In search of an honest man...

As I was perusing the real estate news this morning I happened upon the Washington Post article about the confirmation hearings for David Steven as head of the FHA. In part it read:

A Senate Banking Committee vote to confirm David H. Stevens as head of the Federal Housing Administration was postponed yesterday after concerns were raised about lawsuits involving Long & Foster, the Washington-area real estate brokerage where Stevens has been president for seven months. You can read the whole story at http://tiny.cc/AvesQ

The story goes on to say that even though Steven's was the President of Long & Foster for a while, he didn't believe that the alleged practice of pressuring agents to use Prosperity Mortgage, a company-owned mortgage company, was illegal. The Justice Department apparently agrees with him, so long as kickbacks to the agents weren't involved and agents weren’t actually required to use the internal mortgage provider. It is apparently a legal, if somewhat unseemly practice for the apparent new head of the FHA to be espousing.

I suppose that if the people in Washington started looking for someone without any hint of a taint in their backgrounds, they would join Diogenes in an endless search.

I opined yesterday in this blog about the new bill that Congress is now considering to reform mortgage lending and pointed to the unintended consequences that oft accompany the well meaning, if misguided attempts by our fearless representatives to save us from all manner of evil, including ourselves. Then I saw a discussion of the new HVCC law that is due to go into affect in June. This is the law that is saving us from bad appraisers who, in cahoots with bad mortgage lenders, set up mortgage mills to crank out bad mortgages to people who couldn’t afford the homes that they bought. These are part of the clown posse that caused the mess that we are in today.

There doesn't appear to be anything all that threatening in the HVCC itself (read it at http://tiny.cc/uLrH8 ), however the devil is in the details of the implementation of the law and the lack of preparation on the part of the parties most involved top actually manage the process. Of course the customer is once again screwed in the process, because the process adds cost and who do you think pays for that - not your loyal Congressman.

What a classic case of Congress coming along well after the fact to solve a problem that has already largely solved itself by blowing up the market for it's services. The clowns who got the mortgage industry and it's clients into such a mess are now all working for short sale or mortgage loan modification companies, with promises to get them out of the mess that they put their clients into in the first place.

And what about the sleazy appraisers who were a part of that game? Many of them have now set up mortgage appraisal management companies, so that they can take a scrape by managing other appraisers. Many of these companies are reportedly run by ex-appraisers who lost their licenses due to fraud or other shady practices. Great qualification for setting up an appraisal management company; but then, there are no rules for that, so the wild, wild west just moved up a notch in the management stream. You gotta love the American entrepreneurial spirit.

Be afraid, be very afraid...

I'm afraid that Congress and Representative Barney Frank are out to help us again and that is something to be frightened about. It's not that they don't start out with our best interests at heart, it's just that so much politics and so many stakeholders get to put their 2 cents into the process that we - the intended recipients of benefits - end up being the victims of the laws. Some of that is due to unintended consequences; however the lobbyists in Washington seldom leave anything to chance, so most of the problems were in fact intended consequences put into the laws by one group or another.

You can read what the National Association of Realtors has to say about this at http://tiny.cc/6WOc2 and read one of the Wall Street Journal stories about testimony to the Congressional group - http://tiny.cc/Najf7 or one of the stories that is critical of the legislation that appeared over the weekend - http://tiny.cc/IqbbT

The issue is not whether or not something needs to be done to rein in the wild lending practices of the past (although those horses are already out of the barn), but, rather that the new laws will end up hurting consumers by being so restrictive that lenders will turn off credit or make it too hard to borrow. There needs to be a happy medium reached between the old 20% down or no loan mentality and the “no job, no money, no problem” mind set of the real estate bubble era.

Whether Congress can find that compromise is the thing to watch here. Unfortunately they have a long and sad history of passing legislation that seems to be tossing a life ring to drowning consumers, only to be discovered that the ring is made of concrete, because the lobbyist for the American Association of Concrete Dealers wrote the bill. Unfortunately, as has been widely reported, some of the people advising Congress on various aspects of the economic recovery are the same Wall Street clowns who got us into this mess in the first place. Heaven help us!

Rolling the dice with your home…

Lots of people who have homes that are unoccupied, whether because of a move or some other reason are choosing to roll the dice as far as insurance goes. I always advise clients with empty houses to check with their insurance agent about vacant home coverage, but few do. The sad truth is that is anything happens to the home and they make a claim, the claim will likely be denied. Most insurance companies have provisions right in the policy that cover occupancy of the home and most do not cover unoccupied homes.

There is good reason for those insurance company policies concerning vacant homes, since so many vacant homes are vandalized these days or suffer damage from improper winterization during the cold months. I suppose you can’t blame the insurance companies for wanting the house to be occupied. But you can blame the homeowners who abandon the homes to the vagrancy's of the times. It’s likely not a big concern of someone who has been foreclosed, since they are unlikely to still be paying on the policy anyway. But what of the job transferee or the retiree who has moved on? Those folks are talking a big gamble if they don’t get honest with their insurance companies and get a vacant home rider or policy.

Now I have to be honest here, these vacant home policies are more expensive than just your normal policy, so maybe that’s why so many homeowners avoid them. But think about it. Let’s say that you’ve moved on to your new job, leaving behind your empty house that is on the market. What if a pipe bursts and your basement floods and sits there for a couple of days before anyone notices water streaming out of the basement windows. Or, what if someone comes to look at your house with a Realtor and falls down your basement stairwell and hurts himself or herself. Or, what if the timer that you left with the lights on it to fool people about the house being empty shorts out and starts a fire that causes major damage. In all cases, you have a major financial problem on your hands and the insurance company will be quickly washing it’s hands of any responsibility, as soon as they find out that the house was unoccupied and that you had not notified them and made provisions for extra coverage.

Welcome the real world of insurance, my friend. You do not get coverage if you don’t pay for it and vacant house coverage is separate and distinct and at an extra cost from your normal homeowners policy. Don’t believe me. Call your homeowners policy company and ask them. There’s a good likelihood that they’ll tell you that they don’t even cover vacant homes and that your empty home is in fact bare of coverage already. Then ask yourself if you are willing to gamble with the largest single asset that you own. If you need more information on the special vacant home policies that some companies offer call your insurance agent; or, in Michigan call my Milford Team teammate Eric Chase at 734-662-0172 or email him at

Like a beacon in tough times...

