Housing, the force that has lifted the economy from almost all previous recessions, now appears to have become the little engine that can’t, as the nation seeks to find another means of raising the U.S. from economic stagnation. One only has to look at the graphs (courtesy of Calculated Risk Blog) to see just how far housing has to go in order to stimulate the economy as it has done following previous recessions. And a look at the unemployment situation shows that “full employment” is still years away.

Instead of seeking ways to artificially stimulate housing—efforts to date have been dismal and expensive failures—perhaps it’s time to accept the status quo and move on. One of the latest brainstorms from government is to sell huge segments of government owned foreclosures to investment groups who are expected to rehab and rent the homes to the growing number of renters. On the surface such a proposal appears to have merit; however, if it is price stabilization the government desires, it’s unlikely to be found in such a rental program.

Investors buying homes in bulk will receive sizable discounts, not only below market, but below the prevailing rate for foreclosures. Incentives and concessions will have to be offered in order to attract the number of investors desired. And such incentives will likely maintain downward pressure on prices in those areas where rentals are concentrated. It seems unlikely that neighborhoods filled with a large percentage of rental homes would see any appreciation in the near term; declines and stagnation would be the more likely scenario.

And if it’s “fairness” sought by DC, such a program is inherently unfair. While I’ve generally opposed government attempts at achieving fairness—true fairness is neither desirable nor possible—the  beneficiaries will be the big banks and Wall Street firms that participate in the program. Such a program would favor billion dollar hedge funds—some of which participated in creating the housing crisis—over small, local investors who have a vested interest in rehabilitating the individual neighborhoods in which they purchase. The difficulties of managing hundreds of single family residences scattered about a city is far different from managing a single location, multifamily project; and I suspect we’ll discover some unintended consequences as the plan unfolds. 

Another program currently being touted by the Administration—actually an expansion of one already in existence—would be to make refinancing available to a far greater number of struggling homeowners, especially those who owe more than their home is worth. And while the President offered a plan “that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage,” millions of responsible homeowners will be locked out, unable qualify. The devil will certainly be in the details—the Administration promises more in the coming weeks—but some experts, including the FED, have estimated the benefit to be limited to only a small percentage of homeowners.

With 10 million or more homes expected to face foreclosure or short sale in the next few years, it seems unlikely that housing will continue to be the little engine that can’t. It can’t drive the economy into recovery and it can’t return the trillions lost when the bubble burst; only time, and lots of it, can do that. Political rhetoric may play well to those whose hopes have been dashed, but it does nothing to create actual change.  

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News

“ The Little Engine That Can’t” - Originally posted at: www.TheHousingGuruBlog.com    

With millions of homeowners having lost much of their net worth as a result of the housing crash, many have asked, When will home prices return to pre-recession levels? And the answer is neither simple nor encouraging.

What homeowners really want to know is when their lost equity will return, when they’ll be able to sell and walk away with cash for a down payment, or when they can get a home equity loan to supplement a college fund. Sadly, for many the answer is not soon enough, and for some, never.

Much of the equity lost by homeowners during the housing crash—some may argue that such gains were always a mirage—is lost forever; for even when a home’s price returns to pre-recession levels, the dollars gained are diminished by their loss of purchasing power.  That loss can never be regained. One only has to look to the increased cost of food, healthcare or gasoline during the past decade to realize how our dollars continue to decline in value. 

When will home prices return to pre-recession levels? The answer varies depending upon a number of factors; but that question may not be the one we should ask. Although most will see the price of their home return to pre-crash levels at some point, that point may be so far in the future as to be meaningless. Housing has undergone structural changes, and we must now adjust to those changes. Perhaps we should ask, When will housing and the economy reach stabilization? Only then will real progress be made towards restoring our financial futures.  

Yet, while the news isn’t great for homeowners, it may not be as bad as the numbers appear. For most, a home is a leverage purchase with lenders supplying eighty to ninety-five percent of the required funds. The true out-of-pocket losses occur when the initial investment is not recouped in a sale or because the home was lost to foreclosure. That’s a loss, of course, for some a significant one, but it’s not as severe as many have portrayed it. This recession and the collapse of home prices will resonate throughout the economy for decades, but the personal impact may be softened when taken in perspective.  

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News

When Will Home Prices Return to Pre-recession Levels?  - Originally posted at: www.TheHousingGuruBlog.com 

As the candidates flood the airwaves exaggerating their accomplishments and deriding their opponents, voters should prepare for the best election money can buy. While 2012 may herald one of the most important elections in our nation’s history, with the potential for a change of the Presidency and major victories/defeats in both the House and Senate, the outcome won’t be determined by an informed electorate, but by the number of dollars spent.

