The market is cloudy.

Like our local weather.

It seems like just yesterday it was sunny and bright and warm.   Then . . . BOOM . . .  Fall arrived.

What clouds do I see in the local market?

1. Fixed mortgage rates are low.   And addictive.  I wonder what will happen if rates return to a more “normal” 6 or 7%?   Low rates are a boon to buyers today.   Addictive.  Great tasting.  And will be a curse to sellers in the future.

2. FHA problems.   Loan limits are moving down tomorrow.  And that’s not a big deal here – but the future of the FHA program is now suddenly important to Perrysburg.   A majority of deals in and around Toledo are now FHA funded.   Take FHA away and the bottom will fall out of the market.

3. Appraisal problems.   One of my jobs now is managing appraisal issues.  Up front.  And after the debris of a wrecked deal.   The mortgage implosion has caused the REO explosion.   The shrapnel?   It flies over at supersonic speed and hurts your sale or purchase.

4. The Bifurcated Market.   There are really two markets now.  One for the wealthy.  One for everyone else.   I am certainly not interested in “social justice”.  But a healthy market has movement.  People moving up.  People moving laterally.  People aspiring to invest and save and gain.   Somehow in a diminished, “soft” America with an increasing stratification of incomes and assets we are losing that.

5. More delinquent mortgages in the 43551.   Big news – more and more nice houses in Perrysburg are going to be foreclosed.    I have never in my 23 year career been working on more distressed, big, nice houses in Perrysburg than right now.   And – it’s happening all over America.

6. Rentals.   There is a shortage of them right now in Perrysburg.  Markets hate imbalances.  So – if this continues you may see more rentals being developed here.  More houses being converted to rentals.  And higher rents (good if you are a landlord, bad if you are a renter).

7. Falling incomes.   Which is not something we are used to here.   We are used to wage increases.   Inflation.  Increasing prices. But wage drops?   Effects here are hard to predict.  This could, if it continues, lead to lower property values.  Lower prices for all assets.   And downward pressure on rents and taxes.  More market uncertainty.

8. Boomerang Kids.   What?  What is that??  Kids, done with college *(hopefully not with a degree in Ancient English Poetry or Integrative Social Work for Aleutians!) who are bereft of job opportunities.   Lots of my clients in Perrysburg have had to welcome their progeny back.   So if they are selling or need to sell or buying and need to buy – those extra bedrooms that were empty and contained old PHS trophies and Saturday Night Fever posters . . . are being used again.

These are some clouds on the real estate horizon in Perrysburg.   What clouds do you see?

The market is in flux.

The job market is abysmal.

The broad economy in Northwest Ohio – horrible.

The stock market -

And . . . 30 year fixed money for houses 3.99%.

FHA loans as low as 3.75%.

Amazing.   We are talking record low interest rates.  Breaking ALL modern records.

Why?  It seems that with the volatility in every other part of the economy, large investors still want to have money invested that makes money and getting mortgage backed securities that have a government approved stamp and pays 3.5% to 4.5% seems like the best bet.

But . . . that does not make it “a great time to buy a house” as the National Association of REALTORS chief economist can always be faithfully predicted to spout.   It’s only a great time to buy a house if it really is for you and your family.   How is your credit?  Your savings?  Your rainy day fund?  Your other debts gone/under control/closed out?  Your job?  Your current lease ending?   Get ALL of that right . . . . get the right house . . . and with these ridiculously low interest rates . . . it might make sense to buy in Perrysburg right now.

1. Have a finished basement without a back up plan for the sump pump.   The power does go out . . . and if your plan is to call Toledo Edison and beg for faster service . . . .

2. Get your home/budget/mortgage in trouble and not talk to people.   It’s public knowledge.  Some people are going to charge you by the hour and do nothing – some are going to pester you on the phone and do nothing.   Get some special help.

3. Buy an extra house.   Not now.  Not in this market.   Sell your current one first please.

4. Buy REO property to “flip”.  You are not going to do it.  You are not going to make money.   There are lots of good reasons to buy REO as an investment – flipping is not one of them.

5. Pay someone upfront to sell/market/advertise your house.  Just plain bad business.

6. Hire a real estate agent without asking a page or two of questions about them and for them to cogently answer.  Many agents are abandoning the business right now (that’s a good thing!).  Some are carrying on to clients like they are full time producers while they have other jobs and even live in another state!

7. Fail to understand that the first showing of your house for sale in Perrysburg will occur ON THE COMPUTER.  Via the photos that your marketing agent has taken.   Failure to understand this costs you time, money, and sales power.

