Is it a good time to list my home?

One of the most common questions that I get as a Realtor is, “Is it a good time to list my home?”

The answer is YES, now’s a great time to list your home. The listing inventory is the lowest that it’s been in longer than I can remember and the buyers who are out looking are ready to buy.

We know that this is a great market to be in according to Fannie Mae’s Home Purchase Sentiment Index, a survey of 1,000 Americans in January about their attitudes toward housing.

• ·         42% of Americans believe home prices will increase, a month-over-month uptick of 7 percentage points in January.
• ·         69% of Americans say they are not concerned about losing their job, a 1 percentage point increase from December 2016.
• ·         15% of Americans say now is a good time to sell, a 2 percentage point month-over-month increase.
• ·         15% of Americans who say their household income is significantly higher than it was 12 months ago, a month-over-month increase of 5 percentage points.
• ·         29% of Americans who say now is a good time to buy a home, a 3 percentage drop from December 2016 and a new survey low from May and September 2016.

These attitudes and sentiments point to a favorable market for those considering listing their current homes. The additional factor of it being a very “tight” market (few homes for sale) make it a Seller’s Market; one in which the Seller is in control and likely to get top dollar.

The only caution that I have to advise is not to get too greedy. Even in this favorable market, there are still homes sitting on the market for long periods because the owners got greedy and overpriced them. Listen to your Realtor® and price it properly. Not all areas have come back from the “Great Recession” at the same pace and there are still pockets of depressed pricing, which your Realtor can identify.

Many people decide to wait for Spring and warmer weather to list their homes. That is a mistake, too, in a tight market. The old saying to “strike while the iron is hot” should be modified to read “strike while the market is tight” for real estate. In the spring lots of new listing will all come on the market at once, giving the buyers too many alternatives to look at and potentially burying your home in the crowd. List now, while you will stand out in an un-crowded field.

I saw a sign outside a dentist’s office that read “Accepting new clients”. Well, I’m accepting new listings, if you are ready. The market is certainly ready and primed for your home to be listed. If

you’ve been waiting to downsize, nor that you’re retired or that the kids are all gone; or you are ready for that move-up home that you can now afford; give me a call and I’ll come out and give you a free Market Analysis, so that you can see what your home is worth in the current market as well as provide you with feedback on the things that you might still need to do to get it ready for the market. The analysis is free; but, the advice that I give you, based upon my visit may be priceless.

Call today – Norm Werner at 248-763-2497.

2015 Economic Outlook: Economy Drags Housing Upward

A Press release today from Fannie Mae is encouraging for the housing market in 2015 –

WASHINGTON, DC – Driven by strengthening private domestic demand, economic growth is expected to accelerate modestly this year and drag last year’s unspectacular housing activity upward, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group. Amid continued low gasoline prices, firming labor market conditions, rising household net worth, improving consumer and business confidence, and reduced fiscal headwinds, the economy is expected to climb to 3.1 percent in 2015, up from the Group’s estimate of 2.7 percent in the prior forecast. The stronger economic backdrop should lead to improving income prospects, underpinning a higher rate of household formation in 2015.

"Our theme for the year, Economy Drags Housing Upward, implies that both housing and the economy will pick up some speed in 2015, but that the economy will grow at a faster pace," said Fannie Mae Chief Economist Doug Duncan.  “We believe this will motivate the Federal Reserve to begin measures to normalize monetary policy in the third quarter of this year, continuing at a cautiously steady pace into 2016 and 2017, likely keeping interest rates relatively low for some time."

Duncan went on to say, "Given historically low mortgage rates and a gradual easing of lending standards, our forecast calls for a 5.8 percent increase in total home sales for the year. Most of that is likely to come from growth in existing home sales, but we expect the rising share of new home sales to lead to a healthy increase in single-family construction of about 19 percent, or 765,000 units. Although we don’t view this as signaling a breakout year for housing, we do expect to see broad-based improvement in 2015 following a disappointing and uneven year for the housing recovery in 2014."

So, what does all of that mean for us in Southeastern Michigan? Well, we have started to see local headlines about our unemployment rate being the lowest in over 10 years; so I guess we are already a part of the national economic trend. Our housing market, at least in my little 8–Township patch has lagged seriously behind and has had a very low inventory of homes for sale for quite some time. Hopefully that will pick up some soon. It is actually very frustrating for people who want to move into this area right now – they can’t find a house.

or would-be sellers this is not carte blanche to jack up the price and try to gouge the buyers; but, it is a great time to sell for a good price more quickly that you might if you wait. Many people take their homes off the market for the winter, which is a mistake. Winter buyers are serious buyers, who aren’t out just kicking tires; they need a house. People wishing to sell should take advantage of that and the low inventory and list now. If you wait until warm weather you just be lumped in with a big crowd of homes coming on the market. Maybe you welcome competition in sports or business or elsewhere in life; real estate is not a place where competition is good (at least not for the sellers – buyers love it). 

