Perrysburg Blog

One of my favorite real estate writers posed a similar query in the Wall Street Journal’s excellent real estate blog – Developments.

James Hagerty posed the question: “Will the bank take my iPhone?”

Which is sobering – I have an iPhone.  You can’t have it.  You can’t take it.  It’s addictive and it’s mine . . . and I have a hard time imagining it being surrendered to a creditor.

Which made me do some thinking.

And then some investigation.

Since I deal with many homeowners today who owe the bank MORE than the market value – what can happen to their iPhones?

And their cars?

And their retirement savings?

And their other assets and possessions?

5 or so years ago this was a pointless, absurd question.

It just did not happen in Perrysburg.

Today – it’s a vital, important, timely question.

According to the Fed (specifically the Federal Reserve Bank of Richmond VA) in their monolithic report “Recourse and Residential Mortgage Default:  Theory and Evidence form U.S. States) Ohio is considered a “recourse” state.

That means that lenders may have MORE remedies against a defaulting homeowner than just taking the house back in a foreclosure.

(N.B. – for this entire post, please remember that I am not an attorney and you should and are highly recommended to hire your own attorney to answer your questions!  You need a good, honest attorney . . . call me, and I will recommend one to you)

If I am a defaulting homeowner, I do not like “recourse”.

What is interesting about the lenders right of recourse in our state is that only in Ohio and Iowa does the lender have a very short period to seek recourse – and in Ohio, and thus Perrysburg, it is only for 2 years after the foreclosure.

Y0u can download their 50+ page paper yourself and read the gory details.  The financial equations on page 10 caused me to have a regression attack and revisit my finance classes at Duke University.   I was so shook up by this I had to go out and sell 5 houses today – but that’s another story . . .

2 years.

That is the time frame for recourse that your bank has to get more coins from you.

Lose your house to the bank . . . and they get an automatic deficiency judgment against you.

But they only have 2 years to collect it.

And many banks are taking 12 months to return phone calls right now – so what are the odds they will get your iPhone?

This recourse is usually obviated when a short sale is negotiated – which reinforces my belief that 2010 and 2011 will be the year of the Short Sale in and around Perrysburg.

Because then you will get to keep your iPhone.

A empty shell.

Crabs like them.

But they are terrible for helping homeowners to pay their mortgage.

And if you drive along Alt20 – aka Illinois Ave. in Maumee, you will see a lot of empty shells.

And “FOR LEASE” signs.

And vacant factories, offices, and businesses.

It’s a vivid reminder of what has happened and what has helped residential real estate to collapse in value.

The collateral damage from this one street’s empty and shuttered businesses and factories is felt in every subdivision in Perrysburg.  I know clients that have lost jobs in Crandenbrook and other Perrysburg neighborhoods who used to work on this street.

But now their jobs are gone.

You want reports of the economy getting better?  You want to know when the residential market is better?  You better go for a drive . . .

Which meant that my clients were all invited to pick up a Schmucker’s Pie . . . . (which is highly rated it seems).

And not many could resist!

Since they are acknowledged to be the best pies in Northwest Ohio . . .

(N.B. Cherry was the number one pick . . .)

Had a great time – meeting about 100 “old clients” and friends.

And many asked me . . . . well you know what they asked me.

“When will the market in Perrysburg turn around.”

The short answer was . . . not now.

The long-winded, blogy answer is when Dr. Holly Beard is out of a job.

Who?

What?

Dr. Holly Beard.

You and I just hired her.   With our precious tax dollars.

She now works for the “Ohio Housing Finance Agency”.

And her job is to do research on how to help “deeply understand the affordable housing world.”

Seriously.  Having an entire AGENCY is not enough.  We need MORE state employees.

And the New OHFA Office of Affordable Housing Research Director (the aforementioned Dr. Holly Beard) is going to do some research on “finding the number of homeless or newly homeless in need of permanent support for housing.”

