Case-Schiller - Schmiller we don't need no double dip

The recent Case-Schiller report on the national real estate market showed real evidence that the market has indeed entered a double dip- a second decline in home values, after a short "recovery" earlier in the year.

Of course all real estate is local, so the national trend may not apply in your area. In fact, in my home market of Milford, Michigan, we appear to be defying the odds - see chart below from Altos Research:



Milford home values turned around earlier in the year and continue to rise and the inventory in the local market is going up, too. Inventory is still low, compared to historic levels, but more people are apparently feeling good about listing their homes (or maybe they just gave up waiting out this mess).

Such is not the case right next door in Highland. There the home value decline turned around in April, but inventory continues to decline.



And if one looks at the White Lake market it is hard to see more than a tiny blip that even looked like things were getting better. The malaise continues in that market.



Finally, there is the Commerce Township Market, which has taken off so fast that the inventory can't keep up with the demand. Since April the Commerce market has come roaring back, in terms of median sold home prices and the inventory has struggled to keep up.



Both White Lake and Highland also continue to top the 50% mark in terms of the percentage of home sales that are foreclosures or short sales - not an encouraging sign of things getting better.

I certainly hope that our market is a leading indicator of a robust recovery (at least in some of the sub-markets) and not just lagging the national scene. I've listed five houses since the turn of the year, which is good; however, I still have all five on the market, which is not so good. We still need more buyers in the mid-price range ($200-$400K), which is where most of my listings are priced.

So Mr. Case and Mr. Schiller can report all they wish about a double dip in housing. We seem to have been happy with our Single, prolonged dip - thank you very much. We're off to a new, better market without them.

Stalled and languishing the Michigan market decline continues

According to a recent report by Zillow’s Chief Economist Dr. Stan Humphries, first quarter Real Estate Market Reports, median home values, as measured by the Zillow Home Value Index, fell 3 percent during the first three months of the year. This decline was large enough to cause Zillow to push back its forecast. Previously, we anticipated a bottom in home values by the end of 2011. But with values falling by about 1 percent per month so far, it’s unlikely that will happen. We now believe a bottom will come in 2012, at the earliest.


The continued falling home values have caused more homeowners to slip into negative equity. By the end of the first quarter, 28.4 percent of single-family homeowners with mortgages were underwater, up from 27 percent in the fourth quarter of 2010. Read the entire Zillow report here.


One consequence of the underwater mortgage situation is that homeowners who otherwise would have tried to sell their homes in order to move on with life now feel trapped by the negative equity in their homes. Many have made the mistake of thinking that they could ride out this recession and that value would return quickly. Not true, with home values slated to continue to slide, waiting is actually a very bad option that is likely to make matters worse.


Right now, in my market area, we are actually suffering from a lack of available housing inventory to show potential buyers. That is particularly true in the mid-price market of $200-400,000. These have always been a sweet spot in the market. They represent “move-up” homes for most buyers, but too many buyers have been afraid of job losses and too many sellers are too far underwater to be able toe sell. So, we have a stagnant market in that price range.


Most of our market activity is taking place on the low end (mainly in distressed home sales) or at the luxury end. Much of our market has also become a cash market, with mortgage money still tight and with lots of investors roaming around looking for bargains on the distressed market. Even the low end has taken a recent hit as many inexpensive foreclosed homes were pulled from the market due to being involved in the MERS mess. In Michigan MERS-initiated foreclosure processes were declared to be void by an Appellate Court, so now we have to await a Michigan Supreme Court decision to clear things up.


So, right now, we have a disgruntled bunch of Boomers who feel trapped in their underwater McMansions and a younger middle class who are still cowering in their starter homes, afraid to take the risk of moving up to a larger home mortgage obligation. We have a market that continues to decline in value and a foreclosure mess caused by MERS that has stalled that portion of the market. And of course we have the government types running around trying to make everything harder for everyone by suggesting that we do away with the Mortgage Interest Deduction and make everyone pay 20% down in order to get a mortgage. Sounds like a scenario out of Dante’s writings doesn’t it?

May seems to be off to a slow start…

I know that this is only an anecdotal observation, but May seems to be off to a very slow start this year, so far as home sales go. That could well be attributed to the terrible (and at times cold) rainy weather that we’ve had. It certainly hasn’t been all that good for open houses so far this month.

For six of the nine markets that I track this year I have multiyear data, which at least lets me look back at a fairly gross level at year-to-year comparisons.

We are half way through May, 2011 and this is how those markets compare to May 2010, in terms of sales:

Milford –

Homes sold far in May 2011 – 3

Homes sold in all of May in 2010 – 18

Highland –

Homes sold far in May 2011 – 9

Homes sold in all of May in 2010 – 19

Commerce –

Homes sold far in May 2011 – 20

Homes sold in all of May in 2010 – 46

White Lake –

Homes sold far in May 2011 – 13

Homes sold in all of May in 2010 – 36

Lyon/South Lyon –

Homes sold far in May 2011 – 4

Homes sold in all of May in 2010 – 28

Brighton –

Homes sold far in May 2011 – 12

Homes sold in all of May in 2010 – 18

The numbers would seem to indicate that Commerce and Highland are on about the same track as last year with Brighton actually ahead of the pace of 2010. My home market of Milford, along with Lyon/South Lyon and White Lake are lagging the 2010 pace for home ales in May right now.

Some of this might be attributed to the lower inventory levels this year and the temporary slowdown in foreclosure sales as the industry tries to sort out the MERS mess in our state. MERS is the holding company created by the banks to provide a holding company (some would say dumping ground) for their bad loans. MERS was the entity that foreclosed on many people and now the Michigan Appeals Court has ruled that it did not have standing to initiate those foreclosures, so it nullified them. Chaos has ensued has lenders and buyer alike scramble to figure out if the foreclosures that MERS was involved with will have to be redone. The Appeals Court decision is being appealed.

So whether it’s the weather or confusion over foreclosures, something seems to be holding back the market a bit here in the start of what should be our best selling season.

April 2011 redux...

The month of April 2011 was perhaps a tuning point in the process of recovery in the Southeastern Michigan real estate market. The results for April, 2011, in six local markets that I have been tracking for over a year are shown below, along with up-to-date Altos Research charts of the median sales prices and inventory for those markets. If you looked at the numbers by themselves you would not see the turnaround in four of the six markets.


Milford


Number of homes sold (above $20K) – 18
Percentage of sales that were distressed – 35%
(foreclosures or short sales)
Median Sale price - $240,000
Average SEV multiplier – 1.9174
Average sold $/Sq Ft - $112


The Altos Research chart for Milford –




Let's hope that was an inflection point in April and that the Milford Market has turned the corner. Distressed sales are well below 50% and the $/Sq Ft and the SEV multiplier numbers are the strongest in the area. Of course some of that is due to stubbornness on the part of sellers who refuse to drop prices to sell. That's why this is such a small market right now.



Highland


Number of homes sold (above $20K) – 15
Percentage of sales that were distressed – 53%
Median Sale price - $175,000
Average SEV multiplier – 1.8280
Average sold $/Sq Ft - $97


The Altos Research chart for Highland –




Highland (along with White Lake) continues it's role as a poster child of the bad market. Distressed Sales still made up over 50% of total sales, although the $/Sq Ft statistic was up in April.

Commerce


Number of homes sold (above $20K) – 51
Percentage of sales that were distressed – 51%
Median Sale price - $138,500
Average SEV multiplier – 1.5662
Average sold $/Sq Ft - $74


The Altos Research chart for Commerce –




Commerce continues to be a roller-coaster ride for would be sellers, but it is currently on an uptick, both in sold Median Prices and Inventory levels. Hopefully that is a harbinger of a better summer selling season; although Distressed Sales still make up too much of this market.


White Lake


Number of homes sold (above $20K) – 27
Percentage of sales that were distressed – 67%
Median Sale price - $148,000
Average SEV multiplier – 1.5590
Average sold $/Sq Ft - $69


The Altos Research chart for White Lake –




The chart shows White Lake to be a market that is still in serious distress. After and end of year recovery of sorts last year, things have been consistently down in 2011. That is consistent with the numbers for SEV multiplier and the $/Sq Ft.



