John Mulkey, Housing Guru

Perhaps It’s Time To Re-think “Strategic Default”

John Mulkey, Housing Guru (TheHousingGuru.com) — Thu, 17 Dec 2009 12:33:31 -0600

Taking a cue from struggling homeowners, Morgan Stanley, the giant Wall Street securities firm, is planning to transfer 5 properties it owns in San Francisco to its lender, Barclays Capital. The move, in effect a strategic default, will terminate the firm’s obligation on a loan of $2 billion.

Although Morgan Stanley paid $6.5 billion for the office buildings in 2007, property values have declined as much as 50%. And while the company is current on its debt and has the funds to maintain payments, the move represents a purely financial decision.

It seems that strategic default may be the wave of the future, and with this one and the potential for hundreds more commercial defaults during the coming year, the stigma for homeowners may no longer exist.

Read full article: Bloomberg

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Treasury Department Has Just Realized That Loan Modifications Aren't Working

John Mulkey, Housing Guru (TheHousingGuru.com) — Thu, 10 Dec 2009 10:35:43 -0600

While millions of homeowners continue to face foreclosure, the Treasury Department has just realized that loan modifications aren't working. I suppose that someone must be the last to “see the light,” but must that someone always be government?

Almost a year into the program and with a couple of million more homes lost to foreclosure, the wizards in Washington are now looking at “improving” their loan modification program. The point they seem to have missed is that we had a Housing Bubble, where home prices were driven up far beyond their value.

Offers to adjust interest rates or to extend the terms of mortgages do little to help those homeowners who won’t see their home’s value recover for many years. As more come to the realization that their mortgage payment is just falling into a “bottomless pit,” more will choose strategic default. The bubble losses must be absorbed by someone; and, after watching their tax money spent to “rescue” the mega banks, a great number of homeowners won’t be willing to assume that responsibility.

With the current pace of government action, millions more homes will be lost before the tide turns. Home prices will remain depressed, and neighborhoods will continue to suffer.

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Lake Arrowhead Georgia, Where You Can Have It All

John Mulkey, Housing Guru (TheHousingGuru.com) — Sat, 05 Dec 2009 15:20:20 -0600

Looking for a place, the right place, a place you’ll enjoy calling home? Come to Lake Arrowhead, Georgia, where you can have it all. Nestled in the mountains of north Georgia and just outside the small town of Waleska, visitors will discover a lifestyle unmatched by other neighborhoods. A gated community offering round the clock security, Lake Arrowhead allows you to feel both safe and relaxed in the peaceful environment offered by this lush woodland setting.

However, before I continue, I want to emphasize that my only interest in providing this information is to make others aware of this well-kept secret. I am neither a Realtor® nor a builder, and receive no financial benefit from home or lot sales in this, my community. I am a former home builder and eight year resident of Lake Arrowhead, and while I previously lived less than thirty miles from its beauty, I was unfamiliar with its magical environment; and I’m sure there are others who have yet to discover this local treasure.

The neighborhood is a serene setting that can soothe the nerves of the busiest of lifestyles. But it’s not just a pristine environment that beckons. Georgia’s Lake Arrowhead offers amenities for the most demanding home buyer. Within its more than 8,000 acres, residents can enjoy the new 18 hole Championship golf course, complete with a 7,000 sq. ft. clubhouse including a gourmet restaurant and pro shop.

There’s also tennis, swimming, and the Great Festival Park, a 40 acre complex offering basketball, volleyball, and an eco garden, and which is also the location of one of the neighborhood’s two pools.

Nature enthusiasts will enjoy the hiking trails where you can relax in the quiet of the forest, listen to the splashing of one of the many brooks and streams, or catch an occasional glimpse of the abundant wildlife, including deer, water fowl, as well as native and migratory birds. Those who enjoy boating can explore the community’s 540 acre private lake with its 11 miles of shoreline, and which has been proclaimed by the Georgia Department of Natural Resources, “one of the cleanest lakes in the state.” Boaters can tie up at the one of the two marinas offering both slip rental as well as dry storage. And for those who don’t yet own a boat, daily rentals are offered as well as regular classes in sailing. Avid fishermen will find the lake abundantly stocked with a variety of native species.

But Lake Arrowhead is much more than its peaceful environment. Located less than an hour from Atlanta; it’s an easy drive to entertainment and fine dining. And it isn’t necessary to drive into the city to find dining, cultural events, museums, or higher education. All are located in the town of Waleska or the nearby city of Canton, only a short drive from the front gate.

Waleska, one of the most affluent small towns in Georgia, is the home of Reinhardt College, a 125 year old, four year, liberal arts institution, offering a wide range of educational opportunities. The town, established in 1899 derives its name from a local Indian princess. Additionally, the college includes The Falany Performing Arts Center, a 360 seat auditorium with an annual program of concerts, plays, comedy, and other performances. Also on campus, The Funk Heritage Center, Georgia’s Official Frontier and Southeastern Indian Interpretive Center includes a museum of the history of the Southeastern Native Americans, their artwork, and a reconstructed Appalachian settlement.

