AUDIO: Foreclosure tracker offers solutions to housing meltdown

DISCOVERY BAY
October 29, 2008 12:01am

Think you know what caused the housing meltdown and what it will take to dig out?

Prepare yourself for some out-of-the-box logic from a national expert on foreclosures that goes against much of what has been said.

“One really common, I mean extremely common misconception -- and I would say everyone up on Capitol Hill has this misconception – is that foreclosures are driving prices down. It’s actually the opposite,” says Sean O’Toole, founder of ForeclosureRadar Inc., a Discovery Bay-based company that tracks all aspects of the foreclosure process daily.

“Prices going down are driving foreclosures,” Mr. O’Toole says.

Without coming to grips with that, he says, putting the nation’s housing market back together again will be difficult.

“The question everybody should be asking is why are prices going down if it’s not foreclosures,” he says.

Mr. O’Toole says it’s a pretty simple answer: The financing that was available pro-meltdown is gone, thus making home purchases unaffordable for a vast swath of the population.

It was this demographic that was able to afford half million dollar homes in crowded developments, because payments were affordable at very low interest rates.

“If you look back to 2000, kind of when this thing got rolling, and we saw these huge increases in prices, the first set of increases came because Alan Greenspan (then chairman of the Federal Reserve) dramatically cut interest rates,” Mr. O’Toole says.

“People buy based on payment, not based on price, he says. “So as interest rates go down, you can afford more price for a given payment.”

(Sean O’Toole amplifies his observations and offers two ways out of the housing mess you may not have considered in today’s CVBT Audio Interview. Please left-click on the link below to listen now or right-click to download the MP3 audio file to your computer or mobile media device for later listening.)

Mr. O’Toole, who holds a California real estate license and is the founder of other software companies, developed his proprietary foreclosure tracking software to include not just the courthouse filings of notices, but also the actual sales of the homes -- or, in many cases, the lack of a sale where the lender has to take back the property.

“This isn’t my first barbeque. I’ve been starting software companies since I was 18,” Mr. O’Toole says.

Still, starting any business can be tough, even for a seasoned entrepreneur.

“The most difficult thing is just that hurdle of getting to revenue break-even,” he says. “It’s really expensive to start a software company, especially a data intensive company like ours.”