‘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.

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.

I just got a message from my REO asset managers at Fannie Mae:

They are having another “Spring/Summer” REO sale.

Wow!

I have been doing A LOT of appraisals this week.

And that is good.  (We also are negotiating a HUGE number of offers – so I know that Spring has Sprung)

And the numbers are not good for sellers.

Sorry if this makes you sad.  But like all free markets, for every sad seller there is a glad buyer.  The January 2011 Case-Shiller numbers have been published this week.  They point to a very pronounced “double dip” in the housing market.

Perrysburg (and Sylvania, and Ottawa Hills, and Monclova/Maumee) has not been wiped out like many parts of other local towns have been value wise. (How bad?  I just had to tell an out of town owner that his house was worth -$10,000 today.  Think about that . . . !)

Remember my thesis – right now the numbers in Toledo are paralleling those in Detroit.

First the big, national Case-Shiller chart:

There is your double dip.

None of us are going to enjoy this ride.

Next the numbers.  Note the Detroit data.  Metro Toledo numbers feel about like that to me . . . about -8% for the year.   Remember your mileage may very based on your exact location, condition, floor plan, etc.

I will show you one more chart – just because I am into bad news today.

New construction?

Here’s your new construction!   It has hit the absolute bottom.  Amazing.

Burning houses?

Increasing tax rates?

A scarcity of buyers? (not in my world – sold 2 or 3 today . . . and very busy . . . )

What is wrong?  What is the new thing?

The Busted Appraisal.

I saw this about 15 years ago with the ratcheting effect of appraisals in condo conversions.  Discreet price jumps had to conform to a steady pace of higher appraisals.

Appraisers are like pendulums – following behind the real velocity and position of the market.

But they catch up!  And they have now in Perrysburg and in all of Northwest Ohio.

Wow – to think I worried and worked appraisers to keep raising valuations in steps to help condo projects price properly.  Those were the days!

We could only wish for that problem today.

Today the problem is the busted appraisal.   The failure of the house to appraise.

Money quote from a very good news article you can read:

“There’s been a pendulum swing in appraisals comparable to the one we’ve seen in mortgage credit, from foolishly lax to overly restrictive,” said Walt Molony of the National Association of Realtors. He reported that as recently as October, one in 10 member agents said they’d had a contract canceled as a result of a low appraisal, 13 percent said they’d had a contract delayed, and 16 percent said they’d had a contract negotiated to a lower sales price as a result of a low appraisal.

The pendulum has swung.  Way back to where it was.

If you own a house with a paid of mortgage and you need to or want to sell it . . . you are still going to be severely effected by the foreclosure pendulum.

Sellers need to be informed.

Buyers need to be aware.

A year or two ago . . . me – totally wrong.

Because I believed that the current real estate/mortgage/financial system crisis would wind down and end in a year or two.

But the old crisis has just morphed and grown.

To the new robo-signing/QE2/inflation/invisisble reo inventory crisis.

And it shows no signs of stopping or slowing down.  (Proof?  Here is my client action plan for today . . . 2 new short sale clients to list, 2 new REO’s to list, 1 “normal” Perrysburg house to list, and one huge 4 plex to order demolished in Toledo.  Normal is a long way away . . . )

So, I stopped guessing.

And began planning.

For a 4 to 5 year slow burn.

A continued slow burn in the real estate market.

My plan: reposition my team and my company.  Focus on new marketing tools and methods for 2010 and 2011.  Be the expert in pricing and marketing in Perrysburg.

It’s working so far – more sales, closings, listings, and closed volume than any year in my 22 year real estate career.

What about you?   If you are a Perrysburg real estate owner . . . and I am right about the length of the current crisis . . . you may need a plan.   A NEW plan.

In the recent election Ohio seemed to make some plans – hiring a notorious cost and budget cutter to be the new CEO of Ohio.

How about Perrysburg?  Maybe our city and school needs an updated plan (no more spending increases for a couple of years sound like a plan?).   IMO Perrysburg has to focus on the key differentiators that make it the preferred choice to people moving or relocating (and thus staying) here:  1. Quality of Life   2. Excellence of Education   3. Safety and Security

If we can do that we can weather whatever economic real estate storms are on the horizon.