So the bottom line here is to get on the market if you’ve been holding off until things got better. They just did! You’ve put your life on hold long enough waiting for the market to improve. Well it did, so don’t wait to be dragged kicking and screaming into the market. You’ll just be left behind kicking and screaming; or maybe just crying. 

Case-Shiller Report confirms market direction...

The latest Case-Shiller report, which includes data through the end of December, 2012, confirms that the country is generally on an upswing for housing. Detroit joined four other locales with double digit home value increases year-over-year in the attest report. The chart below shows the overall US market index for 20 cites and 10 cities.

 

 

 

Topping the Case-Shiller list is Phoenix  with a 22.8% increase in values compared to December of 2011. Phoenix was one fo the hardest hit areas in the country, so they are starting back from a deep hole. Next up was San Francisco with a 12.7%, followed by Detroit with an increase of 11.9%. Remember that Detroit too dug itself into a deep hole, with property value losses of as much as 60-70% off the peak. Next came Minneapolis at 11.1% value growth year-over-year and finally, rounding out the top five was Las Vegas at an even 10% gain. You can see the entire report by clicking here.

It’s always nice to get confirming reports about things that I think I’m already seeing and reporting. The Case-Shiller Report always trails the market by a month or two and thus provides that good “looking back” perspective on the market.

Locally our issue is now more about lack of inventory that about low home values. Many people are still under water on their mortgages; but, many more are starting to realize that they may be OK on their home’s value and that it’s time to come out of the bunker and take a look at the market again. If you haven’t had a market analysis done by a real estate professional within the last 3 months, you are sadly out of date on the potential market value of your home.

Home owners who have been putting off plans to move or downsize should definitively take a quick look to see where they are in terms of their home’s value. Call me today. The Market Analysis is free and you’ll also get some good free advice about anything that you may need to do to get your home ready for the market now or later. Call 248-763-2497.

If you want to see what homes in the markets that I focus upon have been doing, go to www.movetomilford.com and click on the “What have homes in this area sold for?” I just posted the final numbers for January late last week. There is also 5 years-worth of sold homes data there month by month.

Is the time right for you?

From the Jack’s Winning Words blog comes this gem - “Don’t wait. The time will never be just right.” (Napoleon Hill) Hill was one of the original writers of the value of positive thinking. “Believe it, and you can achieve it.”

If there was ever a saying that we, as Realtors, need to get across to potential sellers it is that one. Too many seem to be frozen by the wait for just the right time. For a long while it was waiting until the value decline stopped. Well, it has stopped in most areas and values are now inching back up. So, now, too many are waiting for the value to come back to where it was. That will be a long wait – at least a decade or more in most areas.

We Realtors tend to think that people aren’t listing because they are underwater on their mortgages. Many would-be seller aren’t underwater at all; they just can’t let go of the “value” that they thought they had at the peak of the market. So my advice is “Let it go.” You need to get real and let go of the mental picture that you are clinging to of the value of the place at the peak of the real estate bubble. Your house has lost 25-40% (depending upon the area) of its peak value. It is what it is today. Right now there are buyers out looking. If you’ve been sitting on the sidelines waiting for things to be just right, this is as close as it’s going to get in quite a while. Take to heat the message of Napoleon Hill – “The time will never be just right.”

In fact, the time is as right as it can get, right now in many areas. The foreclosure inventory has been depleted in many market areas, with fewer new foreclosures happening currently. We have flipped over to a seller’s market here in my area, with too many buyers chasing too few listed homes. Multiple offers and offers above asking price are the norm now. Sellers are selling faster and getting market price for their homes right now; they just won’t get 2006 market price. So, if you’ve been delaying your plans to make that retirement move or that move to downsize your life, now is the time to take action. Call your local Realtor and explore the market value of your home with him/her. The time is right to take action.  

Mixed signals now, but get ready for change...

I saw a report today for June's real estate sales in this area. Sales and listings were down compared to last month. Sale values, both the average and median were up. New home starts were up in Lyon Twp but stable or down elsewhere. My own data confirms that we appear to be in a period of mixed market data that, on the surface looks a bit like another slowdown.


What seems to be exacerbating the situation is the fact that so many would-be sellers are still under water on their mortgages that listings are in the dumps - no one in that condition can afford to list. In our area, the banks have sold off most of their foreclosure inventory and even short sales are down. Homeowners are hanging on by their fingernails and would be buyers are getting frustrated because there is so little out there to look at. That has been a mini-boom for the new-build market, especially for those builders smart enough to adjust their build content to suit the lower market.


