There is quite a bit of buzz today about the Clint Eastwood Super Bowl Commercial. The 2-minute spot was a follow-up to last year’s Eminem Super Bowl commercial for Chrysler. This one was also a spot for Chrysler, but it expanded the embrace of the message well beyond just Detroit, with Eastwood delivering a message of confidence that America will be back.

 

I certainly agree with the message. America is a resilient country and it will recover fro the present economic downturn. In fact there is ample evidence that the recovery is well under way – lower unemployment and increased manufacturing output to name two. However, those who naively believe that we will return to ”how things were before” are sadly mistaken.

 

In the midst of this recession the big “reset button” was pushed and whole new norms established that have nothing to do with how things were in 2005/6. We ain’t goin’ back there kiddies. Real estate values have been reset and will have to slowly grow their way out of the hole that they are in now. So called middle class jobs in manufacturing have been largely negotiated away in favor of two-tier wage systems and guaranteed benefits retirement is now considered a quaint thing of the past. We’ve been to Oz, but when we get “back” we won’t be in Kansas anymore either, Toto.

 

While one may not consider this to be a good thing, it was pretty much an inevitable thing. The whole ramp up to this bust has its roots firmly in the 1980’s and 90’s and the whole “me” generate thing that was going on back then. The balloon and bust of the early 2000’s was something that many saw coming for a long time, but few paid much attention to the alarms that might have been sounded. After all this was also the feels good generation and warnings didn’t feel good.

 

So now the question isn’t really how long will it take us to get back (that answer is we’ll never get back). The real question is, how long will it take us to adapt to our new reality and get on with life? I suspect that answer is that it will take us a generation. The current generation (really the so-called baby boomers) is setting on over a Trillion dollars in lost equity in houses that they can’t afford to sell. That isn’t going to change for at least 10 years. Until this overhang of loss works it way out of the system as foreclosures or short sales a huge part of the buyer/seller pool will remain frozen on the sidelines and the market will remain in the doldrums.

 

We are seeing better news in the market in terms of increases in housing prices mainly due to the shortage of available homes from those would-be sellers who are on the sidelines. This is the new normal and will be for quite a while, it appears.

 

So, yes America will recover, it will be back, just not back to the same place as before. That doesn’t necessarily mean it will be a better or worse place, just a different place. What we all make of that in our lives is up to us.

 

Every market is different, of course; so this report is local to the Southeastern portion of Michigan, which embraces Washtenaw, Wayne, Livingston, Oakland and Macomb Counties and is inclusive of several cities, including Ann Arbor, Warren, Troy and Detroit. The statistics that were used to generate the chart below were collected from the various MLS's in those areas and compiled by Real Estate One.

The chart shows average home sale values and clearly shows what happened to this market right after it hit its peak in 2006. Our crash was rather dramatic and reached an average of 40% loss in values, with some areas (especially the City of Detroit) going well beyond that into value losses of 50-60%. We believe that the market bottomed out somewhere in 2011, after five years of falling values. The chart shows a gradual return of value over the next five years.

 

It should be noted that this chart assumes a fairly brisk appreciation rate and there are many factors which could impact the rate of recovery of value. A financial meltdown in Europe, for instance, would certainly not help our economy and would slow everything down. The pace of recovery could still be impacted by many factors, but the point is that those waiting to see their home values return should anticipate it taking years, not months.

Other factors that will impact the pace of recovery include the speed with which the lendors recover from the legal issues of the Rbob-signing debacle and get back on track with foreclosures and the release of the overhang of foreclosure inventories. We still need to work that inventory off the books.

Finally there seems to be growing awareness in Washington that something needs to be done about resetting all of the underwater mortgages that are essentially damming up the normal flow of homes and home buyers in the markets. I'm not sure that there is the political will to do anything this year, with the election looming; so, perhaps that is a 2013 issue to resolve - depending upon the election outcome.

“All we need is confidence.”  (Charlie Brown). I like this little saying that was on the Jack’s Winning Words Blog on Thursday.

 

If there’s one thing that holds back many new agents it’s the lack of confidence in themselves. They tend to get into the mindset that they’ll make a fool of themselves in front of potential customers if they don’t know everything. So, that lack of confidence paralyzes them into inactivity.

