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.

It is here.

Winter.

I know -  not officially until 12/21 or something like that.

But in real estate – Winter has arrived.

Things SEEM to slow down (although I think I sold 6 houses yesterday . . . so much for slow!).

Many Perrysburg homeowners become concerned.  “Why are showings so low this month?”  Well, because it is a slow time of year.   Evenings are filled with events.  Parties.  Get togethers.  Travel.  Swine flu.   Norovirus.

And it is cold.  And snowy outside.

But here is what you should consider:  People are still looking at homes in December and January.  When it is dark at 5PM in Perrysburg it is still bright on your computer.

They are looking online.

My team tracks all our online marketing.  Our web hits.   Our page views.  Down to the number of photos viewed on our listings on Realtor.com.

Trust me – people are looking at houses in December.

Just online.

Loan apps are up according to the Mortgage Bankers Association.

Rates are down.

People in Perrysburg are just smart enough to know that you can look in your slippers and pajamas right now.

More words than I am going to write.

“When is the market turning around?”

“Is it getting better in Perrysburg?”

Many questions . . . . and I continually believe that until the job market changes, nothing will change for the better in Perrysburg real estate.

The data from all the various states has been combined into an info-packed graph:

When companies are expanding, hiring, and adding employees that is when real estate will turn around.

Not until then.

2 real estate equations that cause the most confusion?

Easy:  Cap Rate and Absorption Rate.

Absorption rate is the topic for this post.

In this kind of market you REALLY have to pay attention to absorption rates if you are a seller or an investor.

Simply put -  the Absorption Rate is the rate at which inventory is being removed from the market by a closed, successful sale.  It tells me, if I am a seller, how long – all things being equal – i will have to wait to see my house “cleared” from the market.

Great definition?  Well, in reality the market is moving.  And in reality no home is average.   And in the real world, each and every house is unique.  So much for the technical definition.   In reality it’s a gauge.  Like a wind speed gauge.   Or a weather vane.

The absorption rate can show you what is happening and where the market is heading.  So it’s pretty useful.

In Perrysburg – with single family residential homes – we had 313 active listings on the market on the last day of October.  The number of sold listings last month was 18.  Multiply solds (18) by (12) months and you get 216.  This is a yearly number of solds IF everything works like it did in October.  Take this number (216) and divide it by 52 weeks in year and you get 4.15 homes per week being “absorbed” under current market conditions.

Now go back to the number of active listings in Perrysburg – 313 and divide it by 4.15 and you get 75 weeks.

Which is a huge absorption rate!  Usually we put that in month  -  so divide it by 4 and you get 18.75 months which I will round up to 19 months supply of inventory.  Which means if everything stayed the same and NO NEW HOUSES came on the market it will take 19 months to clear the market of inventory.

I use this number – as expressed on the chart below – to show my clients what is happening with the trends in Perrysburg real estate.

Today?  The absorption rate is going UP.

Got a question?  Ask!  jon@modene.com or 419-874-1188.

If you are focused like a laser beam on Perrysburg, which I am trained to be when I have to (which is when I am listing and selling and consulting on Perrysburg real estate and for Perrysburg real estate clients, although this was a typical day in that I had to list a house in Toledo, list a house in Rossford, secure/list a house in Holland for a bank, and then list a house in Perrysburg all while my team was showing houses in and around Maumee, Perrysburg, and Toledo . . . but I digress)

IF you are focused on Perrysburg the number that arrests your attention today is -9%.

Because the Toledo Blade ran a story yesterday (www.ToledoBlade.com) about housing values in Toledo being off by 5.2%.

I was quoted in the story by John Chavez, the Blade’s excellent Business reporter.

But, you know, when you are quoted, you can never really get the whole story out.   John was working with the national numbers that the National Association of Realtors was using in a press release for all of Ohio.

But there is no “Ohio” real estate market.

If I had my own place to write – Oh, I do, right here! – I would say that ALL real estate is local.   All of the big national statistics have to be brought right down to the local level.

You want the truth about the Perrysburg market?  Then you had better use the right metrics and numbers and data to get it.

And the numbers have indeed flattened out – but if you look back to just one year ago, which is a time frame that most of us are very comfortable using, the median price in Perrysburg of sold homes is down by -9%.

$197,500 in July of 2007 to $179,750 in July of 2008.

That’s a BIG drop.

Are we done?  I don’t think we are going to see another $17,750 drop in Perrysburg over the next 12 months.

I do not see it.

Not in Perrysburg.

You can track what is happening with homes on the market anytime you want by looking at www.OnlyPerrysburg.com (shameless plug – it’s one of my websites, a pretty neat one I think – one button gets you every house for sale in Perrysburg!).

What will our market look like in July 2009 if it drops another 9 or 10%?

You and I most likely don’t want to know . . .