Those who would like more information on Lake Arrowhead Georgia can visit the community’s website: LakeArrowheadGa.com

If you would like to talk with a property owner, feel free to contact me through my website: TheHousingGuru.com or by phone at: 404/310-6015

The Housing Guru: The one source for all your housing questions

An 800 Pound Gorilla Called Negative Equity Is Lurking

John Mulkey, Housing Guru (TheHousingGuru.com) — Fri, 04 Dec 2009 06:32:41 -0600

While the administration continues to talk about modifying mortgages, about “shaming” lenders and servicers who fail to perform to some pre-determined standard, an 800 pound gorilla called negative equity is lurking in the corner. At some point the gorilla will pounce and crush those who stand in its way. It will crush already depressed housing prices; and it will do so because no one has faced the reality of its existence.

Negative equity, a beast that has decimated the wealth of millions of homeowners across the nation, must be confronted as an integral part of the modification process; not doing so invites more foreclosures and will wipe out the remaining equity of those who had been spared from the ordeal. But if this danger exists, why is everyone avoiding it? Why do the politicians establish mortgage modification programs that ignore one of the core problems of this housing crisis?

Politicians by their very nature avoid complex or controversial issues that might endanger their political power, and look to short-term or temporary solutions for problems that demand more bold actions. This issue demands such boldness and leadership. Of course unemployment is the other major issue, and while it’s much more difficult to solve, resolving the problem of negative equity would make it easier for those whose income has been lost or reduced to remain in their homes.

What we need is a leader who is willing to address Congress and the nation; to lay out the cold, hard facts and to present a program that would require lenders to reduce principle balances so they are in line with current appraised value. Would that be unfair to those of us who have seen our homes value drop, but are still making our payments? Who cares? The issue has nothing to do with fairness. Life isn’t fair.

Dramatically slowing the foreclosure process would certainly benefit all who remain in their homes, by keeping neighborhood values from dropping even more. And it would bring an end to the chaos that will continue to disrupt the housing market until home values have fallen so much that everyone suffers.

I’m not a fan of government intervention. Government by its very nature usually creates problems equal to the ones it solves; but there is nothing “normal” about the crisis we face. Unless something is done to deal with the problem of negative equity, we will see more foreclosures than many could imagine; and they will continue for years, depressing the housing market and disrupting the economy.

The issues involved in dealing with negative equity are complex and will, of necessity, demand showing preference for one group over another, but to ignore the problem is to invite disaster for all.

The housing Guru: The one source for all your housing questions

Foreclosure Victims Have No Hope And Their Only Change Is Their Address

John Mulkey, Housing Guru (TheHousingGuru.com) — Thu, 03 Dec 2009 09:23:52 -0600

When the current administration came into power it promised “Hope and Change,” and struggling homeowners, devastated by the rising unemployment and the collapse of the housing market, eagerly awaited the changes that would save them from foreclosure. The previous administration’s Hope for Homeowners had proved more hopeless than hopeful, and the promised relief had never materialized.

But January had ushered in a new attitude, and new team that would look out for Main Street, not Wall Street; and hopes ran high. February’s announcement that 7 – 9 million homeowners would be saved from foreclosure let struggling homeowners know that help was on the way. If they could hold on for a couple of months, a new program would allow their lender to modify their loan, insuring they could remain in their home.

Well, we’ve now had a loan modification program for about nine months, and it’s a joke, a farce, masquerading as a rescue of the “little guy,” when in reality it’s just a continuation of the pandering to big banks that is the cornerstone of this and previous administrations.

Sure, we can say that those who applied for mortgages are receiving the consequences to which they agreed in their loan documents. We can say that the banks were providing them a service by loaning the bank’s money, but that’s all irrelevant. These are not normal times. The economy, housing market, and banking system are on a tight wire stretched over a chasm of unknown depth. We can say it’s just business as usual; “let the chips fall where they may;” but the fall may break them so severely they can never be repaired.

Our leaders have failed us. They are not leading. They are accomplices in a great crime against the people and the system that has allowed us to prosper for two centuries. It is time for change, and I hope enough of us will speak out to make our voices heard.

Unemployment To Rise Into 2011?

John Mulkey, Housing Guru (TheHousingGuru.com) — Thu, 03 Dec 2009 07:46:50 -0600

In a Reuters Blog it has just been reported that Goldman Sachs is projecting unemployment to continue its slow rise throughout 2010 and not peak until mid 2011. Such a view is contrary to that of many economists who have predicted a peak about a year earlier.

A continuation of high unemployment for such an extended period would be considered disastrous to both the economic recovery and to the political futures of many of those in Washington, and would probably guarantee a single term to the President. And while there will probably be many who will disagree, the projection is in line with a POST I did just a couple of days ago in which I outlined why “normal” levels of employment are at least a decade away.

Regardless of what actions the administration’s “jobs summit” takes, the country has millions of unemployed who must be absorbed back into the work force before full employment can be realized. This single issue will haunt the administration and keep us from experiencing a robust economy for many years, and its effects have yet to be fully realized.

It certainly looks as if the “jobless recovery” will be just that—jobless. And such a recovery is no recovery at all.

The Housing Guru: The one source for all your housing questions

Are Home Sellers Becoming More Realistic On Pricing?

John Mulkey, Housing Guru (TheHousingGuru.com) — Wed, 02 Dec 2009 18:51:51 -0600

One of the biggest problems today’s home sellers face is coming to terms with the realities of price. For many who watched the dramatic rise of their homes value during the past decade, the truth hurts. Homeowners who had wished to trade up and to use their existing equity as a source of down-payment have made the depressing discovery that the equity they thought secure, was wiped out as home prices plummeted. Others who just wanted to “cash in” on their home’s equity in order to downsize and save for retirement have also been disappointed.

