The good ole days were always that good...

“How easy it is to think that the good old days were only good.” (Herb Chilstrom), from the Jack’s Winning Word blog.


Herb had a good point. We hear a lot about the good ole days in real estate and we tend to think about and mention only the fond memories; however, all was not always good in the old days. Those who have been in the business for longer than the last 8-10 years can tell stories that will make you cringe at the thought of going through what they went through in some of those old days, especially the days of hyper-inflation when mortgage rates were well above 10%.

I’m not sure that I can point back to good ole days, since I‘ve only been doing real estate for 10 years. It seems to me that I’ve been in what has consistently been described as a buyers market for all of that time, although certainly not as bad as it has been for the last few years. I’ve heard stories about the days when there were sellers markets and how frenetic the pace was back then, with bidding wars for almost every house. The Realtors who lived through that era don’t make it sound all that good either.

I suppose the best that one can hope for, in terms of perhaps a rational market, would be a “normal” market, whatever that it. I’ve seen differing definitions of what a “normal” market might look like, usually expressed in terms of inventory levels, days on market levels, mortgage rate levels, a balance between buyers and sellers and other factors. It must be a rather elusive mix because I haven’t seen it in 10 years. Perhaps the balanced market is like Bigfoot, often talked about but seldom, if ever, seen.

I suspect that people describing the “normal market” are actually reminiscing about some time in their personal lives that they remember as happy times and they associate those times with the real estate market. You really can’t turn back the clock, so longing for the good ole days is really a waste of time. Better that you should put that energy into figuring out how to deal with the days that are in front of you – for some, these are the “good ole days” that we’ll all tell our grandchildren about some day.

Recurring themes – renewed hope…

I had occasion to go back over the last three years of postings to this blog recently and what jumped out at me was the recurring theme at this time of year for the last three years running – the bottom is near and things are about to get better.

It was actually hard to believe that I’ve been writing about this recession and its impact on the housing market for that long. Post after post was about the foreclosure mess and the mess that it has caused in the housing industry. I did see a few post back in the 08 and 09 that foresaw the current “new reality” situation that we are experiencing right now. I called it a fundamental reset of the American way of life in those posts. Perhaps that was a bit over dramatic but the basic premise – that things had changed permanently and that we would never return to the “the good ole days” turned out to be true (at least here in Michigan).

There were a few other themes that seem to have been consistent over the three years –

The ineptitude of government at the state and federal levels to deal with the issues at hand; with a running litany of alphabet soup programs HAFA, HAMP, HA-Whatever.
The ability of the scammers and sleazy operators in the banking and mortgage business to stay ahead of the regulators and to find new ways to rip people off during hard time.
The dramatic changes in the real estate industry as home values fell and as more and more practitioners turned to focusing on the distressed home market.
The failure of homeowners to accept and deal with the sudden loss in values of their major investment.
The unfortunate education of a whole new class of lowball buyers who are out trying to steal houses from the unfortunate foreclosed homeowners.
A recurring headline (used at least 5 times) of “Are we there yet?” as we all searched for the elusive bottom of this dreadful market.

Of course there were also lots of posts that encouraged hope and finding a positive attitude amidst all of the carnage. One cannot be forever the pessimist, after all.

Although I have been proven wrong for three years in a row, I am convinced that we are there now – bumping along the bottom and about to start climbing back. There are lots of positive indicators, from increases in housing starts and sales increases (albeit inconsistent, yet), to stories about the economy in general being back on track. In Michigan we were the first into the tank and many predict will be the last one out; however, even here we have some indication that the worst is over. Two of our local three automakers have been through their catharsis events (bankruptcy) and have returned to the living. The resulting ripples through our supplier companies are settling down and life is settling back into what will be the “new normal”. I’m even starting to see a trickle of move-up buyers cautiously re-entering the market – something that has been largely missing for almost two years now.

So, as we head into the Holiday season and I get to write my annual “looking back” and “looking ahead” posts, I’ll be dragging out the old theses about how it seems that the worst is over and the year ahead is going to be better. Hopefully I won’t look back o that someday and wonder, “What was I thinking?”

And when they got there the cupboard was bare...

That line from an old nursery rhyme might well be used to describe the current real estate market in our area. For reasons that likely includes a good deal of disgust over what has happen to home values; the inventory of homes for sale in my little patch of the market is very low, maybe even historically low; especially in the "sweet spot" of this market - the $200-$300K range.

Traditionally that $200-300K sweet spot is the most active part of our market and represents those move-up buyers who are making their second home purchase - moving out of their first home, their starter home. That's just not happening right now due to concerns about employment. The average DOM (Days On Market) for that segment is now above a year in this area. Add to that the frustration of the loss of 30-40% of the home's value over the last 2-3 years and you have a formula for market stagnation. And, that's just what has happened.