8. Don’t be pressured into buying right now.   Not by anyone.   There are good deals.   There are smart buys.  There are great personal business cases to be made for purchasing a home for many families.   There are also a lot of fear-based sales tactics that can lead you into a terrible decision.

I am a Fannie Mae direct broker.   And a HUD listing broker. They send me a lot of business.  And I sell a lot of homes for them.   

My team and I also represent a lot of buyers who buy REO listings from Fannie and HUD and Freddie that OTHER brokers have listed.

So I see the velocity and behavior of the local market from both sides.

Some thoughts for you if you want to be a buyer of the “great REO wave”:

1. Know what you want to pay – for a particular house – and no matter what happens or who says what, stick with that price/offer/valuation.

2. Be prepared to be disappointed.   The best houses in REO Land get multiple offers.   Some of my best assets get 3 or 5 or even 7 offers.   One family is happy.   The others are crestfallen.   Be prepared to be disappointed.

3. Know in advance the newest tactic that banks are using.  It’s simply called “highest and best offer”.   You are told there are multiple offers.   You are given a deadline.   You have one chance to put in your offer, your “highest and best” offer.   Why do the banks do this?   It gets them higher sales prices, obviously.   And paradoxically it flushes investors out of the pipleline.

4. Investors beware. Fannie, Freddie, and HUD all actively discriminate against . . . investors.  It’s the only type of legal housing discrimination that I know of.   It’s designed to penalize investors who often just “flip” a house after making cosmetic changes or rent out a nice house and often contribute to a decline in housing values in a specific area.

5.  Beware that some banks are artificially, and on purpose . . . deliberately underpricing some assets. By many thousands of dollars.   That helps the banks often get many thousands of dollars more than their list price.  And that’s why you and your agent (hopefully me and my team!) have done our homework up front.   Because it may be wise and financially smart to spend $5k MORE on a house than list price (if, for example, it was underpriced by $30k as I have just seen . . . ).

The rules are different in REO Land.

But the results and the home you can buy . . . they can be spectacular!

I recently sent an email out about a new listing.  I used the hook “everybody asks me when are going to hit the bottom of the market”?

I don’t know.

2012?  2011?  2021?

No one does.

We are in need of a new model now.

A new model of buyer behavior.  Lender response to buyer default.  And seller behavior.   The old models are no longer working.  The chart has flaws.  Case-Shiller numbers are the best we have, but still flawed.  The new model of tactical defaults, bank “unforeclosures” to get TARP rebates, buyers who are REO’d or BK’d and have huge monthly incomes – they are all helping to rewrite the rule book.

‘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.

“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.

What was the REAL effect of the following:

HAMP/the foreclosure moratorium/the robo signer moratorium/”Making Home Affordable”/and HopeNow?

(these were all roadblocks to market clearing foreclosure activity or government sponsored mortgage crisis programs for homeowners in distress)

The considered net effect?

Some economists are saying it was ZERO.   It just pushed foreclosures ahead to the future.

Like this guy . . .

“It is pretty clear, however, that overall foreclosure moratoria, foreclosure delays, modifications, and other workout activity continued to keep the number of homeowners who “lost” their homes to foreclosure massively lower than one would have expected given the delinquency/in foreclosure numbers.” (Quote from economist Tom Lawler in Calculated Risk blog.)

Here is my take “from the street”.  From Main Street USA.

I just met a guy today.

Foreclosed.

I was helping him move out and securing the asset for my client.

The city/house/street do not matter – because this is happening all over Northwest Ohio.

What did he tell me?

What is the street effect of this crisis?

He has lived in the house for 4 years without making one single mortgage payment.

And with no property taxes paid by him either . . . . that equals a lot of money.

In fact it is “worth” over $50,000.

$50,000 of imputed savings/benefits/gain that he has accrued to him.

While he was being foreclosed.

I am not an economist.

But this is being repeated all over the country.  The effect is real.  The bills are going to come due.   The merry go round will stop.

“3 or 4 times MORE foreclosures”???

Hard to think about that . . .

Here – link.

Why?

Because if this proliferates . . .

If this is not overturned . . .

If this spreads to Ohio . . .

No one is going to be able to either get a mortgage or get title to sell a home with a mortgage.

Simply amazing.

The Federal system of 50 different states with 50 different state court systems should insulate us from a blow out mistake in another state.

SHOULD.

Will it?

We will see.

No lender and no title insurance firm can operate in such a legal environment.