Living in a modern Mayberry...

This weekend is the Shop Rock and Stroll event in downtown Milford, Michigan, which means that Main street is blocked off and there are inflatable jumpers and other things for kids to do while parents enjoy sidewalk sales and later listen to old fashion rock and roll while having a beer or a meal on the sidewalk or in the street. This is one of about 8-10 events that happen throughout the year in Milford for which Main Street is closed off.

That started me thinking about Milford as the epitome of Mayberry – the mythical town in the Andy Griffith TV series Mayberry RFD. Mayberry was one of those sleepy little towns where everybody knew everybody else and where I imagine that had parades and festivals, too; although I don’t recall that every being shown on the TV show. They had Floyd the barber and Gomer and Guber Pyle and Aunt Bee and Opie and lots of stereotypical friendly neighbors and friends. We have our own equivalents to many of the characters here is Milford, albeit more modern versions of most of the stereotypes.

Then there’re the events. We had the Fourth of July Parade last weekend, along with fireworks in nearby Kensington Metro Park. Those events were preceded by the Memorial Day parade a month earlier and the Little League Parade down Main Street before that. And, of course, in the fall we have the annual homecoming parade, complete with the King and Queen, down Main Street and a rally/parade for every home game of the local Milford High football team. Then there are the Ladies Night Out events in the Spring and Fall where the local merchants and eateries/bars rollout the red carpets for ladies who come to shop late and enjoy a night out.

This past Thursday (and every Thursday during the summer) there was the farmers market and a concert in the park. Next up is Milford Memories, our major street fair that occurs in August and then following that, in September, will be the Milford Home Tour, which is a weekend full of events – the Home Tour, an annual car show on Main Street (closed off again), a tractor show and this year a “Tin Can Campers” show out at nearby Camp Dearborn – something for everyone in the family. After that will be the Halloween parade up and down Main Street in which the kids parade in costume and the Main Street merchants hand out candy. The final big event of the year will be the Christmas parade, which occurs on the weekend following Thanksgiving.

Another thing that I love about Milford is that it does still have a useful downtown, where you can go to get more than knick-knacks or antiques or cutesy tourist stuff. There are real stores were real people can buy useful everyday items. Sure there are our destination restaurants, too; and that’s also a part of the charm. But there are clothing stores and shoe stores and toy stores and candy stores and dog treat stores and kitchen supplies stores and more. It is just some much more inviting and useful than a downtown completely devotes to cute, but worthless junk. Milford is also one of the most walkable places to live around. You can see Milford’s “walk score” and compare that to where you are at http://www.walkscore.com/ .

I mean, come on; is this Mayberry or what? You’d be hard pressed to find a more idyllic hometown in America than Milford and you’d certainly have a hard time finding one that has more going on week after week and month after month. I credit the very active and innovative groups at the Huron Valley Chamber of Commerce, the Downtown Development Authority and the Milford Historical Society for sponsoring and running these events. An active, vibrant town like Milford doesn’t just happen by accident and there are lots of people behind the scenes planning and coordinating and running these events. That’s why Milford, unlike Mayberry, is a happenin’ place to live and visit, not a sleepy little backwater. Somehow, I think Opie would have grown up and approved of Milford.

Scary things and home buying...

I got an email today from the folks at http://www.asbestos.com/ asking if I'd consider adding their site to the links that I maintain here and on my various Web sites. So, I went to their site and looked around - it certainly looks like both a legit site and one that has lots of good information about mesothelioma, the type of cancer that is caused by asbestos. So go there and read about it.

That got me to thinking about all of the scary things that can be found in homes and which cause some would-be home buyers to back off of a sale, most times unnecessarily. Now, don't get me wrong; every one of the dangers that I'm about to discuss are very real and can cause serious health problems, including death. That sounds like one of those pill commercials on TV doesn't it? Here are some of the biggies to watch out for when buying a home.

Obviously the presence of asbestos in or on the home. Many older homes have asbestos wrapped pipes, especially those with steam or hot water heat. Many also were sided with asbestos siding or have floors covered with asbestos-based tile. Some may have also been insulated with vermiculite, which was later discovered to have asbestos embedded in it. There are lots of potential sources in most older homes. It is also true that most of that asbestos is "locked into" the products that it was used in, whether that be siding or tile or even wrapped pipes. However, the unsuspecting home owner may undertake some remodeling project that involves demolition of some of these things without realizing that the very act of breaking up the product that the asbestos is in will release the deadly asbestos dust that causes mesothelioma. So my advice is to get a good handle on where the asbestos is in your house and NEVER disturb it without a professional involved.

Radon is perhaps more prevalent in our area as a carcinogen. Radon is a naturally occurring gas that is a by-product of the decay of uranium in the ground. The glaciers that once covered Michigan resulted in good natural soil conditions for the release of Radon, so lots of our houses test positive for it. Many houses already have Radon remediation systems installed. Radon seeks the lowest level in the house and it seeks a way into the house around or through cracks in the basement floor. Remediation system are installed that create a vacuum under the basement slab and capture the Radon and exhaust it out of the house. Buyers should always get a radon test for any house that has a basement that is used, or will be used, as living space.

Mold is likely the third leading cause of both problems and failed real estate sales. It is unfortunate that misinformation and general FUD about mold has caused such concerns. Literally every house has some mold, most of it simple, non-toxic, everyday mildew. But there are the occasional cases of the dreaded “black mold”, which is a toxic mold that can and does cause serious health problems. A good home inspector will find any mold in the house and may be able to identify to or at least collect a sample and send it off for identification, if it looks suspicious. Mold, like Radon can be easily remediated and does not have to be a show stopper on any sale. What you do need to get is a good remediation estimate to pout into your offer as a contingency addendum.

Gases venting from sources like new carpeting or paint or even Chinese wallboard can be another source of major health problems. I have had clients who would become ill upon waling into a newly carpeted room. Ingredients in the glues of some new carpets include Formaldehyde, which some people are allergic to and which can make them violently ill. There are lots of court cases right now against the distributor of a specific brand of Chinese-made wallboard that apparently contains toxic chemicals that make homeowners sick.

So are all of these potential health risks reason enough not to look at buying a new home? No, but they are reasons to get good inspections and to visit the home enough times and for long enough to see if just being there makes you feel ill. You really don’t want to close on a house and go “home” for the first night, only to wake up ill or to discover years after you bought the place that it has been exposing your to cancer causing sources. I certainly won’t say buyer beware so much as buyer be informed and then take action on that information.

Are we in a lenders' market?

I read a very good blog on ActiveRain this morning, which took the position that we are in a "Lenders Market" right now. You can read the entire blog, written by William Johnson, a San Diego Realtor, at http://tinyurl.com/lxgsvy .

William began by defining the more normal Buyers' and Sellers' Markets that we tend to swing back and forth between. We haven't seen a Sellers' Market, where there's low inventory and multiple bidders on every property at asking prices or above in quite some time (in fact I've never seen that in my 7 years in the business, but the "old-timers" tell me that we had a market like that here in Michigan back in the 70's). We've been in a Buyers" Market for several years, where there is more inventory than buyers, with buyers in control of prices and very slow sales. And perhaps a year or two we likely entered into a Lenders' Market, where lenders control much 0f the available inventory and st their own prices and rules for sales. As I have been reporting for some time now, the sale of foreclosed properties has dominated the market for the last year, with 60-70% of all sales being foreclosed properties. That gives the lenders control of the market. What the lenders have done with that control is the rub.

Early on, most lenders were simply overwhelmed by the flood of foreclosures. Most did not have adequate staffs in place to handle the workload and most had inadequate policies and procedures in place to deal with the property management aspects of taking over foreclosed properties or with the marketing of those properties. That gave rise to a whole host of sleazy operators in both the property management field and in the real estate sales field. We all suffered through those early stumbling, bumbling days and having to deal with some of the sleazy people who were initially given rein over foreclosed properties. We also had to deal with interminable delays in bank processing of offers, often waiting months to get an answer on an offer. It was terrible.

The banks have gotten better. They have developed better systems for handling the foreclosure workload and they have hired better people to manage the properties and to market them. There are still a few of the original sleazebags holding on, to be sure; however, most people who are representing foreclosed properties now are doing a decent job. There are still issues with short-sales, but many of the issues are being caused again by sleazy operators who are misrepresenting themselves to sellers and mishandling negotiations with the lenders.

So, even though they have become better at it, the fact remains that the lenders are in control of a major segment of the market inventory (generally about 15-20% of the active inventory) and that is the segment in which most of the sales activity is taking place. In that segment the lenders make all of the rules. They throw out almost all of the normal real estate Purchase Agreement terms and conditions and impose their own terms. Why and how? Because they can and because they just do, if you want to buy a property that they own. There is no appeal or higher authority to turn to in real estate. In more normal times there is a quid pro quo in the market, largely brought about by the Code of Ethics of the real estate profession and it's practitioners. The lenders have no such code and do whatever they want.

So, until things settle down and we get rid of the foreclosed properties overhang on the market, we will likely be at the mercy of this Lenders' Market. It is a market that is destroying home values everywhere as lenders dump foreclosed houses at well below normal neighborhood averages. It is a market that allows abandoned homes to blight neighborhoods and endanger residents. It is a market currently being fed by the twin beasts of bad ARM mortgages that are resetting and the impact of layoffs in our primary local industry. It is a market being exacerbated by a slumping overall economy and a high unemployment rate in our state.

What is a potential home seller to do in this market? My best advice is to understand that the market that you are entering requires a very aggressive pricing strategy, but that you are not necessarily competing directly against the lenders and their foreclosed inventory. Their inventory is often distressed and in need of major repairs and investment to bring them back up to a livable state. You need to have you r home in tip-top shape – clean, uncluttered, all maintenance up-to-date, and as updated as you can afford to make it. You are really competing against other owner-occupied homes, so make yours stand out from that crowd. It will likely already be in much better shape that the foreclosed houses that the buyers may look at in their search. Your advantage can (and should) be that your home represents a move-in-ready proposition.