I've actually used the beacon analogy here before, and now my company Real Estate One is using the beacon analogy in an advertising piece. It is apropos since there has been quite a bit of turmoil in the local real estate business, what with Century 21 Town 7 Country going into bankruptcy and shuttering some of it’s biggest offices. Neither it’s agents nor its customers can feel comfortable about that. So maybe Real Estate One is the equivalent of good comfort food in a market starving for stability.

The company ad points out some interesting facts of the history that Real Estate One has lived through in its 80 years in business:

TWO Depressions (including the Great Depression)

THREE Economic Booms

FIVE Wars

EIGHT Recessions

And, FOURTEEN Presidents



That’s quite an accomplishment, when you think about it and the company is still owned and operated by the founding family – the Elseas. Current CEO and patriarch Richard “Dick” Elsea took over from his father Staunton, who founded the company in 1927. Other brands also work under our Family of Companies. Johnstone and Johnstone, a well-respected Grosse Pointe firm established in 1919, and Max Broock Realtors, established in 1895, are now members of our company. For our client’s convenience, we also operate John Adams Mortgage Company, Capital Title Insurance Company, and Insurance One.

The nice thing about working for a stable and even growing company like this for agents like me is that I don’t have to worry all the time whether or not my company is going to survive. Real estate one is several orders of magnitude larger than our nearest competitors in Michigan, even though they work under big, impressive sounding national franchise names. The fact that they are all franchisees and all relatively small operations (our closest competitor has only 6 offices in Michigan, compared to our 65+ locations. We pretty much blanket the lower peninsula of Michigan.

Another nice thing is that our size allows us to give our agents leverage with the media and with application providers, so that a Real Estate One agent is always going to get a great price for whatever the company sponsors for them, such as newspaper advertising or agent productivity software. We even have great deals on healthcare, insurance, retirement plans and other benefits that small, mom-and pop franchise operations just can’t offer.

So, it’s good to be the leader, especially in hard times. Maybe we can be a beacon of stability and comfort for customers who have been rocked by enough fear uncertainty and doubt lately and who don’t need another thing to worry about – whether their real estate company will be around next week.

It was the best iof times...

The novel "A Tale of Two Cities" starts off "It was the worst of times, it was the best of times." I thought of that yesterday as I was perusing various real estate news sites. I spotted on headline that read, "Experts say we've bottomed out" and another "Economist says things will remain bad through the summer." Like the novel, I suppose it depends upon where you are and your point of view on things.

We do seem to be in a phase of this recession where things bounce up and down a little everyday, so maybe we are bouncing along the bottom. We get good news about decisions to delay toxic ARM resets right nest to stories about layoffs now causing most foreclosures. I'm still seeing foreclosure sales making up 70% of all sales, but I'm also seeing more owner-occupied homes in prices ranges above $200K sell. Is that a thaw in the deep freeze that those homes have been in?
I'm also getting calls from people who don't necessarily want to look just for foreclosed homes. Certainly they'd like to find a great deal on a foreclosed home that is in good condition; but more and more are actually more interested in getting the right house than just the greatest deal. Many are now realizing the work that might be involved in bringing a neglected house back up to snuff.

I currently have a couple of deals working, which hasn’t happened in quite a while and got a new listing over the last weekend, with two more in the hopper. So for me, things have picked up recently. We still need to get through the GM and Chrysler bankruptcies (if that’s what’s going to happen) and see what emerges on the other side, before outr market will truly start to settle down. So maybe for us we can say, “The worst of times were over, and the best of times were just ahead.” I certainly hope so.

Get your hands out of my pockets!

There seems to just be wave after wave of really disgusting news coming out lately about how we, as taxpayers and average citizens, are being picked clean by the clowns who caused the mess that we are in right now.

Lately we have seen several TV and newspaper articles about the excessive charges and interest rate increases on credit cards. I read one article that took the position that it’s our fault as credit card holders that we aren’t profitable enough for the card companies, especially if we pay off our cards on time. They need for us to be late, so that they can charge us late fees and make money on us. Ridiculous! Last night on the TV news, in an interview, the credit card industry spokesperson said that they have had to raise the rates on cards so that they can make a profit, in order to be able to pay back the government loans that bailed them out. So now it’s our fault for saddling them with those nasty bailout debts. Outrageous!

Today I read an article that says that lenders are deliberately holding foreclosed homes off the market as a means of artificially holding prices up (www.tinyurl.com/c3hk8y). Of course this too was couched in “it’s actually good fore the consumers to pay more” terms by the banks’ reps. They don’t want to see us all suffer more by having to give them more bailout money, if the foreclosed homes market sees a price collapse. I feel better, knowing that they are looking out for my best interests by charging me more. Gee, I wish the government had thought of that – Oh, wait, they already did.

So here we are with some credit card rates as high as 29% and foreclosed houses so few that multiple offers are being made on them and it’s all out fault! We should flog ourselves or fast or something in penance for our transgressions. Obviously we are not to be trusted with our own money, so these helpful people will take care of us by taking it from our spend thrifty pockets and putting it to work for the good of America or at least for the good of the banks. After all, we’ve been told over and over that what’s good for the banks is good for America. And we’re all patriots, right? Come on, empty out those pockets for America!

Layoff insurance comes to real estate

I read an interesting article in the Detroit Free Press this morning. It appears that the popular layoff insurance that the auto companies have been advertising has now come to real estate, at least in this area. Several big home builders, including Toll Brothers and our local big guy - Pulte Homes – have begun offering an insurance policy with their homes that covers from 4 to 6 months of house payments, if the buyer gets laid off. With so much uncertainty in our local economy and looming layoffs at the automakers and automotive suppliers, this is an attractive lure for those looking to buy a new home.

An even better deal being offered by a luxury condo complex in Atlanta was reported in the same article. Atlanta-based Cousins Properties is offering to refund all of their mortgage payments to buyers, if, after three years, the value of the condo that they buy should be appraised at less than what they paid for it. The company will also let buyers walk away from the property, if they lose their jobs or can’t make their mortgage payments anymore. They would lose their 5% down payment, but they would not have a foreclosure on their record. It’s sort of a pre-arranged deed-in-lieu arrangement – a “quick rinse” in government parlance.

Some real estate companies have also jumped into the layoff insurance game, as a way to encourage customers to buy. There is a non-profit called Rainy Day Foundation, which administers the insurance programs for builders and other companies making the offers. You can visit their site at http://www.rainydayfoundation.org .

While this all sounds great, the reality in our area is that giving someone 4-6 months to find a new job is not likely to help. We have unemployment well above 10%, with more to come, once GM declares bankruptcy and that ripples through the supplier base. In a bit of appropriate irony, the Free Press ran the bulk of the article about these programs right next to another article titled “Subprime swindlers preying on homeowners facing foreclosures.”