Which I, being an MBA and a 20 year veteran of the housing business can translate for you to English:  “We are going to help people who are homeless buy homes with your tax money.”

Now you think about that.

Because I have.

Homeless men don’t need to increase their rates of home ownership.  They don’t need help with mortgages.  They don’t need studies.  They need help.  Usually with drug and alcohol issues.  With a job.  With someone to help them make wise choices.

But they DO NOT NEED a house with a mortgage.   Especially one funded by your tax dollars.

Because I can practically guarantee you, with no research costs, that each and every homeless person you give a mortgage to is going to be a “future foreclosure” as we call them.

I am certain that the people at OHFA mean well.

But as long as it is a government mission to get homeless people mortgages, this current real estate crisis is not over and it seems to be increasing in volume and pain.

The homeless could use a pie I suppose.

So, if you are at the Cherry Street Mission tonight – enjoy the Schmuckers Pies from the Jon Modene Team.

They are mortgage free.

A joke?

A cry for help?

The owners of the “D.C. Ranch” who actually live in Perrysburg Township are advertising a new use for their defunct building.

(By the way  . . . what is the problem with people who actually LIVE IN Perrysburg and try to put these smut shops here?  In the SAME town you live in?  Shop in?  Have a few friends who live here?  Usually the mob from Cicero is the group that brings in the hookers and smut and crime and shady lawyers.  But people who live here have recently been smitten with this business model.  Amazing.)

Wow.

Right across the street from Levis Commons.

That’s being a real nice neighbor.

Study after study shows that such porn shops help lower everyone’s property values and help to increase crime.

Maybe Perrysburg needs more rape and divorce.  This will help!

You can call the mayor or the township trustees or the other officials whose job it is to protect the citizens of Perrysburg with a modicum of zoning.

Yes?

Right?

Isn’t that the new word on the street.

Well, let’s dive into some of the data.

I have postulated all along, at least if you have read my blog, that the current and expanded Federal House Buying Tax Credit Stimulus Boondoggle (aka FHBTCSB) will do nothing to improve the position of sellers/homeowners today, and will hurt future sales, deform demand, mask market effects, and  . . . . in the process help to saddle our kids with debt and further bankrupt our nation.

Some have just written that Perrysburg real estate is looking up – booming in fact.

Let’s see:

Here is 2 years of MLS market data.

Let’s just look at November 2009 vs. November 2oo8.  ONLY Perrysburg single family homes.

November 08 – 340 houses for sale.   21 houses placed under contract.  20 houses closed.  Median asking price $204,900.  Median price of listings that went into contract $179,900.  And . . . the median price of the houses that closed in November of 2008 was $242,950.

Now let’s look at the loosey-goosey tax credit fueled, rebounding market in November of 2009:

November 09 – Only 241 houses for sale.   22 houses placed under contract.  27 houses closed.  Median asking price $220,000.  Median price of listings that went into contract $187,450.  And . . . the median price of the houses that closed in November of 2009 was $212,950.

Fewer for sale.

Only 1 more house “pending”.

7 more deals closed.

But … the houses are selling for $30,000 less on average.

Hello?

This is helping?   This is great program?  And the money to pay it . . . has yet to be repaid with interest?

I will note in passing that the average price per square foot has dropped from $99 to $91.

Now – the caveats.  This is a month vs. month snap shot.  The economy is different.   The numbers we are comparing are small.  The trend is more important than a slice of monthly data.

But a rebound?

A better market?

Improved prices and more equity?

Insane.

It’s not happening.

And it won’t until the jobs/employment situation is FIXED.

Bad news follows bad news. (GM is gone, FIAT buys Jeep!, and rates are up).

Followed by more bad news.

What can a motivated seller do?

I had meetings today with many potential clients.

And they all asked me “THE QUESTION”.

(Well, actually it is one of two “The Questions” that you always hear as a Realtor, the other one being “How Long Will It Take To Sell My Home.”  That is the OTHER “the question”.)