There was another group, however, who were unable to accept the possibility that THEIR home was part of the housing crisis; and they boldly called in Realtors® and asked them to list at yesterday’s price. Many of that group interviewed several agents before finding one who would agree to list for the specified amount. And those homes either languished on the market or were sold at greatly reduced prices, once the seller realized the realities of the market.

There are growing indications, however, that an increasing number of home sellers are aware that the boom market is gone and unlikely to repeat in the foreseeable future. According to a report on Fox Business, a Rasmussen survey has found that fewer than 50% of homeowners believe their home will increase in value during the next five years. While some sellers may not have yet embraced the current pricing structure, they seem to understand that the market has changed.

The Housing Guru: The one source for all your housing questions

Want An Investment That Guarantees To Quadruple Your Money In Ten Years?

John Mulkey, Housing Guru (TheHousingGuru.com) — Wed, 02 Dec 2009 16:13:35 -0600

What if I told you I had found the secret to knowing what the economy would do in the coming decade? Such knowledge could make you millions in the stock market. You would know whether to buy gold, real estate; which banks might fail and which industries would prosper.

But the truth is, I can’t see the future. I can make predictions based upon research and past market trends; but I have no magic mirror that will allow me to KNOW with certainly what the future holds. My predictions are just a best guess; and guess what—so are the predictions of everyone else.

What that means is that we can’t know when the housing market will turn; we can’t know if this will be a double-dip recession, or if it might collapse into a depression. We can’t know. And we can’t know because the economy—the world—is just too complex. We can’t see our financial future because we don’t know if China will decide to stop purchasing our debt, if war will break out in the Middle East, if the terrorists will gain access to nuclear weapons, if the jobless rate will climb to 12%, if the global economy will collapse, or if the world will suffer a climactic or other catastrophe.

Additionally, we cannot predict the future because things will occur which are yet to be conceived. New inventions may revolutionize the way we communicate or conduct business; alliances between nations may be forged that were never before considered possible; or new strains of disease or other disasters may wipe out entire populations.

When I was a kid, I read predictions that we wouldn’t need cars by the year 2000; we’d all have personal aircraft. We’d have inexpensive homes (about $5,000 each) built with synthetic materials and which would be disposable—when we tired of them, we’d just tear them down and build another. Our kitchens would have a large freezer, where all our processed food delights would be stored; and an electronic oven would thaw and cook our meals within minutes. We’d be protected from all disease by the chemical concoctions of laboratories. The new vacation “hot spots” would be the Moon or Mars, where we’d stay in huge glass-domed cities.

None of those or dozens of other exotic predictions occurred. But what did happen that was beyond the scope of all those making predictions, was the invention of the personal computer, a single device that has contributed to one of the greatest transformations in human history, breeding a technology that is advancing exponentially. A once powerful and feared government that dominated half a continent has collapsed, another that had struggled for centuries as a semi-feudal state has blossomed into a major center of manufacturing and economic power.

All of this is to remind us that our future is uncertain; and this applies especially to those in political power who tell us what WILL occur, both with our economy and our national security. Our problem lies in believing that somehow our “leaders” do have a magic mirror, that their proclamations, projections, and promises will come to pass. And the one thing of which I am most certain is that they, like me, are only guessing and hoping.

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A Clean Water Heater Is A Safe And Efficient Water Heater

John Mulkey, Housing Guru (TheHousingGuru.com) — Wed, 02 Dec 2009 10:05:23 -0600

Water heaters—what do we need to know as long as they’re providing hot water? While most give little or no thought to these usually cooperative appliances, there are several things that all should know, some of which can save us money, and some of which could save our lives.

A properly functioning water heater will sit quietly until called upon, will deliver hot water on call, and will provide years of service ; but one that malfunctions has the power to literally blow a house apart. Take a few minutes to learn about your water heater and how you can both increase its life span and improve its efficiency.

Click HERE for tips on water heater maintenance.

The Housing Guru: The one source for all your housing questions

A Perfect Storm Of Foreclosures May Be On The Way

John Mulkey, Housing Guru (TheHousingGuru.com) — Tue, 01 Dec 2009 06:29:44 -0600

While many of the “talking heads” and financial experts talk about reaching the bottom of the housing crisis and a slowing of foreclosures, a perfect storm of foreclosures may be on the way. However this “third wave” of foreclosures won’t crash down on the market like a tsunami, but instead will inundate us more slowly like a flooding river.

A number of factors are contributing this flood which will, I believe, spread its damage over many years. Modification efforts and state moratoriums have served to slow the process, and some banks have allowed owners to remain in their homes as “guardians” of the banks declining asset. Other lenders have chosen to delay foreclosures in a struggle to keep the market from free-fall.

Elizabeth Warren, chair of the Congressional Oversight Panel expects the housing market to worsen, and has estimated that as many as 12 million homes could succumb to foreclosure. Here’s why I believe she is correct and why the “green shoots” crowd has it wrong.

