Friday, March 26, 2010
Like Jack, I have a bit of a problem with Einstein’s statement, if it is interpreted to denigrate knowledge. I think knowledge and wisdom (assimilated knowledge in my book) are important, too. I do agree that the ability to think and see outside of one’s comfort zone and maybe outside accepted commonly accepted “knowledge” is a key to being able to make progress. In our industry some have perhaps pushed too far outside of accepted practices and ventured into the land of fraud. It’s always interesting to me how the fraudsters keep claiming right up to their convictions that what they were doing was not illegal, just a stretch of the accepted boundaries.
These days we all need to be extra cautious and look at new things that are being introduced in real estate with a somewhat jaundiced eye, since so many new approached to dealing with shot sales and foreclosures are suspect. Pushing the bounds of ethics is bad enough, which too many are doing these days; however, venturing into outright fraud seems all too tempting to all too many.
It seems to me that we all have a big enough challenge trying to come up with new and better ways to market the normal owner-occupied sales that we are trying to make without wasting the time and taking the risks involved with coming up with new ways to game the system on short sales or foreclosures. We do need some new ideas to somehow prod a moribund move-up market back to life, at least in my area.
Saturday, March 20, 2010
Friday, March 19, 2010
They don’t give much detail in these stories about these $50 Million+ mansions, which is OK, because then your imagination can have all the more fun. Suffice to say that a home described as 20-30,000 St feet, with maybe 4-8 stories and maybe acres and acres of land and great views, doesn’t have to go into minute detail about the bedrooms and baths or mention whether or not there is granite in the kitchen. This is a whole different class of living folks.
I’ve been through some of great old mansions here in the Detroit area, many of them associated with the automotive barons of the early 20th Century. There is a whole different way of looking at life when one has things such as rooms dedicated to wrapping Christmas presents and a ball room for dances and servants quarters. I the old days it was people like Henry Ford and the Dodges and other local millionaires that lived that lifestyle. Now it’s the Bill Gates and Larry Elisons and Donald Trumps and other Billionaires (but not Warren Buffet) who have the wherewithal to build or own these palatial estates and mansions. Russian billionaires are buying up some of the gaudiest of the big showcase estate now.
I get to go into million dollar homes locally quite often and they are really nice, but they are nothing when you compare them with the homes that the really, really, really rich can afford (did I miss a really there somewhere). I’ve actually seen playhouses that were built for the children of these people that are bigger that the first house that I ever owned and most had (have) guesthouses that might put many modern McMansions to shame.
Thursday, March 18, 2010
Green’s reasoning is that lenders actually changed their business model away from making reasonable loans and servicing them towards making any and all loans that they could as fast as they could, so that they could package them up and sell them to Wall Street. Their profit center switched from the loans themselves to the sale of packages of loans, not matter how risky they were. Wall street had already created vast pools of money for mortgage-back securities, so there was almost unlimited opportunity for the lenders, no matter how high the risks involved. You can read the story as it appeared today at http://realtytimes.com/rtpages/20100318_president.htm. It is part one of a 2-part series on the current financial crisis in housing by Fletcher.
To a certain extent Green’s analysis almost makes the Wall Street types look like innocent victims of greedy lenders; however, they certainly share the blame for not policing the risky front-end tactics of the source of all of those mortgages that they were busy packaging and selling as investments. Green actually makes the case that lenders created the market that led to the bubble by creating new and attractive mortgage products to lure in home buyers who were otherwise unqualified, all in an attempt to keep fueling the insatiable appetite of Wall Street for more and more packages of loans to sell.
Green also discussed the limited ability of the government to regulate this while thing, since so much of the money flow was in the unregulated private banking sector of the financial industry. He suggests some remedies, but they are mostly of the “now that the horses are out of the barn” type of hindsight. I look forward to part two of this article.
As in all looks back on disasters, it is also interesting to find those who saw that this was unsustainable behavior and who steered their companies away from these practices. They usually have good stories about trying to warn others and being ignored, just like the guy in this week’s Business Week who tried in vain to warn some people about Bernie Madoff. He was ignored because too many people in the investment world needed Bernie and his scheme to be real – they were in deep and dependent upon him for their living.
