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Wednesday, April 30, 2008

Stacks of stuff

“One of the advantages of being disorderly is that one is constantly making exciting discoveries.” (A.A. Milne), from the Jack's Winning Words blog today.

OK, so I know that I'm a bit of a messy hoarder. I have stacks all over my desk at home and every now and then I have to just stop and go through them to get them back down to a less intrusive size. I'm just one of those people who saves everything. I've never been good at the management principal that says "read it once and either file it or throw it away." I tend towards, read it once and put it in a stack on the desk. Later I either file it (seldom) or throw it away.

Sometimes this comes in handy, when I suddenly find that I need the name or phone number of someone that I dealt with months ago. They are likely on a piece of paper somewhere in one of my stacks. But, where? That does consume a bit of time that could likely be better spent on other things.

I also have virtual piles of paper all over my computer, many of them duplicates of the physical piles on my desk. I do 6-8 Market Analyses per week for potential clients. I print out a copy of each one and put it in a box next to my desk AND I keep a copy in a file on my computer. Why? Well, because I use the pile in the box to help me remember whom to add to my newsletter mailing list, plus I just feel better about being able to reach into that box and retrieve a specific client's Market Analysis to reference, should they call. (Hoarders always can conjure up some logical sounding reason for why they keep everything).

So, this is likely another thing I should work on as I get older (in addition to being more positive about things). I do find that I need less and less of the stuff that I save, so just not saving it in the first place is the next step. But what if I needed to find...

Oh, well. time to go through the stacks and throws some stuff out. Now, if I can just make a new stack over here to put stuff in that I should keep and anotrher stack over there for stuff that I should really sort through...

Tuesday, April 29, 2008

Laugh and stay young...

One of my clients sent me this - Life is what you make it. We do not stop playing because we grow old; we grow old because we stop playing!! So, remember to laugh....just for the HEALTH of it!

What a great thought for the day. Humor and laughter have always been a big part of my life. I may even ask my wife to have them inscribe on my tombstone – “He made me laugh.” I’ve used humor all of my life to disarm threatening situations (real or imagined) and to get through life’s little rough spots. Humor probably comes in a close second to faith as a mainstay for me in dealing with the tough things in life. I’ve also tried to make those around me laugh, too. Sometimes a quick wit coupled with a fast tongue and can one into trouble, when a quip or retort is not well enough thought out, before being blurted out; but that’s the price one pays on occasion. I have also tried, with age, to temper a wit that was a bit caustic at times. Some of that still comes through in posts here. Then, I go off and stare at my green dot some more.

The other part of the saying above, it seems to me, is also true. We all seem to lose most of our ability to play as we grow older. We become way too serious about ourselves and about life. There is something magical about how children play – with abandon and enthusiasm. That becomes nearly impossible later in life as self-conscientiousness takes over and limits our ability to just let ourselves go. It’s funny, though, how you’ll occasionally see an old person doing something sort of absurd and they’ll tell you, “I’m too old to care what you think,” and go on having whatever good time they are enjoying. They have recaptured the ability to play.

So play and laugh and have a better day. Life is way too short to be serious all the time. You need play and laughter to be healthy, just like you need exercise and sleep. And, like I said in yesterday’s post - Don’t worry, be happy!

Monday, April 28, 2008

Don't worry...Be happy!

Wow, did I need a big dose of the old Bobbie McFerrin song this weekend. And low and behold that's exactly what our Pastor preached upon this last Sunday. His theme was wrapped around the song and was focused upon not wasting a lot of time and energy energy worrying about things, especially things that one cannot change anyway.

I suppose that I am a worrywart - a product of an over-active imagination most of the time. Unfortunately it's a personality trait that I passed on to my son, who is now the head worrywart of the family. I try not to be, but sometimes the mind just races as one is lying there trying to get to sleep. It likely doesn't help that the real estate profession is ripe with things to worry about.

It's hard not to worry about things, but we have to try. There is little that any of us can do about the current economic and mortgage crisis. Worrying about it doesn't help, it just wastes energy and time. It would seem that, instead of worrying about it, we need to accept that it is what it is and be going ahead with life.

I get the question all the time, "Should I list my house now; or, try to wait out the market?" My advice lately has been to go ahead with your life plans. We may not be in a market that can be waited out. We may be going through a fundamental change; an adjustment, if you will, that is resetting housing values back down to the historical trend line (see my post of March 14, 2008) that it should have been on all along. If you bought recently (last 3-4 years), you are just going to have to deal with the fact that your house has lost value. If you are a long-term owner, you lost some "paper value" but still have an asset that has appreciated nicely over your term of ownership.

So, in either case, what can you do about it? Nothing! You might as well not worry and try to be happy. If you are selling to buy another place, even it it is to downsize, you'll make up some of the "loss" by getting a good deal as a buyer. You'll know when you've become a buyer, because of the big smile on your face. Don't worry...Be Happy!

Saturday, April 26, 2008

The real gloomy Gus...

I thought that I sometimes get a bit gloomy here with my observations - like yesterday's post. However; today, I read the same story - good people going bust in the housing market - in a national real estate news posting. And, then, there is the story below - a report on a recent speech by Robert Shiller, co-author of the influential Standard and Poor's Case-Shiller Index.

An influential economist who long predicted the housing market bubble cautioned Tuesday (April 22, 2008) that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression and bailouts will be needed so millions don’t lose their homes.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor’s/Case-Shiller home price index, said there’s a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.

“I think there is a scenario that they could be down substantially more,” Shiller said during a speech at the New Haven Lawn Club.Shiller’s Standard & Poor’s/Case-Shiller home price index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month.Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct.Home prices rose about 85 percent from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Shiller said. “Basically we’re in uncharted territory,” Shiller said. “It seems we have developed a speculative culture about housing that never existed on a national basis before.” Many people became convinced that housing prices would increase 10 percent annually, a notion Shiller called crazy.

Shiller, who said it’s difficult to forecast prices, endorsed legislation proposed by Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., that would allow the Federal Housing Administration to back as much as $300 billion in mortgages for struggling homeowners. Servicers would have to agree to take a loss on the existing loans, while borrowers would have to show they could afford to make new payments on their refinanced mortgages.

