‘Double-Dip’ in Housing Prices Even Worse Than Expected

U.S. single-family home prices dropped in March, dipping below their 2009 low, as the housing market remained bogged down by inventory and weak demand, a closely watched survey said Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas declined 0.2 percent in March from February on a seasonally adjusted basis, in line with economists’ expectations.

The price index was below the low seen in April 2009 during the financial crisis. The glut of houses for sale, foreclosures, tight credit and weak demand have kept the housing market on the ropes even as other areas of the economy start to recover.

The 20-city composite index was at 138.16, falling below the 2009 low of 139.26.

“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation,” David Blitzer, chairman of the index committee at S&P Indices, said in a statement. “Home prices continue on their downward spiral with no relief in sight.”

You can read about it here . . . . but this is what I have feared and been warning about.

Has finally arrived.

Here is what it means to me, from a real estate perspective:

1. More houses on the market.  Happens every year.

2. Parades.  You bought a house in the Historic District?  Now you can walk to the parade with a stroller and not worry about parking.

3. Independence Day.  You bought a house by Ft. Meigs.  Now you can have a great party and not fight traffic.  Or you can hope your brother has a party and you can watch from his house.

4. The Farmer’s Market.  Fast becoming a great Perrysburg event every week.  You no longer need a lot big enough to garden.  You can buy someone’s organic produce and not mess with it your self! 

5. Tornado Time.  Remember last year?  Watch the news about Joplin?  You buy a house WITHOUT a basement you might want to have a plan . . . .

6. Heat and Humidity.  We always get some really hot stretches.  Got central air?  Screens for all windows?

7. Water.  Pouring into your basement as the walls collapse.   This does not happen in Spring/Summer.  But now is the time to reattach and check your downspouts.  Don’t do it?  Don’t care?  $25,000 to fix a bad basement in the Perrysburg Clay.

8. And a sad change – want to bike ride?  There are ZERO good trails in Perrysburg.  You have to drive to the Slippery Elm or Wabash Cannonball.  Bummer!

Enjoy the upcoming great weather!

Which I try not to do too often.

But . . . . since this is in all actuality the absolute nicest, best, most amazing house on the market in Perrysburg right now, it gets it’s own blog entry.

If you want to see what $795k will buy you should call me.

Here is the garage!  (Also known as the “Man Cave” or as my normal patter/joke goes the “Mother In Law Suite” . . . but in this case it REALLY IS!  With a full apartment upstairs.)

Want more details?  Pond? Check.  Fully finished lower level?  Check.  Fireplace in the den?  Check.  High/vaulted ceilings? Check.  Granite, tile, marble? Check.

To see it is to fall in love.

Call or email me for your tour.  24290 Sun Air in Perrysburg Township – $795,000.

“Anyone Can Do A Short Sale” . . . . right?

Not true.

Not even close to being true.

Most Realtors do not know how.

And let me tell you something even worse – most Realtors DO NOT WANT TO EVEN TRY OR LEARN.

That becomes a problem when your regular sale turns into a short sale.

That becomes a problem when your reasonable buyer turns into a lawyer calling terror.

Short sales have to be negotiated differently.

Short sales have to be handled differently.

Short sales have to be presented, obviously, to the bank in a very different way.

Short selling sellers have to do a lot of things differently.

And short sale buying buyers have to be managed, informed, and hand held to a very different standard.

None of this is easy or fun to do.

But it must be done if the short seller is going to get debt forgiveness.

And if the buyer is going to get the home of their dreams.

Make sure your agent is fully trained (at a minimum a practicing CDPE specialist from the Distressed Property Institute).

It is very hard to pull one off.

These are very stressful, very adversarial deals.

The risks and barriers to success are hard – but the potential payoff is HUGE for both the buyer and seller.

Out and about in Perrysburg today.   Foreclosing and securing new bank owned properties in the city and township.

Then out to Toledo and Rossford – to snap some photos on a rare sun-shiney day of some new listings.

Then back to work on offers and new listings.

And everywhere I go . . . . “is the market getting better?” is the question.

Not based on what I am seeing.

