Perrysburg Blog

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.

Picture the scene:

A great 3000++ sq. foot brick 2 story.

A great location hard by Ft. Meigs, River Road, the Maumee, the Y, and the great Rivercrest Subdivision.

And . . . the foreclosed seller decides to “send a message” to the bank.

So he removes all the light fixtures.

And he removes and discards all the cabinet doors.   In every room.

And the doors.

He even takes the toilet seats.

THE TOILET SEATS!

So . . . . the bank gets the message.

The $350,000 two story brick home with a finished basement, sideload 3 car garage, deck, and more . . . . has become a $212,500 house.

And if you think about it, the next owner is going to be able to do the work, make the repairs, put some sweat-equity into his new home . . . and laugh all the way to the bank.

So the story will at least have a happy ending.

You want to get inside 1400 Rivercrest – call or email me today!

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 . . .

Just for your perspective.

Just for comparison.

This is for the City of Toledo ONLY over a 3 year period.

2010 Q3 vs. 2007 Q3 . . .

1300 fewer listings on the market.   -20%

200 fewer listings pending. -23%

300 fewer listings closed.  -35%

That is a changed, impacted, depressed market.

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.

It is a question more and more people are asking.

And it’s a dangerous question.

The mountain looks peaceful.  It is large and contained.   It is immense but has always been that way.  What could go wrong?

The denizens surrounding Krakatoa thought that way too at one time.

Until their lives were forever changed in 1883.

Same with our mortgage system today in 2010/2011.

If no one pays . . . then there is going to be economic and financial chaos.   Just about every bank will go bust.  Credit will be a distant memory.  Your 401k might be vaporized.

So, if you are following the news and watching what is happening in different Perrysburg subdivisions – it is a valid question.

Many people are choosing to NOT pay when they can.

And many people are unable to pay when they really want to.

Nationwide it is now taking over 490 days, on average, for the bank to get control of the “asset” after the borrower stops paying.

You can do the math just as well as I can – that’s a lot of “free” rent.  A lot of money to be saved.  A lot of perverse incentive.

490+ days.

Some people who are upside down in their homes are figuring this out – the ability to simply not pay any payment and live free for a year or two.

I can’t get into the morality or rightness or wrongness of each individual case and or foreclosure or short sale.  They are all – trust me – very unique.

But it seems to me that banks need to remove the incentive to live free that many are now using as a tactical financial tool.

If it spreads the results will be “unexpected” as they say.

Where are the “good houses”?  So asked a buyer/investor that I just got off the phone with.

“I can’t find them right now” he told me.

They are hidden.

In the shadows.

Today’s news from Core Logic confirms it:

The “shadow inventory” of unlisted bank-owned homes and potential foreclosures increased to 2.1 million units in August, up 10% from one year earlier, according to new estimates from CoreLogic, a real-estate research firm.

That’s around eight months of supply, compared to a five-months’ supply one year ago.

Banks and asset managers are holding them.   Like trump cards they don’t want to play right now.

The reasons are varied, good, and at the same time unimportant.

They are “their” cards.  And if they don’t want to play them right now it’s their call.

8 months of future sales . . . sitting there like a deep and dark shadow.

It’s getting larger.

(I have argued in the past that the Detroit Metro and Toledo Metro markets have been in sync for several years as to inventory and price trends . . . Core Logic estimates that the Detroit market has a 21 month supply of shadow inventory!!!  That is an amazing number – but we could be worse off if we live in Miami which has a 33.5 month supply.)

And it’s going to cause market disrupting and market cascading effects when it unwinds.

Caveat Emptor!

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.

I was talking this week with a fellow Realtor.

About the dearth of new REO orders.

In the face of hundreds of empty houses.

“What is going on in your business?” I asked . . .

He is seeing the same thing that I am.

The REO pipeline has been shut down.

It started 3 or 4 weeks ago.

Someone “of a higher paygrade” decided to slow down the marketing of new foreclosed homes.  The news is grim – at least in the headlines.  Then you read the reassuring copy – “nothing to worry about”, “move on . . . nothing to see here”.  Let’s say I agree.  There is no wave of new REO coming.    Then the tactic of the lenders to hold off inventory now is a premeditated attempt to firm up prices and values for today’s buyers and to protect their asset values.

The houses that are foreclosed and not available?

Oh – they are still there.  They are just sitting empty.  Waiting.  Marinating.

Does this make sense?  Does this make money?  Does this “help” the housing market?  Does this increase prices?

Like “Rosebud” in Citizen Kane . . . NO MAN KNOWS.