Jon is a real estate marketing and negotiating expert. With over 18 years of real estate experience, an IBM sales background, and an MBA from Duke University, he is the man you want on your side.
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.
“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.
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.
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.
The collapse of the Toledo Real Estate Market, caused by the collapse of the economy and our manufacturing base, has left a lot of home owners upside down – owing more than their home is worth in today’s dollars. And this is known as a short sale.
Short sales are complicated transactions. They are not for the feint of heart.
Who Actually Makes the Decision to Approve a Short Sale.
2 people.
You, the seller.
And your lender or lenders. You both have to cooperate or nothing but a foreclosure train wreck will result. You will not be allowed to take any money away from the closing so you really don’t have an economic reason to care about the price your home sells for. But . . . the bank cares. It’s now their money at stake. And while they care there is neither rhyme nor reason as to why one deal is accepted, approved, and closed and another one is not.
Why Would I Short Sale My Home?
There are advantages – if done properly. You can stop the bleeding. You can be “forgiven” from owing any more. You can avoid collection acts and lawsuits that lead to a deficiency judgment. Bottom line – you can get the bank to take the money that the house sells for and you can walk away. You will not be able to finance another home with an FHA mortgage for 3 years . . . but that beats the 7+ year ding that a foreclosure action generates on your credit.
What Is the Best Way to Go About a Short Sale on my Perrysburg Home?
“Just call Jon” as I am want to say. I have closed quite a few in Perrysburg and have special trainingto increase the odds of success. A real estate agent with actual field and negotiating experience in short sales is, in my opinion, absolutely required if you want to succeed. You will have to prove to the bank/investor/mortgage holder that you really did try to get top dollar for it. You will need help proving your suitability for a short sale, and assembling the paperwork packet that will increase your odds of success.
That’s what I and my team do.
Why Do Most Short Sales Fail?
Time. And communication issues. And mistakes in contract process, buyer process, appraisal process, and with second lien holders. These are tough, complicated transactions and if your Realtor is also working at multilevel marketing too or selling holiday hams at the mall it’s not an indicator of future success. Hire the best for the toughest jobs.
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.
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.
“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.
This chart shows that there is a move toward a more balanced supply of houses:
In the cold, cold months of Winter the 43551 had about 10 to 13 months of inventory on the market and moving off the market.
That was too much obviously.
Now?
May MSI (Months Supply of Inventory) was 4.7 months. It was 6.5 last month.
It always drops in the Spring and Summer (mine is a seasonal business – like picking strawberries).
But the current numbers are indicative of strong demand from buyers, the continuing popularity of Perrysburg real estate, realistic sellers, and sellers moving houses off of the market.
How about prices?
Behold the numbers:
Ignore the bank numbers – and median prices for closed Perrysburg homes are right – almost exactly – where they were last year in May.
In fact, they have declined from this past Winter, which speaks of sample size issues. The trend is steady – perhaps we have reached the end of the pricing cliff in Perrysburg?
There are no major Ohio loan/bond issues being promulgated. Back to normal.
Two offers on Perrysburg listings today:
A buyer just submitted a conventional financing loan/offer to me.
Another buyer . . . . the same. Back to normal.
In Perrysburg real estate, with no tax credits, special government loans, and other market deforming forces THIS, today, right now is normal.
Rules for this market, now that it is finally normalizing:
1. Price is king. Queen. And Jack. It’s all about price.
2. Perrysburg still get’s the “Perrysburg Premium”. It just does.
3. Quality of life, crime, schools will continue to be more valuable. Perrysburg ought to not mess this one up.
4. It has to appraise. Your wants/needs/sticker price/contract price . . . all will be validated, satisfied, and hostage to the appraisal.
5. It’s allright to mow your neighbors yard. Seriously. If they are gone – foreclosed – abandoned – you can mow it. It keeps up appearances. It keeps out the petty crime that vacant houses attract. It actually may increase your homes value. Neighborhoods have to start banding together.
Here’s a three year overview of supply and demand in the entire Northwest Ohio market:
Median price change in Northwest Ohio over 36 months is -$30k.