South Lyon/Lyon Twp


Number of homes sold (above $20K) – 16
Percentage of sales that were distressed – 31%
Median Sale price - $200,500
Average SEV multiplier – 1.7587
Average sold $/Sq Ft - $82


The Altos Research chart for South Lyon –




Inventory is headed up while Median Sold Prices are falling, an indication that all is still not well in this market.

Brighton (City and Twp)


Number of homes sold (above $20K) –23
Percentage of sales that were distressed – 39%
Median Sale price - $150,000
Average SEV multiplier – 1.6233
Average sold $/Sq Ft - $88


The Altos Research chart for Brighton –





The Brighton Market is one of the few in the area that is headed in the right direction, with both median sold prices and inventory headed up.

Milford Real Estate Market Report April 2011

There were 17 homes that sold for more than $20,000 in Milford, Michigan in April, 2011. Of those 35% were distressed sales – either foreclosures or short sales.


The Average Sale Price was $368,556 and the Median Sale Price was $240,000. Those figures (the Average was greatly influenced by one sale for $1,350,000)


In general, home sold for 1.9174 times their State Equalized Value, which is supposed to represent ½ of the assessed value.


Homes sold for an Average of $112/Sq Ft in April.


On average the sales prices were 93% of the asking prices in Milford.


In 2010 the numbers were –


Average sale price - $146,832, and Median sale price - $144,450


In 2010 the average sale price was 1.2949 times the SEV and homes sold for an average of $83/Sq Ft


So, we’re making progress in Milford in getting out of the real estate market malaise. For all of the data on the Milford market, as well as 8 other surrounding markets, go to my Web site – http://www.movetomilford.com/ and click on the What has sold locally choice.


Here’s a chart from Altos Research which shows the trends for home sale median values and the inventory level in the Milford market.





You can see that late March and most of April were back into positive trends. Perhaps we've seen the inflection point for theis market and not even recognized it at the time.

Has MERS Met its Match in MIchigan? Maybe.

A national company name Mortgage Electronic Registration Systems or MERS is both the holder of record of many mortgages across the country and the major filer of foreclosure actions in most states. There have been several law suits involving MERS and many headlines claiming that they used robo-signers and had no authority to foreclose anyway.


Some of the suits were probably brought by the same clowns who loudly proclaim that the U. S. Government has no legal right to collect taxes. There will always be a vocal cadre of ignorant people shouting nonsense about legal issues for about which they don't have a clue. MERS has prevailed in most cases, but they now face a series of cases in Michigan in which the Michigan Court of Appeals has rules that they did not have standing under Michigan law to file for foreclosure.

Read the details below, which contain the comments from Dan Elsea, President of Brokerage operations for Real Esatate One, Michigan's largest real estate company.

MERS Michigan Case Details


The general theme of this case is the interpretation of the statue as it applies to the entity Mortgage Electronic Registration Systems, Inc. (MERS) and their legal ability to act as the nominee for the lender in the foreclosure action, even if named as the mortgagee. In spite of the opposite ruling in the two prior courts, the Michigan Court of Appeals recently held that MERS is not "the owner of the indebtedness, or of an interest in the indebtedness secured by the mortgage, or the servicing agent of the mortgage" 9MCL 600.32 04(1)(d). The court also held that MERS as the mortgagee only held an interest in the property as security for the note, not an interest in the note itself. (remember that the note is the promise to pay)


The Michigan statute requires that ALL of the provisions of the statute must be met to permit foreclosure by advertisement versus judicial. Specifically, it requires that the party foreclosing is 'THE OWNER' of the debt , or the OWNER of an INTEREST in the debt secured by the mortgage or the SERVICING agent of the mortgage. In MERS case, they acted on behalf of many lenders as nominee or mortgagee of record. Their role was to supervise and report on the moving around of the beneficial ownership interest or servicing rights which were often transferred amongst members. It appears there were never any specific recordings of these transfers in a public forum, only electronic tracking services. In Michigan the opinion is that the Legislature REQUIRES ownership of an interest in the NOTE before permitting foreclosure by advertisement.


One reason the Michigan Legislature wrote the language the way it did was to prevent the possibility that borrowers would be obligated under the note to more than one entity and potentially be subject to double exposure. In other words, one could potentially lose the property through MERS, and still be sued by the NOTE HOLDER for the amount of the debt because MERS technically does not have the authority to discharge the NOTE.


The conclusion of this case (3 judges-1 dissenting) was that MERS did not OWN the indebtedness, did not OWN and interest in the INDEBTEDNESS SECURED BY THE MORTGAGE OR EVEN SERVICED THE MORTGAGE. The court concluded that MERS' inability to comply with the statutory requirements renders the foreclosure proceedings in the cases VOID ---ab initio. (For example, if something is said to be void ab initio,the thing was never created or valid to begin with) Remember-- there was a dissenting opinion from one judge and there are options for another hearing that may reverse this current opinion or uphold it.

Until the case winds its way to the Michigan Supreme Court, we won't know for sure whether the Appelate Courts decision will represent the law in Michigan. Clearly this is a mess in Michigan, as it is elsewhere, and will need to be resolved. Like Dan, I believe that homeowners might have at best a temporary moral victory. Whether it be by MERS or the banks directly, the deadbeat homeowners will eventually be foreclosed and evicted. Of course, many of these same deadbeats see this as a way to get another 6-8 months of free housing, which is the kind of mind set and thinking that got them into this situation in the first place.

The victory, however temporary the stay of foreclosure might be, it to be found in the principal that the banks cannot treat the system of recording and maintaining a documented trail of evidence of ownership as lightly as they have been. A recent article in Bloomberg Businessweek by Hernando deSoto. a renowned Peruvian economist, makes a convincing case that the recent financial meltdown was caused as much as anything by the breakdown of the public record keeping and transparency for debt of all kinds, not just mortgages. Mr. deSoto explores the lack of transparency and accountability in several sectors of what he claims has become a $15 Trillion underground parallel economy. The MERS scenario. along with huge pools of risk in arcane derivatives that were not understood by anyone and largely undocumented (at least in public), just set the stage for the eventual worldwide financial meltdown.

Let's hope that someone or some state eventually prevails against the lunacy of MERS and other attempts to obliterate the trail of documented ownership that is critical to the concept of begin able to pass "clear title" to a new owner. As it stands, the MERS mess gives title companies pause when considering the issuance of title insurance for homes that have mortgages that have been included in these bundled mortgage instruments. It might be difficult for a homeowner to prove that he really owns the property and has the right to sell it.

Seeking fairness for the loss of equity

The world of law often establishes guilt, settles disputes or establishes precedents by exploring and proving theories. There is a somewhat obscure and arcane branch of law called equity law. It takes place, when it happens at all, in special courts called chancery courts or in special sessions of the more normal civil courts. Only two states still have formal chancery courts – Mississippi and Delaware. The remainder of the states rolled their equity courts in the common law civil court after the Federal Rules of Civil Procedure were published in 1938. Chancery courts are sometimes appointed by the governor of the state.

The concept of equity that is separate from common law comes to us from our English heritage. In England people found reason to appeal directly to the King for redress of issues that were not dealt with fairly in the courts of common law. The King created Chanceries to hear the pleas of the people for fairness on matters that weren’t dealt with well under Common Law. The idea of appealing for “fairness” is core to the concept of equity in this branch of law.

According to The Free Dictionary by Farlex - In its broadest sense, equity is fairness. As a legal system, it is a body of law that addresses concerns that fall outside the jurisdiction of Common Law. Equity is also used to describe the money value of property in excess of claims, liens, or mortgages on the property.

There is also a concept under the broad heading of equity called waste. This concept is associated primarily with real estate equity in these courts.

Again as defined in The Free Dictionary:

Waste is an unreasonable or improper use of land by an individual in rightful possession of the land. A party with an interest in a parcel of land may file a civil action based on waste committed by an individual who also has an interest in the land. Such disputes may arise between life tenants and remainder persons and landlords and tenants.

The four common types of waste are voluntary, permissive, ameliorating, and equitable waste.