Are you seeing these mortgage insurance programs in your areas? Have they been effective in getting buyers off the fence? Inquiring minds want to know.

Bits and pieces and random thoughts...

There is a lot going on in real estate lately as the various players try to figure out what the government is doing and what that will mean to them. It's sort of like watching a peewee soccer game, as the entire group of kids just runs around the field chasing the ball, instead of playing a position. All the players, lenders, investors, buyers and sellers and even Raltors are chasing the Federal Bailout ball around the field and it is going in seemingly random directions.

***************************************

I saw an article in Business week this week in which Alan Greenspan is reported to have said " I have been going for 40 years or more with very considerable evidence that (my ideology) was working exceptionally well." Why anybody listens at all to that clown is beyond me. He, more than any other single individual, led this country down the garden path to ruin that it is now experiencing. They should also have his testimony where he said "I was wrong." Of course, even in that testimony he continued to defend his position as being largely correct. The Greenspan quote above was in a story titled "What good are economists anyway?" That is a valid question that was not well answered in the article. I think the role for economists is best saved as economic historians. They can look back on events that have transpired and, with great Monday-morning-quarterback insight, pontificate in learned terms about why that happened.

The most misleading self-proclaimed aspect about the profession of economists that they would have us all believe that it is somehow a science. It is at best a black art. People who are meteorologists have done a decent job of creating weather models that will predict with reasonable probability what the weather will be like in 2-3 days. Many economists claim to have created models for the economy, yet none could forecast what people without a high school education could have told them about the impending collapse of the economy.

As one looks back on the body of testimony that Alan Greenspan made before various Congressional committees it is just amazing that all of those people sat there lapping that drivel up as if they somehow understood and believed it. I would end watching every newscast snippet thinking – the guy used lots of big words to essentially say nothing.

***************************************

We are still running about 70% foreclosed houses as a percentage of total sales in this area. Now, a second, maybe bigger wave of foreclosures is starting to hit, now that the institutions that paused in their foreclosure processes to allow the government programs to be announced have resumed with foreclosures. A big change is that job loss has replaced toxic ARM mortgages as the biggest single reason for foreclosures. It sure looks like we’ll be in this foreclosure inventory glut for the rest of this year and into next.

***************************************
There are still programs that will give buyers 100% mortgages and even beyond – up to 106%. A program under the USDA (yes the same department that inspect our food supply) is set up to encourage rural development by allowing borrowers to get 100% loans to buy houses in rural areas. You may be surprised at what areas qualify for these loans. Go to http://www.rurdev.usda.gov/ and click on your state to see if your area qualifies. FHA also has loans available for more than 100%, which are to be used primarily to buy homes that need fixing up (most foreclosure homes). There are lots of rules and requirements for estimates on the work that needs to be done, but it is a great program for those willing to work their way through the process. You can get up to $25,000 to make improvements on the home that you are buying. Go to the FHA site for more details - http://fha-home-loans.com/home_improvement_fha_loans.htm for articles, a FAQ section and more on that. The biggest confusion seems to be around the definition of a first-time buyer for eligibility purposes for this program.

********************************************

As I reported yesterday, things are picking up in real estate in the Milford area. Some of that is just the natural spring bounce that we always get, but some is likely from pent-up demand in the market. I’m starting to get a few more buyers who want to look at normal,. owner-occupied houses and not just at foreclosures. That’s a good sign.

Getting busy

I had a happy problem today and yesterday. I was busy all day long, both days, showign houses. That kind of busy has been thge exception of late, so I'm happy. Sorry that I didn't get around to doing a proper blog post. There's lots to report on and react to in the news about real estate lately; although many of the programs that just kicked off this week will need some time before their impacts can be assessed.

I'll get back to regular post soon; hopefull by tommorrow. In the mean time, I have still been making Twitter posts (cutely called Tweets), so, if you wish, you can follow me there at www.twitter.com/normwerner.

The toughest generation to deal with...

Perhaps the toughest group to deal with in terms of pricing a home for sale these days is the group that most of the time in the best shape on the their mortgage - the Baby Boomers and Matures (a classification for those who are slightly older than the normal age-range associated with the Baby Boomer generation). Many of these homeowners have owned the same house since it was built in the 60's or 70's or 80's. Most did not fall to the temptation to cash out equity, so most owe little or nothing on the houses.

What these older homeowners did fall victim to were the stories of the steadily and rapidly increasing values for those houses in the late 90's and early 2000's. They may have even had an appraisal done. They sure seem to know the guy down the street that got $300K for his when he sold in 2001/2/3/4. And, they have a firm belief that they should be able to get that, too.

Let's look back for a moment. Most of these homes were built in a era when $70-80-90K was big money. Some may have even gone all out and spent $100K to get one with all of the extras of the day - deluxe Formica countertops, fake wood beams in the family room (which was paneled in oak or maple, of course), certainly the multicolored slate tile in the foyer. Over time perhaps a portion of the basement was “finished” by painting the block walls and putting down some good indoor-outdoor carpeting under the ping-pong table and maybe putting in a dropped ceiling.

You can tell it was built using all good stuff, because most of it is still there today, although the place may have been freshened up a bit by painting over the paneling in the family room. Maybe the kitchen cabinets have been replaced, but more likely just new doors were put on them. Perhaps granite countertops were put in, but just as likely that deluxe Formica has held up pretty well. And there was certainly no need to replace the turquoise bathtub and toilet in the upstairs bathroom.

Sound familiar from either side of the equation? It happens every day in this area. We have lots and lots of these homes that were built in the 60’s, 70’s and 80’s in southeastern Michigan, many of them built by our local success story – Pulte Homes. They are well built and have held up well. They were upscale at the time that they were built, not luxury-homes per say, but certainly more upscale than most subdivision homes of the time. Now hundreds of them are coming on the market, as the earliest stages of the Baby Boomer generation starts to retire and move or downsize.

So in walks Mr. Realtor and tells them that the house is “dated”, needs extensive updating and is likely only worth $180-200K on the market today, if that much. “Throw the bum out, they say. “The guy down the street got $300,000 for his house in 2003, I should be able to get close to that for mine.” So starts the tenuous relationship between the homeowner and representatives from the real estate industry. I say representatives, because this type of homeowner is likely to go through 2-3 Realtors before becoming realistic (worn down might better describe their mental state by then) enough to actually settle on a price that will allow the home to sell.

