contract.

This article also involves the topic of reputation. The application of information technology and systems to traffic enforcement provides new opportunities to measure and share information about driver behavior and performance. Assuming that these systems can recognize and read license plates, it’s possible that these systems could identfy frequent offenders for additional scrutiny.