Perrysburg Blog

The sales numbers:  GRIM.

I am sure that they will be all over the news.

“Existing-home sales plunged to their lowest level in 15 years in July as inventories soared, painting a grim picture for the housing market absent government support.

“Home resales dropped a record 27.2%—nearly twice as much as analysts had expected—to an annual rate of 3.83 million in July, the National Association of Realtors said Tuesday. Meanwhile, inventories rose to 12.5 months from 8.9 months in June, pressuring already depressed home prices. Inventories are at their highest level in more than a decade.”

This is not a surprise.

Residential real estate is a game of positioning.  Of immediacy.  Of marketing impact.

Give financial incentives to lots of buyers to hurry up and buy . . .  they will and then prices and sales will crater.

Pull demand forward  . . . and there is a snap back the next quarter.

None of this was unpredicted.

Sellers in Perrysburg today have to have their home in PERFECT condition.  Priced PERFECTLY to the market.   They have to be on the top of their game.

The numbers are grim – but houses that are presented and priced well are selling.

Even in this market.

Next post: Perrysburg sales numbers . . .

It’s secret.

It’s above top secret.

But if you are doing a short sale you need to change where your checking and savings accounts are.  Banks are now using language in their checking and savings policies that you have agreed to when you opened your account to PULL MONEY OUT of accounts that are not linked to your mortgage.

Now, in polite society, this is called STEALING.

Or THEFT.

In bank terms it is called the “Right of Offset”.  You can go here and do a search for that term if you want to get real mad.

But the average consumer does not have a copy of what they signed, can’t remember, and probably can’t hire a lawyer to look at all their agreements.

So – the simple solution that I am telling ALL my short selling clients is this:  MOVE YOUR MONEY TO A TOTALLY DIFFERENT BANK.

Simple.

Sweet.

Ends the drama.

I won’t name any banks – I am assuming some are not doing this.  But some are.  And the solution to protect you is as simple as the pain of the unauthorized monetary removal is great if it happens to you!

I do get phone calls.

“I have a couple of questions about . . . ”

And I try my best to answer them.

I also have a couple of questions about Perrysburg Real Estate:

1. What is the future of home values in Perrysburg?  Will we ever see an “automatic 3%” increase every year like we did for many years?

2. What is the impact on the continued meltdown in Toledo home values going to do to our prices/values in Perrysburg residential real estate?

3. How much/many new taxes and property tax levies can the citizens of Perrysburg keep passing and paying until the stigma of “too many taxes” hits the top of mind thinking of buyers and they discriminate AGAINST Perrysburg listings/houses?  Will the City ever STOP spending more each year?

4. Who is going to rent/lease in Levis Commons?

5. What is the “BEST” subdivision in Perrysburg?  The one that people, irrespective of price point, love the most?

6. What can Perrysburg do to better leverage one of the greatest downtown districts in Ohio?  More car shows?  More parades?  Getting more people to a bigger/better Thursday Farmers’ Market?

7. How many homeowners are “underwater” in Perrysburg today?  Right now?  And how does that realization change their spending?  Change their planning?  Change their involvement with the community?  Change their desire to stay/work here?

I do not have the answers . . . . not on these.  I’m just asking . . .

There are many.

Sewer tap fees that keep people from building.

Zoning rules that keep people from “stepping down” to the right use or “stepping up” to the best use.

But 2 that I really hate and detest, because of the “unintended consequences” that their use causes are:

1. Condo associations that want the “right of first refusal” on you or me buying into their association.

What’s wrong with that?

Example:  property has been on the market for months.  Everyone in the association knows it is for sale . . . and vacant.  But they want the right to know who is buying it so they can decide if any of their current members wants a crack at it?

Seriously?

That’s not a “right of first refusal”.   It’s a right to discriminate and try to select your neighbor.

Outrageous conduct often results from such a mischievous law.  Many years ago I was representing a divorced single parent mother.   Who hoped to buy a condo.   But the nosy neighbors did not like her single parent status and tried to keep her out.    Big mistake.  (That’s what the Fair Housing Center is for, btw).

2. Utility Bills that are the Banks Responsibility.

This one is really rearing its’ ugly head now.

From $200 electric bills to $8500 water bills.

Every little town, village, utility, and conglomerate wants my bank clients to shell out $$$$ for the utilities that the prior, now foreclosed owners ran up a tab for.

And if you don’t pay – no service. (while the house fills up with mold and water and other damage happens)

What’s the harm in that, you say?

If everyone thinks they don’t have to pay – they won’t.