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With large numbers of investors and others seeking to take advantage of low home prices, many remain unaware that real estate profits are made on the purchase not the sale. Sadly, millions of current homeowners and others who may have already lost homes to foreclosure overlooked the economic realities of their purchase.

In past years, especially those of the recent housing boom, profiting from a home purchase was the norm, and sometimes those profits were dramatic. However, most now realize that the gains received were artificially driven by a combination of loose lending policies and direct government interference in the free market. Rapidly escalating home prices are not normal, and housing of itself may not be a great investment . . . unless one uses the proper diligence when making a purchase.

A good friend recently sold his home, purchased only months earlier, for a tidy $20,000 profit.  While no real estate expert, my friend’s good fortune was not due to the housing market experiencing a dramatic surge in prices, but because he did his research prior to purchasing and then used his negotiating skills to buy at the lowest possible price. He knew that real estate profits are made on the purchase not the sale. 

With the housing market still in turmoil and expected to remain so for several years to come, homebuyers and investors should keep in mind the basics of a successful real estate purchase. Those who locate properties in great locations, who do sufficient research prior to purchasing, who have a keen awareness of value, and who purchase at a price below comparable properties may experience significantly more appreciation than their less savvy neighbors. While the housing market may not offer investment opportunities to the masses, astute buyers are regularly reaping the profits yielded through shrewd purchases.  

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News

"Real Estate Profits Are Made on the Purchase not the Sale" - Originally published at: www.TheHousingGuruBlog.com

“Lessons From The Light,” a True Life Encounter with Angels 

While most here on Active Rain know me as The Housing Guru, a retired homebuilder, a few are aware that I have interests that extend far beyond the mundane; and some may be aware that I am also a published author.  And while I have rarely posted on my other interests, I’d like to share what I believe is a fascinating story. 

Several years ago I was asked by Myra Starr, a Native American healer, to write her story.  Amazingly for me, I had only spoken to her about my homebuilding career; and though I had considered approaching Myra about writing a book about her, I was reluctant to do so, for at the time I had yet to be published.   I was shocked when she one day said, “You’re supposed to write my story.” 

Myra is a remarkable lady, having had a life-changing, near-death experience several years prior to our meeting.  Her story is so fascinating that NBC featured her in an hour long special on angels and healing a few years ago.  I was honored by her request for me to detail the incredible events that followed her encounter with death. 

Although it took several years to get the work together—writing another’s story was much more difficult than I’d imagined—“Lessons From The Light” is now complete and available for download on Amazon Kindle.   And since Myra desired that the book be available to anyone who was interested, the price has been set at $0.99, affordable even in this difficult economy.  

I would say that I could write a book about my experiences with Myra, but of course that’s what I did.  However, the book represents only a small part of what I learned from her.  I hope that anyone who is interested in knowing more about the realm beyond this plane will take time to read the book.  And I hope they will find some answers that may help them deal with the difficulties of life, that they will come away with a better understanding of both our amazing world and the Creator who placed us here.  

I’ve provided a quick link to the book on Amazon, HERE.  And for those who may not have a Kindle or other device capable of downloading books; Amazon offers a FREE download for Kindle on your PC.  I would love to hear from anyone who reads the book and will be happy to answer any questions the reading may spawn.  

The Importance of Location When Buying a Home

Most have heard the Realtor® adage, “The three most important aspects of real estate are: location, location, location. And while we may smile when hearing it and even acknowledge the importance, many purchases are made without considering ALL the factors associated with location.

Those shopping for a home will consider whether the home in an area where they want to live, measuring the property’s distance from work, shopping, schools and churches. Just checking distances, however, shouldn’t be the end of the research. Buyers should check the drive to work during rush-hours and confirm that easy access remains even during periods of heavy traffic. The extra hassle of spending hours commuting or the inconvenience of living far from shopping, schools, churches, or other activities, multiplied by the number of years you’ll spend in a home isn’t worth it. Buyers should seek a home where access and drive times are reasonable.

Of course some may choose to live in a less convenient location because of price. Such a compromise may be necessary due to the price of land—the more desirable locations are naturally more expensive—and as builders try to keep prices lower, they build in areas where land costs are less. However, for those willing to conduct a diligent search, there are usually affordable homes to be found in all areas. 

Evaluating a location is a great opportunity to meet your potential neighbors. Stop and talk to as many as possible. Remember, the area may soon be your neighborhood, your neighbors. A short introduction and conversation can provide information about the quality of schools, the best places to shop, parks and recreation facilities, neighborhood concerns and other pertinent information that will help in the decision process.

Check zoning

Once you’ve found a potential property, check the zoning for both the property and the surrounding area. Your agent should be able to help you with the research.  Most municipalities have zoning laws to control the manner in which real estate may be used, and such laws generally benefit everyone. Zoning laws determine the density of housing in residential areas, the types of businesses allowed in commercial areas, and the proximity of commercial to residential.