It's hard to establish a price

I'm working with several buyers right now and, of course, they want my advice on prices for houses that they might make offers upon. Now you might think, "just tell them to low-ball them all." That seems to be a trend lately, but it is not a winning strategy most of the time, especially with foreclosed homes. Banks have changed their pricing strategies and are now pricing very close to what they will accept for the foreclosed houses that they have in inventory. So going in a low-balling an already low, foreclosure price is just a waste of time. It's particularly a bad strategy on houses that have multiple offers. The winning bids on those houses is generally a little above the asking price, which leaves all of the other bidders wondering why the bank didn't take their low-ball bids - well, duh.

What's particularly hard these days is providing pricing recommendations for normal, owner-occupied houses on the market. Most are priced a bit above the market average, which is itself subject to influence from foreclosed houses. So, recommending something less than the asking price in these cases is the right thing. However, it is a much finer balancing act to reach just the right price for one of these homes - one that the owner will accept (begrudgingly most of the time) AND that an appraisal will support. The appraisers are the main problem right now, since they are still appraising with future value drops in mind and they are taking more and more of the foreclosed home sales into account in their calculations.

You really end up in a quandary if the appraisal comes in $10-20 thousand less than what you have bid. That's not all that unusual these days. There is a saying in real estate that a property is worth what someone else is willing to pay for it. That would be true if mortgages and appraisers weren't involved - if real estate were a cash transaction. But it's not. So, the question on an appraisal that comes up short is, "who is gong to make up that difference?" Usually the seller will be expected to concede some or all of the value difference, but sometimes a compromise is reached where both sides contribute to the shortfall in appraised value. I've had sales go both ways. I've also had sales fall apart because no solution could be found and the disgusted seller just took the property off the market.

Now, I understand that appraisers are just doing their jobs, and factoring in the continued devaluation that the market is still experiencing. I've had to tell sellers that "this is all you can get in the market today" or buyers, "I know you really like the house and feel that it is worth what you bid, but the bank takes an impersonal, business-oriented approach and this is all that they will loan on it." It's a very disappointing position to be in from either side of a deal. Will those values come back some day to support the price that the appraiser couldn't get to right now? Of course they will, but how long that will take is anybody's guess. So. I'll keep plugging along, doing the best that I can to figure out what a fair price would be for specific homes and then working out compromises when the appraisals come in. I just hope this whole housing mess bottoms out soon, so that we can get back to a more sane approach to things.

Busy, busy, busy; but what does it all mean?

I've been really busy lately. Mainly busy showing houses, mostly foreclosed houses, or houses for lease to lots of clients. And I've listed a few, too. I've got a couple of sales working, one signed and moving towards closing and one in the heavy duty negotiations stage. And I've got lots of prospects for whom I'm doing searches and to whom I'm sending weekly lists of listings. So, I'm relatively busy lately. But is that a reflection of a change in the market or just a normal seasonal adjustment in real estate activity?

I have to say that I believe that the recent increase in activity has some of both elements in it. As I watch the statistics in the little five township market that I track on a weekly basis, I've certainly seen the activity in owner-occupied homes pick up since May. From January through April the sale of foreclosed homes made up 70% of the sold market in that area. In May that dropped to 61% and in June is now at 60% and may go lower before the month is out. And I've seen homes in the $300 to 500K range selling for the first time in months in that market. Good signs that more than just increased seasonal activity is taking place. The normal, move-up buyers are creeping back into the market.

We still have lots and lots of fear, uncertainty and doubt (FUD) in the local market, due mainly to the automotive bankruptcies and the ripple affect that is reverberating through the supplier base now. That is going to take most of the rest of this year to play out. However, the lower end of the market is starting to tighten up, with most of the really cheap foreclosed house swept up by investors or first-time buyers. It's hard to find many houses worth looking at in the $40-80K range anymore, at least out this far; and those that are still out there are in fairly sad shape. So the focus is turning to the $100-200K range, within which you can find foreclosed homes that 2-3 years ago were $250-350K - nice houses, many in fairly good condition.

And there are good deals on leases to be found everywhere, too; as people who can't sell for what the market will bear try to get out from under most or all of their monthly nut. The ironic twist is that most of the people who are looking to lease right now are doing so because they just lost a house to foreclosure and need to rebuild their credit before buying again. So I'm showing lots of lease houses. On most lease deals the agents involved split one months rent, which they then must split with their brokers and pay other fees. On most leases that means a "payday" of a couple of hundred dollars, but, hey, it's something and may pay one bill.

So, I'm busy, busy, bust. I'm working harder than ever, making less than ever, but having as much fun as ever. The people part of the job - meeting and working for some great clients - is what keeps me going in the business. If I was in it just for the money, I'd go get a job for Walmart or Home Depot. As for the meaning of it all in the larger context of the overall market, I certainly think (maybe hope is more accurate) that the pickup in activity is a precursor to a larger and more permanent market turnaround. I'll keep watching and let you know for sure in a couple of months.

How do you take life when it comes at you?

From the Jack's Winning Words blog come this gem -

“Life is 10% what you make it and 90% how you take it.” (Irving Berlin) Berlin came to the US from Siberia at age 5. His father died 3 years later, and Irving had to go to work, taking menial jobs in those tough economic times. Through perseverance and hard work he was able to survive. We know him as a successful songwriter, but his real success came from how he lived his life…10% and 90%.

How appropriate for buyers, sellers and Realtors in today's real estate market. Of course buyers are having a bit of an easier time than sellers right now taking the current market, but they suffer from being overwhelmed by the vast inventory and unable to make a decision. Their nightmare is the old "What if..." bug-a-boo. What if there was a better house out there at a better price. So they look and look and look and never buy anything.

The sellers have the obvious issue of "What happened to the value of my home?" Well, it dropped and dropped a lot. It followed the market and that market is driven right now by pricing on distressed and foreclosed homes. Accept it and get over It and get on with life. That lost value is not coming back for a long time - a decade or more - so, if you need to move are really want to move to get on with life, just do it. You can't wait this recession out in less than 10 years.

And for Realtors, ouch. These are tough times to try to make a living in the profession. Much of what's selling is in the $30-100K, with a few int eh $100-200K price and very little in what used to be the sweet spot of the market - the move up homes in the $200 - 400K range. You have to sell a lot of $50-60K homes to make a living, but that's the hand that we've been dealt, so trying to be the best $50-100K Realtor in the area is now the goal. Go for it.

Is this like snail-Facebook

Is Starbucks the social networking equivalent of snail-mail, sort of a snail-Facebook or snail-IM? I got to thinking about that the other morning while walking my dog past the local Starbucks n Milord, Michiga. I pass by it nearly every morning and I’ve noticed that there are ”regulars” who show up every morning and sit around talking to each other – a strange concept in these days of IM and Facebook and Twitter and other social networks.

It’s sort of like the tongue-in-cheek ads that Colin O’Brien did for his show when he took over the Tonight Show, where he tried to reintroduce the concept of watching video on something other than your cell phone or computer – it is call TV. As he put it, it’s just like watching on those other devices, only more comfortable and in a bigger format. Maybe going to Starbucks every morning and actually sitting there and talking to other people is just like IM or Facebook or Twitter, only more personal and interactive and you can actually see the other person. Imagine that.

We have become a society of people who have isolated ourselves behind the anonymity afforded by the Internet, preferring to tap away at a keyboard or screen, rather than actually directly talking to another person. There is some weird sense of empowerment that comes from hiding behind a screen name and lobbing comments or criticisms or opinions into the ether that is the web. Even when full profiles are available for all to view, it somehow seems less real and less threatening than a face-to-face conversation.

That’s really a bit sad. So, maybe Starbucks and other coffee gathering places perform an unintended but valuable service for the people who go there and give them a few moments in their days when they become human beings again and not just “Mama Mia” or “MortgageMan” or whatever screen name you’ve chosen for yourself. Try it some time. You’d be amazed how satisfying snail-Facebook can be. Can I get a double Latte with two shots of Mocca please.

Feds say money available...not much evident yet

The feds made nearly $6 billion available for the Neighborhood Stabilization Program, which intends to combat blight by reducing the number of foreclosed homes on the market.
The money, which has only started to flow during the past few weeks despite much of it being authorized last summer, will go to state and local housing authorities and non-profit organizations involved in providing housing for middle- and low-income families.

"The NSP was designed to help deal with all the properties in foreclosure around the nation," said Antonio Reilly, executive director of the Wisconsin Housing and Economic Development Authority (WHEDA), which will administrate the program in several counties in the state.
The bulk of the NSP funds will come from the $3.92 billion that was approved as part of the Housing and Economic Recovery Act of 2008 passed in August.

By regulation, these funds must be spent in communities with the highest incidences of foreclosures and subprime loans. That would likely include Detroit. They'll go to helping households earning no more than 120% of the median income of the local area, with 25% of the money going to families earning less than half the median.

There will also be a lease-to-own program. And there'll be a program in which the department will buy and rehab housing, mostly single-family homes and condos, to rent out to low-income families. All told, about 300 homes will be put back on the market in Las Vegas.

In some hard-hit towns, such as Cleveland and Detroit, where many of the vacant foreclosed houses have already be so damaged by vandalism and nearby home values are extremely low, authorities want to use the money to demolish derelict houses. The lots will go into a land bank for later development when neighborhoods recover.

Even before the first round of spending has filtered down to help many families buy homes, a second round of NSP funding is is poised to enter the pipeline. This money was approved as part of the Recovery and Reinvestment Act of 2009 (stimulus plan) that was signed into law in February.

It provides $1.93 billion to be allocated on a competitive basis. Potential grantees will be non-profits like community development organization certified by the U.S. Treasury Department.
They'll be judged on, among other things, their abilities to execute projects, how well they can leverage the money and how well the plans they offer can work to stabilize neighborhoods.
A third allocation, called NSP-TA, of $50 million provides cash to pay for technical assistance in running programs funded by the first two rounds of cash.