On Tuesday (April 22, 2008), the National Association of Realtors said that sales of existing homes fell in March while the median home price declined to $200,700, a decline of 7.7 percent from the median price a year ago. Sales of existing single-family homes and condominiums dropped by 2 percent in March to a seasonally adjusted annual rate of 4.93 million units. Many analysts said they do not expect a rebound for a number of months, given the problems weighing on housing from a severe glut of unsold homes to tighter credit standards for prospective buyers and a rising tide of mortgage foreclosures.

Wow, this means more time staring at my green dot (see post of August 12, 2007 for more on that).

Friday, April 25, 2008

Putting good people at risk...

I'm starting to see a new and alarming trend in the market, due, I'm sure to the recession that we're in now. I'm seeing good people, who did not take out toxic arm loans or overextend themselves to buy too much house, now getting behind on bills and mortgages. It doesn't take all that much to tip the scales, sometimes. A little less overtime or one spouse getting laid off or health care and gas prices going up by double digits. all of a sudden, Joe Average is in trouble, behind on credit card bills or on the mortgage.

Now, we could all pontificate upon the fact that Joe should not have used his credit cards or that he should have planned for this rainy day. In fact I'm seeing people who did plan become tapped out with their savings and some even with their 401K plans, trying to keep their heads above water, but to no avail. These are average Americans living what they saw and believed was the average American life. Now, they're trapped in houses which have lost 15-25% of their value in the last 2 years and upon which they owe more than the house is worth. And when the call the bank to see what can be worked out, mostly they get the run around or are told to come back when they are in default. No wonder so many get angry and take it out on the houses.

I believe that we are on the cusp of a more serious melt-down in the housing market than we have yet seen. The current recession-driven credit crunch is likely to hit most homeowners in America just when they would have wanted to tap into home equity to see them through, only this time the equity is not there and the mortgage bill is due, too. We Americans have lived by credit and many will now suffer due to credit problems. Let's hope I'm wrong, but an increasing number of economists seem to also think that the big foreclosure wave is yet to come and may hit later this year. I'm now seeing reports that 2009 may be the bottom out year and that a return to "normal" may have to wait until 2011.

In my little world, we've already had one homeowner on our block walk away from his house and move out of state to find work. I'm afraid that we'll be seeing much more of that later this year. Michigan's economy just isn't generating anywhere near the number of jobs that are required to replace the lost automotive jobs in the state and what jobs are created tend to pay less than half what the displaced autoworkers made before. You can't pay for that $200-300,000 house on $14/hour, especially when that $14/hour job has no benefits.

So, now I'm going to have to go off in a corner and stare at my green dot for a while and try to find a happy face again. Things will eventually get better for sellers and I'll feel better about dealing with them. Lately, I've been focusing more on the buyer side, since those folks are happy about the bargains that they are finding. Let's see maybe my mantra should the buyer, be the buyer, be the buyer. There, I feel better already! Gotta run and find some buyers.

Wednesday, April 23, 2008

“Happiness is wanting what you have.”

Today's title is from the Jack's Wining Words bog, quite often a source of inspiration for me. I might modify it a bit for real estate to read "Happiness is wanting what you can afford." Accompanying Jack's words this morning was a pointer to the Web site for an organization called The Center for a New American Dream. The Web site is

The New Dream center is another organization that espouses living a more simple live and goes on to champion dong things that will make a difference in the lives of those around you. These are certainly noble goals. I didn't take a lot of time to look at the site, but it may be worth a visit, if you've been considering a change in your lifestyle or attitude.

Returning to the real estate implications of all of this, I suppose one could make the case that many of the people who are now in trouble with their mortgages reached for more than they could afford because they weren't happy with less, to at least thought that they wouldn't be happy with less - less house, less car, less everything. I certainly know lots of people who are that way - possession-centered. Generally they seem to think that acceptance in life or the measure of life's worth is somehow associated with how many of life's trappings one is able to collect and display.

I have to admit that I went through that stage in my life, too; so I can be too sanctimonious here. As I've gotten older, I've started to appreciate other things in life - relationships being the most important. Now, I'm not ready to give it all up and go live in a cave in the forest; but, I also no longer need the newest car or the biggest house or many of the other things that I used to think would make me happy. what makes me happy now is waking up in the morning (always a great way to start the day) to a wonderful wife and realizing that I have a great family with children and grandchildren close at hand. I have a faithful dog who gives us unconditional love and I live in a great old historic home in one of the nicest places in Michigan to reside - The Village of Milford.

Tonight, I get to go on a call to try to list a local home and whether I get the listing or not, I'll get to meet some new people and likely will have a good time talking with them for an hour or so. So, I also have a wonderful job that gets me out to meet people and to try to help them buy or sell homes - both hopefully joyous occasions - and I get paid for it to boot. What more could I really want and why?

Monday, April 21, 2008

First Quarter Market Results

The first quarter of 2008 is history and it's time to look back as see if we can spot any trends in real estate. Our company President, Dan Elsea, sends out a report every quarter to let us know how the company is doing in Michigan and what his take on the local market is for the quarter and the future. As many of you know, I track the statistics for my little corner of the market on a weekly basis – see and click on Market Statistics. What Dan “sees” are the statistics for the whole company over the entire market that we service.

I’ve posted the charts that Dan included in his report on my Web site, also under my Market Statistics page, so go there to see the data. Below is Dan’s report to the agents of real Estate One about the market.

There have been few years that have started out with as many mixed signals at this year. The MLS numbers published in the papers show some real growth in terms of homes sales yet our collective pocket books (Sellers and Realtors) don’t seem to be feeling the good news. I was skeptical about the MLS numbers and in fact held off on sending out any market data until we could detect some consistent pattern in the market. It appears the drop in March was somewhat weather related, with many “March” buyers finally coming out in April.

