Karl's Blog

The President's Foreclosure Rescue Package

Karl von Loewe (Prudential NJ Properties) — Fri, 20 Feb 2009 08:36:07 -0800

A couple of days ago the President announced his plan to rescue homeowners in mortgage trouble. Those who criticized him two weeks ago for not having a plan are now criticizing him for the plan he has. As Kurt Vonnegut wrote in Slaughterhouse Five - "and so it goes."

However, I'm more concerned by the continuing criticism by those of us who have been paying our mortgages (at least semi-regularly) that those bad people should not be "bailed out." It reminds me of a Russian fairy-tale that is probably centuries old.

Russian peasants traditionally are jealous of their neighbors' good fortune. Against that background, a peasant finds and releases from a desperate situation a wood sprite. The sprite tells the peasant that he, the sprite, will grant any wish the peasant has. However, he will give double to the peasant's neighbor, whether it be gold or whatever. The peasant thinks for a moment and then says "poke out one of my eyes." So, the peasant loses one eye, but his neighbor is blinded. What a triumph!

Those who are not having difficulty paying our respective mortgages might think that our neighbors who "bought too much house" deserve to be foreclosed on. But if our neighbor is foreclosed on, the home will become vacant and the house may very well deteriorate and its value decrease. Imagine, if you will, that you own a house worth $500,000, and your neighbor's house was worth $500,000, but couldn't be sold for more than $400,000 after a lending institution foreclosed. And imagine as well that your employer tells you that they like you so much that they are going to transfer you to East Japip. When the appraiser comes to call, what do you think your home will be valued at? $500,000? $400,000?

Do you really want the value of your home to be tied to your "matter of principle?" Wouldn't you really be willing to pay taxes to "bail out" your neighbor (so long as the amount you paid was less than $100,000)? Think about it. Really, poke out one eye so your neighbor could be blind?

And the "moral hazard" issue (rewarding the bad behavior of defaulting on one's mortgage) is one which is not in your best interest when it costs you $100,000, is it? I can feel very caring about my neighbor when such caring saves me $100k. How about you?

Gender Differences in Selling?

Karl von Loewe (Prudential NJ Properties) — Thu, 24 Jul 2008 18:32:55 -0700

The other day I was in a training session where the discussion turned to the showing of homes. I explained that when I show a home to a buyer-client, I let them go first into the home, lead me from room to room, basically allowing them to "discover" the home on their own. Usually, I say nothing, unless asked a question. I never announce "this is the bathroom, because you can see there is only one chair and it has a hole in it." After nearly 30 years of selling real estate I feel comfortable without "selling" every minute. My clients deserve my silence unless they need my experience and/or knowledge. I let them know there is no stupid question. Just because you might be ignorant doesn't make you stupid.

A woman in the session said that it is important to tell buyer-clients about all the features in the home -what brand of windows, etc. She remarked "of course, I am a woman, and women are communicators, as we all know." Constantly talking about the obvious is not communication, is it? I used to be a radio announcer. Dead air is deadly only in radio.

Communication is not one-way. The old saw about "God gave us two ears and one mouth; that should tell us something," is no less important in real estate than in any other human endeavor. Communication is about listening, not just talking. In fact, I say that communication is 70% listening, not talking. It is NOT about gender; it is about being a successful communicator, isn't it?

Blog Comment Abuse or Good Marketing?

Karl von Loewe (Prudential NJ Properties) — Sat, 21 Jun 2008 07:08:33 -0700

I have another blog at Real Town. A comment was just posted on it that annoyed me. The contributor did not mention the content of the posting, but instead wrote about his agent - by name, company and town - and how wonderful he is. I imagine that the comment in some form has shown up on a lot of blogs this morning.

Is this sort of thing appropriate for a comment? It is only one step above an agent herself posting a self-promotion in the guise of a comment on every blog out there in order to generate business.

In any case, I deleted the comment.

Interpreting the Numbers

Karl von Loewe (Prudential NJ Properties) — Tue, 29 Apr 2008 10:02:17 -0700

A major appraisal firm in New Jersey, one that puts on seminars for Realtors®, but does not want to be quoted without prior written permission is doing its best to worsen an improving market through logic worthy of a hedge-fund manager. This appraiser (who shall remain nameless) reported (correctly) an increase in sales made in March compared to February throughout New Jersey, noting that the numbers were down over last year's March (also correct). From these factoids, with tortured logic he concluded that the market has further to fall.

I guess I'm just a poor farm boy with corn hanging out of my ears, but I fail to see how he can conclude that. There are two forces at work in the New Jersey real estate market. The first was decline in activity that started in Fall 2005. The second was the subprime mortgage crisis that peaked in August 2007. The second exacerbated the first. Until this Fall, we will see year-on-year decreases. In any case, the numbers in New Jersey seem to be improving monthly. In Somerset County, supply/demand ratios are increasing (a good thing - an increase in homes sold compared to homes listed), and the absorption rate is declining for four months straight.