Just a thought.

Everyone is telling every buyer that “now is the time to buy!”.

Really?

It might be for me.

It might not be for you.

Each family has to make the correct decision.

This morning I talked with a transferring family . . . whose breadwinner works for a large local engineering concern that is undergoing some corporate governance turmoil . . . about their impending move.

Buy?

Lease?

Land Contract?

The old National Association of Realtors line would be “BUY NOW!”

“THERE HAS NEVER BEEN A BETTER TIME TO BUY!”

“GET THE TAX SAVINGS!”

My advice: rent.

Don’t buy.

Too much risk.

Don’t buy and assume it’s the best choice.

Don’t buy and assume you can always sell it for a profit.

Don’t buy and plan on being an absentee landlord if you are transferred or your employer goes under.

Think tactically.

Think long term.

Think about the worse case scenario.

Then act accordingly.

For many it will be to buy.

For many it will be to rent.

But seek after wisdom and understanding in residential real estate by asking some good hard questions before you jump into a purchase contract.

Resources:

100 Questions to Ask Before You Buy . . . Courtesy of HUD.

Special Report on Buying Today . . . Courtesy of me.   (See image below)

Some good, tough questions to ask any seller . . . Courtesy of a Realtor in CA.

What?

How?

Why?

The Fed is going to inflate our currency.

The headline:

Fed poised for biggest decision in decades

Some call this debasing.  Some call it foolish.  Some call it criminal.

It should have the effect of raising fixed asset values as inflation ramps up.

“Should”.

We will see.   You may want to go out and borrow with today’s more valuable dollars.  Because you will be able to pay back your debt with tomorrows inflated dollars.

Gory, inflationary details HERE.

Those that refuse to read and understand history are apparently condemned to repeat it.  Or so I have heard . . .

I have returned.

3 or 4 days.  In Dallas.

At the 5 Star REO / Foreclosure Conference.

Which is now, in my opinion, the BIGGEST real estate conference in America.

Sad to see that.  We used to, as a trade group, fill up Waikiki or SFO or New Orleans to meet and network about new houses.

Now?  We fill up Dallas to meet about foreclosures.

Theme song?  “I Used to Rule the World” . . .

Dallas? Nice town.  I lived there once.   Great climate . . . except when it snows (which it does) and then the denizens of the Metroplex turn into suicidal automotive kamikazes . . . but I digress.

Heard former First Lady Laura Bush speak.

Former Minnesota Viking Nemesis Roger Staubach speak (it WAS pass interference by the way).

Met with other top producing Realtors from across the country.

To “compare notes”.

And heard from a passel of nervous – in fact, very nervous bankers and Fed guys.

What are they worried about?

I will post on that next.

But a hint  -  it rhymes with “Strategic Default”.

Inquiring minds want to know.

Big houses in Perrysburg?  Yes.

Little houses in Toledo?  Yes.

Today I had one in Maumee, several in Toledo, one in Perrysburg, and one in Genoa.

The REO Market is absolutely the prime force in Toledo area real estate as of today.

You have to take this market force into account when you are coming up with your plans.

If you are a buyer . . . you need to understand what may happen with more and more bank owned houses coming on the market.  Do you want to look at them?  Do you want to exclude them?  Do you want to wait and see what they do to values?

If you are a seller . . . you need to understand your competition.  And their price advantage over you.  And their power on market values.  What if more REO comes on the market?  What if it your neighbor’s house?  What do buyers now expect?  What is this REO tsunami doing to appraisals?

I was reading the WSJ today.

The real estate part.

A great resort that I have been to . . . on Maui . . . was just foreclosed.

My wife and I honeymooned on Maui.

The idea of a single family house being foreclosed there is foolish to me.

And yet, the Ritz Carlton Kapalua is going down.

The current owners borrowed too much and now cannot finance.

Ritz Carlton REO.

Perrysburg is no different.

Yes it is a great place to live.  But so is Maui.

And the cost of the real estate bubble and the job destruction and shift of industry overseas continues apace in our little city.