What was “THE QUESTION”?

Here it is: “When Will The Market Turn Around?”

That is THE question of day and the hour and the year.

When?

Since I approach my work from a consultative, educational mindset I try to NOT dogmatically answer “THE QUESTION”.

Rather I try to help every home owner come to the right answer with some guidance.

“Why does it matter?”

“Since no one knows, and I don’t know, how does that information effect your position?”

“It might get worse if we don’t stop destroying jobs and spending our nation into oblivion!”

There is not a simple answer.

But today, in meeting with a diverse range of potential clients, I can tell you that irrespective of WHEN and IF the local market comes back, the wisest thing for any homeowner to do is to cut their spending, cut up their credit cards, cut back on their luxury purchases, and prepare and live as if the market is NEVER coming back.

Because it might, in fact, get worse.

And as I observe this nascent government – if it gets worse, they are going to subsidize buyers more, subsidize interest rates, subsidize payments, etc.

And just like they are destroying the automobile industry, they might harm the residential real estate market EVEN MORE than it has been hurt already.

I get asked “how is the market” all the time.

In fact, if I had a nickel . . . .

But HOW IS the market?

That is the wrong question.  Really.

I will tell you how our current Perrysburg real estate market is.

The banks?  Lending.  They have money.

Interest rates?  Are you kidding!?  Best in history.

Inventory?  Plenty of homes to choose from – but not way too many as 2 years ago.

The secret to figuring out how the market is . . . . is knowing how local employment is.

JOBS.

How is the jobs market?  That will answer the real estate question.

If we have MORE jobs – we sell more homes and house prices rise.

If we have MORE layoffs and firings – we have more depressed home owners and more depressed demand and more declining values.

The local economy is hemorrhaging jobs.  The red above shows where it hurts – it’s a static photo here, so don’t try to make it work!

When that stops the real estate market will improve.

No government program, no mandated plan for mortgage cram downs, none of that will work.  Or help.  In fact they all make the local housing market worse.  Because they cost jobs.

Do you remember the old Toledo version of the board game Triopoly?  (You probably do not – it has even lost its Wikipedia page . . .)

It was a Monopoly like clone game with big local companies “advertising” by buying the right to be a property/company on the board.   It came out back in the 1970’s.

Well, I no longer have my copy of Triopoly.  But I remember some of the “big, local companies” that were on it.

And they are gone.

Toledo, which used to boast 10 or so members of the Fortune 500 being headquartered here . . . we have lost our job/manufacturing base. (Sheller-Globe, AutoLite, Champion, Toledo Scale, and many more . . . brownfields, empty buildings, or worse now)

When it comes back – then the housing market will come back and real housing values will increase.

Not one bit.

There are going to be income phase outs.

There are going to be all kinds of government red tape requirements.

But don’t believe me.

Read the experts.

A real economist, James Hamilton, opines:

“If my hunch is correct, then all the house purchase tax credit will do is to modestly increase the number of houses sold each month… with no noticeable impact on house prices.

That doesn’t mean that the tax credit would have no impact. In particular, it may be a boon to some cash-constrained households that want to buy a house right now but can’t borrow enough. And it should help to reduce inventories of unsold houses by a bit. But if you’re hoping that it will make house prices rise, with all of the beneficial economic effects on home equity that such a rise might have… think again.”

Do we really want to be encouraging “cash constrained households” to buy houses they really cannot afford today?

Seriously.

Is not that “solution” somehow related, at least tangentially, to the problem we find ourselves in?

With a GM and Chrysler bankruptcy imminent . . . with declining real property values in Perrysburg . . . with our regional banks failing . . . might I suggest a tax cut?  A payroll tax cut?  A tax holiday?  A tax cut for business?  Something to goose employment?

I will encourage every American to pray for our leaders.  Pray that they have wisdom.  They are lacking it right now by borrowing or printing a TRILLION DOLLARS that we don’t have for things that will not work.