Usually in a Presidential election year we can count on seeing some extraordinary efforts by the incumbent President to short things up or make things temporarily better (often at the sacrifice of long term good).  We’ll probably see that between the conventions and the election. The President and the administration still have stops that they can pull out to help the housing market. Right now he is focused upon the unemployment issue, but housing will come back into focus before the election. Count on it. The housing situation is still a major drag on the economy and when all is said and done, remember the phrase – It’s the Economy Stupid! The politicians won’t forget. They will find a way to make it all better, even if it's just a band-aid.


What should the homeowner do? Be ready to act. Something will likely be done to make it easier for you to refinance or to sell and to deal with the negative equity situation. For buyers; keep looking. There is as huge a pent up desire to sell as there is the pent up demand to buy and sometime before the election the politicians will figure out a way to let homeowners loose a flood of homes onto the market. Be ready to act when you find that perfect new home.

More on yesterday's topic...

Yesterday I wrote about how to interpret the news that one reads about the housing market. Perhaps the most misleading have been the stories that carried headlines like "Average Housing Values up 19% over last year." Many (if not most) people took may have looked only at the headline and come away with the impression that the price that people can expect to get for their house when they sell is up 19%. That is not only not true, but it really isn't even what the headline or the story actually says.

 If you read the accompanying stories to those types of headlines you will find that the headline was based upon the fact that the average of the sold prices for houses in the area went up 19% when compared to the averages for sold houses in the same area the year before. Isn't that saying the same thing? No. the averages being referenced take all home sales in the area into account. Those sales include short sales and foreclosures, both of which are at substantially lower prices than regular retail sales. As the number of short sales and foreclosures has drifted down as a percentage of all sales, the AVERAGE price for the total sales has gone up. The prices for non-distressed sales in many areas have bottomed out and have even started back in some places; however, the values of those houses has not jumped 19%. In places where we are seeing positive appreciation again, we are seeing 4-7% rises in sold values, not 19%.

So there is good news. The market locally seems to have bottomed out in most places and there are lots of instances where positive appreciation has begun again. But, if you read those rosy real estate stories and think that you can now somehow get a much higher price for your house, maybe even what you bought it for in 2005/6 – think again. That ain’t gonna happen.  If you bought your house during the peak years (2005/6) it has likely lost between 30-50% of the value that you paid for then, depending upon where it is located. So your market value for that $250,000 house is now likely in the range of $160,00 to $170,000. If you are lucky enough to find someone willing to pay above market for it, say $175 – 180K; you still have to hope that it will appraise for enough to justify that purchase price. Right now that is pretty much a fools bet, since appraisers are still leaning to the conservative side and many are still baking in further value loss into their appraisals.

My advice is to work with a good Realtor to establish a fair market price (one that an appraisal would support) and then decide if you can afford to sell at that price (or maybe decide to do a short sale at an even lower price). No amount of wishfully positive news stories is going to magically restore your home’s value to where it was 5-6 years ago or where you wish it was. If you can’t afford to sell, see if you could at least take advantage of one of the new government mandated re-financing programs. Some of them deal with the loss of equity and could put you in a much better position to sell later.

What to make of what you see, read and hear about the real estate market

We all see, hear and read stuff almost every day about the real estate market. You can't go to a party without encountering conversations about it and you almost can't pick up a paper or tune into a newscast without something being said - almost all of it different. What are you to make of that?

Well, for one you really need to pay attention to the source of what you are seeing, hearing or reading. Many news organizations tend to focus on the negative stories, because they seem to have more drama than the good news. There's nothing like a good tear-jerking story about yet another family being foreclosed and thrown out of their house to fill time on a slow news day. Then again some stories keep trumpeting the good news of the housing recovery - "home values raise again!" Of course, buried deep within that story is the "news" that the number home sale were also down again because of the lack of inventory on the market.

So what’s the truth? All of it. Average home values for sales in Michigan have been going up in this area for months, driven mostly by the fact that, with few houses on the market, sale prices have been bid up by multiple bid situations. Is that good or bad? Again the answer is, Yes. It's good for the sellers who are getting more for their homes (I've recently seen headlines that average home sale prices are up 19%); however, if you're a buyer there are fewer homes to choose from on the market. Rising average sale prices also do not reflect true positive appreciation in the market in general, although that too is occurring in some markets.

If you are at a party or gathering and happen upon a Realtor and ask "How's the market?", expect a positive answer - "It's great. We just need more houses to sell." That's also true. There are fewer Realtors left in the business these days and the ones that are left are quite busy. You may hear some grumblings from real estate people about the short sale process or foreclosure sales, but in general they will pitch a positive view of the market. And why not? Good Realtors can make money no matter what the market, if they can adapt to the needs of the market.