There has certainly been press about these programs, but little on the street to show for them locally, so far. I've seen articles about various local communities receiving the funding and there have been a few articles in local papers, but I have yet to meet a single buyer who has benefited. Perhaps the first round of funding went to line the pockets of local politicians and maybe we'll see some real benefits in subsequent rounds. A few million dollars can disappear very fast locally, with no one really sure where it went. After all, they spend more than that on travel budges locally without any receipts required. You gotta love Detroit area politics.

The tunnel got longer, but there's still light at the end...

An article about the U.S. Real Estate Market in BusinessWeek Magazine this week took the view that we are in for a couple of more years of a depressed market, with a recovery predicted to start in 2012. Wow, that seems like a long time to wait, especially if you are considering selling. Of course, if you are a buyer that might mean more time to wait for just the right house to hit just the right price.

The article predicted another year of falling home values, which the author predicted would result in another 16% loss in values in 2010 and a bit more in 2011, before things level off. If that is to be believed and added to the losses in value already experienced in our local markets, that would put the total loss in home values projected in this recession at about 50%. Wow, again!

The article outlined the 7-year run-up in prices (called the bubble years), which started in 1999, and the following 3 years of decline that we are still in the midst of and which the author predicts will now total 6 years, before the economy turns around enough to cause a turn around in housing prices. Long-time readers of this epistle will recall that I’ve been writing about a similar timetable for some time now. The other thing that the BusinessWeek author also echoed from my earlier writings is the opinion that when the turn around occurs, housing appreciation will return to a more historic rater – likely somewhere in the 3-4% per year range. It will then take at least a decade to recoup much of the loss in value that homes have suffered.

The reasons given for the continued depression in the housing market were explored in BusinessWeek on a region-by-region basis, with a few passing mentions of the Detroit area and the Michigan market in general. Of course the decline of our major industrial base was cited as adding to the already heavy influence of foreclosures in our area. The states unemployment rate is hovering above 14%, which almost certainly puts us in the top 5 states as far as that factor is concerned, maybe in the top two.

So, where is the light at the end of the tunnel? It can seem like the tunnel just got a bit longer, especially if you are trying to sell. To a certain extent that is true. The key to selling these days is pricing aggressively in a market that is driven by foreclosed properties. It is no longer possible to price your home only against other owner-occupied homes that are similar. These days you must look at what the buyer can get for about the same amount of money in the foreclosure market. If you have a home to sell that might have been worth $200,000 a few years ago and today would compare with other owner-occupied homes that are on the market at $160,000, you will be competing with foreclosed homes that used to be valued at $200,000 that are now on the market for $60-100,000, depending upon condition. Wow! How does that work?

Well, the only weapon that you have to fight back with in that kind of market is the condition of your home. Most foreclosed homes have some issues. Many foreclosed homes were stripped by the previous owners, who almost always take out the appliances and who may have stripped out lighting fixtures and some of the plumbing (nice faucets or upscale shower heads for instance). Some of them have been further damaged by vandals and almost all of them have started to deteriorate due to neglect. In most cases the previous owners just left the homes as is when they left or were evicted, so most need painting and updating.

Therein lies your opportunity for a edge in the market hat will justify the added cost of your house. If your home is in move-in-ready condition – freshly painted, updated, maintenance all done – it will appeal to those who aren’t looking to have to do a bunch of work in a house, just to save a little. Most foreclosure homes would require $20-30-50,000 of investment by the new owners right away. Some aren’t even habitable in their “as-is” condition. So, you need to be the “no immediate investment required” option for home shoppers. Before you try to sell, get an opinion from a good Realtor about the things that you should do to get the house ready for the market. The Realtor will tell you all of the things that need to be fixed or painted or updated to be competitive. Some recommended updates may be too expensive to do and that’s OK; just remember that you’ll need to deduct the cost of those deferred updates from the asking price (just as the buyers would).

Can you sell in this market? Absolutely yes! It just takes better and more preparation and the resolve to price you home to the current market and not what it might have been 2-3 years ago.

From the guy in the tie...

“No matter how you feel, get up, dress up and show up.” (Regina Brett) from the Jack’s Winning Words Blog. Good advice in today’s horrible real estate market. I might modify it a bit and say, “No matter how you feel about the real estate market, get up, dress up and show up.” That kind of philosophy helps me get started everyday. Whether or not I have an appointment for the day, I get up, dress up (put on what I call my “Realtor outfit”, complete with a tie and my Realtor badge, and show up at the office.

Lots of my compatriots in the business don’t bother to dress the part, if they don’t have an appointment set for the day. They show up in jeans or other casual looks. To my way of thinking, that says something about their attitude about the office and about fellow workers. When I’m in the office I feel like I’m I a professional business environment – an environment where the public and customers have the right to expect a professional appearance. It is also a sign of respect for my fellow workers to show up in their business environment dressed appropriately, just in case I should happen to run into one of their clients. I would certainly never go to another business office dressed casually, even if it was just to drop something off for another agent.

I suppose that this attitude and my practices must look rather old fashion to many younger real estate pros; however, I suspect that most really successful Realtors would say the same thing. Even a recent article on 30 successful young Realtors who are under 30 years old showed them all dressed nicely (perhaps just for the pictures in the article, but I suspect that good dress is a part of their success story). The most egregious case of this too casual practice that I have seen is an agent showing one of my listings who showed up dressed in shorts, a Hawaii shirt and flip-flops to show the house. Excuse me! I don’t care if it was on a Saturday that was at the least disrespectful to his clients, not to mention my clients and me.

Maybe Steve Jobs of Apple Computer, can pull off the "way cool" casual jeans look at board meetings and with customers, but I just don't think it flies with most of the public, especially if you aren't already a very rich guy like Jobs. So, for me, I’ll continue to get up, dress up, show up and try to carry the banner for upholding a professional appearance while on the job. I’m known around my office and “the guy in the tie” and that’s OK with me. I’d rather be known as that than to ever be called “the slob over there in the jeans and tank top.” So, excuse me now, I have to go pick out today’s tie.

What are your options?

Recently I was a speaker at an Open House event that we put on in the office in Milford, which I wrote about in my last post. I spoke on Real Estate Trends, which are still going down, although not as much any more. When we took questions from the audience a young couple asked a very tough question – “When should you decide to just walk away from a home?”

These days that is a difficult question to answer, because it brings into play both logic and emotion. One can reach a logical conclusion to just walk away and let the bank have the home back, based purely on numbers – what do you owe, what is it worth on today’s market, how long can you hold out at your income level and what could you afford to bring to the table to sell it? The emotion comes into play because, as Americans, raised in a society that puts a value on meeting one’s obligations, it is difficult to bring one’s self to “just walk away.” That’s giving up. That’s quitting and we’re not a nation of quitters.

Here’s a link to a good article about the options by Ralph Roberts a local consumer advocate and writer for Realty Times - http://tiny.cc/MhTWB. As Ralph points out, there are lots of options, some of which may be better than others. Some less than forthright people and companies will try to convince you that the services that they mat offer will get you out of the mess that you are in without pain or consequence – don’t believe them. All of the options that end with you losing the house have consequences to your credit score and to your lifestyle for the next few years.

Many people say that they don’t need credit, that they’ll just pay cash for everything. That sounds great, but in a society like ours, that is credit-oriented, that is easier said than done. Almost all big-ticket items, from homes to cars to furniture are bought on credit these days. Delaying those purchases in order to save enough cash to make the purchase gets harder and harder as you back through that short list – furniture, cars, homes. Not only is your ability to purchase things hampered by bad credit, you ability to earn the money to buy things might be too. Job applicants with bad credit might get a little extra scrutiny by perspective employers and would almost certainly be asked to explain the situation that caused the problems.

So, when should you just give up and walk away? I guess I’d agree with Ralph that you should first explore and try all of the alternatives that apply to your situation. You don’t have to drive yourself into poverty and you certainly should protect your future retirement, rather than spending down your 401K or other retirement funds; however, you should seek the advice and help of professionals and do what you can afford to do to avoid the stigma of either a foreclosure or a bankruptcy.

If everything that you try fails and you end up having to do a short sale, go into foreclosure, do a deed-in-lieu or declare bankruptcy; then suck it up and start executing a come-back plan. Don’t waste time wallowing in self-pity or trying to find someone else to blame. Stuff Happens! You’re still here so get on with life.

Don’t get bummed out…

I’m speaking at an event that we’re hosing at our office today on the topic of Real Estate Market Trends. As I was preparing I researched all of the current market numbers for our County market and for the little market area that I focus upon surrounding Milford, Michigan. Just looking at the numbers it became obvious how to answer a question that I had posed for myself as a topic that I would cover – Should I buy now or wait? What was much less obvious and is somewhat harder to answer is the Yang question in the Yin and Yang world of real estate – Should I try to sell now or wait?

If you want to sell or perhaps need to sell, it is easy to get bummed out by what you hear and see of the current market. It’s so obviously a Buyers Market that is easy to become discouraged, if you are a seller. There is no way to sugarcoat what has happened to home values – they are down 25-30% from their high mark in 2004-5. In just a little over 4 years everyone has lost ¼ or more of the value that they thought they had in their homes.
For people who bought between 2003-2006 that is a very real and very serious loss of equity that is not going to come back in less than a decade.

For people who have owned their home for 10-20-30 years and did not take equity out through refinancing, this is a paper loss; which is no less painful to deal with, but with much less real impact. The $80-100,000 that many paid for the homes in the 70’s and 80’s is now only worth $200,000 and not the nearly $300,000 that it was worth 3-4 years back. Don’t get bummed out. You still did OK on that investment, just not as well as you thought you would. Hopefully the equity growth that you had planned for in your house isn’t the only things you had in mind to fund your retirement.

So, getting back to the question – Should I sell now? – the answer is yes, if you have to or want to, in order to move on with life. Things aren’t going to magically turn around and all of that “lost value” rush flooding back into your home. Once we bottom out and start to see appreciation again, instead of the constant loss of value, we will more than likely return to what was the normal appreciation rate historically. That was about 3-4% per year, prior to turning into a much steeper level of increase in the late 90’s and early 2000’s. We cranked along at 8-10% per year appreciation for a period during those “bubble years.” What we have seen over the last 2-3 years is a rapid fall back down to the levels that we should have been at (and sometimes well below that level as the correction overshot the mark) had we stayed at the historic appreciation level during those years.