• Voluntary waste is the willful destruction or carrying away of something attached to the property.

• Permissive waste is an injury caused by an omission, rather than an affirmative act, on the part of the tenant.

• Ameliorating waste is an alteration in the physical characteristics of the premises by an unauthorized act of the tenant that increases the value of the property.

• Equitable waste is a harm to the reversionary interest in land that is inconsistent with fruitful use.

I read some about the background and theories that are involved in this peculiar branch of law after a potential client, who happens to be a lawyer, suggested that the concept of waste under the laws of equity might provide the legal umbrella under which successful class action lawsuits might be brought by homeowners who find themselves in positions of greatly reduced home equity due to no fault of their own.

Even though the concept of waste is usually applied towards an owner or a tenant, the theory here is that it can be extended to cover the mortgage holder who certainly is a person with “an interest in the property.” The line of reasoning in seeking redress would be based upon the premise (theory) that certain lenders willfully, knowingly and unfairly engaged in practices that caused a loss of equity for the owner.

There is already some evidence and a few admissions on the part of some lenders that they knowingly (and in some cases fraudulently) made risking loans and then packaged those risky loans together with pools of normal loans and sold the resulting investment instruments without proper disclosure of the risks to unsuspecting investors. When a high percentage of the bad loans went into default the pools themselves went bad and the whole house of cards that was based upon those investments came crashing down. The increased foreclosure rates caused by the bad loans had the effect of pulling down the value of those other homes in the pools, and the rest, as they say, is history – the housing crash and recession followed.

A few of the big lenders even created hedge instruments that allowed them to bet that the bonds for the mortgage-backed pools would fail. So, they made money selling the bonds based upon the pools of mortgage AND they made money by selling bonds (mainly to themselves and friends it would appear) that bet that those mortgage-backed bonds would fail due to high default rates.

Now, supposing that this behavior on the part of the lenders and the resulting loss of equity can be proven to the satisfaction of a chancery court judge (jury trials are not required in these courts, just a hearing in from of a judge or panel of judges) the directed redress from the court might well involve restoring the lost equity to the homeowners, which is usually how equity cases are settled.

Since it is literally impossible to restore the equity, even by court order; the next best solution might be for the court to direct that the lost equity be forgiven by the errant lenders involved and resets of loans to the current equity levels (which their actions caused to happen) should take place. While that is financially painful for the lenders involved, it does have a ring of fairness about it and it is what many experts have been saying needs to be done to get out from under the current cloud of negative equity. The banks aren’t about to do that on their own.

A solution based upon a court of equity decision wouldn’t necessarily apply to all mortgage loans everywhere. There were and are many lenders who did not engage in the practices that led to the crash of home equity. These might be smaller regional banks or credit unions which made mortgage loans and held on to them. They watched in horror, along with their mortgagees, as the home market tanked. They and their mortgagees probably have no chance for redress under actions that might be taken in the court of equity; however, these homeowners might join the class of actual customers of those lenders who caused the problem and claim that their actions tainted the entire mortgage pool and thus impacted their own equity. How that would be redressed is problematical.

So, what, you may ask, is the point of all of this? Well, the tobacco companies were able to thwart the legal efforts of many individuals and some early class action suits until lawyers finally found an argument (a theory) that they could apply across the class of smokers who became cancer victims even after the tobacco companies had plenty of evidence (and lots of juicy internal emails to boot) that their products were a cause of greatly increased risk of cancer for smokers. In other words they knowingly caused waste to the health of their customers. When enough States Attorneys General jumped on that bandwagon the big tobacco companies caved and they settled.

Perhaps the same cause-effect theories can be shown and proven for real estate under the concept of waste by the lenders causing the loss of equity of the homes of mortgage borrowers across America. It’s worth a shot by some good lawyers somewhere. Imagine the juicy emails that would come out of the disclosure process for that Chancery Court hearing.

To read more about this interesting, if somewhat obscure, branch of law just Google “waste and a legal term” and follow the links.

Break out the bubbly, the bleeding has slowed…

Today’s Detroit Free Press has a story under the headline – Oakland Co. housing set for rebound, report says. The story is based upon a report that shows that assessed housing values in Oakland County dropped less last year than the year before; with a forecast of an even smaller decline in the assessed value for next year. The story also reported the decline in our foreclosure rate. The assessed value drop reported for 2011 was 9.18%, which was les than the 11.75% for 2010. The 2012 forecast drop in assessed values is only 3%. Foreclosures peaked in 2010 at 9,292 in Oakland County and are forecast to be down about 11% this year. There were even two markets in which the assessed values actually went UP! The city of Northville (at least the portion in Oakland County reported an increase of .53% and the city of Pleasant Ridge was up .60%. Below are the numbers for the markets that I track in Oakland County:


Milford Township: -5.42%


Highland Township: -6.87%


Commerce Township: -3.84%


White Lake Township: -6.50%


Lyon Township:-2.73%


City of South Lyon: -5.55%


West Bloomfield Township: -7.33%


While it may seem strange to celebrate while declines in assessed values are still taking place, the decline to low single digit losses in value are good indicators that the market is in the process of leveling off and about to head in a positive direction. There are still some sore spots in Oakland County. Pontiac, for instance is off 22.89% in assessed values. Other hard hit cities include Hazel Park at -17,74, Oak Park at -14.81, Fenton at -13.95 and Southfield at -13.20%. Of the Oakland County townships, Waterford was the hardest hit at -11.70%, with Novi also in double digits at -10.18%


The Free Press story went onto chronicle some of the tax base consequences and the difficulties that local governments are having dealing with the revenue losses, due to lower taxes. It’s hard for homeowners to be too empathetic to the trials of local governments when many find themselves trapped in homes with negative equity; however, those reduced local budgets are starting to manifest themselves in reduced local services and local infrastructures that are badly in need to attention.


So, what are we to make of stories like this? Certainly everyone is searching for the bottom of the current economic and housing malaise. Some of the stories that we see about increases in existing and new homes sales are caused by the seasonal nature of real estate – more people just finally get out and start looking to buy it eh spring. However, if you look across the whole spectrum of articles that are finding small positive signs of recovery, yo can’t help but be hopeful. There is sufficient evidence in the decline of bad things, whether it be the rate of foreclosures or the lower rate of assessed value loss; and, the stories of increases in applications for mortgages and housing starts going up and inventories going down, to find reason for optimism that worst is over in this long winter of discontent.


I think I have personally written at least 3-4 blogs over the last few years asking the question, "Are we there yet?” about the bottom of this dreary market. Well, I’m not sure that we’re there yet, but it feels like we’re damned close. It may not be time to break out the Champaign , but maybe I’ll pop the top on Bud (after all it has bubbles, too).

Olly, Olly All In Free...

There is some disagreement about that phrase. It is often written as Olly Olly Oxen Free; but, whichever, the phrase yelled at the end of a game of hide and seek told the still hidden that it was safe to come out of hiding now...that the current game was over and it was time to restart the game.

Well, it's time for a big "OLLY OLLY ALL IN FREE" cry to go out to the housing market. The current housing depression game is over and it's time to start a new game. The problem is that too many would be sellers are still hiding out, hunkered down and waiting to put their homes on the market. Well, Olly, Olly All In Free. It's time!

Our local inventory has been dropping for several quarters and now we find ourselves with a severely depleted inventory of non-distressed homes as well as distressed homes. The distressed homes have been selling so briskly that they are now subject to bidding wars as more investor money chases the falling inventory. And so-called "normal" sales have been good enough to more than absorb what little inventory that has been hitting the market. The result is an inventory as we enter the spring selling season that is pathetically thin, especially in the middle prices. Olly, Olly All In Free! Let's get out there people.

Many homeowners who would like to sell have been trying to guage the market bottom; but, as stock market analysts will tell you, trying to time the market is a fools' game. Stockmarket pundits can tell you with great certainty when the market changes...about a quarter ago. They look back at data that is months old and finally see the inflection points. We'll probably be able to do the same thing in the housing market. I'm sure that Lawrence Yun, the NAR economist, will be able to provide great scholarly proof of what happened and when, about 2-3 months after the fact. In the mean time Olly, Olly All In Free! It's changing people.