Wednesday, March 17, 2010
In this second chart, all three markets - Milford, South Lyon and Brighton Townships appear to have turned the corner and headed back up. Is this cause for real optimism or just a temporary tease?
It appears to be too early to tell for sure. The trends showing rising Median Sales Prices are only a few weeks old, so these could be anomalies caused by the rush of buyers to get in on the tax breaks that are available.
The charts below tell the tale of the continuing drop in market inventory, which is also contributing to rising prices. The downward trend in inventory should run smack into the spring listing rush soon, as potential sellers put their homes on the market when the weather warms up.
Only the Brighton market has stopped falling, in terms of inventory. Maybe spring arrived early there.
These last stats to look at is the average Days On Market (DOM) for these markets. DOM is a good indicator of whether or not we are in a normal market or still in a buyers market.
Four of the six markets have flattened out or started down in terms of the average DOM. That's certainly an indicator that the falling inventory is having an impact and that the markets are headed back towards more balance. That's good news for potential sellers and should be a heads up to buyers that they need to act quickly to take advantage of the current buyer's market.
These charts from Altos Research are live and automatically updated each time they are accessed, so you can return here to watch these trends develop. Only time will tell if we were just being teased or whether we are looking at the long anticipated turnaround in these local real estate markets.
Tuesday, March 16, 2010
How does the Commerce Township, Michigan Market compare to the White Lake market in terms of number of homes sold so far this year and at what price per Sq Ft? If you don't know, but want to know, find out at http://www.movetomilford.com/sold_homes.html
What is the average SEV multiplier for sold homes in Soouth Lyon? Find out at http://www.movetomilford.com/sold_homes.html
How many homes sold in Commerce this year vs. last year. Find out at http://www.movetomilford.com/sold_homes.html
How does the average cost per Sq Ft of sold homes Y-T-D in Milford, Michigan compare with that same average for Highland? Find out at http://www.movetomilford.com/sold_homes.html
Do you see a patern here? Check it out at http://www.movetomilford.com/sold_homes.html and then go see all of the other great statistics at http://www.themilfordteam.com/market_stats.html
Monday, March 15, 2010
I think one key is to focus upon taking advantage of the opportunities in real estate, many of which involved distressed homeowners, without taking advantage of the people involved. The opportunity is there to help that beleaguered homeowner, not to take advantage of someone who is likely in a state of mind where that would be relative easy to do.
I guess that is the difference that I see between the really good agents and the sleazy operators who are swooping down on these people like vultures trying to pick their bones while they are still alive and kicking. It is disgusting to have to watch some of what is going on in the short sale and foreclosure markets and having to hold one’s tongue for fear of violating some ethics guideline by criticizing a fellow agent. Yet so much of what is happening deserves criticism.
But, I digress. Let’s focus upon meeting the challenges in our current market by being helpful. For most of us that means getting up to speed on short sales, especially on the new HAFA guidelines, since such a big a part of our business will be in that space this coming year. We certainly have all sorts of training opportunities locally, being presented by our companies and local boards, as well as many commercially available courses and certification programs. So the needed education is there. There will be a learning curve to get over with each bank or lender, as we discover how each wants to work on these deals and I’m sure that their procedures will change to with the new guidelines.
Saturday, March 13, 2010
So, now, imagine trying to make a living in this market if you were not doing short sales and bank owned sales - it's not possible.
I avoided getting into the listing side of foreclosures and short sales because I just didn't want to deal with the hassles involved; however, it's now impossible to make a living in real estate without engaging in those listings. The bank-owned category is tough to break into, unless you have established relationships with some bank asset managers; however, the short sale listings business is something that we all hit all the time, since so many sellers are under water on their homes.
The short sale listing business requires training, patience, persistence and caution. I've got the caution part down pretty good and I've developed better patience and persistence with things, so now I'm working on the training part. I plan on engaging in my first short sale listing soon. I've done lots of deals from the other side (representing the buyer in a short sale) and now it's time to represent the seller. Hopefully my first few short sale listings will be the relatively simple kind where there is only one mortgage to deal with and one lender to negotiate with on behalf of the client.