So, if you had decided to wait out the market, you’ll have quite a wait. It may be better, especially if you’re at a life stage where waiting for a decade is not a real good option, to bite the bullet on the “loss” that you have taken and get on with life. If you’re buying anything else – going either up or down in size – you’ll get some of your loss back by getting a good deal on that new place. Of course downsizers may not recoup all of their loss, but at least a good deal on what you are buying can take some of the sting out of the situation. Obviously this is a great time to be moving up in the market. The bottom line is not to be frozen into inaction by concerns over paper losses. Life goes on and you must, too.

I won’t give it away…

I get that phrase a lot these days when discussing pricing with potential home sellers. It’s interesting how we perceive or set the values of things, based largely on beliefs disguised as knowledge. If one bought a car 10 years ago and was ready to sell it, the conventional wisdom (belief) is that it has probably lost value and lots of it, even if it was exceptionally well maintained. Most other items of our personal possessions tend to lost value over time and be worth less if we sought to sell them – visit any garage sale to see how much less.

There are some exceptions that come to mind. If one bought diamond ring 10-20 years ago and now wanted to sell it, the belief is that it might be worth whatever the current going rate for gold and diamonds or maybe more, if it is of exceptional design and quality. Antiques, whether they be furniture or cars or whatever are expected to go up, but we accept that they float in value up or down with their specific market. Collectibles are the same way (got any valuable Beanie Babies?). Stocks and some other, non-personal possessions could go either way and tend to float in value with the market, and we’re OK with that.

Then there are our houses. The need to change how we think about the value of houses is a huge issue right now. We have all been raised on the belief (held onto as common knowledge) that our houses always hold their value or go up. Now, it would be absurd to think that there are people who haven’t heard of the current economic meltdown; however, I certainly meet a lot of people who have yet to fully deal with the consequences of what has happened to the value of their homes.

I usually meet people in the stage where they are trying to see what their homes are worth on the market today, because they would like to move or might have to move. It seems like those who bought only a few years ago (up to maybe 6-8 years ago) know in the back of their minds that they have taken a loss. They are somewhat resigned to the bad news that I have to deliver. People who have owned for longer periods, especially the 10-20-30 years owners also know that the economy has affected the value of their homes, but they often aren’t prepared for how much that impact has been. Article after article has been written about the 35-30% drop in values in this side of Michigan, yet somehow that just couldn’t have happen to most of these folks, or so they think.

So I go in with my data and my analysis. I show them similar homes that have sold and ones that are currently on the market (I don’t use the word “Comps”, because that word carries more baggage than it can support). I look at the condition of their home – has maintenance been faithfully done, has it been remodeled or refreshed within the last 5 years (especially the kitchen and baths), what is the condition of the flooring, have the mechanicals been updated, how old is the roof, what are the style/layout issues, if any and on and on– and evaluate it as compared to other similar homes. I’m not yet even looking at the things that might have to be done to it to make it more marketable – de-cluttering, staging and the like – just for the things that impact market value.

Based upon all of my research and evaluation of the house, I come back with a price range. That’s when I often hear – "I’m not going to give it away." Well, I’m not really asking them to give it away, just to put it on the market for what the market will currently bear. Many times these days I hear that the price that I have returned with is less than what they owe on the place, sometimes because they have taken equity out and sometimes just because they paid top dollar to begin with. Many will tell me that they have more into the place that the number that I just put on the table or they’ll say, ”I need to get more for it than that.” Some have been banking (pun intended) on their home equity to fund their retirement.

Sometimes I deliver my little speech about how the market works and fact that it really doesn’t care what they want or need from the sale of the house. Our market-based economy is cruelly efficient at finding and setting values for anything that is for sale. There are always 10-20-100 more of whatever it is to compare with on features and price. In today’s real estate market we also have the huge foreclosure inventory that buyers can look at and compare. And they will compare.

It might not seem fair to most owners who are seeking to sell to have me tell them that their home will be competing with foreclosed homes, but it is a fact of the market and the competition isn’t even fair. I recently previewed a beautiful 4000 Sq Ft home in great shape that used to be valued at about $600,000 and which is now priced in foreclosure at $329,000. How do I explain that as competition to an owner to whom I have just given a $330,000 to 350,000 price range estimate for his owner-occupied home? Is it fair? No! Is it the reality of today’s market? Yes.

So I have to tell that owner that they really need to be down around $310 – 315,000 in order to be competitive. And they need to have the place in immaculate condition, so that they represent the move-in-ready option for buyers. It’s not an easy sell for me or for them. “I’m not going to give it away,” they often retort. I can’t blame you for being disappointed, but that’s the market today. I often advise, “Hold on if you can, but don’t look for things to return to where they were, maybe ever, but certainly not for a decade or more.”

The bottom line is that you aren't giving it away. You're selling for what the current market will bear. If you have to take a loss on the place, perhaps you'll make up some or all of that loss on what you buy next. If you don't plan to buy another place, then you need to be able to look at this loss just like you are looking at losses in the stock market. It's hard, but I try to use the "So What" technique of coping. So what if this or that happened, I'm still here. I still have great family and friends around. I still have my health, my faith and a lot of life left to live. I may have to live a bit differently than I had planned, but, so what. I try to let it go and move on. Besides, you have other things to do, rather than to sit around worrying about the value of your house.

What you do...

“Ability is what you are capable of doing. Motivation determines what you do. Attitude determines how well you do it.” (Lou Holtz) from the Jack’s Winning Words blog. I agree with Jack that Lou Holtz is a great motivational speaker and coach. In these tough times this saying of Lou’s is especially true. Most Realtors have some abilities, but many have not been motivated to apply their abilities in this tough market and even more have done so with a negative attitude and thus not done well.

I’ll certainly admit that these are tough times and I sometimes have difficulty getting myself motivated. I am thankful that I have one character flaw that seems to help during times like this – I hate to do a poor job. If I’m going to do something I really put my best effort into it, because I just can’t stand myself if a do a half-a** job on anything. Early on in my real estate career that trait was a constant source of frustration for me, because it seemed that there were always things left undone at the end of each day. I had to learn that real estate is a job that can consume all of the time that you can give it, and then some.

There is always one more thing that you could do in real estate – one more flyer you could print and deliver, one more client you could call, one more letter to a FSBO you could write and mail, always something. The key it turned out is understanding how to prioritize things and how to just let go of some things (generally the really low priority things that I didn’t get around to). That’s still tough for me and something that I don’t do well.

So, maybe to Lou’s advice above I would add – Good time management is how efficiently you do it. Now, excuse me; I think I can still deliver one more set of flyers today, if I hurry.

What kind of people have we become?

I show lots and lots of foreclosed houses and ay of them have been trashed or damaged or stripped by their previous owners. I get the question a lot, "What kind of people would do this to a house?" I guess our kind of people, us, what we've become as a nation.

These are not all homes that were owned by scofflaws or druggies or lazy louts. Most were owned by regular people just like your and me and our neighbors. Most are people who fell on hard times through no real fault of their own. Some may have reached too far for a better home than they could afford and some may have over extended themselves with lots of credit; but, by-and-large they were just plain folks who got caught up in the economy of excesses that led up to the crash and then got caught in the tidal wave of the economic tsunami that washed over us all.

How they reacted to what happened to them and what they did to the houses in that reaction may be a reflection of the mores of our society, as they exist today. Pride of ownership was replaced by just pure pride in owning lots of things. Houses became things to be possessed, not homes; so it was easy to take out frustrations on those symbols of lost wealth. And after all, it felt like they were somehow “getting back at” those distant and impersonal bankers who had repossessed their house.

Then there was the perverted logic that led some to believe that the bank somehow only owned the structure itself and that everything in the structure somehow belonged to the owner, such as the light fixtures, the kitchen cabinets and the like. I don’t know how that line of reasoning extended to the furnaces and the water heaters, but apparently many ex-owners considered those to be personal property, too. They weren’t stripping the house, the logic went, just taking their personal property with them.

So, have we become a nation of vandals and thieves? I don’t think so. Even faced with all of the terrible things that I see that have been done to foreclosed homes, I still also see many more homes in which there is still a pride of ownership and a strong sense of doing what is right, rather than what is wrong. I do believe that more of the people who intentionally damage houses or vandalize them, should be brought to justice and prosecuted, if for no other reason than to continue to show our children that we as a people believe in and uphold the laws. I’ve only seen a few cases make the news and they were egregious. AS a society we have to draw lines and there needs to be a clear line on this issue. What do your think? Should we prosecute foreclosed homeowners who intentionally damage or strip their homes?

The New Normal

I’ve opined here before that I believe that we are witnessing a fundamental reset in the American way of life. Some have agreed and some have pushed back and said that this recession is just a temporary blip and that things will return to “normal” soon. Recently Business Week magazine had an article that I thinks puts it well, too. It was titled “The New Normal”, and it was focused upon the financial aspects of the current, monster recession. Basically the author made the case that we are seeing an adjustment that is permanent to the inflated real estate and stack prices and that a new baseline is being established from which future growth and appreciation will be measured – a reset, so to speak.

For those who bought either stocks or real estate right before the crash, that’s not good news. Basically, that article is saying that the losses that people have suffered are now (or about to be) locked in and that recovery, if it can be called that, will follow a more conservative growth/appreciation curve. For long-time owners of real estate it means that the illusion of wealth that was created in the late 90’s and early 2000’s is gone. If you bought a house in the 70’s or 80’s and held on to it without constantly taking equity out, you are likely fine. You house has likely doubled in value since you bought it, but it is not worth the 3-4 times that price that you once thought it was worth. If you have an appraisal from 4-5 years ago or further back – throw it out and quit thinking about it. That number is meaningless in today’s market and will likely never come back.