In short, the good news is the combination of bargain prices and great rates are beginning to both draw new buyers and cause old buyers to act. However, there has been a pretty strong pricing “bribe” to bring them out. Prices will continue to fall 8-12% this year from last year (it will feel like 15 to 20% when based off the asking price). These bargains are drawing down the listing inventory, so each month we are moving a step closer to a balanced market. There is still a wave of foreclosures yet to hit the market. The foreclosure and tax relief bills in process at both the state and federal level will help smooth out the remaining foreclosure lump. If they are delayed, the pricing pressure from short sales and foreclosures will continue into the third quarter of 2009.

Financially stressed sales (either foreclosure or short sales) still make up 50 to 70% of pending listing sold, indicating that buyers are drawn to the perceived potential bargains they represent. Sellers who are not in that category still need to adjust to compete or their piece of the buyer pie will shrink in half.

As we have said before, this does not mean a buyer should wait until next year to buy. It is unlikely that interest rates will remain this low. Further cuts by the Fed in short term rates will continue to cause long term rates to rise. Any delay in trying to buy at the bottom will be lost in higher interest rates.

The Rule of Thumb is a 1% increase in interest rates wipes out any gain from a 10% drop in home values. It is more likely rates will rise by more than 1% over the next 12 months than values will fall by more than 10% in most of our markets.

The rules have not changed for this year or next. Now is the time to buy, what you lose on the sale of one home you will gain on the purchase of another. Vacation homes are at all time bargain prices as well.

Many Sellers are not in a position to make a move, regardless of potential bargains. They should take a hard look at their housing needs over the next 24 months to determine if selling is in their best interest. As much as we love to help them sell their homes, our best advice for some is to wait, if they can afford to do so.

So, Dan’s view is consistent with what I’ve been reporting here and on my Web sites. His statistics also indicated a slight year-over-year drop in the 1st quarter sales in Oakland County (-1.4%)l as in Washtenaw County (-5.6%) and Wayne County (-0.3%); however the other counties in Southeastern Michigan had increases. See the charts on my Web site. I tend to agree that the March drop was weather related. As soon as the weather turned better in April there seemed to be a flood gate open up and buyers were everywhere.

As a company, Real Estate One sold or leased 3,220 homes in the 1st quarter and listed 3,241 more. We also had 6,345 potential buyers go through open houses during the quarter and 354,313 people visit out company web site – . Our National ranking among brokers went up from number 22 is 2007 to number 15 in 2008, so we’re obviously doing lots of the right things during this downturn in the real estate market.

Saturday, April 19, 2008

Looking, looking, looking, GONE...

I've been spending lots of time looking at houses with prospective buyers lately and one pattern that I've seen is that buyers who are too tentative or unprepared to actually make an offer end up losing out on the really good deals, especially foreclosure deals. Now, I certainly don't advise leaping in before you are comfortable with a house, but one also risks loosing out, if after 2-3 visits to the house and after the bank has lowered the price to the "dump it" level, you still can't pull the trigger on making an offer. It's really sad to hear the coulda, woulda, shoulda conversations between buyers after they've "lost" a house that they really liked by not being quick enough to make an offer.

What I've seen are two main things - some people just have a hard time making a decision to stop shopping and make the offer and some people haven't prepared and positioned themselves to be able to make an offer. The first type are perpetual shoppers, who just have to see that next house and who are looking for the perfect house. When asked what it is that they want in a house, they'll often answer., "I'll know it when I see it." When I get that answer, I know that I'm the one in trouble; since I will be spending a lot of time trying to find a the perfect place for these folks. The second type of buyer has a problem that I should be able to identify and help with - they just haven't do the necessary financial preparations to be positioned to make an offer. I have mortgage people whom I can send them too for help with that.

The point of this is that, as a buyer, one needs to be ready to make and offer and one needs to really have a good understanding of what it is that you are looking for in a house. I usually spend time after each outing asking the buyers what they liked and didn't like about each house and then ask them to tell me why they wouldn't buy each house. After 2-3 outings we both should have a very good idea about what it is that they want in a house. Then if we see one, foreclosure or not, that is a good deal and meets their needs, hopefully we'll be ready to act.

With the market the way it is today, it is especially important to be ready to act, if you are looking at foreclosures. Most foreclosed properties are put on the market for a month or so at the price that the bank wants to get to recoup their failed loan. But, banks quickly tire of having too much inventory on the market, so they often dump the price down to the "sell it now" level fairly quickly. Homes that have been priced to sell like that by the bank usually don't last more than a week or two. They are just too good of a deal to pass up and there are lots of buyers out looking for those deals.

Your Realtor should be able to tell you the pricing history of the home and should have a good idea if it is priced to sell. Once a house is priced at that level, it's sort of like the old musical chairs game - the music has stopped and you'd better be ready to grab a chair ( or the house as the case may be). The slow are left standing and are out of the game. An interesting twist to this analogy is that you may end up as one of several people who are trying to sit in the same chair - multiple offers on the same house. We'll discuss that in a later blog.

Friday, April 18, 2008

The Pew report – housing market stinks!

I’m sorry, I couldn’t help myself. Anytime one sees a Pew report and the news stinks, one has to go for the cheap shot pun.

One in every 33 homeowners is likely to be in foreclosure sometime in the next two years, according to a study released today by the Pew Charitable Trusts.

"Stronger standards from federal policy makers could have helped avert this crisis," said Shelley A. Hearne, managing director of Pew's Health and Human Services Program. "Future legislation must consider ways to strengthen standards to prevent more troubling loans from being made.”

Homeowners won’t be the only ones affected, the study predicts. It found that an additional 40 million neighboring residents will see their property values decline, while municipal tax bases drop by as much as $356 billion nationwide over the next two years.

Pew's research analyzes two principal data sets: the Mortgage Bankers Association 4th Quarter National Delinquency Survey and the Center for Responsible Lending's foreclosure projections and Subprime Spillover data.

So, OK; aside from the fun one can have with the name, there is nothing funny about this report. In fact it makes one want to head for the pew and pray for relief. Oh, stop me, before I go further with this whole pew thing. Next we’ll be seeing reports like “Housing market sucks," says economist for Hoover Vacuums or “Stop the bleeding in housing market," says representative of Band-Aid.”

Maybe we could do man-on-the-street interviews to see what John Q. Public says about the housing market and then publish that. Let’s see if we can summarize things – It’s bad and it may get worse. I can see the headline - Joe Blow's Woes!