I'm still working with a professional short sale negotiator and may recommend that clients use her for the more complex situations - multiple loans involving multiple banks. For the less complex deals, I feel that I can do the job myself, using the training that I have received. A key to my involvement with these types of sales is going to be to make darned sure that my clients understand what they are getting into and what the potential outcomes could be.
For many, starting the short sale process involves stepping out onto the slippery slope towards foreclosure and hoping that the lender will approve a sale before that happens. Hopefully the Home Affordability Foreclosure Avoidance (HAFA) program will help. It at least encourages lenders to pre-approve short sales and to not go after deficiency judgements against the sellers, once they have agreed to the sale.
Stay tuned. The next episode of the Twilight Zone is just beginning.
Friday, March 12, 2010
What's happening here? In the local markets that I track - Milford, Highland, White Lake, Commerce, South Lyon and Brighton, Michigan - a few things appear to have converged to cause this unusual pattern.
1. The initial round of the first-time home buyer tax credit was very successful and took quite a bit of inventory off the market, especially at the low end. The second wave of buyers, both first-timers and current-owners, who are influenced by the extended tax-credit, was delayed by holidays and weather and are just now starting to impact the market. They are finding much less inventory to choose from. I have at least three buyers couples right now for whom I cannot find decent homes for them to look at because they need to be in the $50 - 150 price band and there's just very little there locally.
2. The big initial rounds of foreclosures that dumped so much inventory on the market in late 2008 and into 2009 are over and the banks have adjusted to the market and to new Federal programs by delaying some foreclosures and by holding some foreclosed inventory off the market.
3. The market has shifted to short sales as a better alternative to foreclosures and more and more homeowners are taking that route, which serves to delay foreclosures. Much of that inventory is hitting in the price bands above $200,000 right now. A lot of the short sale activity seems to involve people who have been laid off by the automotive industry and need to move out of state to find work.
4. The expected big second wave of ARM resets was temporarily delayed by actions taken by the state and the feds. The various moratoriums have run out, so we may see that kick in soon, if the homeowners haven't started loan modification proceeding. The new HAFA short sale guidelines will soon start impacting the market.
5. Many homeowners just let their listings expire and decided to wait out the market, some in hopes that prices would come roaring back (that ain't gonna happen) or that , at least, they wouldn't have so much competition. Hurray, you won on that bet! Now, get back in the game.
6. The expected Boomer downsizing spree has been delayed. Many Boomers find themselves "trapped" in their McMansions and are unable to seller so that they can downsize for retirement. In many cases, retirement itself has been delayed by the current economic environment. Where Boomers have been able to downsize that often contributes to the decline in low-end inventory, since they are downsizing into the same houses that a young couple might otherwise buy as a first home.
So, what we are left with locally is a market in which inventory continues to drop, Days On Market continues to stretch out and in which Median Sold Prices have stopped dropping and turn back up, as much because there are so few low end homes selling as anything, so the few higher-end houses that are selling impact the average greatly.What does this mean for buyers and sellers?
Low-end buyers are going to have to look harder and perhaps in wider areas to find homes to look at and even mid-to high-end buyers will find much less on the market right now. For sellers, this is the moment that you've been waiting for in the market. The market is no longer saturated with excess foreclosed inventory. You'll still have to price aggressively and many will still have to take a loss on homes that have lost 30-40% of their value over the last 3 years; however, you aren't looking at lingering on the market for 12-18 months like has been the recent case.
If you're a buyer, give me a call and I'll work even harder to find you just the right house. If you've been waiting to put your house on the market, now is the time. Beat the spring rush and catch the buyers who are desperately trying to beat the April 30 deadline for the tax credit. In either case it is time to act. The real estate market is in a very unusal condition right now - it is still favorable for buyers, if you can find what you want; and it is now favorable for sellers, if you've been waiting to sell.
Thursday, March 11, 2010
•While more than 400 million consumers are active online social network users, a growing subset are getting off the social media carousel. Many consumers are quitting online soc nets over concerns they worsen their offline lives.
•Consumers are weaning themselves off of sites like Facebook and Twitter, some even quitting cold turkey. Free services like Web 2.0 Suicide and Seppukoo (Japanese word for "suicide") have helped tens of thousands of social network users completely erase their online profiles (USAToday.com 2.10.10).