● Deutsche Bank has predicted that nearly half of all U. S. homes with mortgages will be underwater by early 2011. Even if their numbers are exaggerated, all experts predict a significant increase in the number of homes with negative equity. As home prices decline, foreclosures increase. The millions who purchased between 2003 and 2008 are at the highest risk of negative equity. Currently, about 11 million homes with mortgages have negative equity with another 2.5 million near that point. The total value of mortgages at risk totals almost $3 trillion.

● Declining values will cause more homeowners to seek “strategic default” as a remedy for their financial problems. As more consumers choose to voluntarily abandon their mortgage, more will consider it an acceptable alternative. And as it becomes evident that some homes won’t recover their value for a decade or more, many who are able to pay their mortgage will choose not to.

● As long as unemployment increases, foreclosures will follow. The third quarter foreclosure numbers were at an all time high, with almost a million homeowners receiving a notice of foreclosure, a 23% increase over 2008. We are currently experiencing about 200,000 foreclosures per month.

● Unemployment will not return to pre-recession levels for at least a decade. How can this be possible? It’s simple math. There are currently more than 15 million unemployed, and hundreds of thousands continue to be added to that number each month; by the time job losses cease, we will have lost a few million more. With the normal growth of our population we add about 1.5 million workers each year. Absorbing that number, plus the millions already unemployed, will require extraordinary growth in the economy, something no experts are predicting. Even if the economy grows at a better than expected rate, a return to full employment (5% or less) is still many years away. If, for instance, we can experience job growth of about 3.5 million jobs per year, it will take a decade to return to previous employment levels; and that is assuming that we can stop the bleeding and begin creating jobs within the next year. Job growth fuels the formation of new households, a necessary component of a robust housing market.

● With unemployment not expected to peak until mid 2010, mortgage delinquencies may not decline until sometime in 2011. The ensuing stream of foreclosures will maintain its pressure on an erratic housing market, spoiling any hopes for recovery until unemployment and foreclosure activity both experience a downward trend.

● There are currently about 8 million delinquent mortgages. The Fannie Mae seriously delinquent rate is now at 4.5%, about three times the amount from only one year ago.

● We also face the Option Arm reset peak coming in 2011 and totaling more than a third of a trillion dollars. According to Goldman Sachs, as many as 50% of those borrowers will be unable to meet the higher payment associated with their loan reset; and a number of these loans are already in default.

● The move-up market, an important barometer of a healthy housing market, will be damaged for years, as those whose homes have lost value will have difficulty selling and will lack the equity required for a move up. The loss of equity also results in a loss of borrowing power. Banks have closed or dramatically reduced HELOCs, the personal ATM of many homeowners, closed some credit card accounts, and raised the interest rates of others. With consumer spending destined to remain sluggish, the ripple effect will ultimately reach back to the housing market.

● Loan modifications, as currently structured, cannot work. As Elizabeth Warren has pointed out, the modification program wasn’t created to deal with the issues we face today. Somewhere between thirty and fifty percent will fail to qualify because of job loss, reduced income, insufficient equity, or inability to document income. And, a great number of the home buyers who purchased during the last decade did so with two incomes; the earnings of both spouses were necessary to meet their obligations. Today, many of those same households have a single wage earner, some of whom are earning less than they did when their mortgage was originated. Unless the program is changed, these people will ultimately lose their homes.

While trial modifications have been extended to about 650,000 mortgage holders, less than 2,000 permanent loan modifications have received final approval. And, a significant number of those receiving mortgage modifications will ultimately re-default, especially those whose homes remain underwater.

Lenders are not making a realistic effort to deal with this problem. I believe some are “foot-dragging,” assuming they may yet receive another “bailout” to help them deal with the potential losses posed by foreclosures. Additionally, the looming danger of commercial defaults, expected to cost hundreds of billions, perhaps as much as a half trillion, is keeping some banks from taking a more aggressive stance towards residential loan modifications.

If the administration is serious about helping millions of homeowners avoid foreclosure, they need to stop talking and develop a plan that works; if they fail to act, a perfect storm of foreclosures may be on the way.

The Housing Guru: The one source for all your housing questions

Loan Modifications Are Not Working And The Government Doesn’t Get It

John Mulkey, Housing Guru (TheHousingGuru.com) — Mon, 30 Nov 2009 15:08:55 -0600

The Treasury Department has announced yet another effort in its attempt to modify the mortgages of those facing foreclosure. Hoping to convert many of the trial modifications to permanent status, the Government plans to apply pressure to lenders that have been slow to respond. Requiring lenders to report the status of their modification efforts, the Treasury Department intends to make public those lenders who fail to show progress.

Wow! This is big news. Now the government is going to point out the “bad guys,” as if we didn’t already know. If that’s the teeth in this “new” incentive, those expecting help from the program will continue to be disappointed.

Those losing homes today are doing so because they don’t have jobs, or have insufficient income to make their payments. And the program currently in place does nothing to help them—if you don’t have a job or can’t show proof of income, you fail to qualify for the program. If the government wants to save the millions of homes from foreclosure that it promised, they will have to change their approach.

The Housing Guru: The one source for all your housing questions

Need More Space? Raise The Roof

John Mulkey, Housing Guru (TheHousingGuru.com) — Mon, 30 Nov 2009 08:42:24 -0600

With the impact of the recession and housing crisis hindering those who wanted or needed to trade up to larger homes, many are faced with the reality of being unable to sell and have resigned to living in their cramped quarters. But for those who like their neighborhood and just need more space, there are alternatives. Expanding their existing home may not be out of the question simply because of property or lot restrictions; in many cases it’s possible to move up—literally.