If the bill keeps getting punted down the line to the next owner – at some point (which is . . . oh, right about NOW) normal business forces will stop working.  Utilities will just keep giving “free” service to free riders.   Normal Joe who pays his bill?  Sucker.   The utility is racking up bad debts and expecting you to front the money to keep them running.   Foreclosed Phil?  Once he figures out that others will pay – he will run the air and heat all the more.  Utility Dude who runs the utility?   He doesn’t have to worry about credit checks, deposits, or even shutting people off when they don’t pay!   The bank will pay someday.

Lucas County Auditor Anita Lopez is trying to put a stop to this mess.

Other counties ought to think about the consequences of their policies too.

Macro?

Big.

A simple chart of “big numbers” that covers the whole US economy.

Perrysburg area homes would be included . . . as a tiny little subset of these big, macro numbers.

While these are national numbers . . . they are not good.

By some measures almost 1 out of every 4 new loans is headed for a future default.

This is simply unsustainable.   On many levels.   We will run out of solvent buyers.  We will run out of solvent banks.  And the capacity of the enormous American economy to absorb so much expense and bad debt will run out at some future, unknown point.

Don’t ask me for a prescription for today’s market to get better.

You won’t like it.

But I would remind you about my grandfather, Gilmer Moden, bought his first house in Albert Lea Minnesota.   When he bought his first house, he worked and saved and worked and saved and then put 25% down before the local bank, whose manager and bank president knew him, loaned him the difference.

The idea that in a declining market people can and should be buying homes with nothing down is a fallacy.  It will not work.  Someone is not helping people own homes, but rather helping them take huge bets on the velocity and direction of the housing market with other people’s money.

“Unexpectedly”

People are always surprised.

Chagrined.

Shocked!

To discover that paying buyers to buy backfires.

We really didn’t pay the buyers.   WE PAID THE SELLERS.

We inflated values by $8000.   With money we don’t have.  That the Germans and Chinese have kindly loaned us.  That our kids and grandchildren will pay back.

And, “unexpectedly”, sales of existing homes declined.

CNBC has details here.

“Sales of previously owned homes fell unexpectedly in May as delays in processing mortgage applications hampered the closing of contracts benefiting from a popular homebuyer tax credit, an industry group said on Tuesday.

AP

The National Association of Realtors said sales fell 2.2 percent month over month to an annual rate of 5.66 million units from an upwardly revised 5.79 million-unit pace in April.

Analysts polled by Reuters expected May sales to rise 5.5 percent to a 6.12 million-unit pace from the previously reported 5.77 million units in April. Sales were up 19.2 percent compared to May last year.

Sales were expected to rise as transactions for existing homes are measured at contract closing.

Although the tax credit for home buyers expired in April, qualified home owners have until June 30 to close contracts.

“There hasn’t been much of a rebound in housing. We are growing from the extremely low levels of last year. On average, we are looking for a moderate advancing trend,” said Stephen Stanley, chief Economist at Pierpont Securities in Stamford, Connecticut.”

Shocking!

But not unexpected.

A contrarian view here:

“Things are looking worse on the housing front, with a severe drop-off in existing home sales following the expiration of the home-buyer tax credit. It’s hard to overstate how stupid this policy was. The government marketed it as a measure to boost residential real-estate prices by providing new home-buyers with a tax credit in the neighborhood of $8,000. Did you see the ubiquitous ads featuring the couple that gets an envelope full of cash from Uncle Sam? The idea was to convince potential home-buyers that they were the ones who would benefit from the subsidy, when in fact the opposite was true. The tax credit was a subsidy for sellers, not buyers, allowing them to increase their asking price (or avoid decreasing it) by $8,000.

The government’s “gift” to new home-buyers? A house immediately worth $8,000 less than they paid for it, and falling fast thanks to the sharp drop-off in demand that accompanied the expiration of the tax credit. Gee, thanks, Uncle Sam! I’m not sure the “predatory lenders” Obama likes to talk about ever did anything that sketchy.”

“It can’t happen here!”

“This is an unsinkable ship!”

“The Maginot Line will protect France!”

Umm.  Might want to check your assumptions.

Sellers in Perrysburg need to check theirs too.  RIGHT NOW.

I wrote on this before and told you

If your assumption is “The Lender Will NEVER Come After Me!!”  you may be embarking on a financial voyage of Titanic consequences.

I just put a house on the market today – $120k area in Toledo.

The owner thought he would be smart and TOTALLY REMOVE his updated kitchen.