Somehow buyers seem to know that the end of the buyer's market may be near. They are out in a frenzy buying up distressed homes in my area, with many now involved in bidding wars over HUD houses and foreclosures. An would be move-up buyers are calling, looking for help because they can't seem to find what they're looking for as they wander around searching for lawn signs. That's because the sellers are still hiding. Olly, Olly All In Free! Come out, come out, where ever you are and join the new game.

Dramatic differences when distressed sales removed

I track and report upon several local real estate markets. In general I report on all of the sales in each market, which obviously includes a big slug of distressed sales - foreclosures and short sales - these days. Potential customers often complain that they shouldn't be lumped in with those distressed sales when I'm evaluating a market price for their home. They are partially correct. The distressed sales do have an impact on the overall market by lowering everyone's value. But by how much and what is the difference between the two categories - total market and non-distressed only sales? I decided to review my data to see if I could see that difference.

I must admit that I was not prepared for the dramatic differences in some key metrics. In general the median non-distressed homes sold for $40,000 or more than the total market median price. The impact on the SEV multiplier is even more dramatic, rising between .35 to .5 depending upon the specific market. The difference in price per square foot is also dramatic, ranging between $16-26 per square foot for non-distressed homes. Below are some of the markets and the differences.

Milford Overall Market
Median Sold Price - $200,000
Average SEV Multiplier - 1.5316
Average Sold Price/Sq Ft - $80

Milford Non-Distressed
Median Sold Price - $240,000
Average SEV Multiplier - 1.8775
Average Sold  Price/Sq Ft -  $100

Highland Overall Market
Median Sold Price - $97,000
Average SEV Multiplier - 1.4881
Average Sold Price/Sq Ft - $72

Highland Non-Distressed
Median Solf Price - $235,500
Average SEV Multiplier - 2.0011
Average Sold Price/ Sq Ft - $102

White Lake Overall Market
Median Sold Price - $136,425
Average SEV Multiplier - 1.5937
Average Sold Price/Sq Ft - $75

White Lake Non-Distressed
Median Sold Price - $179,375
Average SEV Multiplier - 1.8624
Average Sold Price/Sq Ft - $87

Commerce Twp Total Market
Median Sold Price - $154,000
Average SEV Multiplier - 1.5943
Average Sold Price/Sq Ft - $80

Commerce Twp Non-Distressed
Median Sold Price - $225,000
Average SEV Multiplier - 2.0028
Average Sold Price/Sq Ft - $96

So there is a case to be made for keeping the two markets separated for purposes of advising would be sellers what their home might fetch on the market. In general sellers still want to start out too high, but not as bad as one might have thought. I looked at the Days on Market figures too and not unexpectedly the non-distressed homes are on the market longer, although that is a statistic that is so often gamed by the listing agents (keeping the listing "fresh" by re-listing rather than extending) that ii is not always a very accurate indicator.

Up popped the devil we know…

My gut told me that March was a tough month, just based upon the high percentage that I saw in the data for my little patch (9 townships that I track), and the headline in today’s local paper confirmed that feeling. Foreclosures jumped back up in March, after having been down in January and February. There were 955 foreclosures in Oakland County in March of this year, as compared to only 915 in March last year. January 2011 started out with only 558 foreclosures in Oakland County, which gave us some hope that the worst was behind us. It was not to be. We seem to be in that confused and confusing state of change that occurs near the bottom of any recession. We haven’t quite reached the inflection point or at least not one that has proven to have legs. We keep bouncing along near the bottom, moving up and down in what appears to be a random pattern, but with distressed sales – foreclosures and short sales still dominating the markets. Last week was the first time in a long while that distressed sales made up less than ½ of my market. I took that to be a good sign. Another good sign is the fact that houses above $200K are selling again, even if they aren’t distressed. That’s good for two reasons – 1.) it says that move-up buyers are back out in the market, and, 2.) it will encourage more would be sellers of midrange homes to get them on the market. We have actually had a very low inventory on the market locally of good mid-range homes that are not distressed. A good portion of the newspaper article about the foreclosure spike in our area focused upon the impact on the tax base and revenues of local governments. This was another year of declining assessed values in our area, with properties down 8-12% depending upon the area. That not only impacts the tax base, but the ability of many owners to even consider selling. The value declines are a real mixed blessing. They mean lower taxes, which everybody is in favor of; however, the continued decline in values continues to put “innocent bystander” homeowners underwater. Now many people who did nothing wrong, who did not overextend themselves or buy more than they could afford; find themselves in the some boat as the people who supposedly caused this mess. I guess, if you are on the Titanic, you never know who you’ll end up in the lifeboat with when the ship goes down.

Census uncovers size of the problem in affluent neighborhoods…

Articles in today’s Detroit News reported on the surprisingly high percentage of empty homes in some of Detroit’s more upscale suburbs. Places like Bloomfield Hills and Birmingham with upscale homes have always been considered to be somewhat immune to economic downturns. After all these are not places where hourly workers live, don’tcha know.

The News articles reported empty hoe rates of of 9.4% in Birmingham and 10.2% in Bloomfield Hills. One interesting note in the article was the fact that this issue is masked somewhat in those areas because the local governments make sure that the lawns and exterior of the empty homes are maintained, so as to keep up a good impression for the neighborhoods. One resident was quoted as stating, “Even our blight is better.”

These are neighborhoods where owners are walking away from $1.5 Million homes that are nor only worth $600-700,000. These are mainly occupied by what were (and still are in most cases) wealthy Baby Boomers who are now retiring. Many are people with money who are making “strategic default” decisions (see my blog on that topic here). Some are older and may be headed to elder care homes. There are many reasons sited for the high vacancy rates in these rich suburbs, but the bottom line is that many of the people who were apparently wealthy weren’t as well off as we thought or they aren’t as willing as the average Joe on the street to sacrifice in order to keep up payments on underwater assets. That is perhaps the main reason – they see these houses more as assets than as homes and they are willing to cut their losses with those assets just as they would with a poorly performing stock. After all, they can go live in their 4,000 Sq Ft cottages in Traverse City or Aspen until this all blows over. One is hard pressed to feel much sympathy for those now “homeless” people.

In the same Detorit News issue there was also an article that claimed that much of the current home buying in America right now involves cash sales to foreign investors. Apparently they see the U.S. housing market as a golden opportunity to park money in something that they feel has better potential for income (rentals) or eventual appreciation than stocks or bonds. We certainly all know that it is great time to be a buyer, especially if you come with cash in hand. So if you see a foreign buyer wandering around you market with a bag of money, send him my way – have I got some houses for him.

Get over it...

“Sometimes you’ve got to say to someone, ‘Get over it.’”(Anon) from the Jack’s Winning Words blog.

I’ve blogged in the past about Anon, the world’s most prolific author. The words of Anon seem particularly appropriate in today’s real estate market.

I spent the weekend basically telling potential seller’s to get over it as it concerns the lost value of their homes. Sometime you will hit a fairly realistic homeowner – one who has watched what is gong on in the world and does not believe that somehow there was a miracle and his house was spared the ravages of the current market. However, more often I hit the older couples who just can’t come to grips with the fact that between 1/3 and ½ of their nest egg of home equity is now gone. Moreover, many of them are holding on to the false hope that the dust on the horizon is the cavalry riding to their rescue with an immediate return of value, rather than just more Indians joining the battle to pick over the remains of their equity.

I use lots and lots of facts and comps and charts and other data driven stuff to support the “news” that I have to break to them; however, I continue to get the push-back that , “my house is different, it’s better, it certainly hasn’t lost that much value.” It has. Get over it!

Now, obviously, I’m seldom that blunt or insensitive to the pain that my market pricing analysis brings into the discussion about selling and moving on. In fact, I’ve cried with recent divorcees who have to sell and move their children as part of a settlement and prayed with recent widows who found out that their deceased husbands didn’t provide well enough for an untimely death. I’ve had long, empathetic discussions with husbands whose losses of jobs have forced them to the brink of bankruptcy and into feelings of failure and inadequacy. Even in all of those circumstances one eventually comes to the point of having to say; OK, we’ve had our cry; now, get over it and let’s move on.

