Perrysburg Blog

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 do hear this.

Probably at least once per week.  Maybe more.

The buyer calls me or emails me and has the address of a specific house that is REO (”real estate owned” aka bank owned) and wants to see/buy said house.

But the problem is . . . THIS house is not for sale yet.

It is bank owned.  But NOT for sale!

It is part of the “Shadow Inventory”.

“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.” (San Francisco Chronicle)

Many people cannot understand why it is not for sale.

There are many reasons.

1.  The foreclosure process may not be completed.

2. The former home owner may still be occupying the house.

3. A tenant may be in the house.

4. The home is being appraised/prepared for market.

5.  The lender is simply overwhelmed and CAN’T get it on the market.

6. The lender is not willing to sell it - so that it does not have to be written off as bad debt on their balance sheet.

And amazingly the most common reason is that the bank is simply not going to put it on the market right now.

Which seems to make no sense.

But if ALL the REO homes hit the market right now . . . their values would be very depressed.  So it makes financial sense for banks to parse them out “slowly” or at lease more slowly then they can be marketed.

And think about this - up until this year, in Perrysburg, we have MAINLY been dealing with “Alt-A” and Sub-prime foreclosed loans.

But there is a giant “clot” of OTHER types of bad loans/foreclosures coming right for us.

Look at this chart:

It is a forecast of the future REO inventory.

And it is a sobering picture.

• 1.8% of all U.S. homes are in foreclosure
• Therefore, 98.2% are NOT in foreclosure
• 33% of all owner-occupied homes don’t even have a mortgage!
• 18% of all U.S. mortgages are upside with 2/3 of them located in 7 states (Arizona, California, Florida, Nevada, Ohio, Michigan, Georgia)
• 2.8% of all U.S. mortgages are three or more months in arrears.
• There are 18.6 million vacant homes in the U.S. now.
• 25 MLS closed sales, single family, in Perrysburg, February 2009
• 305 MLS closed sales, single family, in Lucas and Wood Counties, February 2009
• Average Toledo Board of Realtors agent sold just .25 of a home in February 2009
• Jon Modene closed 11 transactions in February, 2009.
• Perrysburg number of listings for sale on MLS, end of February, 2009 = 305
• Perrysburg number of listings that went “pending” in February, 2009 = 30
• Perrysburg median SOLD price, February 2009 = $172,000
• Total number of houses for sale in Lucas and Wood Counties in February 2009 = 4838
• Total number of houses that went pending in Lucas and Wood Counties in February 2009 = 363
• 11.1 Months supply of inventory in Wood and Lucas Counties

When Will The Market Thaw??

I am asked by about every client or customer: “When is it going to turn around (in real estate)?”

I don’t know the answer.

I used to say “If I did have the answer to that question I would be working on Wall Street” - but that’s not a good place to work anymore!

Here’s what I think:  when the number of new bank owned properties starts to dry up, then the market will change course.

But you must know this - Fannie, Chase, Freddie, Bank of America, et al have all had a moratorium on new foreclosures and evictions for the past 60 days - and that “REO HOLD” has NOT slowed the pace of new REO properties coming on the market.

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.

Avoid the hassles of the city!

Avoid the noises of the city!

But get a big snow blower and a big lawn tractor.

5 acres, 3 beds, new baths, and a bargain price for 4171 Dowling Road.  Perrysburg mailing address with excellent Eastwood Schools.  $150’s.

Did I mention 5 acres?

No pole barn yet, that is the first thing the next buyer will add.

We call them “Toy Boxes” in male real estate lingo.

You will love this home.  So new on the market there are no photos and no brochures or virtual tours yet.

Tell a buyer you know if you don’t love country living.

This house will make some city slicker very, very happy.

Get me some country living!

Who would have ever thought I would ENJOY living in the country? Not me!

But my wife “pestered” (she really didn’t. she simply kept educating me and helping me to open my eyes!) and after 4 years of procrastination we moved out to the country - Perrysburg Township. Where we love it.

Now I present to you a fine Perrysburg Township farm property. The 100+ acres of farm land is gone - so all that you are left with is 10 acres of barns, trees, a creek, a pond, silos, a pool, and fine country farm house.

Make of it what you will. Ride, shoot, explore, plant, keep some horses. But just know that when you come home from a hard day at work, there is plenty of “country therapy” available to keep you sane and young.

There is a lot more work out in the Township. More lawn to mow. More drifting snow to plow. More things to clean or power wash or kill or cut or . . . but that is actually some of the hidden joys of living in the country that you lose out on in the city.

This house is for sale on Dowling Road. Priced in the $250s’ it is a great buy.

And it will change someone’s life.

Call or email me to see it. You can look at all the pretty pictures at my property website - www.modene.com.