For those who ask me how long will it take to get back to the value that the house had when they bought it 3-4-5 years ago, I generally say at least a decade. You bought at the peak and have experienced the worst loss of anyone and it is going to take quite a while at the new, normal rate of appreciation to recover most of that lost “value”, perhaps longer if you have an older condo.

For those still in denial that this is an inflection point in our countries history, I would invite them to consider the number of big name investment banks that are now gone and the fact that General Motors, as we knew it, is gone. Perhaps the Chrysler failure was not such a big deal – they’ve been failing for years – but GM, now that’s big. Also big is the change in the dealer network for all of the car companies – another fundamental reset, as they downsize those networks and your little, local dealer goes the way of the buggy whip store.

There are undoubtedly lots and lots of local stories or stories about smaller industries that are undergoing radical change because of the current recession. Unions are getting smaller, companies are getting smaller or going offshore, good jobs are harder to find for college grads and even harder for high school grads, many national brands are struggling and smaller brands going away – things are changing rapidly and permanently.

So, now our task is to get used to the new normal that we are facing and figure out how to make the best of it. As for me, I’m trying to figure out how to best advise owners who want to sell on how they have to price and prepare their homes for this market. The end is not yet in sight of having to compete in a market that is dominated by foreclosures. Pricing aggressively is a must and having the house in tip-top shape is the best point of differentiation that the home owner can focus upon. Usually I advise against making major investments in the house (remodeling the kitchen or baths for instance) just as you are going to sell it, but doing everything short of a major remodel job is advised in this market. Rather than put $20-30,000 into the house to get it updated, I’d advise owners to just take that off the list price and let the new owners do those projects to suit their own tastes.

It's going to take some getting used to - this new normal - and many will find it hard, if not impossible. Like lots of things in life, you just have to accept that some things change and will never go back to what they were - we all age and none of us gets younger looking (albeit some pay cosmetic surgeons tons of money to try to turn back the aging process), cars get old and fall apart and houses can lose value that's not coming back in our lifetimes. It's the new normal. If you want to see how pervasive this all is, just Google "new normal". There are already lots of Internet sites devoted to this topic; which is, after all, all very normal

How wide is the foreclosure gap?

There has always been a gap between the prices that foreclosed houses are bringing on the market verses the prices that normal, owner-occupied homes bring. That gaps has served almost like a black hole in astronomy dragging everything down into that abyss. I wondered recently what that gap really is right now, so I looked closely at the data that I collect every week for my little market.

I track all of the sold homes in a five-township area around Milford, Michigan. I record and report on the listed price the sold price, the percentage of sold to listed and then on the percentage of sold to the SEV (State Equalized Value), which is an left over vestige of better times and which supposedly represents ½ of the value that the assessors say the property is worth. In the “good ole days” you could multiple the SEV by 2 or 2.1 to get a reasonable approximation of your homes worth. These days sold prices for non-foreclosed homes is running about 1.6 to 1.7 times the SEV and the SEV values are dropping everywhere (thought not fast enough for most taxpayers). There are some areas that are now down to the 1.5 times SEV level for normal sales.

But what of the foreclosed homes? What is their average SEV multiplier? I had to go back and do some detailed analysis of my own data. Not to be too anal about this, I just looked at the May 2009 data (See http://www.movetomilford.com/sold_homes.html to view the data that I used). We had been running about 70% foreclosed homes as a share of all sold homes, but in May that shifted down to 62%, which means that more owner-occupied homes have been selling – maybe better data upon which to base the comparison. Now I must tell you that a majority of foreclosed homes are currently selling for below the SEV, which is less than half of the assessed values. I used the data from 51 foreclosure sales in May to arrive at the figure 1.0004. That is the current average SEV multiplier for foreclosed homes in this area.

Basically that means that foreclosed homes are selling for their SEV value locally and that would put the average difference in sales prices between them and normal sales at about .6 to .7 of SEV, quite a gap. That says that a buyer who is bidding $100,000 on a normal, owner-occupied home that is assessed at $160,000, could take that same $100,000 and buy a home that is assessed at $200,000 or more. Believe me when I tell you that there will be big differences in the houses themselves with that much of a price gap. That large difference is also why there is so much pressure on owner-occupied home prices. Buyers are seeing that difference and reacting to it by “low-balling” normal homes to try to get them down into the same ballpark.

Now, admittedly there are also risks involved with bidding upon foreclosed homes and many of them have sustained damage from vandalism or theft. The really bad foreclosed homes are selling for less than half of SEV or ¼ of their assessed value. Still, if the house is structurally sound and the mechanicals haven’t been stripped out, it’s hard to pass on such a bargain. Most foreclosed homes in this area are selling well below their replacement costs and many are selling for less than what the land alone would have sold for a few years back.

So how wide is the foreclosure gap? It’s huge! It is probably one of the main contributing reasons for the slow market for owner-occupied homes right now. We work with sellers to get their homes in great shape so that we can position the normal homes on the market as “move-in ready”, for those buyers who just don’t want to hustle with repairs and remodeling. But, for many buyers the perceived value gap is just too tempting to pass up. What is the gap between foreclosed and owner-occupied homes in your area? What are you doing to combat this problem?

Our own Sword of Damocles...

The ancient Greeks created the legend of the Sword of Damocles to illustrate the constant pressure and danger under which Dionysius the ruler of that story lived. The sword hung above his head by a single horsehair, threatening at any moment to fall, if that hair broke. In our little world here in Michigan, the sword that has been looming over our heads has been the bankruptcy of General Motors and the expected carnage that will cause to our economy directly and as the ripple effect races through the supplier base. Well, the hair is scheduled to break on Monday.

To a certain extent there is almost a sense of “get it over already” in the air. We have been hearing about and reading about this impending failure of our state’s largest employer for well over a year now. We have also been enduring the torture of a thousand cuts (oh, don’t tell Dick Chaney about that one) as the local automakers went through lay-off after lay-off and the suppliers followed suit. The world did not end when Chrysler went into bankruptcy, but it was painful and certainly an indicator of hings to come. But General Motors going bankrupt, now that’s a really big deal. GM has always been the grand potentate of the “Big-3”. After all there was even a saying, “What’s good for GM is good for America.”

But, let’s be honest here, General Motors has been a bloated, slow-moving bureaucracy for decades, ruled by accountants and burdened by years and years of bad decisions on products, on union contracts, on the number of manufacturing plants and on the proliferation of dealerships. There have been glimmers of hope – the Bob Lutz impact on product design was one – but, for the most part, this is a train wreck that almost everyone could see coming. The world’s non-U.S. automakers could see clearly how incompetent GM is, as they lined up to eat GM’s lunch – first the Japanese, then the Europeans and now the Koreans. The Chinese are already in line, too.

So, now bankruptcy is the only way out for what remains of GM. It is the only way that GM can get the right contracts with its unions. It is the only way that GM can put right its bloated dealer network. It’s the only way that GM can downsize its capacity to match its market share. It’s the only way that GM can get out from under its under-funded retirement obligations. Well, maybe I shouldn’t say the only way; just the only way out of the mess that the current management team at GM can see.

The sad part is that GM finally was getting the product issue figured out and now has some very competitive cars on the market and more in the queue. They still had not figured out the rest, though, and that sunk them. Unfortunately, they will likely take down hundreds of small suppliers with them and the disruption to our state’s economy will leave major, permanent scars. We have a saying in Michigan, “If you seek a pleasant peninsula, look about you”, to which we may now have to add, “If you seek a good job, leave”.

So, the company that for decades has been referred to as “Generous Motors” will now become “Government Motors” and all of us as taxpayers will become owners. I wonder if they’ll let us all in on the friends and family discount programs then? Fiat seems poised to take over Chrysler; maybe the government can find a buyer for GM. Maybe a Chinese or Japanese company. Hmmmm. Then, it could become “Gaijin Motors.”

Was that the sound of a horsehair breaking?

Condo Market Trailing the Single Family Home Market

I read an article on the USA Today Web site recently (http://tinyurl.com/oxgoe6) that talked about the fact that the condo market is trailing the residential, single family home market nationally, in terms of any signs of recovery. That certainly seems to be true in our area, too.

Condos, like single family homes went through (and are still going through) a massive wave of foreclosures. And like the single-family market, the foreclosures brought out the vultures – people interested in scooping up units for investment purposes or maybe just first-time buyers. Condo prices lost in the same 20-30% range as single-family homes, over the last two years, with some older complexes losing even more (up to 50%). The extent of the condo market collapse was masked to a certain extent by the propensity of investors to lease them out rather than try to sell units. However, a number of investors got caught short, too, so the distressed condo market has been climbing steadily in our area.

What does this all mean for local condo buyers and sellers? Well for buyers, as in the single-family dwelling market, this is a great time to buy. You can find units that are foreclosed and haven’t been trashed or severely damaged by the previous owners. I’m not sure why condo owners were less angry or maybe just less oriented towards stripping the places, but that seems to be the case. So very good deals on units that need little more than paint and maybe appliances are out there.

For sellers this market demands aggressive pricing, just as the single-family market does. Most owners who bought in the last 4-5 years will find themselves underwater – the unit worth less than the paid for it and less than what they owe. That’s just a fact of life these days. If you are selling because you have to or really need to, you’ll take a hit on the condo, but hopefully you’ll make it up on whatever you end up buying elsewhere. One thing to be aware of is that the condo market has stretched out time wise, again just like the rest of the real estate market. It is taking 18-24 months to sell a condo that is not at a foreclosure price. In my market the average Days On Market (DOM) for what I would consider the “sweet spot” in the condo market $150 – 250,000 is 350 days (and that’s the AVERAGE). The lower end of the market $50-150K units are moving faster at an average DOM of 143 and the upper end or luxury condos are slow but I guess doing OK at average DOM of 248.

The current state of the market makes it more important than ever to have a Realtor working for you whether you are buying or selling. Sellers in particular have a tougher time in condo complexes due to the signage rules. You absolutely need to be on the MLS and have the best Web presence that you can get to sell a unit today. For buyers, you need to shop smart and buy smart. Having an agent who can do the searching on the MLS for you can save you a lot of time, plus having an advocate to negotiate for you will help you get the best deal.