•Facebook isn't having it. The largest online social network has blocked the servers of both Web 2.0 Suicide and Seppukoo — and sent cease-and-desist letters.
WHAT THIS MEANS TO BUSINESS
•Consumers aren't ditching digital friendship in droves, but they are getting back to the root of BeehivingSM — good 'ol fashioned face-to-face interaction. (Thus the popularity of the morning Starbucks gatherings that I’ve opined about in the past as being the original “Snail” version of Facebook)
•As online social networks proliferate to the point of bewilderment, consumers are pushing back and reclaiming some of their personal lives from the Web's entanglements.
So what does this mean for business users, who also flocked to Facebook and other social media sites. There have been many articles written and even books published about how to leverage the various social sites for business gain. I suspect that this too has caused an overload in the minds of user audience and will precipitate more fallout as users tire of having to put up with the ubiquitous Google ads around the borders of their favorite sites and the blatant advertising going on in many so-called posts to these sites.
Wednesday, March 10, 2010
What is the current average price per square foot for homes that have sold in 2010 in White Lake? Where would you go to find out? Are homes selling for more per square foot in Commerce or Highland? Where would you got to find out? What is the current average SEV multiplier for homes that have sold n 2010 in Milford? Where would you go to find out? Where can you go to find information on all of the homes that have sold (above $20,000) in Milford, Highland, White Lake and Commerce?
Where can you go to see charts on the trends for the last six months in Median Sold Prices and Inventory levels in Milford, Lyon, Brighton and Highland Townships? Where can you see what the percentage of foreclosed and short sales is as a part of overall homes sales in the markets of White Lake, South Lyon and Commerce? Is there a place that can show me lists of every home that has sold in the last two years in Highland?
Those are lots of tough questions, but there is one answer to them all - go to my web site http://www.themilfordteam.com/. You'll find some of the answers right on the home page in the Real Estate Market Dashboard. The rest will be found (or links to the answers) on the Real Estate Market Statistics page. No other Web site in Michigan aggregates and presents so much critical real estate data for the potential home buyer or seller.
I keep this data updated weekly so that you will always have a quick, up-to-date source for your real estate market questions. I keep myself up-to-date on the market too. If you want a knowledgeable local realtor, give me a call. If you are just curious,enjoy the site and the data.
Tuesday, March 9, 2010
Certainly there is lots within the world of real estate that one could worry about; but, I have to agree with the comment that Jack made following the quote above - I can’t think of any positives that come from spending time worrying. Can you? ;-) Jack.
I’ll admit that I’m a bit of a worrier. I worry about whether a home that I’ve written an offer upon will pass inspection or appraise. I worry about whether or not I’ve done everything properly in the offer process and protected the best interests of my clients. And I worry whether I’ll be able to move this deal through to a successful closing.
Monday, March 8, 2010
I had hoped to present a recap summary from my Milford Team Web site by showing you the data that I capture and present on my "Dashboard" there; however Blogspot has such restricted editing capabilities that I just could not get the table to come over here properly. So, please click on this link to my ActiveRain blog - http://activerain.com/blogsview/1532886/recap-of-february-for-my-michigan-market for that report. ActiveRain supports better editing than Blogspot right now. And remember that you can get all of the latest data for those markets by going to my Milford Team web site.
For buyers and sellers – www.themilfordteam.com
For first-time buyers – www.MIHomeBuyer.com
For people moving to Milford, Michigan – www.MoveToMilford.com
For people in distress with their home – www.MIShortSales.net
For people interested in the history of Milford Michigan, visit www.milfordhistory.org
Sunday, March 7, 2010
On the front page statistics told of the 532, 774 homes in Michigan that have mortgages that are greater than their current values, which was estimated at 38.5% of all mortgages in Michigan right now. The article detailed the growth of so-called “strategic defaults” from 5,100 in 2005 to 17,250 in 2008 (the numbers for 2009 are apparently not in yet).
There was also advice from a Southfield real estate attorney that, “When things are that bad (referring to the huge loss of value and the economic hardships that many in Michigan face), your moral compass and the obligation to make payments that most people feel, has got to give. He opined that, “the stigma of defaulting on a mortgage, even if one can still pay, is disappearing.”