What to do…what to do? As a Realtor, I almost dread being the first listing agent for the house, because I know that I’m going to have to push and push to get the price down and that I’ll probably not even be around when it eventually does get to a price at which is will sell. It’s kind of a real estate mantra that you’re better off being the 2nd or 3rd Realtor to list a place like this than to be the 1st.

I think the best advice that I could give the homeowner is to make sure that they get 2-3 good CMA’s from local Realtors, maybe more; so that they get multiple opinions about the market price. I’d certainly advise them to be wary of any agent who walks in and immediately agrees with their price estimate, without even doing a CMA – they are just desperate for listings and are not likely to do a good marketing job either.

And homeowners should look at the logic and data behind the CMA’s that you get. Having a raft of “Comps” is expected, but take a look at the details for each house to see whether the Comps are really meaningful. I have actually stopped using the word Comparables (Comps) and use the term “Similar homes” instead, because I have seldom been in all of the houses that I might want to use for the market analysis.

In the end, the Dr Phil approach – Let’s Get Real – might be the best, in dealing with these clients. I try to honestly lay out all of the facts, the CMA numbers and the details on the “similar homes” that I used, plus I show them the market that they will be competing in (sometimes we might actually go visit a couple of similar active homes). If, after all that, I cannot get agreement on a reasonable market price; it’s time to suck it up, thank them for the opportunity and leave without the listing. Maybe they’ll call me when a year or so passes and they’ve been through 2-3 Realtors. Who knows, maybe the retro look will be “in” by then and turquoise bathrooms will be back.

Downsizing your home means downsizing your stuff

The economic downturn and the housing bust have combined to get lots of people thinking about it, planning for it or actually doing it – downsizing their living space. Certainly aging Baby Boomers have started planning for retirement and many times that means downsizing into smaller, easier to maintain homes that can better accommodate bodies that are growing weary and pained and can’t do lots of the stairs any more.

Any move is going to be somewhat traumatic for many, but a downsizing move will be all the more so, because of the changes in lifestyle that it may require and of course the need to deal with all of your excess stuff – the accumulated treasures and debris of 20-30-40 years of homeownership. Here’s some good advice from a recent MSN.com article on downsizing By Christopher Solomon of MSN Real Estate. Read the entire article at www.tinyurl.com/cxlhup. Christopher deals with some of the lifestyle issues in the article that won’t be covered here. I wanted to focus upon his advice about dealing with the stuff issue. What to take — and what to leave.

If you need some not-so-gentle advice about whether to take that La-Z-Boy to the new house, Author Lauri Ward, owner of the New York- and Florida-based decorating and interior design firm Use What You Have, and author of “Downsizing Your Home with Style: Living Well In a Smaller Space, has broken down furniture and furnishings into three categories: Always take it, sometimes take it, never take it. Here’s her advice:

Always take it with you:
Anything that has storage in it.
Pairs of lamps; they add balance.
Ottomans; create cozy spaces.
Armless sofas, or ones with lower arms, to make the room feel more spacious. ("Here's a handy rhyme to help you remember: 'Keep a sofa with chairs, or love seats in pairs,' " says Ward.)
Bookcases; they're visually interesting; they hold lots of stuff, and they can make great room dividers.
Mirrors; they make a places appear brighter and bigger; lean it on a wall opposite good light and a view, and a mirror will reflect both and make a place feel larger.
Furniture on wheels or casters; it adds flexibility.
Nesting tables or furniture that stacks.

Sometimes take it with you:
Love seats.
Small desks or writing tables; they can often be used in a kitchen or a guest room.
Modular seating; it can be reconfigured, or even broken up and used in different rooms.
Throw pillows; if they're in good condition and work well with the color scheme, they can add comfort and a visual interest.
Ceiling fans, so long as they hug the ceiling close.

Never take these with you:
Unloved books.
Extraneous bric-a-brac.
Artwork that's not beloved.
Small, never-used appliances.
Doubles of anything.
Square or rectangular glass coffee tables; they're too bulky, says Ward.
Sofas more than 96 inches in length.
Big plants and potted trees.
Unused pianos or other instruments.
Worn rugs, except expensive Orientals.
Tired stuff: old audio gear, incomplete dishes, old magazines, worn-out bedding, tax records and receipts more than seven years old.

A lot of that advice is good for any type of move. A good part of why we end up with so much stuff over time is not throwing out stuff when we move And then never using it again. When my wife and I moved to Milford in 1999, we discovered boxes at our old house that we had moved to Michigan from Indiana in 1978 and never unpacked. We finally concluded that we really didn’t need to keep any of that stuff and pitched in for the latest move.

So, I guess one of the things to plan, when planning for a downsizing move is one huge garage sale to get rid of your excess stuff. And whatever is left over give away, do not haul it back into the house. I’ve seen too many sad examples of basements packed floor to ceiling with unused and excess stuff, just because the owners couldn’t bring themselves to part with it. I hear things like, “Well I’m going to give it to my kids.” Your kids don’t want your old stuff, unless you have some really valuable antiques or a few family heirlooms. If you hold on to all of that stuff until you die, you just make the process of them getting rid of it and selling the house that much more difficult. Get rid of it now!

Baking depreciation into appraisals

Wow, I missed yesterday altogether! Sorry about that. I got caught up in a tempest in a teapot discussion going on over in the National Association of Realtors Group on LinkedIn that I post to almost everyday, too. The topic seemed innocent enough - the practice, apparently just recently "discovered" by some, of appraisers baking a home's appreciation or depreciation into their appraisals.

I opined that we are were more than happy to have them bake-in 6 months of appreciation when homes were going in that direction; but, now everyone is upset when they take 3-6 months of depreciation into account when setting a value for the bank. Not fair, was the outcry. I'm not sure who thought that the appraisal process was ever "fair" or fair to whom. An appraisal is, after all, an attempt by the bank (and paid for by the bank) to assess the risk inherent in the loan. A part of the risk (and one could easily make the case that it is the biggest part right now) is how fast the price is moving with the market and in what direction. The appraisal is not done for the benefit of the buyer or the seller, but for the lender, because it is the lender who is putting the most at risk in most purchases.

So, for the last couple of years, appraisers have been under instructions from the banks on how to account for the risk fo depreciation of the assets that they are about to lend on. Initially there were instructions to take about 5% off every appraised value to account for depreciation. Now, with values dropping between 1 - 1.5% per month, many appraisers have been instructed to take 6 months worth of whatever the local depreciation factor is, as a way to factor in the risk of lost value. Even with that, many banks now find themselves upside down on loans that they made only 8-12 months ago.