A good, honest Realtor would likely ask whether the questioner s a buyer or seller and adjust what they say accordingly. It's still a great time to be a buyer, in terms of the mortgage rates and lower costs of houses. Buyers can still find real bargains in the debris of the short sale and foreclosure market. The challenge for buyers right now is finding the right house in a very tight supply-side market. For sellers there is no magic bullet that will restore the value lost in this recession. Even if they get multiple bidders for their market-priced house they aren’t going to be made whole by the sale. Today’s market price is greatly impacted by foreclosures and short sales and then the sale must pass the appraisal test, too. Appraisals are running behind market pricing in most markets, which is a reflection of the overly conservative approach to risk that most banks have adopted since the housing meltdown.

So, “how’s the real estate market these days?” My answer would be – “It’s much better than it has been and seems to be headed in the direction of a recovery.” How long will it take to recover? If, by that you are asking how long will I have to wait to recoup my lost home equity; I’d advise you that it’s likely to take a decade or more to get back to the 2005/6 levels in our local markets. If you’re asking as a potential buyer; I’d say jump in now, before prices rise too much, but be prepared to be patient in your search.

So like Charles Dickens opened the Tale of Two Cities:

“ It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

Dickens had likely been to a bar and encountered a Realtor there.

The two faces of a schizophrenic housing industry…

Four stories in last Friday’s Realtor Magazine Online news feed provided a somewhat schizophrenic view of the housing industry. The first reported that The national Association of Home Builders says that 23 major markets across the US showed improvements improvement in housing permits, employment, and housing prices over the last six months. Great News!


The second story reported that fixed, 30-year mortgage rates are now below 4% - the lowest that they’ve been in years. More good news for housing, right?


Story three however reported that fully 30% of all mortgage apps are being turned down these days. The last story reported (to no one’s surprise) that homeownership is sinking fast and is on a downward pace not seen since the great depression.


Of course, when one reads the stories one finds that housing improvements are taking place in some areas that have had near-death experiences. And even though the rates are low, mortgages are being rejected for reasons such as bad credit or no job – reasons that were not sufficient to reject mortgages just a short while ago. And as for home ownership, the story reports that young unemployed people are the least likely to own a home – well duh!


Home ownership hit its peak at about 70% during the Clinton and Bush years when home ownership programs by both of those Presidents encouraged the lending behavior that eventually led to the housing bubble and the bust. It is now down to 65.1% and falling fast, according to the latest census information.


The biggest issue right now seems to be the falling and/or low inventory in many areas, due in large part to so many current home mortgages being underwater. We are a long way from a balanced market, but not just due to tighter credit. The same would-be sellers who can’t afford to put their homes on the market used to be our move-up buyers or they are the boomers that we expected to be selling, so they could downsize in retirement.


Now those would-be sellers are stuck and even those with real stories of hardship are finding the road to short sales blocked by incompetent and understaffed lenders who are incapable of making simple selling decisions. Adding to the confusion is the back-end mess created by the pooling and selling of mortgages to investors, which could take decades to clear up or get off the books.


So are things good bad or just ugly right now. I’d vote for ugly. It’s a great time to buy a house, if you have a down payment and can get a mortgage and if there is something on the market that you might like. Those are big ifs right now. It’s actually also a good time to sell a house (due to the low inventory) if you aren’t underwater on it. Don’t even think about waiting until next year to see if the lost value will magically come back – it ain’t gonna happen. AS Dr. Phil might say to would be sellers, “It’s time to get real.”


And what about Realtors® in this market? I listen to them at social gatherings telling prospective clients that things are great, that they’ve never been busier. That’s true. Most Realtors in this area are working their tails off, many selling more homes than they’ve ever sold… and making less money at it that they ever made. It’s a schizophrenic business to be in and we’re all lovin’ it and hating it or both.

We’ve all fallen down the rabbit hole…

A bunch of us were discussing the current real estate market in the office the other day, when it hit me that we’ve all fallen down the rabbit hole and are now wandering around in Wonderland with Alice. That would seem to be the only logical explanation for the madness that is real estate these days. Surely the insanity that we face each day in the realm of short sales defies any other explanation.


For a while, I was using the analogy of the man behind the curtain from The Wizard of Oz to explain the great and powerful Investor – the man behind the curtain to whom everyone bowed and scraped and whose actions and pronouncements no one understood.

But, perhaps the richer set of characters in Alice in Wonderland would provide more opportunities to give face to the various banks and characters that we encounter in our real estate lives today – the Cheshire Fat Cat and the Mad Hatter would seem to be especially appropriate to represent some of the short sale bankers and negotiators that I’ve hit.