So, I’m off to present yet another market analysis to yet another underwater pair of sellers who recently retired. I’ve got my hankies ready. We’ll get over it. That’s how real life works.

Using distressed sales as comps – some states say no…

In today’s RealtyTimes email is a story by Bob Hunt about several states passing or looking at passing laws that try to govern how appraisers might use (include or not include and how to factor) distressed sales – foreclosures and short sales. Click here to read the entire article.

The legislators in the states involved undoubtedly believe that they have the best interests of their citizen at heart – legislators, after all, always seem to think that they know what’s best for us. However, as Hunt points out in the article, these state laws may put the appraisers at odds with Federal laws which state that they must use all available sales in establishing the local market pricing. Hunt goes on to point out some of the complexities that appraisers already need to figure out in order to comply with the Federal guidelines under the Uniform Standards of Professional Appraisal Practice (USPAP), and how these new state rules would further complicate things.

Hunt uses the figures 30-40% of all sales as his measure of what percentage of all sales involve distressed properties. In my area that is still running well about 50% and reaches as high as 70% in some markets. It would be almost impossible to find enough comps to do an analysis without using distressed properties in my markets. The challenge for Realtors® and appraisers alike is figuring out how to factor in the impact of neglect or intentional damage to these distressed houses when using them as comps.

One might make the argument that even if one is diligent in not using distressed homes as comps they still have a large impact on value, since they are now heavily influencing assessments in most areas, causing home values to continue to drop. It is also somewhat ingenuous to think that these homes are not a major part of any local market, especially in my area where they make up such a large portion of the actual sales. I have seen figures that show that they make up less than 25% of the overall inventory on the market in my area and yet they constitute 50-70% of the actual sales in 8 out f the 9 markets that I track.

When I’m doing CMA’s for local clients I try to take out the most egregious examples of distressed homes – those maybe selling for $40-50/Sq Ft in a neighborhood that averages $90-100/Sq Ft. Those are usually the homes that have been trashed or stripped by angry ex-owners and should not be included. I trend to leave short sales in the analysis and foreclosed homes that look like they brought reasonable prices. Those are arbitrary calls on my part, but then the whole home valuation process is much more arbitrary these days that in “normal times”, whatever that was.

A tale of two townships - Green Oak and Hartland

Two of the townships that border on Milford, Michigan are in Livingston County on either side of Brighton. They are Green Oak, which is just west of Lyon Township in Oakland County and Hartland Township, which is just west of Highland Township. Green Oak and Hartland share some characteristics in common. They are both what might be considered to be "bedroom communities", that is to say that they don't have any strong central town/city/village downtown areas around which they revolve.

While Hartland Township does have an unincorporated little area that calls itself Hartland and another unincorporated area called Pharshallville, neither little "village area" has a strong downtown and were likely never much more than a small farm towns. There are few businesses in either to attract anyone. Green Oak has even less of what could be called a central core and was always a fairly rural area. I supposed that it could be argued that the Village of Whitmore Lake is Green Oak's "commercial center." Both tend to be heavily influenced by the City of Brighton, although both do have commercial, shopping strips. Green Oak is served by three different school districts - Brighton, Whitmore Lake and South Lyon - while Hartland does have its own consolidated school district.

One would assume that the real estate markets in these two little suburbs of Brighton would be fairly consistent with that of Brighton itself. In fact, Green Oak is not even tracked and reported separately from Brighton by the Altos Research folks, from whom I get my market charts. However, Hartland is reported separately and is on a completely different track than that of Brighton. The chart shows what appears to be a bottoming out of the market in Hartland after a sustained fall in median home values of sold homes and a continued drop in inventory.



The Green Oak market is included in the Brighton chart, which shows a remarkable recovery of median home prices late last year,, with a bit of leveling off early this year and a continuing decline in inventory.



So far this year, there have only been 31 homes sell in Green Oak Township above $20,000 (my arbitrary cut-off point for tracking purposes) at an average price of $84/Sq Ft and an SEV multiplier of 1.6206. That means that homes that the assessor says are worth $200,000 have been selling on average for about $162,000 in Green Oak or about 81% of the value that they are assessed for. Distressed sales - those that are short sales or foreclosures - made up 46% of all sales in Green Oak so far this year.

In Hartland Twonship, only 30 homes have sold thus far in 2011 at an average SEV multiplier of 1,6255 and at an average of $74/Sq Ft. Hartland has seen distressed sales of 53% of all sales so far this year.

Green Oak has benefited a bit from being out along the I-96 corridor, which makes is a good commuter location for those oriented towards Detroit for work. Hartland is along the M-59 and M-23 corridors, which is not nearly as accommodating for Detroit-oriented work commuters.

South Lyon - a market that refuses to die...

The South Lyon/Lyon Township market has proven to be remarkably resilient in the face of the worst recession since the Great Depression. much of last year found the South Lyon market on an upward trajectory in median sold values and inventory. Near the end of the year, when most other local markets tanked, the South Lyon market stubbornly refused to be dragged down. It stabilized and has been bouncing along at that level every since.



A good part of the ability of this market to continue to prosper is based upon the fact that is was the fastest growing new-build market in the area before the bust. There are still new subs being built there and even though most slowed to a crawl in the depth of the recessison, most developers there did not go bankrupt, so they are still building as we come out of the recession. Many other areas saw developers and builders exit the business and leaving unfinished projects in the lurch.

The Lyon/South Lyon area also benefits from its location out along the I-96 corridor. It is relatively easy to access I-96 and get to where ever one wants to go from South Lyon. It is also perhaps feeding off buyers who work in the Brighton area, since it is right next door to Green Oak and Brighton Townships.

So far in 2011, 54 homes above $20K have sold in the Lyon area at an average price of $89/Sq Ft - well above surrounding areas and an SEV multiplier of 1.8638, also well above neighboring townships. South Lyon has had a lower percentage of distressed homes sell, too; which helps keep those numbers up. It is currently running at only 32% of all sales that are distressed, about half the rate of neighboring townships.

In White Lake Michigan the swoon continues...

After a brief respite at the end of last year, when things looked like they had stabilized and might be turning around, median home sale values in the Township of White Lake are again headed down and is inventory on the market



White Lake continues to suffer a high percentage of distressed home sales, with distressed sales making up almost 70% of all sales in March. So far this year, there have been 55 homes sell at an average SEV multiplier of 1.5992. That means that a White Lake home that the assessor says is worth $200,000 actually sold for an average of $159,920 or about 80% of what the assessor thinks it's worth on the market. Home sale prices also averaged about $75/Sq Ft, which isn't all that bad when compared with other local markets.

White Lake is a fairly populous suburb and the last one along M-59 before you get into what might feel more like rural areas - Highland and Hartland are the next two townships out along M-59. White Lake features some very good shopping areas along the M-59 corridor.

What's up with West Bloomfield?

A visitor from another planet who just looked at the real estate charts and statistics for West Bloomfield Michigan might conclude that this must be a poor area with a badly distressed economy. I suppose that last part might be partially true, but West Bloomfield is anything but a poor area. It is just an area that has been hit hard by the recession and which is still reeling, with distressed home sales (foreclosures and short sales) running above 70% of all home sales thus far in March and about that same level so far year-to-date.



The Average Median Price of homes sold in West Bloomfield has struggled back up a bit since the new year started, but the high percentage of distressed sales is keeping things artificially low right now. West Bloomfield homes have sold so far this year for an average of 1.5369 times their SEV values and about $72/Sq Ft. That means that a home with an SEV of 150,000 that the assessor says is worth $300,000 would likely have sold this year for $230,535. No wonder Tums sales are up in West Bloomfield.

West Bloomfield is an older, fairly well built out community, with many "upscale subs that were built in the late 70's and 80's. Those homes, many originally built for around $85-100K (big money back then) had appreciated to nearly $300,000 before the bubble burst. Now sellers are lucky to get $130-150K for them. Unfortunately for many, the value of their homes was a large portion of their retirement nest egg - a nest egg that has largely vanished. For others, their homes were like piggy banks that they kept taking money our of to pay for various other toys and now many are trapped in homes which are severely underwater on value vs. the mortgages.