Want to keep horses on your property, rent a room in your basement, give piano lessons in your home, offer accounting or other services from a home office, or own more than two dogs? Zoning laws and local ordinances may determine whether or not you can do any of these things.  And what if you don’t want your next door neighbor to raise livestock or operate a business from his home? You may have no voice in the matter if the current zoning allows such ventures. Check the laws in your area and ask about the process for changing zoning classifications. That way you’ll be better able to avoid the surprise of having a superstore open in your backyard.

A home’s location determines a number of factors that can impact your happiness, safety, comfort and financial future.  Location is not just important, it’s critical!  Purchasing a nice home in an undesirable area can be a frustrating and costly mistake, yet it’s one that can easily be avoided. 

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News

Originally posted at: www.TheHousingGuruBlog.com - "The Importance of Location When Buying a Home"

Recalculating—most of us have heard that phrase as a GPS sought to discover a new route, and most of us have felt similarly perplexed as we tried to make sense of the maze that is our present economy. “Economists” tell us that the great recession ended a couple of years ago, but a quick look around tells a different tale. We only have to look to the (real) unemployment rate, declines in incomes, trillions of real estate equity lost, millions of foreclosures, new home sales at record lows and half of American households receiving some type of government benefits, with more than 43 million now on food stamps; the numbers paint a bleak picture.

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Okay, so the de-cluttering, staging and upgrades have paid off and you’ve received an offer to purchase your home. Is your “Mission Accomplished?” And what do you do next? If the offer you received is full price with few or no significant stipulations, proceed to “Go” and collect $200 and declare yourself a winner.  

The above scenario does happen . . . rarely, but it’s probably not what you’re currently facing. Your offer is probably below your asking price, perhaps well below. Is it possible to work out a price that will be acceptable to both you and the buyer? The first step is to discuss the offer with your agent. They should be able to offer helpful insights to guide you towards the next steps and to a successful conclusion. Let’s examine some possible scenarios.

If the offer you received is ridiculously low, you may counter with a discount of 2% or so. I’d generally not counter at full price, as this may drive away someone who was just checking to see how low you might go. A counter at nearly full price lets the buyer know you’re willing to negotiate, but not stupid. If the buyer walks away, they were never serious anyway.

If, however, the offer is within 10% of asking price, try countering at approximately 97% of asking price and check to see if there are certain conditions or incentives that you can concede to make your offer more attractive. Perhaps the buyer needs the home within a short time frame; if it’s possible for you to move within such a short time, offer to do so. Or the buyer may want you to make certain repairs, or improvements; if it’s possible to do so, and you fully understand the costs, you may be able to reach common ground.

Remember, everything is negotiable. Stay involved, stay on top of the process, and be aware of subtle hints that buyers sometimes offer that can help you during negotiations.

The most important tip I can offer is to maintain your objectivity. It’s easy for both buyers and sellers to get wrapped up in their emotions during the process, a mistake that often robs both of reason.

FIVE NEGOTIATING DON’TS

1. Don’t automatically reject an unreasonably low offer. Potential buyers may be turned off by your response and just walk away, and they may have been “fishing” to see if you’d bite. Once they discover you understand the true value of your home, they may return and counter with a serious offer. If you have educated yourself about pricing, you’ll know what your home is worth and should expect to receive somewhere in that range. Your counter offer should be slightly below your asking price, perhaps 3%, and just above the price you’re willing to accept. Remember, you’re not just negotiating on the price, there may be other stipulations that you can use to entice the buyer to pay a higher price. Look for those stipulations that seem to be more important to the seller than to you.
2. Don’t expect the buyer to accept everything in your offer. Be willing to compromise. Buyers expect sellers to ask for more than they are willing to accept. But, remain firm on everything that is important to you.
3. Don’t say, “Take it or leave it.” Even if you really want to tell them to “get lost,” play your cards close to your vest. You might change your mind; don’t close the door until you know the buyer isn’t returning.
4. Never let the buyer’s agent know what you are willing to do. Discuss your position with your agent only; and it’s sometimes helpful not to share all the facts with them. Your agent works for you, but the ultimate decisions will be solely made by you and your family.
5. Don’t sign an offer unless it contains all the specifics you have agreed upon. If there are verbal commitments or stipulations, make certain they are included in the contract. Remember the most important rule of contracts: “If it isn’t in writing, it isn’t.”

Once the offer process has begun, keep your cool. Don’t panic if a response doesn’t come as quickly as expected. The buyer may need time to reevaluate their finances or to discuss your offer with family or friends. Don’t push them for a quick answer; your counter offer should provide a reasonable time frame for acceptance. Allow the buyer to use as much of it as they need. Always show respect for the buyer by being courteous, patient, and polite.