Now that we have that out of the way, let me report to you that things have picked up locally. There is more buyer activity. Some of that is because the weather turned better and some because things have stabilized a bit and there is lots of pent-up demand. Plus, people who want to sell a home have come to realize that they can’t wait this out and that they will get a good deal elsewhere is they are also buying another place to live. So, people are listing homes, too. It is what it is. (Insert your own cliche here). Life goes on – get on with it! Phew! Or should I say, pew?

Thursday, April 17, 2008

A good time to sell...

This article from a recent news feed that I get resonated with me. If you've been dreaming of a bigger house, now is the time to act.

Home owners who are reluctant to sell because prices have fallen, should do the math, and realize that the market downturn could work in their favor, say practitioners in hard-hit, but still pricey Boston.

Their reasoning may work in many other parts of the country as well.

"People are finding houses at prices they thought they'd never see again," says David W. O'Neil of Century 21 Spindler & O'Neil Associates in suburban Boston.

O’Neil points out to potential sellers that if the house a buyer covets used to be $500,000 but its price has fallen 20 percent to $400,000, it is a deal, even if the buyer’s own home also has lost 20 percent of its value.

In general, the toughest sell is people who bought about four years ago at the height of the market, says Zur Attias of The Attias Group at Barrett & Co. in Concord, Mass. But even for these home owners, selling now may make sense as long as they can at least break even.

He argues that almost everyone forgoes something, and probably several things, that he or she wanted when buying a house. For instance, the home may be in the right school district, but on a busy street. Or it may in a great neighborhood, but it's a Cape, not a Colonial. These are things Attias calls "unchangeables."

He says it’s a good time to sell if a seller can get rid of the most negative unchangeable in his current home, and replace them with better unchangeable in a new home. Once the market really turns around, the growth will be bigger in the better house, he predicts.

Certainly I've been advising local, Detroit-area buyers that now is as good a time as any to sell and buy something different, if you are staying in the state. The loss that you might take on the sell side will be made up (and in many case plus some) on the buy side in the current market, especially if you are looking to do a move-up. In fact, if you are thinking of selling your starter home in order toe mover up to a bigger and better house, you may be quite well. Starter homes have been selling well and have taken less of a hit on price than the larger homes in the prime move-up market.

Another factor that has changed recently involves the increase in the FHA loan limits, which now puts more of the potential move-up market within the FHA loan limit zone – up into the $290’s locally. FHA loans are less expensive and less difficult to qualify for than conventional loans. So, if you are moving up, you can get a bigger FHA loan to allow you to get into a bigger house.

And if, like many older Baby Boomers, you are looking to downsize, you can take advantage of the recent law that would make it easier for you to go ahead and buy your retirement home, while you have your current home on the market. The new law allows you to homestead both houses while you try to sell the old one. You save money on taxes and the old house doesn’t become less attractive by being burdened with higher, non-homesteaded taxes. I reported on that law in my last blog post and now I can report that the townships DO have the necessary forms, so home sellers can beat the May first deadline to homestead both their old and new homes. If your Township office doesn't have the form, I've put a link to a PDF copy of it on my Milford Team Web site.

Tuesday, April 15, 2008

More help for home sellers

This week I can report that yet another example of our state government in action may save state home sellers some money - some day. A bill sponsored by Representative Ed Gaffney, Republican from Gross Pointe Farms (pictured at left), provides for home sellers who move within Michigan and allows the seller to retain an additional exemption for up to three years on property previously exempt as the owner’s principal residence if the following circumstances are met:

the property is not occupied,
the property is for sale
the property is not leased or available for lease
the property is not used for any business or commercial purpose

This has the potential to be quite helpful, if only they figure out how to implement it quickly. The deadline for this year’s exemptions in rapidly approaching and so far the townships haven’t received any of the new forms required by the law or instructions on what to do to implement this new law. Why is that not surprising?

I emailed Representative Gaffney and he emailed back that the Department of Treasury in Lansing is working on getting the form out soon. It may not be soon enough to help this year, since May 1st is the deadline to claim the exemption for this year. I have clients who could and would take advantage of this new law, if only there was a way to do so.

This can have a dramatic impact on the ability to sell a house or not, since the non-homesteaded taxes can ad 30-40% to the bill and push some potential buyers out of the debit to equity ratio range that they need in order to buy.

Monday, April 14, 2008

Don't walk away Renee...

You can't go home again. So said Thomas Wolfe in his famous book. Well, apparently you can't just walk away from home either. of at least not from your home mortgage.

According to a news feed that I got today, the government and the lending industry are taking aim at “walk-away” home owners who stop making payments and months later send the house keys back to their lender.

Such borrowers will not be able to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his file will have to make at least a 10 percent down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.

Freddie Mac, which counts foreclosures as major credit black mark for seven years, is now aggressively pursuing walk-away borrowers where permitted under state law, a senior official said.

Federal legislation enacted last year allows home owners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven.

Walk-away borrowers, by contrast, have nothing forgiven, and the Internal Revenue Service may demand taxes on the balance they never paid, the IRS says.

So the "I'll just walk away" option is getting nasty for the beleaguered homeowner. I guess it's better to let them drag you, kicking and screaming, from the house on eviction day. At least you can claim that you did not walk away.

Locally I'm seeing more and more of the walk-aways and those people aren't just moving to somewhere else in Michigan, they're leaving to go somewhere where there is work to be had.

I don't think our "leaders" in Michigan have yet figured out that they have a serious population drain going on and that the state is undergoing a fundamental change. I did see an interesting article in the weekend Detroit Free Press comparing the Detroit area to the Pittsburgh area and what they went through in Pittsburgh when their major industry died.

I think our state leaders are still in denial that our major manufacturing industry is dying or rapidly changing away from Michigan. We will be lucky to come out on the other side of this mess with two Automotive companies left in Michigan and more likely with only one. And even if the local companies survive, they will have to become more global and much less Michigan-based and oriented.