City lots and subdivision requirements often keep homeowners from expanding their homes because of the limitations of property sidelines or setbacks. However, for those who own single story homes, there may be a solution, Need more space? Raise the roof and add a second floor. While the idea may sound so far-fetched that most fail to give it serious consideration, it’s not only feasible, but can offer a workable and affordable solution for those whose homes need more space. I’ve done it successfully several times.

The attached photos show before and after photos of two 25 year old lake cottages that I did a couple of years ago, one of which was about 900 sq. ft., and the other, with a finished basement, about 1,400 sq. ft. Both homes were identical on the outside, with the same look as in the first photo. We removed the roofs of both homes, added two bedrooms and a bath upstairs, and they both ended up with over 2,000 square feet, and with 4 bedrooms and 3 ½ baths. Since they were adjacent to each other, we gave them a totally different exterior appearance.

And for those who already have a second floor, it may be possible to gain space underneath the home. If the home is on a crawlspace, it’s possible to dig a basement. In the smaller of the homes in the photos, we did just that, digging a 400 square foot basement under the home, where we finished a bonus room, bedroom and full bath.

The transformation of both homes was remarkable, and the additional space made them much more compatible with the current market and the needs of most buyers. Those who would like to transform their homes should know that there are options available that may not have been considered. Anyone wishing to discuss the possibilities for their home may contact me at: john@thehousingguru.com or by phone at: 404/310-6015

The Housing Guru: The one source for all your housing questions.

What Tools Do I Need For My Paint Job?

John Mulkey, Housing Guru (TheHousingGuru.com) — Sun, 29 Nov 2009 20:18:23 -0600

What Tools Do I Need For My Paint Job? Natural or synthetic bristle, roller or brush, caulking guns, putty knives—painting tools can be confusing to the beginning or weekend painter. But the key to any successful paint job is to select the right tools, and while they don’t have to be the most expensive, good quality painting tools will always provide a better and more long lasting job.

Click HERE for a brief lesson in basic painting tools.

The Housing Guru: The one source for all your housing questions

Choosing The Correct Paint

John Mulkey, Housing Guru (TheHousingGuru.com) — Sun, 29 Nov 2009 18:53:10 -0600

Homeowners are often confounded by the confusing terminology and various types of paint available for their use, and it’s easy for them to make mistakes. While it may not appear to make a difference—after all, many of the finishes look similar when applied—choosing the correct paint is crucial to achieving the desired performance.

Whether the job is a redo of the entire exterior or the painting of an accent wall in a bedroom, understanding the proper paint to use is vital to both the appearance and serviceability. Those who need to know more about choosing the correct paint can follow the links below for expert guidance on their next painting project.

What’s the difference between gloss, semi-gloss, and flat?

Do I need oil or latex?

What type paint is currently on my wall or trim?

What is low VOC paint?

How will that color look on my wall?

The Housing Guru: The one source for all your housing questions

Black Friday Sales Repeat Last Year’s Dismal Performance

John Mulkey, Housing Guru (TheHousingGuru.com) — Sun, 29 Nov 2009 14:34:41 -0600

According to the National Retail Federation, this year’s Black Friday sales repeat last year’s dismal performance. While the numbers of shoppers/lookers increased, spending per person decreased by almost $30. Overall retail sales this season are expected to decline slightly from those last year, when holiday sales fell to the worst in almost 40 years.

What the numbers seem to indicate is that even those consumers who still have jobs and homes are reluctant to spend in an uncertain economy. With millions of unemployed, and with little prospect of improvement in the short term, retail sales are expected to remain at below normal levels for an extended period.

The Housing Guru: The one source for all your housing questions

OneWest/IndyMac Takes A Hit

John Mulkey, Housing Guru (TheHousingGuru.com) — Wed, 25 Nov 2009 15:04:01 -0600

A Suffolk judge has wiped out the entire debt of a Long Island couple to OneWest Bank, criticizing the bank for its “repulsive” actions. The bank, held by a private equity group including billionaire George Soros and computer mogul Michael Dell, has recently been criticized for failing to work with its borrowers in good faith, and has been accused of ruthlessly punishing those who default on their mortgages.

In the action mentioned, the judge wiped out the entire mortgage balance of more than $500,000, and while OneWest has indicated it plans to appeal, the ruling may cause the bank to reconsider its harsh treatment of its customers. Read the entire article HERE.

The Housing Guru: The one source for all your housing questions

Why Should I Use A Realtor®?

John Mulkey, Housing Guru (TheHousingGuru.com) — Tue, 24 Nov 2009 17:39:47 -0600

Many of those considering buying a home struggle with the question: Why should I use a Realtor®? While some assume they can save thousands by eliminating an agent's commission, others feel that the services of a real estate professional are no longer relevant in today’s tech savvy society. I strongly disagree.

I’m not an agent, have never held a real estate license, and have no vested interest in promoting the real estate profession. What I do is offer the advice of four decades of experience in real estate transactions. During my career I have bought and sold hundreds of properties, and in all but two instances I used the services of a Realtor®. The first, my first home, I purchased directly from my father; and the other, I purchased many years later from my employer. In both cases I was familiar with the homes, the seller, and felt comfortable that the transaction would be fair and honest. And, in both cases, I used a real estate attorney to check the title and to write the purchase agreement.