So the posts fly back and forth – it’s not fair…they should do a real time appraisal…what if they miss the turn around…how can this be…oh, whoa is me, the sky is falling. I’m trying to make the point, sort of like in the movie The Godfather, that it’s not personal, it’s just business. The banks have to find a way to factor in the risks involved in real estate loans right now and asking the local appraisers to factor in 3-6 months of the current, local rate of depreciation may be the best and most fair way to do that. Those who don’t want that to happen are like the children who play hide and seek and yell out “Don’t see me”, when the child who is IT approaches. They don’t want the banks to look at what is staring them in the face. That’s what got us into this mess to begin with. But, maybe you have a different point of view on this. What do you think? Should the banks and appraisers be allowed to bake-in some amount of depreciation when valuing a home for a loan?

How much house is enough?

I opined recently about cheap being relative when it comes to homes and talked about showing houses in the $10-20K range lately. Admittedly those were foreclosed houses in pretty poor shape, but most had a few things in common that got me to thinking about how much house is enough. Most of those homes were built in the era from 1930-1950 and most had about 900-1000 Sq Ft of living space, with most having 2 or 3 bedrooms, a living room a kitchen with eat-in area and a bathroom. Some have basements and some are on crawls or slabs.

I grew up in a house like that. I think we had about 1,000 Sq1 Ft. It was a three bedroom ranch with 1 bath a living room and a kitchen/dining area. My sister and I were perfectly happy growing up in that house, which my dad bought new (it had been the model home for a sub, so he got a deal in it) in the mid-1950’s. Our house was on a slab and had those vaulted ceilings that were popular back then. Of course, being on a slab meant that the mechanicals for the house shared the living space, which they did, right next to the laundry area.

Many of the houses built in the 20’s, 30’s 40’s and 50’s were built with hardwood floors, coved ceilings (most with plaster walls), arched doorways between rooms and other cute features. Most bedrooms were very small by today’s standards with 10’ X 10’ or 10’ X 8’ being fairly standard. Of course, closets were small back then too. And, no one could imagine any family needing more than one automobile; so, single-car garages were the order of the day. Many of these homes were built in platted little subs or on city streets with 50’-60’ wide lots that were about twice as deep as wide; so. There was a small front yard and maybe a fenced in back yard.

I though back to whether or not I felt somehow deprived because I didn’t live in a bigger house and can’t recall ever feeling that way. I remember that we occasionally visited someone who lived in a bigger house and thinking that it must be nice to have a little more room or a basement to store stuff in (our stuff went out into the garage, once my dad built one – we just had a car port originally). With smaller bedrooms, my sister and I were restricted to each having a chest of drawers and a desk. In her case that was a dressing table that she also used as a desk. And we both had single beds, which was about all one could have in those small bedrooms.

The recent housing bust has put a lot of the older, smaller homes on the market and they are starting to be re-discovered by the Millenials – the grandsons and granddaughters of the Baby Boomers. The youngest buyer set is also the most practical when it comes to a first-time home buy. Many of them have come to grips with the current economy and its impact on their earning and buying power. So they are buying the small houses and adding their own Crate and Barrel decorating touches to turn them into nice homes. Since many of these homes are located in the closer-in suburbs or even within the boundaries of larger cities, they are fueling the trend towards reversing urban sprawl. Maybe this is a back to the future trend in housing. What’s happening with small homes in your areas? Do you see the same trends, especially with the Millenials?

Cheap is realtive...

I saw an article on CNN Money recently entitled "The Power of Cheap." It was a story about people in Florida being able to afford houses because they are now "cheap", where cheap was defined as around $100-200K. That reminded me of a conversation that I overheard between two Realtors from California lamenting that they had to waste their time with the cheap $400K foreclosed or short sale homes that were now everywhere out there. Cheap in California apparently is anything under $500K.

These people don't know what cheap is! I'm regularly showing houses in the $10-20K range here in the Detroit area. I feel fortunate if I find a buyer who wants to look as high as $200K and blessed for anything in the $300K range or above. So cheap is surely relative to the market that one is in. How many of you would even get in your cars for a $10-20K sale? What is "cheap" in your markets? How are you dealing with or coping with what is cheap in your markets?

I posted this blog on LinkedIn, too, and have had several replies, some of which I have copied below:

"Our minimum price range for new buyers is about $150,000. I just reduced it from $200,000. Our average sale is about $300,000. This is Maryland Western Shore and Northern Virginia."

I have to wonder what they do if a first-time buyer comes in and wants to look at a $100,000 house, turn them away?

"Cheap here is $500,000. When I moved here 10 years ago, cheap was $200,000." the author was writing from Jackson, Wyoming

Ok Norm, I am the Queen of the 20k and 30k houses you can be the King. Actually some have been quite ok. The author is a Realtor in Ontario, Oregon

Apparently things are about as bad in Oregon as they are here in the Detroit area.

Well, gotta go. There's a $10,000 house out there somewhere for one of my clients and I'm gonna find it.

How are local builders doing?

I know that many Realtors are having a tough time holding on in the current economy and I got to thinking about how builders are doing, especially those smaller, local builders that exist in every corner of America.

Locally we have 5-6 builders who would normally be engaged in small developments 5,10 maybe 15 lots or condos. Right now only 2 or 3 are really building anything and even those projects are at a standstill, while the builders wait for orders (they finished the models and then stopped). We have a few larger stalled out developments in the area and in a couple of cases the companies involved either exited the state or went belly up or both. Many builders sold or auctioned off the lots that they owned and abandoned the developments, often leaving the early buyers in the developments to fend for themselves.

One big builder - Toll Brothers - is still developing and building in this area, albeit at a very slow pace right now. I can't imagine that there is a huge demand for upscale houses right now, but that end of the market seems to be a little more recession-proof than the middle and bottom ends. There is also a fair supply of finished or partially finished new-builds on the market in the area, perhaps enough to last for a year at the current sales pace.

Many of the small builders have reverted to doing mostly remodeling jobs, just to keep their people busy and to generate some cash flow, but even that market is tight right now. I'm sure that a number of people who would have called themselves builders or at least would have claimed to be in the building trades are now working at other jobs, where ever they can find them.

What are the builders in your areas doing? Are you seeing a resurgence in development and building yet? Have builders in your area switched gears to build smaller, more affordable houses? I read that some in Texas have done that already. That would seem to make sense.

