MASSIVE FORECLOSURES COMING? THE MARKET IS SPEAKING LOUD AND CLEAR.

Interesting, let the market correct?  But you are right, unless the prices come down, nobody is going to buy anything!  Let him ride, but give the people an option to come clean and somehow renegotiate the terms so that we don't break the whole economy......see ya ktm

Amen!  This is so true. Believe it brothers and sisters.  Markets always fix themselves.  It is too bad so many will have to get hurt in the process.

I agree with all your points!  I do feel the reason that we have so many overpriced homes it is because we have so many new agents that never sold anything, nor have they ever been in a market that is correcting.  In short, this market is just totally dysfunctional, and inexperience is a major part of the blame both on the sales side, and listing side!

Hi Lenn:  I can hear the "post-writing" wheels in your brain starting to turn.  You go, woman !  Share with us some more of your pearls of wisdom.  I enjoy you and your posts !     Karen Anne

Lenn,

Check out the article on foreclosures on Yahoo's home page. The list certain Metro area's, values in June of 2007, the five-year projections, and the double digit decreases in store for us...

A -27.8% decrease is projected in Baltimore, and a -32.2% decrease in Miami....among others.

Let me know what you think.

Karen M.

Hello Lenn,

I have read some of your posts, and you are a force to be reckoned.  

My head is spinning.  I have been in real estate for 18 months here in Michigan's upper peninsula on Drummond Island.  To find comps for my listings, bank foreclosures I have to go back TWO AND THREE YEARS.  I am working on a comp now for a company out in D.C.  80 acres of vacant land.  I have searched all over the Eastern Upper Peninsula for 8 comps dating back three years.  It took me hours to go through all the companies and their listings.

When I comp out a price for a home it is almost as difficult.  Our market up here took a dive in 04.  Our sellers have not, will not, refuse to taken my advice.  On one occasion I pulled out the termination form and said, Sign It!!! I am outta here.  They were a nasty couple who yelled at me for not selling their over-pirced home listed at 200k over market value.  What can I say, it was my second listing and very stupid of me. 

 

I start out my listing appointments now with "When do you want to sell now or 3 years from now"  I have several over priced listings and I fight almost daily to not write a scathing letter to my clients for not taking my advice to REDUCE YOUR PRICE.  I am angry at myself for continuing with them.  The advice I get from some agents is, "your sign is out advertising for you"  Which makes my blood boil, I am more angry at me than anyone.  In the end the buck stops here. 

Michigan is in such a dire mess.  We lead the in foreclosures and in Mortgage fraud I learned in a workshop I took last summer given by a representative of government loans.

 Being new to the industry I hesitate to tell it like it is all the time. but as I say I get angry more at myself.

I read my periodicals and Margret Kelly of the higher eschelons of RE/MAX said the market will come back by the end of 07, as a newbie, I knew that was wrong.  Then I read in my NAR magazine last June that the market will be back the end of 08.  Wrong!  I don't believe Michigans market will return any time soon. THEN you have the upper peninsula, THEN you have Drummond Island.  We are a second home/retirement community.  In this economy second homes are taking a big hit.  Owners want to make a profit on their homes they have owned for 4-10 years.  They don't want to hear the truth.

It's such a dilemma.  I think I am finally ready to write those letters to my clients.  REDUCE YOUR PRICE or I am walking.  It is my responsibility to manage and market their homes and if they have their head in the clouds then I have to be the bearer of bad news.  Been shot before!  

Being a Realtor is not for the faint of heart.  I love this job, I hope with all my heart to be able to stay the course and stay with my company 

You have one more follower in your posts.  Thank you for your straight talk. 

 

 

 

I think we've still got a long way to go before we see any sort of return to market normalcy.  Thanks so much for your honesty ability to have the stones to say so!

I agree that sellers are turning a blind eye to the media, but they do like facts particularly facts that are objective to support a lower price.

Using data from The Warren Group, a real estate research company here in the northeast is the best way to show that not one person can put a price on the home. The market puts the price on the home.

Lenn - maybe you're right and maybe you're not. The bottom line is there is ALWAYS a market and the biggest problem right now is that it's a smaller one and there are too many Realtors. A lot of us are still doing well and right now there is more money to be made than there ever was in the boom.

Today I did a quick scan of the new listings on the market in my city. About half are short sales. When I clicked on the assessor number to see how far off the list price is from what is owed on the properties, I was amazed at the difference. The current list prices, which are at market now, are about 20% below the last sold price. Is this the market dropping? Not by that much. Many of these are examples of fraud--the homes were never worth the amount lent. Obviously there were some stupid buyers willing to do those deals, but there was some funny business getting them to appraise at 10% over the market. Of course now these owners see the value 20% below their loans and they are bailing.