I did a post some time back with a graphic of a man beating a dead horse. If I could find a graphic of a bunch of politicians sucking on the teats of a dead cow I think that would be a better representation of our current situation. One just wants to scream - "let go of the automotive cow teats and develop other job sources." A variation on the old saw "that dog don't hunt" might be "that cow don't suckle anymore."

But, back to the main theme. If you were thinking, "I'll just turn in my keys and be done with it" as a solution to your foreclosure problems, forget about it. The lenders and the government want a pound of flesh and you know whose rear that is coming out of.

Sunday, April 13, 2008

Does Pleasantville really exist?

It snowed this morning in my area and it's cold; both of those things are likely to disrupt some family plans for many people in the area, but they kind of come with the territory in Michigan. It did getting me wondering, however, where in the United States would be the best place to live to terms of not having to deal or put up with natures interruptions - whether and other natural phenomena. In other words, what's the most benign place in the Continental United States, so far as Mother Nature goes.

Is there a place where it might rain, but there are never severe thunderstorms or tornadoes or hurricanes? Is there a place without floods and earthquakes and wildfires? Is there a location where one doesn't have to worry about volcanoes erupting or foot deep snow falls? A place where the weather doesn't have to always be the same, but in which the weather is never a threat to life or the quality of life?

I suppose you could call this mythical place Pleasantville, since it would generally always be pleasant there. It might even be boring, I suppose; but at least mother nature wouldn't always be throwing you curves and natural disasters. I suspect that it would have to be on the interior, since the coast almost always get severe weather or one sort or another. I'd guess it won't be in the great plains and Midwest, since tornado alley is there. And certainly not in the northern states where snow is a way of life. It could be that the only place like this is in the high desert out west somewhere, but I'd have to think about whether the heat there would still be considered a major annoyance.

Let me know where you think Pleasantville might be located.

Saturday, April 12, 2008

Interior doors

I got to thinking this morning about interior doors. I live in a historic house, built in 1885, and there are doors between every room, or at least there used to be. Some were long gone by the time that I bought the place. The doors between the major rooms on the entry level were glass-paned French doors similar to the picture above(two still remain). It appears that it was once possible to close off every room in the house - the dining room from the kitchen or from the living room and the living room from the parlor and the parlor from the front stairway. The door between the dining room and kitchen was apparently one of those that could swing either way. It's a shame that all that remains of that door is one of the hinges.

So I wondered, when and why did interior doors like that go away as a design feature of houses? I posted that question on the Yahoo Questions site and had an answer back within minutes. The responder opined that interior doors went away when central heating and air conditioning came into vogue, which he/she placed as sometime in the 1940's or 1950's. I guess I can buy that argument, but I'm not sure how prevalent central air was back then. Central heat had been around for some time, albeit mostly boilers and radiators and not forced air. When forced air heating came about I've been told that fireplaces went out of vogue for a while and I've seen this to be the case in a few local historic houses. apparently not having a fireplace indicated the owners wealth by showing that he didn't need a fireplace to heat the house.

The Yahoo answer about interior doors, while it made some sense didn't leave me feeling like I had a valid answer to the time part of the question, maybe just the why part. It also left me wondering why not just leave the doors open, if air circulation was the big issue? I suppose that putting in doors that wouldn't be used would have been a needless expense and thus was eliminated. There was also a movement larger arched doorways between rooms somewhere back in the 30's and 40's; maybe that contributed to the demise of the interior doors.

So, if any of you readers of this blog have a better explaination and timeline for the demise of interior doors between main floor rooms, let me know and I'll pass it on.

Friday, April 11, 2008

No haggle pricing...

I had a discussion with my broker, Dan Elsea, recently about the market and he passed on something that I found to be interesting. He said that a few agents have gone to a "no haggle pricing" approach in some areas and it seems to be working. What they are doing is essentially setting the price at the number that they think it will actually sell for and then offering it for that price and refusing to haggle on it. Apparently it's working for them, according to Dan. It's sort of the Saturn pricing and sales model applied to housing.

I was reminded of the time that my wife and I spent in Iran (back in the days of the Shaw). There was only one "fixed-price" store in Tehran, a department store that catered to Westerners. Everything else was sold in bazaars (see picture above of a Turkish bazaar) or small shops, where the fine art of haggling was an expected part of the process of buying anything. I recall haggling for hours just to buy a small carpet. The process involved elaborate acts of hospitality on the part of the shop owner and protracted negotiations over the price, sometimes involving us walking out of the store several times (only to be lured back by the owner's offer of more hospitality) and small price-change increments from both sides. It was sometime amusing and always time consuming, not unlike some of the negotiations that I've been through with houses. But, is was expected. In fact, it was considered to be an insult to the shop keeper if you paid full price and didn't haggle. We always took a local interpreter with us on these trips to the bazaar and took advice from him.

Some cultures are more accustomed to haggling as a way of life than others. In Iran they used to tell us that every shop keeper had three prices for everything - a local price that a native would likely pay, the price for buyers from Asia, who were known as good, tough hagglers and a Westerners price, which was usually much higher, since they knew that we didn't like haggling for long over something. In the U.S. we have garage sales where one can haggle and of course there is the time honored tradition of haggling when buying a car (except a Saturn), and then there are our home sales.

Most sellers always want to build "wiggle room" into their prices; room that they feel they can negotiate with when an offer is made. The mistake most make is to put the price too high, with their wiggle room baked in, and so they discourage buyers from even looking at the property. If your Realtor tells you the market price for the house is $180,000 and you put it on the market for $200,000, or more, you will just be missing a good part of the potential market.

I really can't figure out why we can't do something like this everywhere. There just seems to be some innate need to haggle when buying a house. I know lots of people who don't like to haggle and would likely prefer a good, honest fixed price on houses, just like there is on other things. Therein lies the rub - getting a good price and an honest price. Who's to say what is a good price? And, how do you determine that this is an honest price? I've been advising potential sale client to get an appraisal up front, so that they know what the current market value for their house is and can set the price accordingly. Even dong that is no guarantee that the market won't change again and the price will be off again. Appraisals that are over 6 months old are pretty worthless in the current market.