Madoff mansion loses value...Pulte buys Centex...Class action suite over drywall

It was a relatively slow news day in real estate yesterday. Still there were a few tid bits that catch one's eye...

************************************************************************************
Looks like Bernie Madoff's Florida mansion lost nearly $2 million in value over a relatively short period:

Even Bernie Madoff isn't exempt from the real estate slump. The Florida mansion that prosecutors seized from the Wall Street swindler appears to have lost a big chunk of its value since Palm Beach County officials assessed its worth last year at $9.3 million.

A new appraisal that federal officials had done in March pegged the property's likely market price at $7.45 million.

***********************************************************************************
Attorneys with Higer Lichter Givner, The Blumstein Law Firm and Podhurst Orseck have filed a federal class action on behalf of Florida homeowners Janet Morris-Chin and Dajan Green against the foreign manufacturer of defective Chinese drywall, Knauf Plasterboard Tianjin Co. Ltd., and the foreign company that distributed it in the United States, Rothchilt Int'l., LTD.

*************************************************************************************
Pulte Homes has agreed to acquire Centex Corp. - creating the nation's largest homebuilding company - in a stock transaction worth $3.1 billion, including $1.8 billion of debt. The combined company will use the Pulte name, with Dugas becoming chairman, president and CEO. Centex Chairman and Chief Executive Officer Timothy Eller will be vice chairman. The new company will be based in Pulte's home of Bloomfield Hills, Mich. The merged company will reach into 59 markets, including 29 states and the District of Columbia.

*************************************************************************************
Maybe Bernie Madof can join in the class action law suit against eh Chinese drywall and pick up a few bucks to help payback the fold he swindled.

Certainly, good luck to the home town Pulte Corporation. Let's hope the new build drought ends soon and they get back to building new homes.

Some economists are starting to talk about the end of the current recession, which is good news. Usually they wait until well after a turn in the economy and then pontificate that they knew it all along.

Are we at the “Coulda, Woulda, Shoulda” point in this housing market?

From a story in CNNMoney, by Chris Isidore (04/06/2009) comes news that - Top Economists Say Recovery Has Begun.

Economic recovery is about making people feel more confident, says Mark Zandi, chief economist of Moody’s Economy.com. Zandi evidenced increasing home sales and gains in the stock market are some promising signs that the worst is over and people will start spending again.

Robert Brusca of FAO Economics is predicting strong growth in the last half of the year and a quick recovery for the labor market. "You've lost 5 million jobs. It shouldn't be hard to put 2.5 million jobs back on rather quickly after you hit bottom," he said.

Joseph Carson, chief economist at AllianceBernstein, calls improving home sales, a rising stock market, and better-than-expected retail sales in February and March good signs of a turnaround. By the time President Obama’s stimulus package takes effect, the economy will be ready, he says.

Of course Lawrence Yun, the National Association of Realtors (NAR) economist is also optimistic that we may have reached bottom and that an upturn will begin in the second half of this year.

So maybe we’re at the “coulda, woulda, shoulda” point, you know that place that you look back on later in life and say things like, “I coulda bought Microsoft stock in 1984, instead of the GM stock that I bought.” Or maybe, “I woulda bought that Microsoft stock, but I just spent all of my money on that AIG stock.” Or perhaps we might lament, “I sholda bought that Microsoft stock instead of taking that hot tip on Lehman Brothers stock, instead.”

In real estate we are likely at that coulda, woulda, shoulda point. Mortgage rates have never been lower. Housing prices are at or near the bottom and there is lots of inventory to chose from on the market. In eceonomics that woud be called a tipping point - the point at which things changed. It is impossible to tell exactly when we will reach bottom or how fast we might see a recovery of home values, once the rebound happens. But, one thing is certain – lots of people will look back on this moment in time and slap themselves on the forehead and say, "I coulda, woulda, shoulda bought that house that I wanted back then." Don’t be one of them.

If you are I a position to buy, now is the time to act. Otherwise, I’ll be telling you, “you know you coulda bought that house for thousands less a little while a go, if you only woulda acted when I advised that you shoulda.”

Good advice in real estate articles...

I read a couple of interesting real estate news articles today. One reported on a recent study that showed that the re-default rate for people who successfully when through a loan modification where their loan payment are reduced by 10% or more are much less likely to default than if they did not get the loan mod or were given more with less than 10% difference. The program is set up to try to get people's house payments at or below 31% of their gross income. The redefault rate was 26% after 9 months, vs. 50% if the payment is left at the old rate or raised. Read the whole article at www.tinyurl.cm/cu9ea6.

The other article was on a topic that I've posted about here numerous times - avoiding getting scammed by foreclosure help con artists. An unfortunately consequence of the explosion in foreclosures has been the increase in opportunistic con men who prey on the distressed homeowners. Read this article at www.tinyurl.com/cu9ea6. As I've stated here time after time, beware the offers to buy your house and then let you live in it while you work things out. Those are almost always cons. A good percentage of so-called short sales specialists are also out to con the homeowner, either out of money to finance the workout or out of the home itself. There are honest short sales agent and short sales services out there, but do your homework before signing up and always read everything before you sign anything.

Good news and a new attitude…

There was good news in an article by Alan Zibel, Associated Press, that appeared in papers on Sunday.

Rates on 30-year mortgages fell to the lowest level on record for the second consecutive week after the Federal Reserve initiated a new effort to assist the staggering U.S. housing market. Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.78 percent from 4.85 percent the previous week. It was the lowest in the history of Freddie Mac's survey, which dates to 1971. Rates are down by more than a full percentage point from a year ago.

The average rate on a 15-year fixed-rate mortgage dropped to 4.52 percent last week from 4.58 percent the previous week, according to Freddie Mac. Rates on five-year adjustable-rate mortgages fell to 4.92 percent from 4.96 percent, and rates on one-year adjustable-rate mortgages fell to 4.75 percent from 4.85 percent. The rates do not include points. The nationwide fee averaged 0.7 of a point last week for all mortgages in Freddie Mac's survey except for one-year adjustable mortgages, which had an average fee of 0.6 of a point.

And from the Jack’s Winning Words Blog came this tid bit of advice on attitude - "Once you replace negative thoughts with positive ones, you'll start having positive results." (Willie Nelson). Jack opined that he never thought of Willie as a philosopher, but he did have some good things to say as well as to sing.