The sad conclusion that we all came to in our discussion is that this is no longer an anomaly, but rather represents the new reality of our market. I suppose the sooner that one comes to grips with that the better. As one who is naturally a bit of a cynic and can appreciate the absurd this Dali-esk landscape s beginning to look natural – “Look is that a clock melting over the side of that table? No, it’s a clock measuring the time passing on a short sale!”

What did the bank say about our offer? They said to lower the offer and resubmit it. OK, which way to the tea party, Mr. Hatter?

Finding hope a little bit at a time…

I read all of the articles about this Federal agency or that making predictions about how things are getting better (or at least that they hope that they will soon). I also get the NAR cheerleading news – “really the dust on the horizon is the cavalry and not more Indians.” But what I really look for are local signs that things are changing for the better.

I’m starting to see a few local indications that things might be better in 2011. We had 11 local new-build developments in my home township going into the recession, some very small and a few fairly ambitious. All 11 developments stalled out during the recession. In some cases the developers and builders went bankrupt and exited the business. People in those projects are in a form of real estate and legal limbo, since most are site condo projects with not enough finished development to form a HOA to take over from the developer.

It will also be interesting to see how the courts resolve some of the issues that were created in Michigan by the use of site condo rules for developments. When those went bust, some were eventually sold off parcel by parcel by the banks that took over from the developer. One has to wonder what happened (or will happen) with the condo association responsibilities that the original developer assumed had for the development. Who owes (or will owe) what for the maintenance and insurance of the common areas, which in most of these developments includes the roads? We’ll see how that plays out in the coming years.

Recently, however, I’ve noted that at least two of these developments are building new units/homes again. Two out of the eleven might not sound very impressive, but these developments have all been stalled for at least three to four years; so, any activity is a very positive sign. The developments that have restarted appear to be run by developer/builders who were smart enough to shut things down quickly as the economy tanked and positioned well enough financially to ride out the worst of the downturn. They are local people who turned to home improvement project business to tide them over during the long drought of new building.

I haven’t visited any of the newly started homes yet to see if any are being built on spec or whether they are all bespoken homes. It will also be interesting to see the size and content of these homes, which are what would be classified as “move-up” homes, not starter homes. There has been much written about builders moving a bit downscale to accommodate the reduced buying power of their potential clients. I would not be surprised to se a little less square footage and less upscale content.

Still, it is good to see anyone building anything these days. I would assume that there is also pent up demand for smaller start-up or retirement homes that will result in new developments for those, too. We have to have a place for all of the Boomers to downsize into soon; and we’ll need places soon for all of those people who were displaced by foreclosure on their McMansions.

For now, it’s time to find hope and some joy in the re-emergence of a few local builder/ developers and the few new-build starts that are popping up locally.

Is it oxymoronic?

I passed a sign along side the road today that advertised Affordable Bankruptcies. Is that an oxymoron? I think so. What would happen if the person that was trying to get an affordable bankruptcy couldn’t afford to pay for it? Would the lawyer’s fee be added to the debtors list for that bankruptcy? Inquiring minds want to know.

Certainly the term short sale is an oxymoron if not completely oxymoronic. There’s nothing short about these sales and it’s getting worse. I’ve just had a bank that my client has been waiting to hear back from for 4 months come back and tell us that we have to close in 15 days. It’s not some cheap cash sale and the bank has known all along (or should have known as lawyers are want to say) that the buyers needs to get an FHA mortgage approved. That’s just moronic. The FHA mortgage people don’t even open the appraisal request to look at it within 15 days.

And now the foreclosure market is in such disarray that the best advice for many people facing foreclosure may be to wait it out. Some of those banks may never get things straightened up to where they can actually foreclose; especially if they were one of the ones that shredded the original mortgage documents when they went to electronic forms. I think every homeowner facing foreclosure anywhere in the U.S. should demand to see the written proof that the Electronic Registrant trying to evict them actually hold the mortgage that they signed. Since they want you to show them the money, maybe you should reply “show me the mortgage.”

In other real estate news, Bloomberg reported the following - The National Association of Realtors’ index of pending home resales dropped 1.8 percent after a revised 4.4 percent gain the prior month. Compared with the same month a year ago, pending sales were down 25 percent. Moratoriums on foreclosure and stricter lending are limiting progress, the group said.

The report went on to say that purchases have steadied after a 32 percent plunge in the months following the April expiration of a government home buyer tax credit. Mortgage rates near a record low have failed to stoke demand because foreclosures are depressing prices and unemployment is stuck above 9 percent.