Yet inside the paper the article took a nasty turn and focused upon the ability and the growing tendency for the banks to go after the defaulters for deficiency judgments and collection of the shortfall, if they have to sell the house as a foreclosure. Articles by Greta Guest, a Free Press Business writer and well known columnist Susan Tompor both gave examples of how the lenders could pursue ex-homeowners for years.
Guest wrote about Michigan laws that would allow the lender to turn the deficiency judgment over to collection agencies and have up to 36 years (if it was a 30-year mortgage) to harass the ex-creditor for fulfillment of the original contracted amount, including any back taxes owed on the place at the time that bank took it over. She wrote that mortgage recovery actions were up 26% in 2008 and some 187 since 2006. She sites data from First American Core Logic which shows Nevada to be the worst state for underwater mortgages at 70%, with Arizona second at 51% and Florida third at 48%. Michigan was fourth on that list, followed by California with 35% underwater mortgages.
Topor focused more on how long it might take to recover the value that has been lost in this recession and opined, as I have several times, that it will be decades before we get back to 2006 levels, if ever. Her example was a $200,000 home that the buyer bought in 2006 with a 5% down payment and a mortgage for the rest. In our area that home has dropped in value by 30%, so it is now worth about $140,000. The original mortgage for $190,000 is probably still in the high $180,000’s. Topor uses an appreciation rate of 3% per year once a recovery starts and positive appreciation returns and figures that it will be 2022 before this owner gets back to his original purchase price.
There was comment made in the Guest article on the very slow progress of any of the Federal programs to help in this situation, especially the mortgage modification programs. The banks complained that the whole process is too complicated and that borrowers are reluctant to go through the whole financial disclosure process that get eh modifications. They also sited the state’s high unemployment as a primary factor that they can’t do anything about. One foreclosed ex-homeowner was quoted, “Everything that I’ve worked for for the last 20 years is gone. Now I’m a dirtball. I can’t even go and get a used car.”
In a related story, the Free Press reported on a local Catholic nun who has lived in the same four-plex apartment for 22 years, who is now facing eviction because the landlord is in foreclosure. The foreclosure happened before the current moratorium on evictions went into effect in Michigan. That is going ot be more and more of an issue as more owners of apartment buildings and commercial building get into trouble.
Saturday, March 6, 2010
So, anyway, Dukes was hopping last night. It was as busy as we've seen it in a long time. I had the chance to talk to the owner, with whom I frequently exchange "how's business" remarks and he confirmed that business has been up lately. Now, if there's one sure indicator of how people feel about the economy and things in general, it shows in how many go out to eat on the weekends. During the depths of this current recession one could walk into Dukes on a Friday or Saturday night and get seated immediately - the place was literally only half full. Last night there was a waiting line. That's a good thing for Dukes and I believe it's a good indicator for the economy.
I'm not sure that the increase in business at Dukes and other local restaurants means that the recession is over, but I do think it means that the worst may be over and that people have learned to deal with the situation as it is and have decided to get on with life. Several restaurants in our local area didn't make it through this mess. We lost three local eateries right in Milford, all on Main Street. We also saw one of our more upscale restaurants change direction to accommodate a less expensive menu. Perhaps, as some of the survivors have told me, our restaurant scene was over saturated in Milford to begin with; still it was hard to watch the three places close down. The buildings are still empty, which shows that we are still somewhat in the grips of hard times. Of course both retail and office space is available in abundance right now, so a few empty restaurants is not all that unusual.
What does this all mean and how might it relate real estate in general? Well, we've all been looking for indicators that consumer confidence has returned and that people will start spending again - especially on houses. I hope that the recent increase in restaurant traffic is a leading indicator that American consumers are inching back into the market - one beer and meal at a time. Anybody need a house to go with that sandwich?
Friday, March 5, 2010
Thursday, March 4, 2010
(March 1, 2010) Washington, DC -- Federal Housing Finance Agency Acting Director Ed DeMarco today announced the extension of the Home Affordable Refinance Program, (HARP), a refinancing program administered by Fannie Mae and Freddie Mac, to June 30, 2011. The program is a key component of the Administration's Making Home Affordable Program announced last February. The HARP program expands access to refinancing for qualified individuals and families whose homes have lost value. The program was set to expire on June 10 of this year.