What’s the condo market like where you are? Is it lagging the single family market, too?

Is so-called Lifestyle Living a victim of the recession too?

A recent article on the Business Week Web site - http://tiny.cc/TT1Tr was about the value of choosing to living in a particular place because of a lifestyle choice. That article was about the choice of living in an expensive upscale neighborhood, but that got me to thinking about what is happening to lifestyle living in our area.

Michigan has its share of ”lifestyle communities” or neighborhoods. We have communities built around golf courses, communities built around our many inland lakes and communities where the draw is horse riding in our various parks and state recreation areas. Of course, we also have smaller enclaves of lifestyle living, such as loft living above downtown stores and a few shared facility colonies, called co-housing communities, as well as other identifiable lifestyle communities.

What I’m seeing locally is a trend away from the lifestyle communities that require fairly large discretionary spending along with a real estate premium on the property itself. This has been particularly obvious in the case of golf communities, where hefty monthly club fees greatly inflate the cost of living. We have some here where the monthly club fees exceed the property taxes and those communities are hurting, with tons of homes on the market for extended periods and lots of foreclosures. The downsizing of local companies and the elimination of executive positions in the current economy have caused much of the shift in these communities.

We also have lots of lake-oriented neighborhoods in the area and those are also feeling the heat of this recession. Lakefront houses have always commended a premium and likely always will, if for no other reason that the views afforded; however, the lakefront lifestyle is an expensive one to maintain, with all of the peer pressure to have the boats ands other water toys. Lately one of our agent who specializes in representing lakefront homes in this area has noticed more and more buyers who are evaluating the homes directly against other comparably sized and featured homes that are not lakefronts. In other words they have discounted the lakefront premium significantly, if not completely and are saying, “look, I’m buying a house here and the fact that it happens to be on water is nice, but let’s look at the house first.”

That’s a significant shift for our market, if it holds. What that’s saying to me is that we are looking at a buyer pool who basically doesn’t have the time or the money to support committing to a full lifestyle purchase. They are looking at the houses, even if they don’t intend to participate actively in the lifestyle of the neighborhoods. In some cases, the extra costs associated with an otherwise acceptable house (mandatory golf club fees for instance) are the deciding factor in whether to buy or not and that is adding to the woes of many sellers in those neighborhoods. As much as a person may like the house, if there is a $1,000/mo mandatory club fee built in to the costs the place is just not likely to sell. Unfortunately, the days of the company picking up fees like that as entertainment costs is long gone.

We are also “horse country” out here in Milford, Michigan; however, the days when people could afford to maintain 2-3 horses on 5-10 acres of land seem also to have faded. We still have lots of horse people and many “gentlemen’s farms” in the area, but more And more people who want to ride seem to be finding places to board their horses, rather than buy and maintain horse facilities themselves.

I’m sure that there are many other lifestyle community types that I could have discussed and many that just don’t exist here in the Midwest. We don’t have the beach-oriented lifestyle here, nor the mountainside lifestyle that might be found on the coasts. Both of those are very expensive and have their on sets of issues to deal with, in terms of maintaining the lifestyle.

Are you seeing the same things where you are? Has the economy forced people to rethink paying the extra money to enjoy specific lifestyles and communities? Are the premiums for certain lifestyle living areas starting to go away or to cause sales of homes there to slow? Do you think this is just temporary or are we seeing a fundamental shift away from some of these lifestyle communities?

Small town America says thanks

Today is memorial day and one of the best days of the year in Milford, Michigan - the quintessential small town America. Today at 11 AM I will be marching through town with hundreds of other Vets, as we celebrate those who served their country in the military. For many in Milford, it is their favorite parade of the year (we have three major parades - Memorial Day, The Forth of July and the Christmas Parade - as well as several minor parades for things like the Little League, the High School Homecoming, and Halloween. The parades and the various festivals that we have during the year all result in Main St being blocked off for a few hours or a few days (the Milford Memories festival lasts for three days. It's all quite Mayberry RFD-like and I wouldn't change a thing. This is small town America at its best.

In addition to the veterans, there will be military vehicles, with many older Vets riding down Main St in jeeps or other vehicles; as well as fly-overs by war planes of all vintages from modern jets to WWII bombers to trainers. The parade route is lined by thousands of people who come from all over to stand and applaud as the vets march by, many with "Thank You" signs. As a Viet Nam vet, I can tell you that these parades are the only welcome or thanks that those of us who went over there ever got and it does feel good.

So, if you don't have other plans, come on out to Milford this morning and watch our parade. If you're a vet yourself, join in, the parade is open to all vets. There is always a short ceremony at the end of the parade down in Central Park at the War Memorial. Out parade has grown and been successful largely through the efforts of Joe Salvia from the local American Legion post. This years parade will also be filmed as part of a documentary, “Detroit, Our Greatest Generation,” a one-hour, prime time commercial-free special on the sacrifices and contributes from World War II veterans.

The documentary, by the Emmy Award-winning Visionalist Entertainment Productions, is expected to air in December on WDIV, Channel 4. It will include historic footage of World War II, personal accounts and in-depth interviews with veterans. So, who knows maybe you'll get in a shot that's used in the film. See you there - I'll wave as I march by.

Dude, what happened to my real estate company?

We’ve recently had a few rounds of consolidation and cut-backs in the local real estate community, with one major bankruptcy and shut down by a national franchise operation. I’m sure that some consumers are confused by all of this because they don’t necessarily understand the business models that most real estate companies operate under. A part of the confusion grows out of the franchise nature of many companies in the business and what that means and doesn’t mean for a local real estate franchise.

There are several recognizable national franchise brands, among them are Century 21, Coldwell Banker, ReMax, Prudential and GMAC Real Estate. These are all umbrella brands that are owned by large companies such as Realogy, which owns the C21 and Coldwell Banker brands. People mistakenly believe that being a part of a big brand somehow also means being a part of a bigger company. It does not.

The local C21 real estate office that you see is usually part of a mom & pop operation, normally a sole proprietorship, which is owned by a broker. Some of those operations are well capitalized and well run and some are not; however, none of them have any real business relationships with the “parent” company other than the franchise license to use the brand name. They pay a good fee for the use of that name and they may gain some benefit from whatever national level marketing and advertising the parent company may do. Some may grow to be big companies, relative to their local market, but most remain small operations. And the fact that you may see 2-3-4 companies in a market area all with the same national brand doesn’t mean anything in terms of leverage or advantage for you as a buyer or seller. They normally don’t cooperate at all, since they compete against one another for business in that market. In our little market we had four C21 franchisees, now we have three.

There is no synergy, no leverage, no advantage that grows out of there being multiple C21 or Coldwell Banker franchises in a state. Contrast that with a brand and company like Real Estate One, which is Michigan’s largest real estate company, but which is not a national brand. Real Estate One is a family owned company, too, which operates only in Michigan. It just happens to be a very successful and very large family owned and run company (in fact it is the 13th largest real estate company in the United States). Real Estate One has 37 Corporate-owned offices in the state and 30 other offices that are franchise operations (yes we do franchises, too), whereas the next largest competitor has 7 locations. The number of Realtors fluctuates up and down, but Real Estate One is normally 3-4 times the size of our closest competitor and our business volume is an order of magnitude greater.

But, size aside, it is the synergy and leverage that Real Estate One is able to generate that provide real advantages for our clients. Any REO agent can go into any REO office and use the facilities and technology that are there to help his/her clients. REO makes such large and consistent media buys that all of the local media give then the best rate, which they pass on to their agents to us on behalf of their clients. REO was an early Internet innovator and still leads in leveraging that resource for its agents and clients. The RealEstateOne.com Web site is the only one locally that aggregates the listings of all of the major realtor boards in the lower peninsula (because we have offices in all of those areas) and makes them available to our agents and our clients. REO continues to innovate on the Web with map-based search options, YouTube video production for our listings and more. You don’t get all of that from the small franchisees, even if they do have a big, impressive brand name on their signs.

So the important take-away here is that those big brand names mean very little. You need to look at the strength of the local company that you are going to deal with to sell your house or to help you find a house to buy. The company with the big brand name could be the next small franchise operation to go belly up in the current real estate environment. Seek, rather, the comfort of the stability and longevity of Michigan’s largest and most successful real estate company, one that has been there for more than 85 years and will be there tomorrow – Real Estate One.

Who can say for sure…

Within the last week we’ve had several stories about the possible monetization of the new $8,000 Tax Credit for first-time buyers. There were also press releases by HUD and other agencies reporting that a program was being worked out to allow first-time buyers to use that tax credit for their down payment. Then there began to be rumors and rumblings about that program being reconsidered and that HUD had pulled back their press release, while they “studied” the risks and potential problems with such a program.

Many in the mortgage community got the equivalent of “Please Stand By” messages from their headquarters, as things in Washington bounced back and forth between a Go/No-Go decision. At this point, at the end of the week, we still don’t know if the program will actually fly and if it does, how it will look when it actually gets out.

The early reports were that some form of a bridge loan was under consideration; however, potential tax issues and risk concerns may have scuttled that approach. Other suggestions for doing some form of early tax filing and rebate were also considered or at least bandied about. It is not clear right now what the thinking is on how best to handle what everyone seems to believe is a good idea, in concept, and turn it into a workable reality.

So, for now, all that we really know is that we have the Tax Credit to work with and hopefully that will be enough to get some buyers off the fence. In a national forum that I post too, I asked earlier this week whether the tax credit is having the impact of drawing more buyers out in various markets. The replies were very mixed, with some saying it has had a great impact and many saying it has had no discernible effect in their markets.

Interestingly enough there was also a common thread running through the relies to my questions to the affect that many buyers still don’t know about the Tax Credit. That’s amazing in this age of instant widespread communications. I guess my earlier rant about our society being tuned-out to most traditional news sources applies to this issue too. So for those int eh audience who haven’t heard about it, here’s a link to a site that can explain the first-time buyer Tax Credit. It also has information about programs that are still available for 100% mortgages.