 

In my mentoring role for new agents in our office, I try to help them see a way out of this dilemma by having them develop presentations (listing or new buyer) that focus more upon the strength of the company that they work for and the support team that is standing behind them. I get them to understand that it’s OK to say “I don’t know, but I’ll find out” and to explain how our company team supports new agents. It is relatively easy to turn what might have been an uncomfortable negative situation into a strength that actually benefits the client.

 

So the thing to do, especially when just getting started in the business, is to focus the client upon the strength of the company that you are a part of rather then just on your individual skills or experience. If you have confidence in your company and the people available to support you and answer questions for you, that confidence will show through in your presentations in front of clients. If you find that you really don’t have that support structure in your company, maybe you’re in the wrong company.

 

Happy Holidays to all!

“Courage doesn’t always roar.  Sometimes courage the quiet voice at the end of the day saying, I will try again tomorrow,” as seen on the wall at a counselor's office and posted on the Blog Jack's Winning Words.

I like this post from Jack's Blog because it has such applicability to real estate sales. So often at the end of a trying day I need to hear the advice of that little voice. It was by getting up and trying each day, day after day over the last few years, that so many of us who have stuck it out in real estate have survived. To paraphrase the lyrics from a hit song by Annie Lennox, "Quitting is easy, it's trying that's tough."

So, have the courage to get up and try again today!

It's feels like the market is comng back in the Milford, Michigan market area and there are statstics to prove that. When I recently went to the Altos Research site to look at the charts that they create for the markets that they track, I got the following chart for median home sale values and inventory for Milford Township and Village combined -



It's pretty easy to see that there is good news and bad news in this chart and that perhaps one is actually causing the other.

The bad news is that inventory has fallen off a cliff. People just aren't listing right now, mainly because so many are so far underwater on their mortgages.

As a result, there's good news - median home prices for homes that have sold are soaring. It's a classic supply and demand situation. The demand for homes in the Milford community remains strong, but there are few to choose from, so the few good ones that are on the market are getting bid up.

That's good news if you've been waiting to sell. Values won't recover all of the lost 30-40% that they lost over the last 3-4 years; however, they have started a nice recovery and they are headed in the right direction. If you have a nice home, in good condition, now is a great time to list. There is obviously less competition and there will not be continued downward price pressure. In fact, you may end up on the winning end of a bidding war situation.

Just in the statistics that I track at http://www.movetomilford.com, I can see the turn around. Prices in the Milford market were down below $90/Sq Ft for a while. Now they are back near $100/Sq Ft. That's still a far cry from the $140/Sq Ft average during the peak, but gettign closer to the long term average that we had achieved befoer the market overheated. A steady-state market in the $105 - $125/Sq Ft range is within reason and probably sustainable in this area.

I suppose I’m a little like Linus sitting in the pumpkin patch on Halloween nioght awaiting the coming of The Great Pumpkin; however, I still have hope that at least one Federal program might end up dong some good for the housing industry – perhaps HARP 2.0.

 

The original Home Affordable Refinance Program, aka. HARP 1 – was a failure mainly because it failed to recognize the severity of the problem and had too many built in restrictions that limited the number of underwater homeowners who could qualify. HARP 2.0 lowered or removed those bars and should end up helping more homeowners. At least that’s the goal.

 

The major idea is to let homeowners who’s home values have sunk below what they owe on their old mortgages refinance with new loans at lower rates, even if the home wouldn’t appraise at the loan value in today’s market. In fact, the house won’t even ned to be re-appraised. The keys to the program are demonstrating the ability to continue to pay the new mortgage. You’ll note the “continue to pay” phrase. HARP 2.0 is aimed at people who have kept their current mortgages current, not those who are behind and headed for foreclosure. HARP 2.0 hopes to prevent foreclosures by providing some payment relief to those who have struggled but kept up payments, so far.

 

One key component to HARP 2.0 is that the mortgage on your house must be owned or guaranteed by Fannie Mae or Freddie Mac, which covers the majority of U.S. mortgages. Even if you send your money to another company called the ”mortgage servicer”, Fannie or Freddie may be in the background for your mortgage. To find out if your home qualifies, you can to go their Web sites – http://www.fanniemae.com/laonlookup/ or http://www.freddiemac.com/mymortgage/ and look up your address.