For those looking to purchase a home in today’s chaotic real estate market, it’s especially important to have the guidance of a professional. In virtually every case a real estate agent will help you work through the complicated process of locating a home, evaluating the price, alerting you to potential hazards, preparing an offer to purchase, providing guidance with financing, and scheduling the closing. Studies have shown that the majority of home buyers still find the services of a real estate agent invaluable during the home purchase process.

Not everyone agrees. Each time I’ve blogged about the importance of using the services of a Realtor® in the home buying or selling process, I’ve received comments from those who are certain they can go it alone. Most have either had bad experiences with a Realtor® or have heard stories about the unethical practices of some agents.

But it’s the same in all professions; there will always be some who are unprofessional or downright dishonest. You wouldn’t stop seeking advice from medical practitioners just because a few have been accused of malpractice. The complex issues of today’s housing market demand that buyers have the best advice and guidance available, the services offered by a dedicated real estate professional. But finding that perfect “teammate,” one who will guide you to success requires a diligent effort. Most agents are knowledgeable, hard-working, and honest—click HERE for tips to ensure you select one from this group—and earn the commissions they’re paid.

The Housing Guru: The one source for all your housing questions

10 Don’ts When Buying Foreclosures

John Mulkey, Housing Guru (TheHousingGuru.com) — Mon, 23 Nov 2009 08:43:55 -0600

While there are sometimes bargains to be found in the purchase of foreclosures, there are also serious pitfalls. Foreclosures are not for the inexperienced. Use the following to help guide you through the process.

1. Don’t buy a foreclosure in the wrong area. Even if the home is a great deal, if you are planning to live there, you’ll probably regret your decision. Price is never the only factor. And even if you are an investor, if the home isn’t in the area you wanted, it may be better to look for another.

2. Don’t assume that a foreclosure is a great buy. Do your homework. Recruit a Realtor® to guide you.

3. Don’t get caught up in the excitement of a bidding war. Whether at auction or through negotiation, bidding wars frequently result in someone paying too much. Have a pre-determined maximum price and don’t go beyond it. If the bidding remains below your maximum, however, use the tactics in Winning a Bidding War.

4. Don’t buy a home without an inspection. Even if a lender is selling the home “as-is,” your offer to purchase should include an inspection clause with a time limit for your acceptance. With an inspection clause, you’ll be protected and not bound to close if you discover serious problems. Your clause should include an inspection for structure, pests, radon, mold, drainage, and anything else that may be appropriate for the home you’re considering.

5. Don’t buy a property without a title search and without purchasing “owners’ title.” Foreclosures may have problems that failed to be uncovered during the foreclosure process. Protect your investment by purchasing coverage.

6. Don’t expect any type of warranty. You’re buying the home “as is” and will be responsible for making repairs.

7. Don’t expect the bank to make allowances for your personal situation. Banks have been overwhelmed with foreclosures and have neither the time nor the inclination to make exceptions.

8. Don’t try to close a deal without an attorney. While you may be using a Realtor® and “trust” the seller, you need an attorney’s guidance to avoid the potential for certain risks and “super liens” that may survive the foreclosure.

9. Don’t attend a foreclosure auction unless you are totally prepared to buy. That means you must be ready to meet the financing requirements of the auction (usually cash or a letter of credit), that you have full knowledge of the property and the costs of making repairs, and that you are fully ready to purchase. Auctions are attended by professionals (often referred to as vultures”) who both know the true value of the property and the cost of repairs. But they are sometimes attended by cash-rich novices who bid up the price far beyond a home’s reasonable value.

10. Don’t consider a foreclosure until you check out the limitations and requirements in your particular state or area. There are considerable differences between states, and just because you’ve heard of great opportunities in one doesn’t mean the same exists in another.

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Is The Housing Market Improving?

John Mulkey, Housing Guru (TheHousingGuru.com) — Sun, 22 Nov 2009 16:33:03 -0600

Is the housing market improving? According to Elizabeth Warren, chair of The Congressional Oversight Panel, it’s not. While the market has shown signs of improvement in some areas, the overall picture is still quite grim. According to Warren, as many as 10 to 12 million homes could be lost to foreclosure, the consequences of which could be “disastrous.”

Continued foreclosures will cause a ripple effect throughout the economy, as homes in those areas hardest hit see values slide even further. In a recent report, Warren described the government’s foreclosure modification efforts as “inadequate,” but it appears that nothing will be done to improve a system hell-bent on propping up bank profits on mounds of foreclosure victims.

While I like the spunk with which Warren attacks what she perceives as flaws in the program, it appears her words are just that, impotent criticisms without the power to effect change, falling on the unprincipled ears of politicians more interested in saving their political skins than creating beneficial change.

The Congressional Oversight Panel or COP was established to oversee the original TARP program which ultimately abandoned the purchase of “troubled assets” and became a simple bailout of big banks. And the not so aptly named COP board seems as effective as a policeman with a booming voice, but no gun.

I suspect that Warren is correct about the potential for additional waves of foreclosures, but doubt that her words will slow the tide. Like footprints on a deserted beach, they’ll soon be forgotten.