Dude, No Way! Way, Dude!

So, who's supposed to be educating the customers?

I recently commented on a discussion post at one of the professional networking sites that I belong to. The Discussion was kicked off by a comment from another Realtor that basically expressed disappointment that there hasn't been more client enthusiasm for, nor demand driven by, the $8,000 tax break for first time home buyers. The poster asked if others were experiencing the same thing around the country. my response is below -

We have experienced the same thing and I suspect for the same reasons. While we, as Realtors, got lots of information about this and internalized it; most of our potential customers have yet to really hear about it or to understand what it means. Impossible, you say, given the widespread news dissemination and coverage of this new tax break.

As weird as it may seem to us, we live in a society that has become so good at personalizing our information and entertainment experiences that we now have whole groups of people who are so plugged into their IPods that they don't ever get regular newscasts. These are people who have chosen to not watch television news cast, to not read papers, to not listen to boring news programs on radio (if they even listen to radio at all). How could they have missed this story, we ask? They tuned it out, along with much of traditional media years ago.

Now that’s only a portion of the prospect base. Another portion has heard something about it or read something about it, but still don’t understand it or they are stuck, like many people today thinking that they can’t take advantage of the tax break because they can’t scrape together the down payment for a house. What they don’t know is that 100% money for mortgage is still available and that there is hope (and movement afoot) to monetize the tax break into a form of bridge loan that will allow them to use it for their down payment.

Who’s fault is it that they don’t understand or know these things – ours! We need to be out there shouting from the roof tops, holding seminars, writing articles for local papers and generally doing whatever is necessary to get the word out and get the clients educated. Those who are sitting in their real estate offices waiting for the flock of customers to come storming in, ready to go find a house to claim that credit are going to end up like the lonely Maytag repairman. It’s not going to happen people! The clients aren’t going to come clamoring for your help to get this tax break. You’ve got to go out and grab them and tell them about it and then tell them again.

So, if your a Realtor and you're sitting there wondering where all of the customers are; they're sitting out there wondering where all of the Realtors are who can help them make sense out of all of these programs and tax breaks and loan modifications and short sales and all of the other nonsense that is going on in real estate right now. Anybody know a good Realtor? Maybe they could help. As for us here is my little patch, we’re kicking off a series of programs and activities to get the word out and get the client-base educated.

Which is a prefect segue into an announcement that our local Real Estate One office is hosting an open house on June 11, at our Milford Office (560 N. MIlford Rd - across the street from Starbucks). We will cover the topic of the $8,000 tax credit and many other topics that buyers and sellers might have questions about. The Open house kicks off at 5:30 with an hour of food and tours and informal discussions with the local Realtors in the Milford office. Then at 6:30 distinguished guests from our Headquarters and from our affiliates will host a set of simultaneous workshops.

The workshops will have Dan Elsea, President of Brokerage Operations for Real Estate One, discussing the state of the real estate market and the trends that he sees. Vicki Ascherl, Vice-President of Business Development will discuss leasing as an option for Buyers and Sellers in this market. Marlene Briolat, Branch Manager for Capital Title will discuss Land Contracts as an option for Sellers and Buyers. Agnes Meisch, Branch Manager for John Adams Mortgage will be talking about the $8,000 Tax Credit for first time buyers, as well as discussing the USDA programs for 100% financing and what it takes to get pre-approved for a mortgage these days. A panel of agents will discuss a variety of other topics and field questions from the audience.

So come and bring your questions. You’ll not only get answers to your questions, but we’ll have hot dogs and chips, pop and cookies, too. For a printable flyer about the Open House, click here- I hope you can make it to that event. You'll be glad you attended.

Wasting time with low-ball offers.

The Detroit Free Press ran a story this morning about a young couple that had finally found their dream home after 2 years, afte seeing over 40 houses and after five failed offers - http://tiny.cc/kPMd6. That article points out some of the issues that Realtors have to deal with and maybe some issues holding the market back right now - there's just too much choice and buyers have become oriented towards trying to see them all before making a decision and then making low-ball bids on everything.

Now, it's hard to fault the buyers for wanting to get a good deal, everybody wants that. But, the fact that they made five failed bids for houses that they liked enough to try to buy tells me that they either weren't getting good real estate advice or that they weren't paying attention to the advice that they were getting.

Banks that have repossessed houses seem to go through a couple of phases in their efforts to market then properties. Initially, they test the market at, or near, the price that they paid for the house at the Sheriff's sale, which usually represents what they had into the place. That can last a month or a year, depending upon the bank and the property. If the house is still sitting there after 5-6 months, many banks will enter phase 2 - the dump-it phase.

It’s the dump-it phase pricing that everyone waits for and most miss out on. During this phase the bank will aggressively price the house and may even engage in what looks like a Dutch auction – dumping the price every couple of weeks until it sells. When the price reaches “dump-it” level is when the pros swoop in and win and most amateurs lose. How? The pros know that they are getting a great deal already, so they don’t mess around with low-ball bids. In fact they most often bid above the asking price.

The amateurs see the dump-it price and think, “Well, they must be desperate to get rid of this property so I’ll bid 20% less.” In many cases the bank won’t even respond to these low-ball offers. They just wait things out, knowing that the pros will be there with a reasonable bid. Later, after they’ve lost the house that they really wanted, the amateur can’t understand why. “Why didn’t they at least counter my offer?” They often ask. Many mistakenly believe that the banks are under some obligation to respond to their low-ball bids. Not true. The banks make their own rules with foreclosed houses or short-sales and they have no obligation under any laws to respond to anyone.

So, I’ll take my stab at advising those who might be looking primarily at foreclosed properties. Your Realtor should be able to look up the history of the listing (if he/she can’t get a new Realtor). If they show you that the house has been on the market for a while (higher priced foreclosures may sit there for a year or more) and is now at a significantly reduced price (the dump-it price), DON’T LOW-BALL it if you want the house. You’ll just tick off the bank people and they will ignore you, or worse.

I’ve actually had clients who, against my advice, continually lobbed in low-ball offers in on a property, until the bank came back and just told them to stop and informed them that the bank would no longer consider offers from them. They got upset, but that is well within the rights of the bank. I’ve had many more clients be befuddled after they lost houses to others, when their low-ball bids were rejected. The winning bids were almost always for some amount greater than the asking price. “Why would anyone pay more than the asking price?” I often get asked by these people. My answer is simple, “Because they wanted the house.”

This isn't a game and Realtors who let their clients act as if it is a game deserve to waste the time that they put in with those people. The Realtor that entertains and encourages this type of activity probably doesn't realize that they are damaging their own reputations, too, with other Realtors and with the banks. Of course there are a few Realtor/Investors out there, too, trying to low-ball everything in sight and steal houses; but, then we’ll always have that sleazy fringe group around real estate.

Is it persistence or stubbornness?

I track the local market that I sell into on a weekly basis and update various statistics about that market on a couple of my Web sites – http://www.themilfordteam.com/ and http://www.movetomilford.com/. One of the charts that I update every week is the Day-on-market (DOM) chart, which shows the average number of days that homes have been on the market within the townships that I cover, as well as the number of homes currently for sale in each price band. The chart is divided into $100,000 price bands, starting in a band from $20-200K (OK, that band is wider than $100K) and ending in a band for homes over $500K (another wider than $100K band).

What this can tell the reader is where to look for homes in a certain price band – a township with 50-100 homes on the market is a better place to look than one with 5-10 homes in that band. It also shows markets that are very slow or where homes have been on the market for a long average time, which may indicate more willingness to bargain. Of course, it might also just indicate a market where the sellers are stubbornly refusing to adjust their pricing to the prevailing market conditions.

The Milford market in the 400-500K and 500K and above price bands may be such a market. In those bands the average DOM is above a year. In the $400-500K band there are 7 homes that have been on the market for over two years and 7 more that have been for sale for over 3 years. And in the $500K and above band, there are 21 homes with over a year on the market and 13 more with over 2 years. Is that perseverance, which I always advise sellers that they need, or just stubbornness? Maybe it’s a bit of both.

The market for homes in those price ranges has been moribund for at least 2 years now; however, many sellers in that range have also been very difficult to convince that they can no longer get the premium prices that their homes brought 3-4 years ago. Generally these are homes owned by folks who can also afford to “wait out the market” or at least they think so. Interestingly about a third of the sales that have occurred in these price bands over the last year have been foreclosed homes.

One of the things that I can’t track is sort of like the hidden unemployment statistic about how many people just dropped out of the job market. In this case, it is hard to tell how many would be sellers in this price band have dropped out of the market. I know a few that have decided not to get in, once I had advised them what they would likely have to price their homes at in order to sell them in this market.

It’s a shame, really that some many people find themselves trapped in homes that they can’t sell, their plans for retirement or a job move or other life changes stymied by thei inability to sell the homes that they now have. That phenomenon is certainly not restricted to the upper price bands. About the only band selling briskly these days is the under $100K band and that is almost 100% foreclosure homes. So, maybe it’s not stubbornness; maybe it’s just the numb reality of this market.

Hoisted by our own petards...

Michigan is one of only a hand-full of states that adopted a condo-hybrid zoning category called a site-condos, as a way to speed up the process for developers to bring new projects to market. The old, traditional zoning category called a platted subdivision served the needs of developers for many decades, but the necessary approvals and the whole process, which involved extensive public hearings, had become cumbersome by the 80’s, and so the concept of the site condo development was born.

Here’s a quick explanation of the concept:

When you own a true condo you are not responsible for outside maintenance and you don't own the outside of the building. It is part of the common property owned by the association. The condo association takes care of the exterior of the buildings and the landscaping maintenance. A true condo community has common property that can not be divided and that can be used by all condo owners. It is property that all owners pay to maintain. Your condo may be detached, so there are no common walls, but you still don’t have responsibility for the outside.

As a homeowner in a site condo you own the house and your lot. You are responsible for the exterior of your home. Nobody else has an interest in your home. You have to take care of the landscaping, the painting, the decks. But remember as an owner of a Michigan site condo you do have to obey the condo association rules. You do have to belong to the condo association and pay association dues. The association is responsible for the common areas that will include the roads at a minimum, as well as any other common areas, like parks, play areas, and entrance islands.