 

The program should be available now through most mortgage companies, so check with your preferred lender. If they aren’t supporting the program, check with a different lender.

 

So, maybe it’s not the Great Pumpkin after all; but, maybe it will help keep a few more homeowners who are struggling in this weak economy in their homes.

You gotta love this story out of Tarrant County, Texas, as relesed by The Associated Press and rehashed in the Daily Realtor Magazine news feed.

 

Squatters in Texas are taking advantage of a loophole in state laws in Texas to move into $Million+ mansions. According to the story written by Yamil Berard which appeared on the Star-Telegram Web site on December 4, Texas state law allows squatters to claim property if no owner is around to challenge them. Texas squatters are apparently targeting vacant properties where owners have died or home owners are away because of a job or even illness. The story referrenced one incident in Houston, in which squatters threw away the owner’s belongings in a commercial garbage bin and moved in while the home owner was having chemotherapy (probably in a hospital). 

 

According to the article. the laws in Texas allow a person to file a claim of adverse possession on the properties with the county clerk., much as one might do on a piece of disputed land or right-of-way in most states. The filing fee is a modest $16 and the filer must sign a pledge to keep the place up to pay property taxes and to live there for at least three years. Heck, why not, it's free!

 

Perhaps Texas, rather than California, is leading the nation this time on the housing front. What a great opportunity to solve the homelessness problem. Basically, if ever state had laws like Texas, the homeless could not only find housing, but they could live in the lap of luxury by squatting in vacant mansions.

 

Of course, we’d likely have to change the real estate model a bit. Maybe we could become “spotters” for vacant properties for some sort of fee. We’d have a list of homeless people (or maybe just people looking for a move up the real estate ladder) that we could keep an eye out for vacant homes. Apparently in Texas the owners don’t have to be gone that long, just gone and not around to contest the occupancy of their property. So, we could be on the look-out for people going on vacation and, BAM! We move a new family right into the house while they are vacationing on a cruise.

 

You’ve got to love the state that gave us George W. Bush and, now Rick Perry. In this case they are so far ahead of the rest of us in solving the housing problem for all Americans. Heck, this would even let us recapture the glory days of the early 2000’s – no money, no job, no problem, let us find you a place to squat. We could even run ads modeled upon the Publishers Clearing House ads - "Be on the lookout for the Squat Patrol coming to your neighborhood soon."

I noted this week, with some amusement, that Realty Times featured an article by Tanya Marchiol, who is said to be a real estate investing guru, which espoused the same Principal Reduction solution that I've been writing about for some time. Perhaps the idea will gain traction, now that a guru is behind it, too.

Tanya does a good job of explaining why investors should be jumping on the Principal Reduction bandwagon and why the banks and other mortgage servicers are holding them back. It's all about the money involved - the fees that the servicers are charging, which is much more if they can ride a property into foreclosure than they would be if the loan were redone to include a principal reduction or even in a short sale. She also re-stated a point that I made in my earlier posts that the banks can certainly afford to take the accounting hits on these underwater loans.

Until this issue is addressed we will continue to have a slow (in some placed stalled) real estate market. The people out at the end of these bad mortgages are the only ones in the chain who can't afford to take the financial hit. So, they are holding on to underwater properties, locked into place by the very mortgage  products that were made to look, oh, so attractive a few years back.

Tanya did note that the lack of action in Washington towards this solution is also driven by money - campaign contributions to the major parties and politicians - to guarantee that nothing is done to endanger those fees. It will likely take an uprising of the people even larger that the Occupy Wall Street movement to ween our politicians from the teats of the big money banks.

This is a time of the year when there are numerous fund raising activities going on. There are a couple of fundraising activities in the local Huron Valley area that are particularly worthy of note because of the unique charity that they support.

Our part of Michigan, like many areas in the country these days, has quite a few families who are dealing with hardship and are unable to properly feed the family. We are blessed to have the Community Sharing Outreach Center Food Pantry in Highland to help those families with free food. Carolyn and I always ask the attendees at our annual Real Estate One Christmas party to bring food to donate to the Food Pantry and always have several bags to take in after the party.