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Where Is The Housing Guru?

John Mulkey, Housing Guru (TheHousingGuru.com) — Sun, 22 Nov 2009 13:44:09 -0600

I have somewhat neglected my blog for the past few weeks, and have been asked if there was a problem. I have had a problem—I “fried” the mother board in my faithful computer and had to deal with the issues of replacement—but I’ve also been doing the final editing on my upcoming book, Shrewd Homebuying.

On Friday I emailed the third, and I hope final, revision of the manuscript to my agent, and am now back to maintaining my website and doing research for blog posts. I appreciate the concerns of those who “missed me,” and am heartened that anyone noticed.

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Did The Tax Credit Suck All The Buyers From The Market?

John Mulkey, Housing Guru (TheHousingGuru.com) — Thu, 19 Nov 2009 08:02:10 -0600

According to the MBA (The Mortgage Bankers Association) mortgage loan applications have fallen again. Despite incredibly low interest rates (4.83% average for 30 year fixed) and despite the continuation of the housing tax credit, home buyers seem to have vanished. The seasonally adjusted Purchase Index has now declined for six consecutive weeks and is currently at the lowest level in more than a decade.

It appears that concerns that the tax credit would do little more than steal future purchasers may have been well-founded. And while we now have a revamped housing tax credit that includes existing home owners, there seems to be little excitement over the program.

Perhaps more buyers would be stimulated to purchase if they had jobs and if it truly appeared that the economy was in recovery.

Source: Mortgage Bankers Association

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The Upcoming Storm

John Mulkey, Housing Guru (TheHousingGuru.com) — Wed, 18 Nov 2009 13:32:09 -0600

Terry Chenier has provided this thoughtful and compelling analysis of why we should all be concerned by the reckless spending coming from our "leaders." Everyone should take time to read it and to contact their elected representatives and encourage them to action.

Via Terry Chenier (Homelife Glenayre):

Lawrence Kotlikoff wrote in the St. Louis Review,

(and I'm paraphrasing a bit). "The U.S. government is bankrupt, insofar as

it will be unable to pay its creditors". He also went on to suggest that the U.S.

should immediately close its Social Security programs, use a voucher system for

Medicare to reduce costs, and replace corporate, payroll and estate taxes with

a single federal sales tax. All of this was published in an article in 2006,

well before the financial melt-down had even begun!

After reading his article, I started digging.

Three years after this article was written, here's what we have. The financial

situation in the United States is not sustainable. The projected deficit to

2018 is NINE TRILLION DOLLARS!

In order to cover that debt load, foreign bond investments need to

increase 10 fold and taxes need to increase by over 60%

just to balance the 2010 budget. That isn't going to happen.

At current levels of spending, the United States government

is increasing liabilities at almost 4 times the rate of revenue.

The numbers are ridiculously huge and no corporation,

company or government can sustain that for long.

Here's another item that is just surreal.

The FDIC's Deposit Insurance Fund had over $10 Billion

at the end of June. It spent so much covering bank failures,

it's now broke. What does this mean? It means there is no money

to cover almost $5 trillion in deposits and over $320 billion in FDIC-guaranteed

debt that banks and other lenders have issued. They can't cover it. Period!

The money they collected was never held in a segregated account.

It went into general revenues-to fund everything else!

Now, the FDIC is telling the financial institutions to pre-pay

their assessment for the next 3 years to float them. In other words,

they're borrowing money from the the banks they are insuring!

Are you still with me here? This is scary.

This is not just the U.S. that's doing this. Most countries in the G20

are blindly strolling down the same path.

I didn't write this post to be alarmist, but I'm

not about to stick my head in the sand either.

I'm going to prepare; not quite sure how yet, but I'm working on it.

I know, this is not my normal post-entertaining, and funny, interspersed

with cartoons. This is cause for some serious reflection.

Where are we going? I don't know.

It's not too difficult to connect the dots.

If I were a betting man, I would say, we haven't

seen the worst of it. There's another wave coming.

And it's going to be a Tsunami!

I've been holding off posting this for three weeks now-

I sincerely hope I'm wrong.

Mortgage Loan Delinquencies Prepare To Set New Records In 2009

John Mulkey, Housing Guru (TheHousingGuru.com) — Tue, 17 Nov 2009 12:53:51 -0600

The foreclosure mill continues to churn as mortgage loan delinquencies prepare to set new records in 2009. According to a report released by TransUnion, mortgage defaults increased for the 11th straight quarter, with delinquencies for the third quarter averaging 6.25 percent, up 58% over 2008.

Those states that have been particularly hard hit by the housing crisis will continue to suffer high rates of foreclosure; however, the overall rate is unlikely to experience a dramatic increase due to the various efforts at mitigation. With the unemployment rate expected to remain at record highs well into 2010, defaults and subsequent foreclosure will remain a problem for the housing market.

Click here for the full report from PR News Wire.

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Who Will Announce That The Emperor Is Naked?

John Mulkey, Housing Guru (TheHousingGuru.com) — Mon, 16 Nov 2009 06:41:22 -0600

In Hans Christian Andersen’s famous tale, The Emperor’s New Clothes, two weavers promise the Emperor a new suit of clothes that would be invisible to those who were unfit for their positions or stupid. Upon donning the nonexistent clothes, the pompous Emperor, fearing to appear incompetent, refuses to admit that he could not see them, and his aides marveled at of the beauty of the fabric.