Then I read this from Marketwatch.com

BOSTON (MarketWatch) — If you thought the housing crisis was bad, think again.

It’s worse.

New data just out from Zillow, the real-estate information company, show house prices are falling at their fastest rate since the Lehman collapse.

Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month, according to Zillow.

And the percentage of homeowners in negative-equity positions — with a home worth less than its mortgage — has rocketed to 28%, a new crisis high.

Zillow now predicts prices will fall about 8% this year and says it no longer expects the market to bottom before 2012.

“There’s no way we can get to flat, from these depreciation levels, in the last nine months of the year,” says Zillow economist Stan Humphries. “Demand is a lot more anemic than we had previously thought.”

Just lovely.

The seller has something to say too!

“I can’t accept that price!”

“I NEED more money than what it will appraise for . . . ”

Or some variation of this.   Usually my putative seller clients owe more than the current appraisal value will come in at.   Or they want/need/have to have more than any rational buyer (again – the appraiser and appraiser manager and underwriter are checks on foolish buyers now . . . ) will ever pay in this current market.

So the seller comes up with the “let’s lease/purchase it” idea.

And we get a “buyer” who will “buy” the house in 3 or 5 or 8 years . . . . at the fantasy price.

The seller gets some income.  They assume that that the “buyer” will close.  And everyone is happy.

Except . . .

Except in this deflationary market the seller is not going to get their price in 3 or 5 or 8 years . . . unless it appraises.

And the buyer is not an idiot.  If the house is worth less than the agreed upon contract price, they will do the equivalent of short sale on the title holder and renegotiate the entire deal.

Or they will just walk away.

So – my suggestions are simple and easy to understand:

1. If you need more money and don’t need the house – just lease it.  It’s simpler, easier, more honest, and helps you to get a better end result.

2. If you need a house and can’t get a loan – just rent one.  Don’t chase after the ephemeral dream of a great priced lease purchase deal.

3. Don’t assume that the contract you get signed today will survive the vagaries of THIS real estate market.   It most likely won’t.

My entire family – wife and daughters are musically gifted.   I hear them play.  I hear them compose.  I watch with pride as my youngest daughter wins awards and ovations and scholarships with her magical flute . . . and none of this impacts the real estate business.

Music is not about business.  (Just ask someone who knows a lot of musicians!)

And Perrysburg house prices are not normally musically relevant.

But some guys have shown the last 10 years worth of Case-Shiller numbers as a musical score.

They even hired a great baritone to sing the arrangement as opera!

Now, even people who are musically gifted can grasp the real estate market in Perrysburg.  (True story – some music genius’s I know who shall remain nameless claim they can see music notes, tones, and sounds as “colors”.  Seriously!  How messed up is that?  I have a hard time seeing the difference between black and blue . . . )

Every day – at least one phone call like that.

Every day – at least two or more email inquiries.

About the almost mythical “lease purchase” property.

What are they? Why are they in demand?  Where are they?  What’s the story?

1. A lease purchase is simply a house that a seller lets a buyer “lease purchase” or in other words they let the putative buyer move in without buying it but promising to buy at a future date and price.

2. They are in demand because real estate speculators and real estate foreclosure victims really, really want to avoid a “pure lease” and gain control or use of real property.

3. Where are they?  They are generally located in an imaginary fantasy land right now.  Many sellers who want to sell but can’t afford to – they will either stay in their home or rent it out.   Some sellers who are upside down and can’t afford to stay are going to somehow give it back to the bank.   What class of seller is willing to do a lease purchaser now?  None – that I know of.

Here’s the investor/buyer/tenant’s point of view so that you can either identify yourself or the other parties motivation:

A. Buyers LOVE lease purchases because they are SO EASY to get out of.   Just break the lease.  Breach the contract.  You lose your deposit.  Done.  Easy.  Or . . . if you are really sophisticated – sublease it out!

B. Buyers often intuitively know that in a declining market the price is going to be subject to further, future modification.  In their favor.

C. Buyers often know or believe that they can gain control or possession of better real estate if the carrot of a future closing is built in.

(to be continued . . . .)