Median price change in Northwest Ohio of closed single family homes is -$31.5k over 36 months.
EVERY house on average lost 20% to 30% in value.
My observations -
1. Ranches in the suburbs have resisted this trend more than anything else.
2. 80% of the “active” real estate agents have an idea this has happened, but are in “pricing denial”. They eventually seem to be running out of money after 3 years of not selling any houses they have listed.
3. We really did not destroy 30% of the housing stock in either Afghanistan or Iraq. But we managed to do it here. Thanks!
4. Toledo now has some of the cheapest housing prices in America, for what that is worth.
5. This has caused some of the strongest and most well capitalized builder/developers to throw in the towel. I have developed land, sold land, marketed new subdivisions, and done market research for new projects . . . . and I no longer can tell you who is going to do future non-condo/villa development in the suburban market.
Is this one from Forbes . . . about the WORST real estate markets in America right now.
Toledo is on this trajectory: lost jobs, out of control State government, public school meltdown, and out of control local government.
You can just look north . . . to DTW . . . to see what the potential future holds if some serious changes are not made in Northwest Ohio.
With interest rates rising, taxes increasing, and a steady grab of diminishing income from private citizens being answered with decreasing city services, things are not on a good path right now.
Toledo does not need this kind of publicity.
This blog is about PERRYSBURG real estate.
And . . . I sometimes have made tongue in cheek comments about Perrysburg gaining at Toledo’s expense . . .
But I do not want to see Toledo drained dry.
I don’t know anyone who does.
It’s the Greater Toledo Metro Area . . . and we are all interdependent economically.
Let’s hope they make some wise decisions up there!
Here are the comments and the list from Forbes:
Milwaukee, WI: Some cities’ housing crisis stemmed from rampant overbuilding. Others can blame the decline of the manufacturing industry. Milwaukee has felt both. The worst-selling housing market saw a 47% increase in unsold homes between 2008 and 2009, thanks both to underlying economic problems and overzealous development during the housing bubble.
Denver, CO: Denver doesn’t come to mind as a housing-crisis hot spot, but the city that once looked like it would escape the housing bust unscathed now shows signs of strain. More than 42,000 homes are on the market in the metro, 27% more than last year.
Los Angeles, CA: Los Angeles has yet to recover from the blows it took when the housing bubble burst. Home sales fell by 5% in the metro between 2008 and 2009, while they rose, if only modestly, in most other large metros. Home sale prices peaked in late 2006, and it looks like the remnants of overbuilding will continue to clog the housing supply.
St. Louis, MO: The city has shed jobs and seen housing prices plummet. Inventory in the metro is up 36%, in part as a result of its 11% unemployment rate. Manufacturing jobs no longer drive the city’s economy, and slow sales are just one symptom of its economic maladies.
San Francisco, CA: Unemployment has reached 11% here, and home prices fell by 6% between 2008 and 2009. The area’s poor-home-sale performance shows that California’s housing woes spared no city.
New York, NY: New York likely made the list in part because the condominium market, which drives much of Manhattan real estate, wasn’t included in the analysis. Still, not everything’s rosy in the Big Apple: Sale prices were down 13% between 2008 and 2009, and inventory has seen a 13% rise.
Cincinnati, OH: Like Cleveland and other Rust Belt cities, Cincinnati suffers from a lack of jobs–the city is 11% unemployed–which has cut sales dramatically and left a glut of unsold houses behind. Inventory in the city rose 48% between 2008 and 2009.
Cleveland, OH: Cleveland was suffering before the housing crisis hit, but the bursting of the bubble surely didn’t help. Unemployment is at 10% in the metro, which has hemorrhaged manufacturing jobs. That means families don’t have the means to buy, and homes remain unsold.
Atlanta, GA: Inventory was up 6% in 2009 from the previous year. That may not sound like much, but together with flat quarter-over-quarter single-family home sale prices and sluggish sales rates, the overbuilt city shows significant signs of strain.
San Diego, CA: Scores of new condominiums were constructed before the market peaked in the first quarter of 2006, driving up prices and spurring overbuilding. Many units were built for speculative buyers, but today the brand-new luxury buildings sit empty.