Highland does the double dip...

Real Estate in Highland, Michigan has been hammered by the recession and now appears to be going into a second swoon - a double dip.



Both Median sold home prices and the Inventory level are back on their way down, after a brief run-up in the 4th quarter of last year. The huge spike in new inventory can probably be attributed to the a burst of listings by sellers who have been like a little boy holding his breath and needing to take a deep breath. In this case the brief run-up in sold prices spurred and over-response by would be sellers to get in on that market - a market that turned out not to really be there.

So far this year, 41 homes priced above $20K (my arbitrary cut-off price) have sold. The average SEV multiplier so far in 2011 is 1.5079, which means that house that the assessor says is worth $200,000 would have actually sold for $150,790 or about 75% of the value that the tax man thinks it is worth. Obviously the local assessors are playing catch-up with the market. That house would have sold for an average of $72/Sq Ft, compared to all of last year at $74/Sq Ft. Of course last year homes sold for an average of only 1.3949 times their SEV, so I guess the assessors are getting closer to market value.

Foreclosures and short sales continue to make up a significant portion of overall sales, but they are running at under 50% for March, which is good and the first time that they've been below 50% in some time.

The clarity of hindsight…

An article by Clara Hill in today’s Realty Times release uses statistics released by the National Association of Home Builders to quite confidently discuss events that took place in February. According to her article, sales of newly-built homes declined by a staggering 16.9 percent in February; as reported by the U.S. Commerce Department. That was a national average with the Northeast hitting a record low, falling 57.1 percent last month. The Midwest was down by 27.5 percent.

This “news” followed reports earlier in the month which stated how confident the NAHB was that things are getting better. Now, of course they discuss in great detail all of the factors that have stalled out new home sales. Hindsight is a wonderful thing.

The pronouncements based upon hindsight are also the only truths that sometimes get reported. There are many guesses or hopes that also make the news, usually positioned as forecasts by various learned men or groups. They actually provide some of the best fodder for the hindsight writers to feast upon later – sort of the “what were they thinking” tag line.

I’m reminded of the recent statements that have been published by Daniel Kahneman, Nobel laureate in economics, which quite correctly pointed out what a buffoon Alan Greenspan is and always was when he repeatedly sat in from of various Congressional panels spouting total nonsense, which of course they took in with wonder and adoration.

Greenspan was, after all, “the smartest guy in the room”; even thought not one of the Congressmen or Senators had any idea what he had just said. Alan, as Kahneman pointed out, has mastered the art of talking in economic gobbledygook to such a level that not only did no one know what he was saying, they didn’t know how to question or refute it. It is only though the clarity of hindsight that anyone has come forward and stated – this guy led us down the garden path to recession.

It’s just too bad that in the midst of the hindsight driven witch hunt that is now gong on for scapegoats in the banking world that there isn’t some way to drag Greenspan into court for his role in perpetrating this mess upon the country. One can only imagine the appropriateness of Alan Greenspan sharing a cell with Jeffrey Skilling or Bernie Madoff – two other smartest guys in the room – although they are pikers compared to the damage that Greenspan did to the U.S. economy. Now that would be a sight worth seeing.

MIA - First time buyers

According to a recent National Association of REALTORS® (NAR) article, in January, first-time home buyers made up 29 percent of the market, the lowest since NAR began tracking first-time buyers on a monthly basis in 2008. First-time buyers normally make up 40 percent to 45 percent of all purchasers. Where'd they go? USA Today also had a recent article that highlighted some of the factors that have first-time home buyers sitting on the sidelines, even though home prices continue to all and mortgage rates are near their all-time lows. USA Today sited: • Tougher lending standards – Not only have lenders tightened up their requirements, but they have also backed away from most of the down payment assistance programs that used to allow these buyers to get into a home. • Expired tax credits – The tax credits were the tipping point for many first time buyers, especially with programs in some states that allowed the credits to be taken up front as part of the transaction. • Competition from cash buyers – While HUD and the GSE’s have programs that give first-time owner-occupants the edge over investors for really low-cost houses that have been foreclosed, investors are waiting like a tree full of vultures to swoop in as soon as the initial 10-14 day period for O-O buyers is up. I would add to this list that it is my gut feel that most of those first-time buyers who were really ready (with money saved up to take the plunge) have already bought. There is not an endless supply of first-time buyers, especially those that have been fiscally responsible and have been saving up to buy. I might add that I’m seeing the same thing start to happen with investors, especially smaller investors. They have tapped themselves out in cheap houses and are now pulling back to regroup a bit. There are still investor pools out there buying; but many of the small-timers are fully invested at this time. I suppose that, if there is a silver lining in the statistics, it’s that mid-range and upper end buyers are making up a higher percentage of buyers overall. The mid-range buyers (our traditional move-up buyers) seem to be testing the waters more and more as they become more confident in the overall economy. They are finding some great bargains in the market, although much of what is holding them back is that they can’t find t a first-time buyer to buy their current home. The Boomers are widely reported to be sitting on their McMansions, hoping for a miraculous recovery of lost value. That’s not likely to happen and it may take a few more years before they finally give up and swallow the losses. I suspect that most can hold out for a year or two once they retire before they realize that not only are they missing their dream retirement plans, but may also be stripping their savings to pay for those houses at a rate that will put those plans permanently out of reach. Having a highly leveraged a big house just doesn’t look nearly as smart, once you go on a fixed income. The upper end of the market has not been immune to the effects of the recessions either, with some really big homes falling into foreclosure; however, there is still a reasonable market for luxury homes and condos in this area. I suspect that it is much worse in Florida and Nevada and California. Still, one can get great deals in the $750K to 1.5 Million range for homes that were $1 – 2 Million. Ahhh, if only one had that 1.5 Million to invest. So, I see the buy-side of the market in my area in sort of a settling out and settling down phase right now. Even though values are still dropping, many would-be low-end buyers are already tapped out and need to sit the market out for a bit. Midrange buyers are cautiously reentering the market and the upper end is still puttering along like it always has. I suspect that by mid-year the market mix of buyers will reflect a more traditional percentage split between first time buyers, move up buyers and high-end buyers. As for the sell side, we are already seeing a drop in the number of foreclosures taking place locally; however, short sales have kept the distressed segment of the market over 50% of sales in my area. Leases also make up a much higher percentage of transactions than would historically have been the case, as owners who want to avoid a short-sale try to hold out for a return of lost value. The mid-range market continues to see low inventory as underwater owners also hold out (probably unrealistically) for lost value to return. Lots of second homes/vacation cottages are also sitting on the market in summer resort areas. That's what I see happening in the local market in the Milford Michigan area.

“Optimism doesn’t mean everything is going to be great. It means that we can respond to everything with greatness.” (Elimelech Goldberg) from the blog - http://jackswinningwords.blogspot.com/ Perhaps this saying that Jack featured today on his Jack’s Winning Words blog should be today’s words to live by. Certainly we all have many opportunities these days to respond to things happening around us that are not great. We can’t change them, but we can change how we respond to them. I sometimes struggle with staying positive in these times, but it is a struggle worth continued effort. One has only to look about to be able to find people in situations that are worse than ours. Doing something to improve their lot will also improve yours. The key is to do something and not to just sit still, wallowing in self-pity. So, find some things to respond to with greatness today and see if you don’t feel better at the end of the day.

And still the champ...

I’m in the midst (three months in) of yet another short sale involving the worst bank in America to deal with in that sort of situation and they have proven again why they are still the undisputed champions of short sale misery.

Yesterday I got a request to have my buyer (at least I’m on the good side of the deal) sign an amendment that states that the sale is subject to the bank’s approval. Now, mind you this is three months into the approval process for the deal and the Purchase Agreement included a Short Sale Addendum which clearly stated that the sale is subject to the approval of all lien holders. I suppose that this particular bank doesn’t want to be lumped generically in with all of the other potential lien holders and certainly not without being specifically named (one would assume for branding purposes).