Finally, if there are serious differences between you and the buyer, don’t be afraid to terminate the negotiations. If it appears that the chasm between you and the buyer cannot be bridged, discuss the situation with your agent, but begin looking for the next prospect. Not every offer will be a great one, and not every offer will result in a signed contract. Selling your home is a sometimes difficult process; be flexible, reasonable, and fair; and you’ll ultimately wind up at the closing table.

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News

While the age of a home denotes how long the structural members have been in place, the actual number of years means little or nothing.  As with humans, age is relative; and sometimes a fifty-year old home is in better condition than one that is only a couple of years old.  Rather than age, the important aspects are determining whether or not the home meets your needs, confirming its condition and having it in a convenient and desirable location. 

There is one area where age may help to point out potential problems and that is in being aware of construction or materials problems associated with a particular time frame.  The existence of lead paint, synthetic stucco, defective siding materials or other potential hazards can often be identified if the age of a home is known.

Fixer-uppers

A popular category of used homes are those homes known as “fixer-uppers.”  These homes may need a new roof (an easy repair which, unfortunately, frightens away many potential buyers), new siding, kitchen and bath upgrades or the replacement of heating, plumbing and electrical systems. Some homes may even require that significant structural repairs be completed before they are safe to occupy.

Ads for such homes are sometimes misleading, and the agent’s or seller’s description of needed repairs is often far from complete.  Buyers interested in such homes should proceed with caution.  While wonderful opportunities exist for those who are knowledgeable and willing to tolerate the hassle and expense of serious home repair, horror stories abound; and a few such homes are truly, “money-pits.”  Many times buyers discover that their anticipated budget will be decimated by undisclosed problems.

If you do plan to purchase a fixer-upper, make your offer to purchase contingent upon an inspection and your receiving acceptable bids for the work needed.  With these homes the inspection process is especially critical.  You may even wish to get separate inspections for the structure (from an engineer) and inspections for the mechanical systems from certified contractors (HVAC, electrical, and plumbing).  Then, get comprehensive QUOTES, not estimates, for all repairs.  Also, check with the local building authority; depending upon the repairs needed, you may need to bring the repaired areas into compliance with current building codes.

If this sounds complicated and confusing, it is.  Fixer-uppers can be disastrous to relationships, to budgets and to your sanity.  However, they can also be challenging, rewarding and just plain fun.  Your task is to make an informed purchase based upon your knowledge and your willingness to deal with the problems involved.

However, buyers should be wary of making additions or upgrades that would price a home above the market.  While you may find the changes desirable, you’ll be less likely to recoup your investment when it’s time to sell.

And unless you are familiar with the remodeling and repair process and have the time, patience, and ample funds, “fixer-uppers” may not be for you.  Never purchase such a home without seriously evaluating both the expense and the “hassle factor.” 

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News

Originally posted at: www.TheHousingGuruBlog.com - The Age Factor in Homebuying

As many homeowners have discovered, selling a home is much more than signing a listing agreement. In today’s housing market, sellers are competing with foreclosures, short sales and neighbors willing to forgo the profits common in past years. Those serious about selling understand the demands of the market and the expectations of buyers looking to capitalize on the best values in a decade.  

Recently my daughter found a building lot near her present home that was being offered for sale by a local bank. And as the selling price seemed very attractive, she and her husband decided that it was time to build a new home. Building a new home, however, would necessitate the sale of their present one, a home I built for them 14 years ago. (Some of you may have noticed a sharp decline in my posting and commenting during the past few weeks, and my absence has been due to my efforts to help my daughter meet the demands of today’s housing market.)

Having once worked in my construction business and being very familiar with marketing homes, my daughter asked me to assist her in preparing her home for sale. While we both felt that the location of the home, a prestigious East Cobb neighborhood of Marietta, GA, should provide a selling advantage, we were also aware that most of today’s buyers are looking for the best deals on “move-in” ready homes.

Although the home has had several upgrades during the past several years, we knew it was critical that it compare favorably to new homes being offered in the surrounding area, and we spent the several weeks making the necessary changes, minor upgrades and repairs that we felt would place the home above the competition. With our updating complete, the home was listed this week, and we hope to soon see a positive result of our efforts.

Those interested in seeing the results of our labor can take a “VIRTUAL TOUR” of the home.  And those considering moving to Metro Atlanta, and specifically the East Cobb area, who are interested in a great home in a great location can contact Donna King  for further information.  

Selling a home is much more than signing a listing agreement.  Anyone thinking of selling and interested in applying the tips we used in preparing this home for sale should read the following articles:

Preparing Your Home For Sale

10 Tips To Help Sell Your Home That Won’t Break The Bank

Must Do Repairs Prior To Sale

Staging Your Home

10 Don'ts in Selling Your Home

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News