We certainly have about the most positive mortgage environment that we could have right now and we have lots of inventory to show, so if we go at this with a positive attitude and positive thoughts, we should see positive results. Remember that you will achieve what you believe that you will achieve, so be positive and believe in yourself and you will achieve success. Got to go now and find a few of my old Willie Nelson albums. Soon, I’ll be “on the road again”; the road to success.

Lenders Cut Credit for Reliable Borrowers

Cathy Chu wrote in Friday’s USA Today that lenders are cutting credit lines and pushing down credit limits on their best-paying customers, which ultimately can reduce these frugal customers’ abilities to get mortgages.A new study by Fair Isaac says 11 percent of U.S. consumers had their access to credit trimmed during the six months ending last October, even though they pay their bills on time and have good credit scores. That’s more than double the 5 percent of consumers with poor credit whose access to credit was reduced in the same time frame.

People who pay on time aren’t very profitable for lenders, says John Ulzheimer, president of consumer education for Credit.com, because they don’t carry balances or pay late fees.The affect of these cutbacks is cumulative, credit experts say. When lenders close accounts or cut limits, it can hurt consumers’ credit scores and make it harder for these good payers to get other loans, including mortgages.

So is this a classic case dammed if you do and dammed if you don’t or maybe more of a Catch-22. I suspect it’s the latter. What the lenders apparently want is someone who struggles along paying something every month on mounting debt amounts and who occasionally is late and has to pay a penalty. Sounds very close to the people who’ve finally hit a hard spot and gone into foreclosure or bankruptcy doesn’t it?

So if you’ve solvent and prudent, don’t bother to get a credit card, because they’ll just cancel you later for being a bad customer and paying the bill every month and that cancellation will cost you on your credit score. Let’s see. They couldn’t call you a deadbeat, since you paid the card balance off all the time. They’ll have to invent a new term for you. What would you call this dangerous perpetrator of an overly good payment history? Spoilsport? Showoff? What?

Now I’ll have to consider being late on a few payments so that I stay in the good graces of my credit card companies. Wow, I sure don’t want to tick them off by paying on time. Who knew that was so evil? Do your part to save America’s credit card companies and be late, too! Come on, we can do it. Let’s all pull together on this.

Mortgage rates are down, but fees are up…

I read a good article by Amy Hoak at the Wall Street Journal Market Watch Web site, from which I took some of this post. Even though mortgage rates are at some of the lowest levels in years, borrowers may end up paying more due to the increased fees being charged by wary lenders. New rules by Freddie Mac and Fannie Mae are upping the fees for borrowers with less than perfect credit, those in the mortgage industry say. Other increased costs reflect the uncertainty in the mortgage market, as lenders try to reduce their risk and anticipate rates. New risk-based pricing from Freddie Mac and Fannie Mae adds fees to mortgages based on a borrower's credit score. In order to avoid the extra fees, borrowers need to have a FICO score of 740 or higher

The new fees, called Loan Level Price Adjustments, have been an unwelcome surprise for some homeowners interested in taking advantage of low rates. Other fee increases for borrowers today include those on underwriting and processing, which range from $300 to $400 on average. It takes more work and expertise to process a fully documented file than the no-document loans that were popular a couple of years back, and that is reflected in the higher charges. Those attempting a refinance can also expect to pay an appraisal fee -- maybe $300 or so -- up front. Mortgage rate lock fees are also becoming more common.
In total, mortgage fees could cost you 3% or so of the loan amount, according to HSH Associates, a mortgage-information publisher.

For sellers in our area, title and settlement fees, as well as the real-estate transfer taxes charged by cities and counties, make up the bulk of the fees that are charged to the seller in a sale. The total of all of those fees is about 1.5% of the sale price. Of course the seller pays the commission, too, which make up the bulk of his cost to sell.

With the advent of higher and more fees on the buyer side it all the more important to get a good faith estimate in writing from the lender, so that you aren’t surprised at the closing table. And make sure that you understand other fees that you’ve agreed to in the fine print of the listing and sales contracts. Most brokers are now charging a fee to help cover their costs, which some call a broker compliance fee and some have given other names. Both the buyer and selling side brokers will likely have a fee that is to be paid by the party that they represent in the transaction.

Many REO brokers who handle foreclosed houses now are trying to collect a special REO Management fee, which is there to cover some of their costs for managing the property and to cover the fact that the bank isn’t paying them enough (at least in their minds) for that work. That is a sore point with many buyers, since the REO Brokers are writing it into the sales contracts as a buyer paid fee. There have been lots of closing table arguments over that fee and it is a subject of great controversy amongst local Realtors.

Get new eyes to get new ideas…

“The real voyage of discovery consists not in seeking new landscapes but in having new eyes.” (Marcel Proust) from my favorite Blog – Jack’s Winning Words. I thought of a recent long discussion string about Open Houses, in which I participated in the LinkedIn.com National Association of Realtors blog. There were many good ideas and comments there; a few from people who may have looked at Open Houses with new eyes.

I have opined before (maybe whined before would be more accurate) about the people who jumped on the foreclosed homes bandwagon early and thus left many of us “regular Realtors” behind. They saw the crisis that we are in with new eyes, before the rest of us could see anything but a hassle in working with the banks. Now they are the ones making most of the money in real estate, while the rest of us struggle. Of course that too will end, so we must keep our eyes open for the new opportunities that will eventually result.

I am hopeful that the trend that is also underway for buyers to shift their emphasis to the Web will eventually pay off for me, since I have invested heavily in that medium. Certainly what is happening across the country to newspapers seems to portend a dramatic shift in where people get their news and other information from these days. One can only hope that this applies to the real estate business, too. I think it does.

If that is true, then other aspects of the Internet world, like Social Networks will become all the more important. There are certainly increasing references in the media about the “blogosphere”, the huge on-line pool of blogs which provides information and opinions about everything and everyone these days. These days, when one Googles (see how ubiquitous the Internet world has become – now the search engine Google is a verb, too) a topic these days, one is likely to get a whole bunch of Blog sites as part of the search results. For fun, Google your own name and see what comes back.

So, I’m trying out several pairs of new eyes – Facebook, LinkedIn, ActiveRain, Twitter and my own MilfordRealEstate.Blogspot.com site, as well as my Web sites – to see if I can see things differently, and maybe better this time. Are you trying to look through “new eyes” too? What are you seeing with your new eyes?

Banks walking away…

A recent New York Times article by Susan Saulny and Published: March 29, 2009, documented several cases of a relatively new phenomenon – banks just walking away from foreclosed properties. Susan documented several cases around the country where banks had started foreclosure processes and even scheduled the sheriff’s sale, only to cancel that sale at the last minute and then quietly walk away.