So now we had to jump through yet another inane hoop put in the way of progress by some buffoon somewhere, who presumably has not even taking the time to read the complete offer package. Is there any wonder why this particular bank has such a well earned reputation with so many Realtors® as the worst bank of America?

If the pace of the decision making process stays on this course, we should have a decision on this sale by mid-June. Of course, every month or two they stop the process and come back out asking us to update the bank statements that the buyer provided to prove his worth for this all cash sale. Fortunately his money is not in that particular institution, otherwise there might be cause for valid concern. I’m tempted to advise my client to revise his offer downward every month or two to take into consideration the continuing decline in property values, but that is way to logical to be understood by this bank.

Monday morning bits and pieces…

New Build Starts Down Again - According to figures from the U.S. Commerce Department, housing starts declined 22.5 percent from January. Builders said the decline is due to concerns over interest rates, energy costs, and tightened lending standards. At the same time, the Commerce Department reported an overall up-tick in builder confidence for the future – based upon what the Department really didn’t say.

Where’s the people go? - A recent report in Forbes Magazine listed the six most vacant cities (as of the end of 2010)

1. Orlando
Home vacancy rate: 4.3 percent
Apartment vacancy rate: 23.6 percent

2. Las Vegas
Home vacancy rate: 5.5 percent
Apartment vacancy rate: 13.5 percent

3. Memphis, Tenn.
Home vacancy rate: 4.7 percent
Apartment vacancy rate: 16.1 percent

4. Riverside-San Bernardino, Calif.
Home vacancy rate: 6.4 percent
Apartment vacancy rate: 10.4 percent

5. Dayton, Ohio
Home vacancy rate: 3.3 percent
Apartment vacancy rate: 26.4 percent

6. Phoenix
Home vacancy rate: 3.4 percent
Apartment vacancy rate: 15.5 percent

Nationwide, the single-family vacancy rate ended the year at 2.7 percent while rentals were at 9.4 percent.

The Forbes article asked the question, “Where’d all of the people go?” That’s an interesting question in general and I think it points to the size of our nation’s so-called “underground economy.” At least in my area there has been lots of investor buying of foreclosed properties and most of those properties are being bought as rental units. Those kinds of rental units don’t normally show up in the local real estate statistics, because the owners don’t use Realtors to list and rent them – they just stick a For Rent sign in the front lawn with a phone number on it. I suspect that many of the displaced people ended up in those homes and will be there for the next 2-3 years, rebuilding their credit scores.

Where’d the money go? – As reported in the Dow Jones Business News of last week - A congressional panel looking into where the money went that was allocated for helping distressed homeowners has concluded that much of it went nowhere. The Treasury Department allocated $45.6 billion for three major housing programs to help home owners, including the Home Affordable Modification Program (or HAMP), a refinancing program run by the Federal Housing Administration to aid underwater home owners, and a program designed to help hard-hit areas. But the Treasury Department only spent about $1 billion in TARP money for the foreclosure prevention effort, the panel noted. Amidst much Harump, Harumping from the Republican lead panel, increased oversight of the use of bailout money was promised, along with promises to do away with most of the programs and the Government Sponsored Entities (i.e. Fannie and Freddie). Democrats were appropriately unset at any mention of ending the programs and the GSEs.

Doing the civil suit shuffle – According to a story reported last week by the Associated Press, Federal bank regulators (the FDIC) reported that they are suing three former top executives of Washington Mutual, accusing them of allowing risky mortgage lending. In the civil lawsuit, the Federal Deposit Insurance Corp. accuses the three former executives of Washington Mutual Bank of risky lending practices that caused the bank to make mortgages "with little or no regard for borrowers' ability to repay them.” Well, duh! Wasn’t that what everyone was doing back then? Washington Mutual, which was the largest U.S. bank ever to fail, collapsed in September 2008. The former bank officials have released statements calling the lawsuit “baseless” and “political theater.” Of course it’s political theater, but maybe it’s as close to the perp walks that those clowns should be taking that we’ll ever get.

Fresh update of market stats

I just completed the weekly updating of the market data that I track for 9 markets in my area - Milford (Village and Township combined), Highland Township, White Lake Township, Commerce Township (including Walled Lake and Wolverine Lake), Lyon Township and South Lyon, and West Bloomfield Township in Oakland County; plus, Green Oak Township, Brighton and Brighton Township and Hartland Township in Livingston County.

You can see all of the latest data, plus historical data for many of those markets at my Web site - www.movetomilford.com . I collect and show the last listed price for the house and the sold price, from which I calculate the percentage of sold vs. list to see how close listed homes are to the actual market price. I also look up the SEV (State Equalized Value) and calculate the sold price vs SEV ratio. In theory, since the SEV is supposed to represent 1/2 of the assessors estimate of the homes market value, I should always get 2.0 as the ratio. In practice we have been consistently running between 1.5 to 1.8 times SEV as the actual sold market price.

I also capture and report the Square Footage of the homes and the calculated price per Sq Ft as listed and as sold. Most homes in areas that I track are selling in the mid $80/sq ft range, some much lower. That is a reflection of the impact of distressed homes on market pricing.

The way I display the data is to focus on this month's sales and then also have PDF files available that show the year-to-date statistics for each market. In the Current months data I also calculate the percentage of sales that are distressed - either foreclosed or short sales - and show that at the bottom of the data for each market.

If you are thinking of selling this is a valuable place to get a feel for the market and where you need to price your home in order to be competitive. You can price it any way you wish, of course; but, remember that this data is showing you what is actually selling, not what is listed and just sitting on the market.

If you are a buyer, this data can give you a good feel for what to bid in any market, since you will have a good feel for what sellers are ending up taking for homes. You can use the price per square foot data to at least find the ballpark that you might want to start your bidding in. Of course, most non-distressed homes will sell higher tan the averages that are shown, since they include lots of distressed sales (distressed sales are making up 50% or more of all sales in most markets).

The Milford Michigan Real Estate market

The market in Milford, Michigan continues to track downward, at lease as far as median sold home value are concerned. The inventory on the market bounched up at the beginning of the new year. but has again started down - perhaps an indication of dashed hopes of would-be sellers.








So far in 2011 the average price per square foot for sold homes in the Milford market remains well below $100 at $82/Sq Ft, with the median value even lower. The SEV multiplier is currently averaging 1.5454, which means that homes are selling at about 77% of their assessed values.



On average sellers are accepting offers that are 95% (the median is 93%)of the asking price at tht time of the sale. I don't track how many times the the property has had price reductions before it sells, but my observation is that homes are starting out way overpriced when they are initially listed and only sell once they are reduced into a reasonable price range. That tends to drag out the listing days on market. Some price bands are well into 2 years as averages for days on market.



See all of the details for the Milford real estate market and eight other surrounding markets at my Web site - www.movetomilford.com

Is the New Home Market bi-polar?

The Daily Real Estate News, a publication of that well respected voice of the real estate industry carries reports from The Commerce Department (and others) that would seem to indicate a severe case of bi-polarized market behavior (or at lease of bi-polar public releases). A quick look back over the last 4-5 months shows how confusing these releases can be on the state of the real estate market. In this case I just looked at the articles which were released in the Daily Real Estate News about every 20-30 days concerning the state of new home starts, along with the learned projections of the so-called experts in the National Association of Home builders, among others.

Daily Real Estate News - March 16, 2011
New Home Construction Plunges in February

New-home construction in February dropped 22.5 percent from the previous month, the lowest in nearly two years and marking the second lowest level on record, the Commerce Department reports.

Builders broke ground on a seasonally adjusted 479,000 homes last month. Economists consider 1.2 million units a year a healthy building pace.


Daily Real Estate News - February 16, 2011
Housing Starts Jump 14.6% in January

Housing starts in January reached their highest rate in four months, increasing more than analysts expected the Commerce Department reports. Housing starts jumped 14.6 percent to a seasonally adjusted annual rate of 596,000 units

Daily Real Estate News - January 26, 2011
New Home Sales Surge

New single-family home sales in December rose to their highest level in eight months and prices were the highest since April 2008, raising cautious optimism for a housing market recovery.