One thing working against this model is the conditioning that buyers have had from the current market. Buyers are now used to offering only 85-90% of the listed price for homes (sometimes less) in hopes that the sellers are desperate. There is so much inventory on the market that buyers feel that they can just go find another similar home if the seller doesn't take their low-ball offer. I've had more than one potential buyer tell me that their strategy is to just keep throwing low-ball offers out until someone takes one. It's usually not any fun working with those people, since we spend a lot of time finding candidates for them to low-ball and then almost always get rejected.

So, should you try the no-haggle approach for selling your house? Only if you have the discipline to stand firm on the price and the patience and perseverance to put up with the low-ballers who will still try to get it for less. Make sure that your agent makes it clear in his/her marketing that this is your best and final price; and, make sure that it is a good and honest price for the property. Remember that the market doesn't care what you "need" for the place, either to pay off the mortgage or to give you some equity to invest elsewhere. The market is cruelly efficient at determining what your house is worth and at not paying any more than that; so, price accordingly. Otherwise welcome the bazaar that is the real estate market today (some would say bizarre). You'll need a good interpreter (Realtor) to help you with the haggling. Call me. Been there, done that!

Thursday, April 10, 2008

Every Little Bit Helps...

On Tuesday of this week, Governor Granholm signed a significant piece of real estate legislation. The legislation enables home sellers to retain 2 principal resident exemptions for property still on the market after the seller has moved elsewhere in the state. The signing of this legislation is a huge step in aiding struggling sellers who have had homes on the market for over a year and have lost their principal residence status on that property.

House Bill 4215, now Public Act 96 of 2008 enacts that the seller can retain an additional exemption for up to three years on property previously exempt as the owner’s principal residence if the following circumstances are met:

- the property is not occupied,
- the property is for sale
- the property is not leased or available for lease
- the property is not used for any business or commercial purpose

The Michigan Association of REALTORS® (MAR) was active in pointing out to lawmakers that the struggling economy in Michigan has forced several home sellers to relocate to other areas of the state, in some instances continuing to market a home that they have not lived in for over a year. As a result, the home was no longer treated as a principle residence and the homeowner lost the principal residence exemption.

Retention of an existing homestead credit for an unoccupied home that is currently for sale would offer relief to sellers who have had to relocate for whatever reason. This is just another small, but helpful step taken by the state government to help struggling home sellers. The while issue of homes going "Non-Homesteaded" on the tax rolls while people tried to sell them was becoming a major block for new buyers. The differences were often as much as 30-40% on the taxes, which was enough to stop many buyers, if they were faced with having to pay the increased rate for most of a year, before the house could be re-homesteaded.

The bill doesn't protect those who have moved out of state, but I guess the legislature can't protect everyone. Many of those people don't report their moves, so they play "catch me, if you can" with the law now anyway. Every little bit helps.

Wednesday, April 9, 2008

Simplify your life...

I recently helped a couple buy a place in Milford who shared with me their unique outlook on life - they are trying to live simpler, less cluttered lives. That seemed to make sense to me and then I saw a story about a new book that delves into the same topic.

"The Simple Home: The Luxury of Enough" (Taunton Press/American Institute of Architects, $40) delves into the realm of simplicity, the idea that having "enough" is often much more than we really need. It was written by architect Sarah Nettleton and landscape historian Frank Morton

The book makes the argument that human-scaled, low-maintenance, green, unadorned homes with straightforward floor plans and natural lighting can be a better deal than starter castles cluttered with stuff we don't use.

The key is, when we inspect our lives at home, we can often find areas where the simple life is a better, less expensive life. Some of the major points in the book are:

1.) Enough is enough. A simple home offers the luxury of space in a world of clutter. When you identify your true tastes, throw out notions of what you think you should have, avoid excess clutter and maintain only the essentials, simplicity begins to set in. Sure, you need a place to eat, but does it really have to be a separate dining room?

2.) Flexible use. Rooms can serve multiple purposes and help you get more out of what you already have. A breakfast nook can be a play area until a child ages. A kitchen can double as an art studio. Make a small screen porch more functional by installing a custom-sized table rather than going to the equity till again to enlarge the porch.

3.) Thrift-minded simplicity. Fresh tomatoes from the garden taste better than greenhouse food. They'll also get you outdoors. Make a list of simple pleasures that delight but do not require expenditures for more stuff.

4.) Timelessness. Avoid the attraction to "new" for "new's sake." Select a starting point for the feel of your home, edit your wish list down to one favorite image from a book or magazine. Trust your instincts. Your own style is authentic and timeless.

5.) Sustain. Gizmos don't create sustainability. You do. Find the balance between what you can afford and what you really need. A comfy window seat tucked into a window nook in a just-right size room can be as comfortable as a large custom leather sofa in an imposing large room.

6.) Resolve complexity. We all talk about disliking complexity in our lives, but can we walk the talk? Examine aspects of your home that prove troubling. Identify the real value of change. Is bigger really better? That new home's kitchen is darkened by the attached garage. Is saving a few steps with the groceries really worth missing the morning sun in your kitchen?

These points make great sense and would almost certainly also lead to a less costly lifestyle. This doesn’t mean that we give everything up and go live with the Amish. It does mean taking a look at how we are living and being honest about why. In our society the Baby Boomers became enamored with possessions as a measure of success in the 80's and 90's and that has just carried over into the new millennium and Generation-X. Gen-Y, the latest generation to take up the torch, has shown early signs of not being so possession oriented, perhaps because they are also facing a much downsized economy and fewer big-money job opportunities, but maybe because they genuinely aren't so self-centered. In either case, they are making choices in housing that tend toward the smaller and simpler homes. Builder need to pick up on that trend and build fewer McMansions, if they are targeting the new generation of home buyers.

I suppose that we could philosophically extend this line of reasoning to say that it’s really not what you manage to collect in life that is important, it’s what you do with your life that really matters. This is likely where a jump into a religious discussion would take place, but I’, not going there. Instead, I will refer you to the blog of my ex-pastor Jack Fred to continue along that line - so start reading Jack’s Winning Words for advise on living not only the simpler but more meaningful life.