The home is going on market for . . . $44,900.

And there is a good chance that the banks that are forced into those situations are going to challenge your assumptions.

Read all about this ACCELERATING trend in the Washington Post ….. HERE.

What Palacios did not see coming was the letter from his lender demanding that he pay the shortfall: $148,064.02. “I really thought I was through with this house,” said Palacios, who fell behind on payments when the economy soured and his cleaning business stumbled.

Some consequences:

-Short selling?  Make sure you do it right.  Hire an expert.

-Foreclosed?  Don’t have a trash out the house party.   Keep the “asset” (that’s what it is to the bank) in good condition.  They are going to run a tab on your decisions.

-Facing foreclosure?  There are plenty of options and decisions you have.  Make smart ones.

It is Monday.

72 degrees and sunny.

The Federal Tax Credit program expired on Friday last week.  Back to normal.

Sometime last month the Fed stopped buying/funding Mortgage Backed Securities.   The tap was turned off.   The world?  It did not end!   Investors still want to buy mortgages!   Back to normal.

There are no major Ohio loan/bond issues being promulgated.  Back to normal.

Two offers on Perrysburg listings today:

A buyer just submitted a conventional financing loan/offer to me.

Another buyer . . . . the same.  Back to normal.

In Perrysburg real estate, with no tax credits, special government loans, and other market deforming forces THIS, today, right now is normal.

Rules for this market, now that it is finally normalizing:

1. Price is king.  Queen.  And Jack.  It’s all about price.

2. Perrysburg still get’s the “Perrysburg Premium”.  It just does.

3. Quality of life, crime, schools will continue to be more valuable.  Perrysburg ought to not mess this one up.

4. It has to appraise.  Your wants/needs/sticker price/contract price  . . . all will be validated, satisfied, and hostage to the appraisal.

5.  It’s allright to mow your neighbors yard.  Seriously.   If they are gone – foreclosed – abandoned – you can mow it.  It keeps up appearances.  It keeps out the petty crime that vacant houses attract.  It actually may increase your homes value.   Neighborhoods have to start banding together.

Here’s a three year overview of supply and demand in the entire Northwest Ohio market:

It has leveled out – the new normal has arrived.

Foreclosed?

Short-sale complete?

As I wrote earlier, Ohio has a 2 year time frame for mortgage holders jilted by borrowers to come and try and collect.

My supposition after attending a couple of national REO meetings is that the banks are planning on using this power to get more money from former homeowners.

Unless, of course, you are sick with cancer.

And suing your former borrower generates a lot of bad press.

Remember – if you are in a short sale situation make ABSOLUTELY SURE you are not responsible for any money owed.  In writing.  With your attorney approving.

If you are in a foreclosure situation . . . know your rights and your obligations.  Try to short sell it and use the negotiations in that process as a lever to get the bank to release your contingent liability.

Or else you have to develop cancer to get the bank to be nice.

Details?

Can’t give them to you.

But in a recent meeting with a Perrysburg homeowner, I realized that they were in denial.

Which can be a serious emotional state that is impervious to reason, evidence, and logic.

These potential clients want their 2005 price.

They “NEED” it as an old mentor, Howard Brinton, used to say.

But it is 2010.

Chrysler is BK.   Toledo, City of, is BK.   Ohio, State of, is broke.   GM has filed for BK.  The entire giant mortgage brokerage that loaned them their money . . . BK and gone.

2005 is long gone.   What you or I paid is immaterial.  What you or I “NEED” is not important.

We should be moving beyond denial to truth.

In fact, we actually have more practice and experience at distressed markets than anyone else in America.

Seriously.

We (Northwest Ohio) went into this market first – along with Cleveland and Detroit.    (“Why?”, o student of history, you ask.  I will tell you:  we shipped our manufacturing jobs over to China first.  Before we shipped our tech jobs and info jobs and pharma jobs.  We – first!, but I digress.)

So – no excuses.   We are experienced in these matters.   Or we should be.

Nationally, 30% of the ENTIRE U.S. market is distressed.

Perhaps 50% of the total market activity in Toledo is now “distressed”.   That means short sales, REO, foreclosures, deed in lieu, and upside down, underwater sellers who have to bring cash to the table just to close.

Half.

One out of two.

We have to move beyond denial now.

There are some very good Realtors that I know that have not closed a single deal yet this year.

They are in denial.

There are some very good homes that will not sell for their owners.

Denial.

“But . . . the tax credit!”

“But . . . ”

Denial.

It hurts.

But you have to move on.

If you want closure.