Wednesday, March 3, 2010
So anyway, I go into my barber shop yesterday for my regular haircut ands the talk turned immediately to real estate. The barbers all know I’m in real estate and I wear my real estate badge everywhere, so even the other customers can see that I’m in real estate. Inevitably thins start out with the generic, “So, how’s the real estate market?” question; which I try to answer in as positive a manner as I can. Then the horror stories start flowing out from everyone in the barber shop.
There’s always 1-2 people in the place who know someone who’s lost a house to foreclosure. Likely there will be 2-3 people who know someone who just got laid off and may lose their house. If I’m really lucky there may even be someone in the place who looking to buy or sell a house, but mostly it’s just about sharing horror stories. My barber told me that on a recent Saturday morning out of his first 10 customers, 7 had recently been laid off, so that’s hi barometer of how bad things have become.
Another barber climes in that he had a customer yesterday who has lost almost $100,000 in value off his house and may just walk away. Another customer allows as how he’d like to buy a house to take advantage of the tax credit, but he can’t afford to sell his place, since it is so far underwater. Then a general discussion of how the government programs haven’t worked and how they should do something different makes the rounds of chairs. That can and does get pretty ugly.
There are all sorts of scholarly studies and reports out there about this mess we are in and lots of government programs and press released about programs circulating; however, if you want to really know what’s happening out in America, go sit in your local barber shop and listen – listen to America. If this were Floyd’s Barber Shop in Mayberry, Aunt Bee and Opie would be hiding in the basement and Sheriff Andy Taylor and Deputy Barney Fife would be facing an angry mob. Andy might even let Barney get his bullet out of his shirt pocket. It ain’t pretty out there right now and the natives are getting restless.
Tuesday, March 2, 2010
Now I have added running Year-To-Date (YTD) reports for each of those market areas. Just scroll down to the bottom of the current months report and there are links to those reports, which are in PDF format. Some of the things that I track are the asking (listed) prices vs. the actual sold prices (and the % of sold to asking), the sold price vs. the current SEV (and what the multiplier was) and the asking price per Sq Ft and sold price per Sq Ft. I also do the calculations of the medians and averages for all of those sales, so that you can see what a reasonable price to pay might be in each area.
Now, I will admit that foreclosures and short sales are having an overwhelming effect on the statistics, since they currently make up 73% of all sales, but that i just the reality of our local markets. I only began tracking these statistics at this level of detail this year, so I can't chart much out yet, but as time passes and more data is available I'll be doing some graphs to show any month-to-month trends that might be emerging. I do have more than two years worth of past sales reports available through links on that same page; however, there have been slight changes to the areas that I reported on for a while and the statistics that I've calculated.
So, visit one of my sites and take the time to take a look at what's available there for you to better understand the local market. There are also some other great reports, like the recent Real Estate One report on 2009 and trends for 2010, as well as the latest Case-Shiller Report and more. It has always been my belief that a well informed client base is best for me and for you. If you're a buyer, you can look at the Days On Market report that is there to see which areas have inventory in the price range that you are seeking and how long that inventory has been sitting on the market. If you are considering selling, the data there can help you better understand what you home might be worth or at lease give you some backup for the Market Analysis that I'd be happy to do for you.
Monday, March 1, 2010
I hit the same thing quite often when I do Market Analyses for client and prospects. Many times the unique features or upgrades that the homeowner has made just aren't going to influence the price as much as the homeowner had hoped or felt that it would. I try to do a pluses and minuses analysis for each house that I evaluate, with pluses being things that might add value above the average and minuses being things that might detract from that value. Sometimes one big minus - perhaps being located on a busy road - will offset many pluses of smaller value - granite in the kitchen or a second floor laundry or other nice to have items. That is especially true if the "comps" that I'm using have similar plus features but not the big negative feature.
I actually avoid the use of the word comps or comparable in my Market Analyses because, for the most part, I have not been in most of those homes. I use the word similar instead and explain that from a data point of view they are of similar size, have a similar number of bedrooms and baths and have other features that are similar to the house that I'm analyzing and reporting upon. That makes more sense to me. So, go read the ActiveRain article and let me know what you think. It might help you understand why your appraisal came in lower than you had hoped.