The Commerce Department said sales jumped 17.5 percent to a seasonally adjusted 329,000 unit annual rate after a downwardly revised 280,000-unit pace in November. Economists polled by Reuters had forecast new home sales rising to a 300,000-unit pace in December from a previously reported 290,000 unit rate. Compared to December a year earlier, sales were down 7.6 percent. Overall 2010 sales dropped 14.4 percent to a 321,000-unit rate.

Daily Real Estate News - December 29, 2010
Housing Starts Predicted to Hit 3-Year High

Housing starts will probably reach a three-year high of 739,000 in 2011, creating about 500,000 jobs and helping trim the unemployment rate to 9.1 percent, said David Crowe, chief economist for the National Association of Home Builders, in an interview with Bloomberg.

Daily Real Estate News - November 29, 2010
New-Home Sales Slide

Blah, blah, blah…
Well you get the picture.

Is it any wonder that the public perception of the market is so confused – it’s up , it’s down, oops it’s back up again…no, no, no it’s down.

Of course the existing home market reports are just as confusing and just as bi-polar. It may well be that we are in the phase of the market that was predicted when we would bounce along the bottom for a while – up and down, up and down.

It would be a relief to get some sustained market movement in one direction or another, just for the reassurance of momentary consistency.

Moving towards equity loss write downs...

The RealtyTimes News feed this morning had a story about how builders are abandoning the traditional McMansions in favor of smaller, more affordable new homes. That’s a good sign overall that the industry is adjusting to the needs of the current economy. Another part of the same story talked about negotiations that are on-going between states and major lenders to try to get the mortgage industry to bite the bullet and write down some of the lost equity value on underwater houses. That’s a strategy that makes a lot of sense.

There is a significant portion of the market that is frozen in place by the current negative equity situation – people who want to sell, but can’t because they are so far underwater on their mortgages. While a few greedy, or maybe not so intelligent homeowners, did treat their homes like piggy banks and took equity out for other uses; the vast majority of underwater homeowners are innocent by-standers who did nothing wrong, but who got caught up in the tsunami of the current economic mess.

The lenders have been waiting all along for the Federal government to figure out a program that will take on their losses or at least share the losses. In the interim, they got caught cheating on foreclosures and now face disciplinary action by the states. Perhaps that stick is big enough to spur them into action; especially if the feds can figure out a way to add a little bit of carrot into the equation.

Since the banks have concerns about the write downs impacting their capital requirements, something as simple as the Fed’s coming up with a way to allow the lenders to move the loses off their books would probably provide the needed push to get this going. Maybe they can get some of the Enron people out of jail to help them with that issue. After all the Enron management team are the guys who figured out how to move all of their bad debt off their books.

Until this issue is resolved, we have a nation of people who are delaying retirements or job moves or other decisions that involve selling their homes; because they can’t afford to take the losses involved. We can’t really turn things around in the economy either, until we get people out from under this huge debt load and get rid of the bunker mentality that surrounds this issue.

Local businesses and communities will continue to feel the impact of their citizens being basically unable to spend on much other than their mortgage payments. Short sales and foreclosures will continue to have a huge negative impact on local communities and local governments. We need the financial reset that can only occur if lenders are allowed to modify mortgages at lower principal levels and write off the lost equity. Then we can start growing again.

The biggest hang up right now seems to be that no one can figure out how to triage the situation – how to determine those who will get help and those who just won’t qualify. Fairness or at least the perception of fairness is very important, if any program is to work. There will be people who would try to game the system, no matter what the system is; and there will be people (tax payers) for whom there is just no benefit at all (people who have paid off their homes or held them so long that they are not under water); no then no system is completely fair. The important thing is to get on with it, so that we can get the American economy out of neutral and rolling again.

Where to go to get the facts...

It's that time of the year when peoples thoughts turn to...

fighting their assessments.

If you're not happy with what the local assessors have come up with for the value (especially taxable value) of your home, you may want to get an appointment to challenge that assessed value. If you're going to do that you should first take the time to talk to the assessor and find out what method he/she used to arrive at the assessed value. You should also ask about the appeal process and what the expectations of the appeal board will be for your presentation to them of your appeal. Then you'll need to go find the actual market data to support your case.

Fortunately, if you live in one of the areas that I track, you can find that market data on-line at my Web site www.movetomilford.com

I have been tracking the sold houses in Milford (Village and Township), Highland, Commerce, White Lake, Lyon/South Lyon, and Brighton for some time now and recently added Green Oak, Hartland and West Bloomfield. There's probably not enough data on the sight for those last three yet, but there is 2-3 years worth of data for the other six. You generally only need to go back 6 months.

You'll have to pick out the homes in your immediate area from the data that is there and you can't just use distressed sales (they are marked as "F" for foreclosures and "S" for short sales). In general the assessment boards want to see market data for your immediate neighborhood or area, certainly no more than 2-3 miles away and in the same school district. You'll be able to find the listed prices, the sold prices, the SEV's the square footage and other data on my site. Again, make sure that you understand what things are important to the appeals board.

Fighting your assessment is somewhat of a two-edged sword. You may succeed in getting the SEv (and taxable) value reduced; however, you should then not complain that your house is worth more when it's time to sell. In the current economic environment about the only place where your home has retained it's old "value" is in it's replacement value for insurance purposes. It almost always costs more to rebuild your house right now than it's worth on the market.

Realtors are not allowed to provide you with a comparative market analysis for the purposes of appealing your tax assessment. They can provide you with the raw data of what has sold in a particular area, which you can then use to make your own market analysis; but why bother them, just go to my Web site and look under the choice "What has sold in the Milford area" if you live in one of the areas that I track.

It’s more than a matter of taste…

Where is the line that marks the difference between “shabby chic” and just plain tacky? How modern is too modern? What do you tell a homeowner whose house is a tribute to Graceland that an oil painting of Elvis on black velvet is not appropriate in every room? Can you suggest taking down the horny heads and putting away the stuffed dead animals to the Great White Hunter? What do you do with the Princess bedroom that is painted pink and has glow in the dark starts on the ceiling? Is it appropriate to suggest alternate colors for the sports team themed bedroom done in maize and blue? How do you deal with “custom-built,” when the result looks like the lounge at a cheap motel? What do you tell the owners who just love their Victorian themed purple and turquoise paint job?

These and many other questions beg the issue of when things are just a matter of taste and when they become impediments to the sale of a home. Somewhere near the center of the universe of good taste is a bland little patch of off-white. Everything else is something else and the further out you go, the further you get away from that happy little neutral patch. The farther away you move from that center point, the lonelier it gets, too. There are fewer and fewer buyers who will share your tastes and appreciate that all black room that your moody teenager chose for himself.

My challenge as a Realtor is to help the owner see that imposing their tastes and preferences on potential buyers is basically an exercise in exclusion. Every personal choice that is expressed in a room color or décor may drive away those who don’t share in that choice. The avid hunter often can’t understand why someone would be offended by the dead, stuffed mounts that are spread around the house. Yet many women won’t even go into a house if they see these trophies all over the place. And many single women who’ve lived in a house alone for a while can’t understand why male buyers are turning off by frilly frou-frou all over the place.

I’ve tried several approaches with owners who are over the top in their home décor, including taking in home stagers to provide “professional advice” above and beyond what I may have told them. Quite honestly, even that seldom works and often the owner is offended by the advice that they remove or tone down the personal touches and content of their house – especially if it involves advising that they take down and store most of the family photos that may have lined the walls of a stairway or, perhaps, that they paint over the cute little marks on the kitchen doorway that documented the growth of their children.

The bottom line is that when they put it on the market it is no longer a home, it is a house – a product that is competing against other houses on the market and the owners must be able to look at it that way. For some this is a tough emotional transition to make – letting go of the “home” aspect of the house and getting comfortable with that aspect living on in memories. This is where taking the sellers to a few other, well staged homes would probably help them see what you need them to do for you to make the house more marketable. Sometimes it just takes time and giving the owners a few weeks to get over this hump and make the changes needed is probably the best thing to do. Sometimes the seller never does agree with what needs to be done to sell the house and in those cases it's a long and frustrating wait, tryin gto find those few buyers who have matching tastes.