There were other good reasons why developers adopted the site condo category:
- Homes can be built closer together (So builders can make more money because they can build more homes on the same amount of land. Which is also a benefit to home owners because the homes are less expensive)
- The roads can be private and built less expensively than city regulations. (Asphalt versus cement) Width of the road may be less sometimes. The association is responsible for snow plowing and maintenance of the roads.
- Common elements like pools, parks, and club houses can be built and supported by the association rules.
- Many time homes and the development can be built quicker because of the easier rules for condo complexes – plated subdivisions can take 8-12 months for the approval cycle in Michigan; whereas, site condo project plans can be approved in 2-3 months.

So, Michigan developers jumped on the site condo bandwagon wholeheartedly and almost every new single-family homes development over the last 2-3 decades has been a site condo.

Then in 2009, the FHA promulgated new rules concerning mortgage requirements for condos and lumped in all condo types, including site condos. The rules, which were apparently written by people who never had heard of site condos and didn’t understand the impact of what they were doing on states like Michigan, have requirements that may make sense for traditional condo complexes, but which are onerous for site condo owners and buyers.

The FHA rules require that a would-be buyer, who wishes to use an FHA-back mortgage, submit a Condo Questionnaire, which is normally filled out and signed by the Home Owners Association (HOA) Treasurer. That Questionnaire, which was again created fore traditional condo complexes, has questions on it about the percentage of units that are leased out, the percentage of units that are in foreclosure, the percentage of the total complex that is owned by a single owner (can’t be more than 20% to qualify for an FHA mortgage), whether or not the developer ever turned the complex management over to the HOA and other questions that seem to make more sense for a traditional condo complex.

Here’s the rub. If any of the condo questionnaire questions come back with even a single “No” as an answer, then an FHA-backed mortgage is likely out and the buyer will need a 20% down payment to go conventional. How easy is it for that to happen? Well here are some of the questions:

6. At least 90 percent of the total units in the project have been sold.
7. At least 51 percent of the total units in project are owner-occupied.
9. No single entity owns more than 10 percent of total units in project.
12. General maintenance level of common elements is acceptable and there is no deferred maintenance, based on the comments by the Appraiser and/or the pictures.
13. The owners association has a reserve plan and a reserve fund, separate from the operating account, that is adequate to prevent deferred maintenance.
14. (a) For projects consisting of over 30 units, no more than 10 percent of total units are encumbered by FHA insured mortgages.
(b) For projects consisting of 30 units or less, no more than 20 percent of total units are encumbered by FHA insured mortgages.

Now, think about that little in-build, site condo development in which you just listed a house. It only has 10 houses and four already have FHA loans. Oops! A buyer wouldn’t be able to get an FHA loan to buy your listing. Your seller is hosed. Or perhaps you have picked up 2-3 bank-owned houses in a failed site condo development, one where the developer gave up or went out of business. The development was only20-30% finished and the HOA was never formed. What now? You’re hosed again. And how about those people who bought in that development before it went bust? They are in limbo. Not only are they living in what likely looks like a wasteland, but also no one can buy their homes unless they can get a conventional loan and put 20% down.

So, here we are in Michigan, hoisted by our own petard (an old nautical phrase) and our love of site condos as development vehicles. Most of these requirements weren’t all that onerous when things were good, but with the current market, fewer and fewer of our site condo complexes can pass muster with the FHA Questionnaire. And those failed developments – fagetaboutit!

Is your state one of the others with site condo developments? How is this impacting your business? Has your state done anything to try to help out home sellers and buyers? What are you doing to prepare sellers and buyers for this problem?

Getting in touch with the other side again…

I’ve written before on the topic of events or activities that seem to get a man in touch with his feminine side. At least that’s the theory – that we all have two sides and that certain activities or events touch one side more than the other. Today I attended the baby shower for Laura, our weekend receptionist, who is as the say in the Bible “great with child”. Laura is due in June, but the baby looks to be about ready at any time. Anyway, Laura has already started her maternity leave and today the office had a baby shower for her.

Now I have to tell you that baby showers are about as far away from normal “guy things” as you can get. So, likely no one expected me to show up today. Only one other male agent showed up. So, we were in the minority by a big margin. As I opined here recently, there is a huge difference in the way that male and female agents “see” things, especially houses, but things in general. That’s normal and healthy. What’s also healthy is trying to occasionally get in touch with that other side, that different view of things and that’s a little of the reason that I try to attend these otherwise “girls events” in the office.

I think every female agent that attended today is a mommy, so they have a special empathy and bond with Laura, for whom this is the first-born. The ooohhs and aaahhs as she unwrapped each present were the genuine sharing of an experience that all of them had been through and fondly remembered. Of course there were the requisite jokes about what changes when they grow up, but everybody in the room was reliving their own baby moments as she held up each little onesie or tiny dress (Laura is having a baby girl). The guys sat in bemused silence or cracked wise every now and then.

I think I did pretty well. I held out until the conversation turned to birthing classes and the details therein, at which time, as most guys do, I excused myself. It is obvious that guys cannot and will never share in this experience and thus will always be outsiders to these little pre-birth rituals; however, I’m glad that I went. It was fun to see the ladies of the office in this shared mommy mode.

We typically interact in the office at a fairly professional level and it is only through events like this and the occasional party that we all get to let down our guards a bit and just be normal human beings. For the guys, if one is secure enough in his own male sexuality to occasionally get in touch with this feminine side, it really doesn’t harm anything and may even make you a better man. Oh, isn’t that the cutest little onesie?

Don't worry about prices, make neighborhoods liveable

I saw an article recently discussing the topic of the percentage of the U.S. population that own their own homes and the run-up of that figure that the author thinks contributed to the current real estate bust. The author makes the case that historically the U.S. has run at about 75-76% of the population owning their own homes, but during the early 2000's there was a Federally backed push to increase that figure that eventually lead to about 79% of Americans owning a home.

The article when on to make the case that the extra 3% were actually people who couldn't really afford to e homeowners and that they make up the majority of the foreclosure wave that has hit the housing market. The article postulates that the easy money policies of the Clinton and Bush years that was put in place to increase home ownership in fact contributed directly to the bust. The author makes the case that a certain percentage of the population will always find home ownership to be out of reach.

I suppose that this is basically true, because it is based on basic facts – about 25%of the population don’t earn enough at their jobs to afford to won a home, at least not the home that they would like. With many homes in the Detroit area selling for under $10,000, you would think that almost anyone could afford to buy those homes. However, most of those homes are in sad shape or in areas that many people just don’t’ want to live. I think that is a key issue that needs to be attacked by local governments. If a city/town/area has viable housing stock, but is so crime ridden that no one wants to live there, that is a problem that can be solved with better police efforts and other programs. If they don’t solve those problems, cities will find themselves becoming urban wastelands.

There are currently huge stocks of affordable urban and close-in suburban housing in many areas of the country that are going to waste because potential buyers see them as undesirable places to live, either because of crime issues or maybe because the school systems are sub-standard. If city, county and state governmental bodies would tackle those issues, maybe we wouldn’t have a housing problem in those areas. The prices are right and FHA programs are in place to loan buyers the money to fix these homes up. Now we need now is local governmental action to make the locations right, too.

Are you experiencing the same issue in other parts of the country? How are your local governmental bodies handling these issues?

Looking through the eyes of a Realtor…

I had an appointment today to go look at a house that I might list and the owner called to say that the house is a mess right now and asked if I could look past that. Of course, I replied, I’ll be looking through the eyes of a Realtor at the features of the house and how it compares to other similar houses. That got me to thinking about that phrase “looking through the eyes of a Realtor” and what that means.

I’ll admit that since I’ve become a bit more experienced as a Realtor I look at homes that I enter differently, even if I’m at someone’s home as a guest. It’s a thing that one can’t turn off and on. Of course I’ll notice if there’s stuff laying all around or the place needs a good cleaning, but I’ll also be looking to see if it looks cluttered – too much furniture and stuff all over. I’ll glance at the windows to see if they look newer. I’ll check out the flooring to see if it needs cleaning or replacement or maybe re-finishing. I’ll look at the ceiling and the walls for evidence of water stains or settling issues and tape and nail pops. I’ll admire the crown molding, if it’s there, or the coved ceilings and arched doorways, if it’s an older home. I’ll check out the woodwork, if it’s a historic home.

In addition to all of those things, I’ll be making mental notes about the room sizes and the layout and mentally comparing those to other similar homes. I’ll likely have noticed any exterior maintenance that needs to be done or issues that need to be dealt with by the owner. Inside, I’ll look into the kitchen to see if it has been updated or if it needs updating. The same is true of the bathrooms. If I’m there on a pre-listing appointment, I’ll probably ask to see the basement too, so that I can check out the mechanicals and the electrical and plumbing to see if they need updating or pose any issues.

There are also lots of things that I don’t “see”, which I’ve discovered over time is as much a function of looking as a man as anything. I don’t see lots of the “cute” things that my female counterparts see when they go through the same house. I may notice a kitchen countertop that could be replaced, while the women agents notice the cute decorating and nice curtains in the same kitchen. Sometime we get back from our weekly tour through new listings and it’s as if we went through different homes. I’ll say, did you notice that the electrical box is still fuses or that sure looked like and older furnace; while my female counterparts will be talking about the nice color in the dining room and the cute way the children’s rooms were decorated. Neither of us is right or wrong, we’re just looking at the home through different Realtor eyes. Having that second and different view was one of the valuable things about the partnership that I had for a while with a female associate. Now, I have to solicit that second opinion from other, female agents.

So there really is a difference in how a Realtor, even a friend who happens to be a Realtor, will look at your house. Don’t be offended they can’t help it. I can’t turn off my Realtor eyes just because I’m visiting a friend or relative, but I promise I won’t ask to see your basement or open your electrical box to check that out. I can’t turn it off, but I can control it.