The Village of Milford Market has only 9 homes that fit the sweet spot definition and is doing OK, since they only average 107 DOM. Out of the nine, eight are privately owned, so only one foreclosure in the group; however there is also one short-sale in the privately held group. So, 2 out of 9 homes that are for sale on the Village are "distressed sales", which may make them less attractive to many would-be buyers. That leaves only 7 homes in the sweet spot in our little Village market. a few years back we would likely have had between 15-25 for sale in that same range at any one time.

What this all means is that, even though the market is still described as a "buyers market", in news stories, it is really a good time to list your house, if you want to (or need to) sell it. There is little competition right now. Sure, there are fewer buyers out looking and they are expecting lower prices; but, they also have much less to choose from, so your home has a better chance of selling. This applies not just to the sweet spot that I've been discussing here but pretty much across the board in all price ranges.

So, if you've been holding off until the market bottomed out and started back, I'd tell you that now is a good time to jump in. Prices have stabilized and there is low inventory. No, I can't undo what the market has done to your home's value; and, if you intend to wait until it comes back, you're in for a long haul. If you just wanted to make sure that prices wouldn't keep dropping if you put it on the market, I think we've arrived at that point, so go for it. Give me a call and let's take advantage of the low inventory situation to sell your house.

We do not live in tranquil times, so deal with it...

“All of us might wish at times that we lived in a more tranquil world, but we don’t. And if our times are difficult and perplexing, so are they challenging and filled with opportunity.” (RFK) – from the Jack’s Winning Words blog. I have a hard time now remembering a more tranquil world. Be that as it may, the real challenge for us all now is to find ways to take advantage of the opportunities presented in the chaotic world in which we find ourselves.

I think one key is to focus upon taking advantage of the opportunities in real estate, many of which involved distressed homeowners, without taking advantage of the people involved. The opportunity is there to help that beleaguered homeowner, not to take advantage of someone who is likely in a state of mind where that would be relative easy to do.

I guess that is the difference that I see between the really good agents and the sleazy operators who are swooping down on these people like vultures trying to pick their bones while they are still alive and kicking. It is disgusting to have to watch some of what is going on in the short sale and foreclosure markets and having to hold one’s tongue for fear of violating some ethics guideline by criticizing a fellow agent. Yet so much of what is happening deserves criticism.

But, I digress. Let’s focus upon meeting the challenges in our current market by being helpful. For most of us that means getting up to speed on short sales, especially on the new HAFA guidelines, since such a big a part of our business will be in that space this coming year. We certainly have all sorts of training opportunities locally, being presented by our companies and local boards, as well as many commercially available courses and certification programs. So the needed education is there. There will be a learning curve to get over with each bank or lender, as we discover how each wants to work on these deals and I’m sure that their procedures will change to with the new guidelines.

The bottom line becomes, “Just do it.” If you don’t, you will be giving up between 30-40% of the market this year, which is the projected portion that will be short sales. Remember that RFK also said, “It is not enough to understand, or to see clearly. The future will be shaped in the arena of human activity, by those willing to commit their minds and their bodies to the task.”

Not as much as you had hoped, but not as little as you might have feared.

I have lots of opportunities to respond to would be sellers who inquire about the state of the market and what their house might sell for on today’s market. I use the phrase above a lot as an opening positioning statement. There is absolutely no doubt left in anybody’s mind that the value of their home has gone down over the last 2-3 years. There are still those who are convinced that their home was somehow passed over for most of the devaluation and that it must be worth nearly what it was the lat time that they had it appraised for a refi loan (usually within the last 5 years). There are also the Eeyore’s of the world who are sure that their home has lost most of it’s value and that they are so far under water that they can’t sell.

Of course neither extreme view is correct in most areas. We do have some pockets of deep loses, such as Detroit, Ypsilanti and Pontiac. And we have some areas that have held values up fairly well – Ann Arbor comes to mind. The statistics that I track tell me that we have generally lost between 20-40% of home values over the last 3 years. The peak is generally acknowledged to have occurred in the 2005-6 timeframe. Obviously statistics based upon averages only give one a starting point from which to evaluate any particular house. Things like the quality of the house and its condition weigh in heavily to moderate the averages.

One of the reasons that people believe that they can’t sell is that they see and hear so many stories of homes just sitting on the market. It is true that the Days On Market (DOM) for many price bands has gone up considerably, especially for higher-end homes; however, a major factor in the elongation of the selling process is the lack of buyers out looking in the higher bands, rather than the price (perceived value) itself. Homes in price bands above $250,000 have always been considered to be “move-up” homes and with all of the turmoil in the local job market that have been few people brave enough (or secure enough in their jobs) to risk moving up right now. We probably get as much traffic in those higher price bands from corporate relocations as we do from local people seeking to move up.

So, is it a good time to sell and what can you get for your house? To answer the first question I always ask what the motivation is to sell. If you have a good reason, whether it be to downsize because of retirement, or because you need to move (for work or whatever reason) or you need to or want to move up in the housing market; then it is a good time to sell. As for what you can get for your home – less than you had hoped but more than you feared. Let me do a Market Analysis and I’ll tell you what that is likely to be.