As for me, I’m going to start by finally tackling cleaning out the clutter in my home. I have stacks of stuff in my home office that I can no longer remember why I saved. I have a closet full of old computer stuff (sound boards, printers, dial-up modems, etc.) that I couldn’t bring myself to throw out, but which likely no longer is useful in any modern computer. And I have stuff in my garage that I have no idea why I’m keeping – a riding lawn mower that doesn’t work (plus I live on a small city lot now) and at least 40-50 old golf clubs that I don’t carry anymore. Why? I have no idea. Time to simplify! Here's a wonderful Web site with more on the topic of simplifying.

Monday, April 7, 2008

Dancing in the rain...

“Life is not waiting for the storm to pass, but learning to dance in the rain.” (Unknown) Those words from today's Jack's Winning Words blog certainly apply to real estate and to real estate agents.

From a home seller's perspective, we are in the midst of the perfect storm, as far as real estate is concerned. House prices are falling and here is a glut of inventory on the market. Realtors too are experiencing the stormy rain, trying to make a living with fewer buyers, and stretched out selling time.

The only people who appear, on the surface anyway, to have a reason for dancing are buyers, especially investors who have swooped into places like Detroit to buy up 50-100 foreclosed houses at a time.

So, how to apply the wining words? For many sellers who are in a position to sell (they don't owe more than they can get for the house), the challenge is to mentally get over the "paper loss" that most imagine they are suffering or the real loss that is just unavoidable in this storm. If you can exit your house without having to bring more money to the table, just do it. Accept the temporary financial set-back and get on with your life. If you are buying another place in Michigan, focus on the good deal that you'll get there. If you are exiting the state, too, then hopefully you'll be able to get a good deal where you are relocating. There are few places in the U.S. right now that aren't also suffering this housing downturn.

As an agent, I've had to refocus much of my time and effort upon the buy side of the real estate equation. I now work more with buyers than with sellers, although I am still accepting new listings. When I list a house I am very honest with the seller about how long it might take and how low they might have to price. Some are easier to deal with on those issues than others and some are impossible to convince about what needs to be done - those listings I turn down.

So, I'm learning to dance in the rain of this storm and I'm trying to get a few others (sellers) to join me. We can't do anything about it, so we may as well make the best of a bad situation and figure out how to live and dance in the rain.

Friday, April 4, 2008

A little relief in the midst of a big problem...

In today's real estate news came this tidbit about a recent ruling from the Michigan Attorney General on Michigan's Property Transfer Tax.

Attorney General Mike Cox issued an important opinion this week clarifying the proper application of an obscure exemption contained in the Michigan Transfer Tax Act. The opinion, arising out of a request from Representative Martin Griffin (D-Jackson), should afford certain home sellers immediate financial relief as Michigan’s real estate market continues its road to recovery.

Exemption “t”, as designated in the Michigan Transfer Tax Act, sets forth that a seller may seek an exemption from paying the state transfer tax if the following criteria are met:

1. The property must have been occupied as a principle residence, classified as homestead property;

2. The property’s State Equalized Value (“SEV”) for the calendar year in which the transfer is made must be less than or equal to the property’s SEV for the calendar year in which the person transfeing the property acquired the property; and

3. The property cannot be transferred for consideration exceeding its true cash value for the year of the transfer.

With property values and corresponding SEV declining due to the struggling economy, home owners and real estate agents first took notice of the exemption’s possible applicability under the state transfer tax. However, absent an official interpretation, there was little awareness of its proper application.

The opinion from the Attorney General uses examples to show how the application would apply.

One example illustrating application provides:
If the SEV of the principle residence when acquired in 2006 is $74,000.00 and the SEV when transferred in 2008 is $72,000.00 then criteria one and two above are satisfied. You can establish the true cash value by doubling the SEV at the time of transfer. In this case the true cash value is $144,000. If the sale price in 2008 is $140,000.00 then the sale does not exceed its true cash value. All three criteria are satisfied and the exemption would apply.

The Attorney General’s opinion provides immediate relief to home sellers already faced with the reality of declining value on their single greatest asset. The opinion also provides a uniform reading of the exemption that is necessary to provide consistent application among the various Registers of Deeds across the state as they are already receiving filings for the exemption.

Sellers should be cautioned that a request for the exemption that fails to meet all three criteria could bring a penalty equal to 20% of the tax assessed in addition to the tax due. Additionally, no similar exemption exists in the County Real Estate Transfer Tax Act.

This opinion would save the home seller about $7.00 per $1,000 of value of the sale. So if a homeowner sold his property for $300,000 and it met all of the criteria above, it would save him/her $2,100. in State transfer taxes. It's not enough to completely dull the pain of selling that house, which was worth $350,000 three years ago when they bought it, but every little bit helps. This relief likely will only get better over the next year or so as SEV's continue their decline.

Thursday, April 3, 2008

Oh we go again!

Detroit named the riskiest real estate market in the U.S.

Wow! We made it to number one again. They're going to have to invent a new category for us soon - The top ten bad things you can say about Detroit real estate. Maybe we'll get a spot on the David Letterman Show. In the latest bit of Detroit bashing news, Forbes Magazine ranks Detroit as the riskiest place in America for real estate. I guess that's what makes it the best place in America for real estate investors (according to a story in the Detroit Free Press over the weekend). One investor was quoted that buying houses in Detroit is “like shoveling diamonds into the trunk of your car.” Investors are swooping in and buying up 50-100 houses at a time, some for as little as $20,000-30,000. I guess they have evaluated the risks and consider Detroit to be worth it.

Forbes reported the following:

The riskiest housing markets are those where foreclosure rates are high, homes are selling slowly, local economies are struggling, and lenders are reluctant to make money available.