I find a correlation between the fairy tale and the current attempts of the administration to convince us that their efforts to stem the tide of recession and joblessness are working. And Congress, bureaucrats, the stock market, and the media have participated in guile, loudly proclaiming, “It’s working. Look at the gains of the stock market. See how we’ve turned the tide away from disaster. And while we may not be creating jobs, we’re saving them. We see ‘green shoots’ and signs of recovery.”

More than fifteen million unemployed would disagree. Neither will you find agreement among those millions more who have lost their homes to foreclosure, those whose homes have declined in value by as much as 50%, those whose investments will no longer fund their retirement, or those who live in fear that their company may soon close its doors. There are millions who have seen no improvement in their personal economy and who see no near-term possibility for improvement. Perhaps the Emperor is naked.

* While the stock market has recovered from previous losses, who, other than the bankers and super wealthy have seen benefit. And, far from representing a solid foundation of growth, many stocks are significantly overvalued.

* Don’t try to mislead us proclaiming a million jobs saved. The numbers aren’t there. The facts have been checked, and revealed an overstatement of as much as 10 times. We discovered that salary increases were counted as “jobs saved.” We’re not stupid; gullible at times, but we can think rationally, and that’s not rational.

* The national debt and deficit have increases to unsustainable proportions. Within 10 years the interest alone will be almost $1 trillion annually.

* Our standing in the world community has declined, not improved. Recent headlines from Germany and Great Britain call for the U.S. to show leadership, something we seem to have forgotten. Those who would do us harm see weakness; and those who perceive us as vulnerable, seek to take advantage.

* We were threatened with spiraling unemployment, economic collapse, and a lack of available credit if we didn’t prop up the banking system; yet we now have higher unemployment, tightened credit, and the only sector of the economy that seems to have profited is filled with those who have connections to DC.

* We were told that the bailouts of GM and Chrysler wouldn’t cost the taxpayer, but now we see that we’ll never recover those funds; and the job losses have been in the thousands.

* And I’ll reserve my comments on the overhaul of our health care system for another time, but suffice it to say that the proposal to “save” almost a half trillion dollars from Medicare is an insult to every thinking American. The government has never cut waste from any program, particularly of this magnitude, and we all know it cannot happen now.

Who Will Announce That The Emperor Is Naked? At some point, the majority will become aware of the canard. Is it not better to be truthful today than to be caught in a lie, never to be trusted again? Instead of politics as usual, let’s be honest with the people. We are not weak, though we have grown far too dependent upon a beneficent government; but we have taken bad news before and can do so again. What we cannot take is lies and distortions, empty promises, and temporary fixes to a system that has spiraled out of control for years. We don’t blame the current administration for this recession, but we do expect rational steps to be taken to bring about recovery; and the most rational of those steps is to reduce government spending.

Reasonable people understand that recovery cannot happen overnight. Don’t try to distort the facts to make it appear that it has. We can be patient if our leaders will be honest with us. It’s time for some tough talk, time for both government and the American people to live within their means. We can accept responsibility for our lives and for our actions but government must do the same.

In the fairy tale, as the Emperor proudly parades before his subjects showing off his “new clothes,” a child cries out," But he isn't wearing anything at all.” Suddenly everyone realizes they’ve been duped. They all wanted to see what the Emperor proclaimed as truth; but TRUTH cannot be fabricated. Just as a counterfeit bill will soon be recognized, the naked truth will all too soon be evident.

The above is neither an attack upon an individual nor a political party, but rather upon a system that has encouraged misdirection and hypocrisy. We have rewarded those who have engineered the farce, and ultimately, we have no one to blame but ourselves. Perhaps it is time to announce that the Emperor is naked.

Is The Shadow Inventory Real Or Imagined?

John Mulkey, Housing Guru (TheHousingGuru.com) — Fri, 13 Nov 2009 15:23:16 -0600

While reputable sources continue to report conflicting statistics regarding the number of foreclosed homes being held by banks, the important question is: Is the shadow inventory real or imagined? And, if it is real, how will it affect home prices and sales? What most consider the so-called shadow inventory is that much touted group of foreclosed homes banks are reported to be keeping from the market for a variety of suggested reasons.

The shadow inventory is real, but it’s much more than homes being held by lenders, currently a relatively small number, and also comprises:

Homes that have entered the foreclosure process

Homes whose owners have applied for loan modification

Homes whose owners are financially unable to continue making their mortgage payments

Homes whose lender has chosen not to foreclose in order to protect their investment

Homes that have recently been unsuccessfully offered for sale

Homes whose owners are waiting for prices to improve

Homes whose owner will take the “strategic default” option as a result of being under water

Until the market can absorb all the above—potentially a three or more year supply—home prices will remain depressed. The housing crisis hasn’t ended; it’s just being spread over a longer period. And those who expect home prices to return to 2005 levels once the recession has ended will be sorely disappointed. The only way such increases could possibly happen would be through runaway inflation, which is particularly unlikely in the short-term, and doubtful in the long-term. This is not to say that inflation won’t return, just that it won’t be sufficient to restore home values for many years.

So, is the shadow inventory real or imagined? It’s very real, includes millions of homes, and has altered the housing market and financial system in ways we have yet to realize.

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