In Michigan we are stuck above 13% unemployment and boy do we have a foreclosure and short-sale problem in the market. Right around 50% of all home sales for 2010 have been either foreclosures or short-sales. Distressed homes still make up a large percentage of the total listed homes, too. It’s been happy hunting for first-time buyers and investors for all of 2010.

A most unusual week in real estate

I've been tracking six markets in my immediate area for several years now and I believe that this is the first week ever that I had one of the markets not record a single sale. I don't track sales below $20,000, which includes all leases; so there was the possibility that I missed seeing a really low priced sale. I looked and that was not the case. For last week the Brighton market - city and township - did not record a single sale. There was one lease for $2,000/week; but, that was it.

It's not as if Brighton is my smallest market either. Milford, followed by Highland are smaller, in terms of units sold year-to-date. The South Lyon/Lyon Twp market is also smaller in terms of units. So it is a bit unusual that the Brighton market would be silent for a whole week. Maybe there is a pent-up demand building - the Brighton Bubble, so to speak - that will burst forth next week, as the month comes to an end.

Otherwise, and elsewhere, the markets that I track seem to be following a pattern of stabilizing and even rising home sale prices (at least in the averages and medians that I measure). Inventory is still down a bit and homes above $200K are finally selling. The foreclosed and short-sales, as a percentage of overall sales continues to fluctuate above and below the 50% mark, with last weeks sales made up of 53% of those distressed categories, after having been below 50% for a couple of weeks.

It's great to see activity in the segments of the market above $200K. That gives me great hope that a recovery has in fact started. All indication are that, if we have not started back up, we are at least bouncing along the bottom, with things not getting worse either. Time and the benefit of hindsight will tell us eventually if we had reached the bottom by this date. I'll see yo in the future where we can pontificate mightily that we knew it all along.

It ain't over 'til it's over...

That is a very famous piece of advice/philosophy from the master - Yogi Berra. He also coined the phrase "If you don't know where you're going, you might not get there." Both are useful to describe things in the real estate market these days. In many ways we don't know where we're going, because we're in uncharted waters in the current recession. And I'll be darned if I can tell if we're at the bottom of the market locally or may have already bottomed out and have started back.

A part of the confusion in the Michigan real estate market is caused by our horrendous unemployment situation - 13+%. There seems to be no end in sight for that, even though the local automakers have been through their rightsizing efforts. Most of the shakeout in the tier-one supplier base is also over, but the ripple effect through the entire supplier base is on-going. Basically, uncertainty reigns and no good can come out of uncertainty.

As I look at the data that I track, things don't seem all that bad. Houses are selling and more and more of them are houses above $200K, with fewer of them being foreclosures and short-sales. However, there is this impending sense of doom out there, too; because there is as big pool of homes that are delinquent but not yet foreclosed. I'm not sure if the banks are just holding back on foreclosures to try to stabilize the market or perhaps to keep more red ink off their books; but, it sure seems that they are going longer before pulling the trigger on the Sheriff's Sale these days. Perhaps some of the government's loan modification programs are working; but, my sense is that the banks are just holding back for purely selfish reasons.

I my little patch the percentage of sales that involve foreclosures and short sales slipped below 50% again last week - now down to 41% for September in the 6 market areas that I track. That's good news. The percentage of asked vs. sold prices in these markets has also crept up to about the historic norm of 97%. That means that homes are being priced properly and that buyers perceive that the asking prices correctly reflect the values. To see all of the local statistics for my market area, go to http://www.movetomilford.com/ and click on the Local Real Estate Statistics choice.

So, if it ain't over until it's over; how will we know when it's over? We likely won't know. We'll look back on some point in time and reflect that this is when things changes and the market started back. It's sort of like the economic numbers that economists use. They are always a quarter or two behind and they are almost always "adjusted" after the fact. Since Realtors are always using past sales to predict the future for new listings, we will undoubtedly miss the change by anywhere from a month to a quarter. We'll keep an eye on it for you, since Yogi also said, "You can observe a lot by watching."

It’s worse than I thought – listening to discussions at the barber shop –

The men's barber shop is an American institution and certainly pre-dates Starbucks as the original gathering and discussion place for men (women certainly know what I mean, since they’ve had their hair dressers shop forever, too). I’ve called Starbucks sort of a snail-version of Facebook or Twitter, like regular mail is called snail-mail when compared to email.

So anyway, I go into my barber shop yesterday for my regular haircut ands the talk turned immediately to real estate. The barbers all know I’m in real estate and I wear my real estate badge everywhere, so even the other customers can see that I’m in real estate. Inevitably thins start out with the generic, “So, how’s the real estate market?” question; which I try to answer in as positive a manner as I can. Then the horror stories start flowing out from everyone in the barber shop.