Some time ago the people at Community Sharing noticed that some of their supported families were sharing what little they had with their family pets, because they couldn’t afford to feed them either. So, the Community Sharing people started a Pet Food Pantry, which they believe is unique in MIchigan and maybe in the country. Local vets and pet owners in the community immediately began supporting the effort to help feed family pets. Peter Barnes and Julie Hass, owners of Veterinary Care Specialists became especially committed to seeing this effort succeed and have spearheaded a couple of local fund raising efforts.

A committee was formed to create a calendar for 2012 that features the pets of local business owners, each of whom donated to have their pets featured in the calendar. Carlos Allison of The Digital Document Store in Milford donated the printing of the calendar and several merchants agreed to carry the calendar. All of the proceeds from the sale of the calendar go directly to support the Community Sharing Pet Food Pantry. Calendars are $6 each or $5 apiece for 10 or more.

The next fund raiser is upcoming – getting your pet’s picture taken with Santa. This event will be held on Dec 3rd and the 10th at the Pettibone Creek Powerhouse, aka. the Milford Powerhouse, at 225 West Liberty St in Milford (Google Map that, so you can find it). This event is also sponsored by Veterinary Care Specialists and supported by Friends of the Powerhouse. For a donation of pet food or cash, you’ll get a nice picture of your pet with Santa and the digital file of that picture. You can take that picture file to The Digital Document Store (DDS) in Milford and they’ll turn it into Christmas cards for you to send out. DDS owner, Carlos Allison, will donate 10% of the proceeds from each specially priced card printing order to the Pet Food Pantry.

The new HARP 2.0 rules that go into effect soon are certainly helpful for many homeowners who wan to stay in their homes, but who would like to refinance at current low mortgage rates; however, they do little to actually stimulate the housing market. The big bullet that is yet to be bitten is getting the banks to swallow the lost housing equity in this market and free up more homes for sale.

 

I’ve seen a number of proposals that hinge on getting the government more involved in the process. Most of them have the government ending up owning the homes temporarily and then eating the losses. To my way of thinking this is just a way to disguise yet another bailout of the big banks. They got themselves into this mess with their loose (some might even say reckless) mortgage lending practices and their greedy practices of monetizing the loans in pools of investment bonds. They need to feel the pain of those mistakes, perhaps by cutting out the outrageous bonuses that they hand out to the very clowns that got them into the mess in the first place.

 

I read yesterday in this week’s Bloomberg Businessweek that Citigroup has recently been handed yet another sweetheart settlement deal by the SEC regulators. Citigroup agreed to a settlement of $285 Million in an SEC complaint that they knowingly created and sold to investors a complex financial instrument based loosely upon earlier Citigroup mortgage pool bonds. Basically it was a bet on a bet. The thing that the SEC alleged is that the Citigroup people not only knew that this was a sucker bet (it was designed to fail), but they also put their money on the failure – they bet against their own investment. Of course it did fail; however, from the fees and winning bet on its failure Citigroup made as much as $700 Million.

 

If true (which Citigroup did not have to admit in the sweetheart deal with the SEC) I’d certainly like to know where this betting window is. It’s like being able to enter a nag in the Kentucky Derby, talking up its chances to drive up the betting line, betting against it and winning big when the nag loses. So what if you get fined $285 Million, if you made $700 Million? That is, after all, capitalism at its finest.

 

How are these things related? Well they both have home mortgages at their core. Both illustrate the government casting about for answers or direction, yet unwilling to take on the corporate corruption that is at the center of much of the mess that we are in. Government at its most basic level is supposed to represent the governed – the people. Our system has devolved to the point where it represents those who can afford to buy the attention of the politicians – special interest groups (who most often bully rather than buy that attention) and wealthy corporations. They are too big to fail or too loud to ignore. In either case their voices and demands most often drown out the voices of regular people.

 

Given the place where we are at right now, there is little hope that real solutions to the current housing crisis are forthcoming from Washington. Instead, we will likely see the slow process of correction play out in the form of continued high foreclosure rates and short sales. The only group that apparently is not too big to allow to fail in the eyes of our politicians is that group mentioned in the front of the U.S. Constitution,  “We the people…”