Forbes magazine examined the nation’s 40 largest metros and identified the 10 housing markets that are in the worst shape. These are the markets Forbes cited:

Detroit – Prices are so low it’s hard to imagine them falling further. Foreclosures are five times the national average.
Orlando, Fla. – The vacancy rate is 7.4 percent
Cleveland – There’s been no job growth here since August 2006.
St. Louis – Year over year, prices dropped 20 percent.
Miami – The inventory of unsold homes has climbed steadily.
Las Vegas – Job growth has been flat since the housing construction bubble burst.
Sacramento, Calif. – The city has the nation’s highest rate of seller price reductions.
Denver – The state has ninth highest rate of foreclosures in the country.
Tampa, Fla. – Weak job market and high inventory of premium properties
Phoenix – Housing inventory is five times higher than it was in 2005

In other news, Forbes failed to mention that Detroit also has the most beleaguered mayor in the country, along with a police department that may soon be under increased scrutiny over the handling of the death of a stripper, following a party at the mayor’s mansion that may or may not have ever happened according to sources that may or may not be creditable. The jury may or may not be still out on that – text messages to follow. And to save having to do another post, we also learned recently that Detroit leads the nation in the high school drop out rate. So not only is it the riskiest place to invest in real estate, but apparently the dumbest place, too.

Unfortunately the mess in Detroit spills over to the suburbs in the form of a stigma with out of state lenders. We are now designated as a “declining market” all the way out through the 5-6 counties that surround Detroit, so our borrowers pay more, our sellers get less, our houses appraise for less and we all suffer. But, we can wave our foam #1 fingers and claim to be number 1 again! Sigh!

Wednesday, April 2, 2008

Housing rises...hedge funds lose billions!

That's the next headline we might see...and the next bail out. In an interesting article on the Realty times Web site this morning it was pointed out that the head of "the real estate sky is falling society" - Robert Schiller (pictured on the left)- one creator of the widely reported S&P Case/Shiller Indices and author of the best selling book Irrational Exuberance, has a largely unreported vested interest in the bad news that he's been spreading. Shiller's Index reported a fall of 8.9% in home values across the U.S. last year, while other reporting agencies could find a decline no where near that number. Schiller is known in the press as "Mr. Bubble" for his pronouncements on the stock market and housing bubbles.

From the Realty Times article - Just to give you an idea of how much the Case-Shiller Indices differ from other traditional home sales compilations like OFHEO and the National Association of Realtors monthly indexes, consider this, says David M. Michonski, CEO of Coldwell Banker Hunt Kennedy in New York City, "OFHEO has been keeping a national index for years and publishes monthly a one inch thick book on housing prices. It says that in 2007 the average price in America was down .3% . Yes, that is three tenths of one percent, not Mr. Shiller's 8.9%. Compared to OFHEO Mr Shiller's index overstates the decline by 29 times or 2900%, not a small amount. The National Association of Realtors index showed a median 1.4% decline nationally after 64 years of uninterrupted gains. Compared to NAR's 1.4% median price decline, Shiller overstates the "freefall" by 6.3 times or over 600%.

So why would Schiller be so strident and apparently so wrong about the market? Because he makes money from the actions that are taken, based upon his report, according to the article.

The Case/Shiller Index is licensed by Macromarkets LLC. In partnership with the Chicago Mercantile Exchange, Macromarkets created the "Housing and Futures Options" for trading.
The CME Group, a Chicago Board of Trade Company, describes trading housing futures as having multiple benefits to investors:

A new means of risk transfer to a broad range of investors Low cost exposure to real estate values without direct ownership of properties Access to a unique asset class Opportunity to profit from a movement in housing prices A way to make trading in real estate a short-term and liquid investment This is a hedge product, folks, and guess who one of the owners of Macromarkets LLC is? None other than Shiller.

"Every time a CME hedge is made, revenue flows to Macromarkets," says Lawrence Yun, senior economist for the National Association of Realtors. "People would hedge only if they believe prices will fall big time." And guess who's running around yelling that the sky is falling - the same Robert Schiller. So, now hedge funds are likely making huge bets on further housing erosion, based upon bad data from Schiller's company. Next year they'll be asking to be bailed out from these bad bets; if housing, in fact, rises.

The article also tackles the issue that the press has apparently been a willing participant in this ruse, mainly because Schillers rantings make for good screaming headlines about how bad things are and it is a maxim in the the press - If it bleeds, it leads. The press loves bad news. They can run out and interview someone getting evicted from a house and make a whole big story out of it.

So, what's the real truth? Certainly, we have seen a value drop locally in housing. In our case we are down -15-20% from the highs of 2004-5; but, we are also starting to see things pick up and prices starting to stabilize a bit. we have a huge backlog of foreclosed homes to sell off, but actions by the Feds have helped slow the rate of new foreclosures. There is still a looming round of ARM resets that Fed actions may forestall or which will go on and happen this summer - we'll have to wait and see on that. Maybe Mr. Bubble can become one of the scrubbing bubbles and help clean up the mess that he's so widely and wildly reported.

Tuesday, April 1, 2008

Spring Clean-up Time

With opening day out of the way and the baseball season under way, it's time to turn you r attention to what winter did to your yard and house. It's spring clean-up time. OK, so maybe I'm jumping the gun here a bit, but with the snow finally gone (again) and warmer weather coming and going, you can at least get started on weekends that it doesn't rain.

Winter normally leaves all sorts of debris in the yard - downed limbs from trees, left over leaves from last fall and more (some courtesy of inconsiderate passers-by who find it convenient to share their left over pop bottle or McDonald's Happy Meal boxes and wrappers. Then there are the remains of last years plants, by now beaten down by winter storms. All-in-all it can look like quite a mess.

So a good beginning, especially if your house is on the market, is to patrol the yard and pick up all of the winter debris. Then look at any large plants, especially those close to the house, to see if any were damaaged by ice during the winter and need trimming attention.

The second item on the spring list should be to look at your gutters and downspouts. Winter has a way of filling and stopping up guters and downspouts somehow seem to always fall off or lose the bottom parts in the winter. Clean the gutters and repair the downspouts.

You can identify also the areas that might need touch-up painting, although you may have to wait another month until the weather is warm enough for that. If you haven't taken down your Christmas decorations yet, now would be a good time to start. If you took them down but haven't stored them yet, take care of that.

If you used a lot of salt on the drive or walk and it's still there, you may want to hook up a hose and wash it off. Spring rains woud eventually do that, but if you are showing the house it's best to go ahead and get that done.

We're still a good month away from it being safe to plant you flowers for the year, but you can spruce up the yard and and house, to recover from the ravages of winter. And it's not to early to put down your crab grass pre-emergent treatment, even if it may snow again.