There’s always 1-2 people in the place who know someone who’s lost a house to foreclosure. Likely there will be 2-3 people who know someone who just got laid off and may lose their house. If I’m really lucky there may even be someone in the place who looking to buy or sell a house, but mostly it’s just about sharing horror stories. My barber told me that on a recent Saturday morning out of his first 10 customers, 7 had recently been laid off, so that’s hi barometer of how bad things have become.

Another barber climes in that he had a customer yesterday who has lost almost $100,000 in value off his house and may just walk away. Another customer allows as how he’d like to buy a house to take advantage of the tax credit, but he can’t afford to sell his place, since it is so far underwater. Then a general discussion of how the government programs haven’t worked and how they should do something different makes the rounds of chairs. That can and does get pretty ugly.

There are all sorts of scholarly studies and reports out there about this mess we are in and lots of government programs and press released about programs circulating; however, if you want to really know what’s happening out in America, go sit in your local barber shop and listen – listen to America. If this were Floyd’s Barber Shop in Mayberry, Aunt Bee and Opie would be hiding in the basement and Sheriff Andy Taylor and Deputy Barney Fife would be facing an angry mob. Andy might even let Barney get his bullet out of his shirt pocket. It ain’t pretty out there right now and the natives are getting restless.

Don’t let the smiley faces fool you…

I try to keep a positive attitude and to project that with clients; however, I refuse to be the devil in the smiley face mask, trying to paint a rosy picture of the current market in from of potential listing clients. We are still in a crappy market, especially here in Michigan. Our unemployment continue to run 3-4 points higher than the national average and almost all of our local markets are still declining in terms of home values.

So why would anyone put on the smiley-face mask and lie to potential sellers, just to get the listing? Well maybe the devil made them do it. The fact is that anyone who bought a home in Michigan within the last 8-10 years should consider themselves lucky if they are not underwater already or about to sink under the surface. Those who bought in Michigan in the last 7 years are already there and those who purchased at the peak, about 4 years ago are likely closing in on a 50% loss.

Well, gee, Norm, thanks a lot for making my day!

That’s not my job. If you want to feel good hire a comedian or a clown to follow you around doing funny things. But, if you want to (or need to) sell your home, then you need someone like me who will tell you what it is really worth in today’s market and who will do the best marketing job possible to get potential buyers through it. I am, however, not Mandrake the Magician (Wow, that dates me, doesn’t it?) and I cannot gesture hypnotically and make the market magically pay more for your house that the market will bear.

So, beware the devils in the smiley face masks that you may also interview. The good feeling that they will give you will last about as long as a good Friday night buzz and the hangover you’ll likely get from dealing with them could be the worst one you’ve ever had. It ain’t pretty out there right now in the real estate market, but things are selling. Price it right and it will sell. Can’t afford to price it right? Then don’t sell. It’s not rocket science, just common sense.

We now return you to your favorite reality TV show in progress; and, no, “The Biggest Loser” isn’t about real estate sales, even though it may feel that way to you sometimes.

If the recession is over, how come…

We are getting lots of signs and pronouncements from various officials and economists that the great recession is over. Even Ben Bernacki, the Fed Chairman, has called the end of the recession. At least, they say, it has bottomed out and we have started back. I guess that’s good news, but unemployment is still high, foreclosures are still increasing and property values are still falling, at least in Michigan. So, if the recession is over, how come my house is still losing value? I get that a lot these days.

Like many other answers that we are searching for these days, the reasons for the continuing fall of home values are complex and not easily covered by cheery pronouncements of the end of the recession. The continued high unemployment has given rise to even more foreclosures in the housing market, these not caused by ARMs resetting so much as by one or both earners in the family being out of work. Many homeowners depend upon having two good income streams in order to maintain their lifestyle. The lost or cutback of one of those incomes can be devastating to the family.

In our area the cutback of overtime alone has resulted in many homes being lost. Many of our automotive-oriented families counted on overtime as the means to pay for the house and the toys and the other things that came to symbolize the middle-class lifestyle. Drive through any middle class area and you’ll find the Harley’s and the street rods and the jet skies and other toys with for sale signs. When times are tough the toys must go. But that is just the tip of the iceberg. The real losses are the homes that these same workers can no longer afford and they are adding to the already bloated inventory of foreclosed and short sale homes on the market today.

Another thing that has happened (to use a sentence that sounds like something that Yogi Barra might say) is something that hasn’t happened. The Government program to encourage banks to do loan modification has gained almost no traction with banks and most still are not doing anything to help distressed borrowers refinance their homes into affordable loans. It just hasn’t happened. Most banks seem to prefer foreclosing on their clients than trying to work with them so that they can keep their homes.