In the cases that Ms. Saulny documented the previous owners had already moved out and in at least one case the house had been vandalized and stripped by thieves. There in lays the root of the problem – the houses were then worth less than the banks thought it would cost them to pursue the full course of the foreclosure. That’s not hard to see, Locally we have foreclosed homes selling for under $5,000 in Detroit and Pontiac (and likely in Ypsilanti). That’s below what one would think the land is worth; however, there is the cost of tearing down the existing structure, which could exceed the cost of the house. And if one did create a vacant lot right now, that likely wouldn’t sell either, since there is little building going on and that lot would be in the middle of a depressed area.

The second shoe that the article pointed out has dropped on the former homeowners is that the cities where these homes are located can’t find anyone else to hold responsible, so they go after the former owners with bills for cleanup or maintenance or for violation of other ordinances. They do that because the sheriff’s sale didn’t take place and the title is still in the name of the previous owner. Wouldn’t that be a kick in the pants? You just got thrown out of your house and now the city says you’re responsible for the stripped hulk that remains. In some of the cases documented by the Times article the lender had gone out of business ands there was no way to track anybody else down.

I guess people who get foreclosed should try to stay in place as long as possible, to see whether the bank is really going to go all the way through the process. In Michigan a foreclosed owner gets to remain in the house rent-free for 6 months after the Sheriff’s sale and even at the end of that “redemption period” would get a few days notice to move upon eviction proceedings.

It’s not clear what the real legal status of these homes would be, if the bank walks away. I would assume that, if the previous owner had kept current on things like taxes and utilities, and there had been no Sheriff’s sale, then the title remains with the previous owner and they could continue to occupy the place. They might have trouble trying to sell it though, since there would likely not be any discharge of the foreclosure ever recorded. This is probably legal fodder for many court cases. Have you seen any of this happening where you are? What was the outcome?

Back to the future…

Back on September 16, 2008, I opined that what we were in the midst of was a fundamental reset of our way of life in America. I ventured that our home values and stock portfolio values were resetting; and our expectations about jobs and job security were resetting. Even our expectations about the future of our children was in the process of a rest; which, in a later blog post, I indicated they were adapting to better than most of us in the Boomer and older generations.

Yesterday, in my weekly Iconoculture newsletter – the Iconowatch - the story below, by Josh Kimball , Executive Editor, headlined the newsletter. It’s sort of déjà vu all over again.

THE REVALUATION REVOLUTION

At Iconoculture, we tackle the issues shaping the culture. In 2008, for our inaugural Cultural Zeitgeist series, we looked at some biggies: the finitude of the earth's resources ("A Finite Future"), the changing station of America in the realms of geopolitics and global commerce ("The Centerless World"), and the dynamics of fear as a consumer motivator ("The Fear Economy"), along with several other topics. This year, my colleagues Derek Stubbs and Hans Eisenbeis led an Iconoculture team that looked into the foremost shift changing our world right now. And if you're eagerly awaiting the big reveal, you're living with the ostriches.

For more than a year, Iconoculture has been covering seismic shifts taking place the world over. For months, little else has rippled the mainstream news. Home prices have fallen, unemployment has risen, America is busting out bailouts, and the acronym FUBAR pretty much sums up the whole thing.

In "Consumer Reset: From Recession to Revaluation," our Cultural Zeitgeist team examines how the financial crisis — and the conversation and attitudes that have since sprung up around it — will shape the culture for years to come. From the consumer to the community to the corporation, Americans and America’s institutions have quickly scaled back their expectations. We've changed what we expect to receive from our work and our investments, and even what we can expect from our future. What to make of this time of chaos? In short: Let's revaluate.

You can see all of Iconoculture’s products and services at http://www.iconoculturre.com/

Of course, being a Realtor, I look at things from the perspective of how this will affect my business and me. It certainly has impacted my business already, with most buyers looking for cheap houses (primarily foreclosures) or to lease something while they rebuild their credit. All of my listings right now are regular owner-occupied homes, for which the market has stretched out remarkably. From an earnings perspective that has meant prolonged sales cycles and severely decreased paychecks – kind of a double whammy.

I’m already seeing articles that support the opinion that I had last year that builders would need to start building smaller, more affordable homes, in order toe reenter the housing market, following this reset. One builder in Texas is now building so-called tiny homes – those in the 700-900 Sq Ft range, because that’s what’s selling as an alternative to renting an apartment.

When I made my post last September I stated that I didn’t know where we’d land when the dust has all settled. I knew from personal experience that my open home had reset to its 1999 price and in a recent office meeting another agent told us that she had just listed a house that she last sold in 1999 to the current owners and she re-listed it for the same price as she had sold it to them. I’m not sure that we’re not on a path that is going to blow right past 1999 and end up with values being reset at the 1980s levels or even further back.

What haven’t come down as fast are the materials and labor costs to build or rebuild similar homes; so, we have homes that are valued well below their current replacement costs. I suppose that the cost to build will eventually slide down too, but we may have this upside-down scenario on existing homes for years. A similar thing happened in the automotive industry recently, when used cars of certain makes (usually luxury brands like Mercedes or BMW) were actually higher than the cost to buy a brand new car.

What this may portend is a scenario where we have a glut of fairly recently built McMansions on the market at prices that make them less attractive than owning a smaller new-build. Why? Several reasons. Owners who are upside down on the place and who can’t afford to (or won’t) take a loss on the place, so they keep the process high; or, buyers who would love to have the place but who can’t afford the taxes and upkeep bills that go with the larger houses.

Then there is the fundamental reset taking place in the Middle Class, which is having to get real about all of the things that seemed to be both in reach and affordable when credit was cheap and jobs were safe. No more garages full of toys – motorcycles, snowmobiles, jet skis and the like – and no more huge house in the gated subs for the guys who are now sweating out the next round of the government bailouts.

In prior Iconowatch newsletters they have documented the ability of the youngest set of adults – the group that they call the Millennials – there has already been a basic reset of values, with these folks expecting less and accepting life with less. The children of the Boomer, the Gen-Xers in Iconoculture-speak were still looking to buy the big house and have the toys, too. That’s now changing.

So the big reset is on America. Where we land is still anybody’s guess. It now “feels” to me like we are maybe in the process of shooting well under where we will end up. It’s sort of like the old artillery spotting exercise – fire one over, then fire one under then adjust to the middle and fire for effect. Where are you in that exercise in your area?