All I can say is, read analyses of the market - even from so-called "friends" - very carefully. Look at your own market closely.

Rude Realtors®

Karl von Loewe (Prudential NJ Properties) — Sun, 02 Mar 2008 12:26:21 -0800

Does a bad market justify bad manners? I am growing increasingly weary of Realtors® who don't recall calls in a timely manner, etc. But now, it has gotten worse. Appointments are made to show a home, sellers scurry around to put the home in showing shape, and then leave for an hour or two.

And then - no showing. No cancellation. No apology.

In the past two weeks two different agents have set appointments (through me, by the way) to show a particular listing of mine. After the agreed-upon period of time the homeowners returned to find no business card. The Supra lockbox showed no one had entered the property. When I finally reached the agents there was only a story - "we eliminated the two homes in Hillsborough," "the lot was too small."

A call to me was appropriate - even if it was a couple of hours later, after the agent returned to the office.

Sellers these days, even in New Jersey, are anxious about the market. My sellers are incredibly co-operative, keeping their respective homes in pristine condition, and willing to vacate the home on an hour's notice. By definition, those of us who sell residential real estate are selling people's homes - whether the residents are tenants or owners. Is it too much to ask that if they need not drive around for two hours or go shopping that they are told?

We are all in the same market around here. What goes around, comes around. Just because times are tough doesn't mean you have to have the manners of a someone raised by wolves.

California Lawsuit

Karl von Loewe (Prudential NJ Properties) — Fri, 25 Jan 2008 10:07:01 -0800

On Monday apparently there will begin a trial of a Realtor® who is accused of being responsible for his buyers' "bad" decision in 2005. The case, described by the New York Times on Monday of this week and discussed on the Today Show this morning, is a cautionary tale.

If you are unfamiliar with the case, here it is in a nutshell (interesting choice of words). When Marty Umell, the plaintiff, bought a home in 2005 she claims her agent did not tell her about other homes in the development (which she presumes were all identical homes) that sold for less. I guess the public information was not available. Yeah, right. Maybe the buyers were unsophisticated; after all, they were only spending $1.3 million in the San Diego area. Sure. Maybe their were denied due diligence. Uh-huh.

We can debate the merits of this case ad nauseum, but the court will decide the outcome. If the court finds in favor of the plaintiff, there will be an avalanche of lawsuits by people who cannot accept responsibility for their own decisions. I hope the California Association of Realtors® is closely monitoring this case (hopefully in an amicus capacity), and that the National Association of Realtors® legal department is paying attention as well.

Combined with the Department of Justice's vendetta and anti-Realtor® website, a plaintiff victory will make Realtors'® job even tougher.

NAR Starts Hitting Back

Karl von Loewe (Prudential NJ Properties) — Wed, 16 Jan 2008 06:29:18 -0800

The National Association of Realtors® has finally started swinging back at the media in a meaningful way. After years of being beaten up in the print and broadcast press as nothing more than a self-interested spreader of non-truths, NAR has created a website that will be a valuable tool in countering the most distorted representations of the real estate market. That website is www.HousingMarketFacts.com.

In addition to having the latest market reports and statistics, the site boosts the notion that the best information for the public comes from local Realtors®, not the press looking at the phantom "national market." The public can even search for a local Realtor® or company by location or name.

Gosh, could this become a more useful site than www.KarlKnowsTheMarket.com?

Naaah.

Who Owns Your Mortgage?

Karl von Loewe (Prudential NJ Properties) — Tue, 18 Dec 2007 21:41:39 -0800

Conventional wisdom for years has been that if you are having trouble paying your mortgage, get in touch with your mortgagee, explain your situation, and work to modify the terms of the mortgage. That was fine when Bailey Building and Loan had the mortgage.

A recent story on ABC News called attention to the fact that in many cases it is next to impossible to determine who really holds the mortgage. What most people don't understand is that the company to which they write their monthly check is not necessarily who actually own the mortgage. They have little chance of negotiating with an invisible mortgagee.

It is time for homeowners to become proactive in the matter of determining whom they should contact should financial exigencies force them into difficulty paying their mortgage. They may never need the information, but they should get it just in case.

Should Realtors® be taking the lead in this? I think so.

NAR's Existing Home Sales Report

Karl von Loewe (Prudential NJ Properties) — Tue, 11 Dec 2007 09:18:27 -0800

Yesterday, December 10, the National Association of Realtors® released its existing-home sales report for October. Keep in mind these are numbers of contracted sales, not closed sales. There is about a two-month difference. For example, a recent closed sales report in many cases was dismal, because it reflected sales activity when the mortgage crisis reached its peak - August. Yesterday's report was more upbeat, so let's see what the media do to it.

Here is a link to whole report: http://tinyurl.com/2calxw.