So, in our area, foreclosures continue to drag home prices down. Home prices are now down between 35-50% from their peaks just 3-4 years ago and continuing to slide. The pace of the decline has slowed and that’s good news; but, for homeowners who bought 3-4 years ago it’s way to late to save them. They are so far underwater on their homes that they have little choice but to walk away when they get into distress and that just adds to the problem.

Is all lost, then? Is everything gloom and doom? No. If you are a buyer, it is still a great time to buy and first-time buyers are snapping up bargains all over the place. If you are a seller with 10 or more years of ownership you should still be OK. You won’t be as happy as you had hoped with what you can get, but you can still sell and then maybe you’ll become a happy buyer, too, and make some of it up on that side. And if you were a real long-term owner, the paper loss you are having trouble dealing with was just that – a paper loss. You still made out OK on that house you built or bought in the 60’s or 70’s for $50-100K and are now selling for $200k (instead of the 350K it was worth a few years ago). Give it up and get over that loss. You had a great place to live for a long time and still made out on the deal.

Has the dam burst and the pent up demand be loosed?

All of a sudden I’m busier that a one-legged man in a sack race. I have two accepted offers working a third in progress and two that I’m told by buyer agents will be in soon. I’ll also be writing an offer for one set of buyers that I’ve been working with and I have a new listing and two in the works. What the He** happened to cause all of this activity?

I certainly can’t blame it all on the $8,000 tax credit. Only two of these deals even involve anyone who even qualifies for that. I guess a bit of it is pent up demand, at least on the buyer side. On the sell side, I think a lot has to do with reality finally setting in and people needing to get on with life. They are more willing to list at reasonable prices these days.

Even in the face of 10%+ unemployment in Michigan, there seems to be some weird form of optimism taking over – thoughts that it can’t get much worse, so it’s time to come out of the foxholes and get on with life. Of course, some portion of this activity, at least on the sell side, is the result of 1-2 years of fighting with sellers to get them to let go of the past and price to the market. It’s amazing how “fast” a property will sell when you get it priced right, even after 2 years on the market.
There have been many articles written about the so-called pent-up demand in the real estate system – people who have been putting off new home purchases until the economy settled down a bit. Maybe we‘re seeing some of that in the current up tick in real estate. Whatever is causing it, I certainly welcome the change.

Are we in a lenders' market?

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

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

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

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

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

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

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

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.

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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.

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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.

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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.

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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.

Where are we inthe current cycle?

I recently saw a great set of charts and explanations of the current economic and housing mess that we are in, which help one better understand where we might be and what lies ahead. First lets get to a chart that I composited from a stack market web site and my own thoughts on what we've been through and where we might be.

I really believe that we can trace a lot of the current mess that we are in to the September 11th incidents that put the country on alert and started us on a path to war in Iraq, so I put that part in. The housing market was still in euphoric state and indeed it continued in that mode well past 9/11. Housing values had been climbing at double digit rates for a while and continued upward until sometime in the 2002-3 time frame, before anxiety took hold and things started back down. They have been sliding ever since, as first denial and then fear took hold in the market and the economy. It was likely the grip of denial on at least General Motors that got them into so much worse shape than Ford Motors is in today. But then, denial has always been big at GM.

Denial also was the watchword from most homeowners, who just refused to believe that the outbreak of foreclosures and falling values could affect them. I'd say that we made rapid progress through fear, depression and panic and have now entered the capitulation stage and maybe the early despondency stage. Those aren't good and they have brought a lot of pain, but they are something that we need to just get through, in order to move on. So maybe the phrase "bumping along the bottom", which I hear from some economists, refers to the stages of capitulation, despondency and depression - each a bump in the road towards recovery.

I certainly think that President Obama leveraged the need for Hope during his campaign and is nourishing it now, as he and his financial team try different things to try to fix various broken financial systems. He's pointing towards Recovery, but it feels like it may be at least next year before we get to that stage.

When we do start up the other side of this cycle, and get to optimism and excitement and beyond; let's hope that we can substitute in a bit of common sense at the Thrill and Euphoria levels, instead of just the stupidity and greed that was there before. That's where proposed new controls and regulations will come into play.

Of course the problem with all of these charts is that they really give one no timetable at all for each stage. We are now in the longest recession since the great depression and no one is predicting the end yet. Many economist are now pointing to 2010 as the turn around year. I guess that would mean that we're left to wander in the wilderness of capitulation, despondency and depression for the rest of 2009. Not a happy thought.

So, let's end on a happier note. Since hope is the next stage and the way out of this mess, we all need to be beacons of hope in the gloom of the current market. The more we can present a positive and upbeat picture of the market, about what a great time it is to buy, what great choices are out there and what great mortgage rates are available, the more we shine as beacons leading towards hope. Let your light shine today!