It seems like one simple solution to eliminate this type of fraud from happening in the future is for lenders to require 2 appraisals on each property without the appraiser knowing what the purchase price is. Appraisers have access to the MLS so they can see what the list price is but they don't need to know what the pending price is. Two apprasiers simply assessing the value would give a better indication than one appraiser with pressure to shoot for a magic number. This would include refinancing also.

Lenn, I finially realize what bugged me so much about this post.  The market isn't speaking at all. The market is reacting to the fact that it was manipulated by "investor's appetite and greed for more, more, & more.    The real question behind your numbers is how many of those short sales wouldn't be on the market at all if a viable solution were created to modify the loan by extending the initial terms of the loan. 

Apparently such a solution is in the works.  You can read about it here:.  Hopefully the agreement between the Treasurey Department and Mortagage Leaders will be finalized sooner rather than later.  This wll only help to ward off some of the impending foreclosures and allow the market to stabalize more naturally.

Hi Lenn.  I agree fundamentally with your assesment of the current market.  The market will take care of itself.  However, I don't believe the situation will be as dire as you or some in the media are predicting.  In my experience and study of markets, not just real estate but equities markets as well, I have noticed recurring trends.  When we have a run up in prices whether in be in homes, as we did in '04 and '05, or in stocks, as we did during the dot com boom of the late 90's, a correction is inevitably to follow.  With the dot com bust we had the unfortunate timing of the 9/11 attacks which sent the market into a nosedive.  But, even though the market lost substantial value, it did not return to pre-dot com/911 levels.  It corrected, no doubt, but again, not to 1995 levels.  And the same holds true pretty much for housing markets.  Yes, we do get slumps and corrections in the housing markets, but rarely do the prices return to the level prior to the run up.  And I don't expect it will happen this time either.  I was born and raised in California and saw these booms and corrections first hand.  I also heard as a kid many adults bemoaning the fact that "they should have bought five years ago when the prices were $xxxx." Yes indeed they should have.  Because real estate has an intrinsic value, unlike stocks.  Now, of course there are exceptions to the rule.  Certain areas have economic downturns (see Detroit and Michigan in general) due large industries packing up shop or vanishing altogether.  However, if we look long term over the past 70 years since the Great Depression you can hardly find consecutive years where home values dropped.  We are seeing the market factors already at work.  Interest rates are falling and home prices are falling.  Rarely do these things occur in tandem.  This will attract more buyers into the market itself.  Without government intervention.  This is the time when Realtors have to earn their worth both in respect to educating our clients and drumming up new business.  I wish all my fellow Realtors the best for '08.  We'll weather this storm and come out stronger on the other end.

Lenn, freezing the interest rates will decrease the number of houses that go into foreclosure, thereby decreaing the number of houses on the market.    If the note is adjusted, many people will be able to ride the storm regardless of the value of the home.  As long as notes are allowed to adjust we don't know what that number is.

Prices are still going to fall, but the absorbtion of unsold inventory will take place more quickly.  Right now the unsold inventory numbers are artificially high because of note adjustments.  Unless something is done about the note adjustments, the market will stabalize later rather than sooner. 

We agree 100% that the Treasury is not looking out for the homeowner.  But, if some homeowners benefit from the collusion with Wall Street so be it.  IMHO, collusion with Wall Street created this mess. 

My argument is that if the notes are not frozen, the housing prices will artificially fall below that equilibrium point.

Let it be said that I'm the first to acknowledge that there is a flaw in this argument.  Adjusting the notes could simply push the inevitable off into the future, thereby extending the pain.  I belive that the gamble is worth it because of the cyclical nature of the market.  As prices start to increase, houses and existing loans are paid down, many of these same people will be able to refinance out of the loans.

Thoughtful fiscal policy on the part of govenrmnet and homeowners can help to ease some of the pain.

If the sole issue is wages and your argument is true, than I think that headed into a depression that will put the Great Depression into the weeds!

 

Jerry, I just read your comment more thoroughly and it is very insightful.  The difference between history and today is the global market.  All bets are off.  Oil prices will continue to rise as China and India increase their use of oil in the years to come.  Unless alternatives can be found, this will hold down the economy for years to come.

Lenn your comment about dropping interest rates to keep the shoppers shopping is really scary.  I thought that we were on opposite ends of the spectrum.  We're not, our views are frighteningly similar, your just more of a purest in your solutions than I am.  You see, I don't the markets are pure at all.  Government intervention already takes place in the favor of business.

You have a good day!