NAR's chief economist, Lawrence Yun, makes a number of good points, but overall he sees sales increasing in 2008 - at least for existing homes. New-home sales will continue to be in the doldrums into 2009. He also points out that in nearly two-thirds of the metro areas across the country there were price increases this year, and "decreases" often resulted from significantly less activity in high-value areas of the country. He expects price appreciation to "return to more normal patterns in 2009."

Hot markets in October: Gary-Hammond, Indiana, Binghamton, New York, Corpus Christi, Texas, and Spokane, Washington. How was yours?

Read the report. Then you can better understand just what's happening in real estate today.

Thinning the Herd

Karl von Loewe (Prudential NJ Properties) — Tue, 04 Dec 2007 15:52:43 -0800

It has become fashionable of late to see as the silver lining in the real estate market cloud the decrease in the number of Realtors®. Don't hold your breath. We may see at work a sort of professional Gresham's Law, where skilled, full-time agents toss in the towel after a bad year or two, while those who have other "real jobs" continue on, so many of the good ones disappear in favor of - shall we say - lesser ones. I would love to hear from anyone who knows of this phenomenon, even anecdotally.

However, let's do the math to really burst your bubble (or tarnish your silver lining). The National Association of Realtors® has advised that 58% of current members have been in the business less than 5 years. There are about 1.3 million members. 58% of 1.3 million is about three-quarters of a million members. NAR, state and local associations are projecting a 10% loss in membership in 2008. Ten percent of 1.3 million is 130,000, leaving still over 600,000 relatively new Realtors®, unlike us geezers (like myself) who have seen this kind of market before. So attrition by the force of the market ain't going to do it, folks.

Zan Monroe, in a seminar at the NAR Convention in Las Vegas, had the most creative solution for reducing the number of Realtors® - he suggested "aerial spraying." I loved it! I think/hope he was being facetious.

In any case, the point here is that we cannot depend on outside forces to increase our business. We alone are responsible for the growth of our business. Don't count on thinning the herd to improve yours.

The Media - Again

Karl von Loewe (Prudential NJ Properties) — Thu, 29 Nov 2007 09:42:18 -0800

Here they go again, as the Great Communicator was fond of saying. The November 29 edition of USA Today shrieked at readers: Home prices plunge further; Declines likely to go on as sales fall." They wrote further: "The median price for an existing home plunged by a record 5.1% in October, shrinking values back to March 2005 levels." Gosh, a 5.1% drop in one month? Quick, Martha, call a Realtor®. We need to do something fast.

Well, not exactly. USAT was citing a National Association of Realtors® press release of November 28, which stated in part: "The national median existing-home price for all housing types was $207,800 in October, down 5.1 percent from October 2006...." So, in fact, the "phantom national market," as I like to call it, experienced a rather unpleasant decrease in prices, but hardly a "plunge." The NAR release goes on to cite those areas like Charlotte, NC, San Francisco, Albuquerque and Green Bay WI, where there were healthy price gains. No mention of those areas in USAT. Quelle surpris as my French friends like to say.

Will someone please create a truth squad to hammer these fear-mongers and truth-distorters?

The Media Attack Again

Karl von Loewe (Prudential NJ Properties) — Tue, 27 Nov 2007 19:48:27 -0800

Today Standard & Poor's released their report on national home prices. The media jumped on it immediately, especially since it showed a 4+% decrease in prices over the past year. Aside from the fact that S&P's index implies a "national home market," no one bothered to mention what is unusual about the index. (Note, the index covers about 20 metro areas.)

The Standard & Poor's index is based on the Case-Shiller model which only uses the same house sold over a period of time. The FHA, unless I'm mistaken, uses the same model. The model has something going for it, most clearly that we're not talking about averages or even medians, but the same house sold a second time several months or years later. No adjusting for number of rooms, finished basement, or whatever. However, the model treats a very small subset of data. How many homes in your market have sold a year later?

In my market if there are two or three out of the 500 properties that sell in Hillsborough NJ each year, that would be unusual. To be honest, I don't know the time span that the model uses, but after two or three years, my guess is that the data is suspect.

Would a buyer's knowledge of an earlier price (easily obtained these days) have an impact on her offer on a property? That is, would a prior sale have a psychological effect? And what would it be?

My point is that when the media toss the numbers out, they do not always explain the significance. Will we be treated to an index showing appreciation/depreciation of homes built in August 1953? And will the public be told? Hmmm....

NAR's Report on the Market - and the Media

Karl von Loewe (Prudential NJ Properties) — Thu, 22 Nov 2007 13:42:16 -0800

The National Association of Realtors® released their monthly report yesterday. The media reported the following snippet in various mutations from the report: national median price existing home price dropped 2% in the third quarter compared with the third quarter last year. That sells newspapers and grabs eyeballs.

However, the report led off with "The vast majority of metropolitan areas showed rising or stable home prices in the third quarter with most experiencing modest gains [my emphasis] compared with a year earlier...."

The media still want to report the calamitous nature of the real estate market, even when the news is mostly good. Come on, folks. Report all the news. Here's a link to the entire NAR report: http://tinyurl.com/22k238.