"UNDER WATER"??? WHO'S UNDER WATER?? WHAT'S UNDER WATER??

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

"UNDER WATER"???    WHO'S UNDER WATER??  WHAT'S UNDER WATER??

                           * * * * WARNING!  HARD CORE REAL ESTATE TALK * * * *

WHO IS UNDER WATER?
A huge percentage of the American Consumers.

HOME OWNERS ARE UNDER WATER.  25% - 33% of all home owners in the United States of America.  Beginning in about 2006, we in the real estate industry began to see a shift.

HOME PRICES SKYROCKETED.  Fueled by lower than ever interest rates and less than intelligent mortgage instruments, home prices had reached a point where the average prospective home buyer could no longer qualify to buy the average home price in their area of choice.  Sales plummeted and almost minute to minute, prices began to drop.  The price reduction didn't stop and in fact continues.  Home values dropped about 8% nationwide in April 2011.  That's about 4 years to the month that the market began it's downward spiral.

                       

Family

2007

"Honey, do you think we'll ever be able to buy a home?"

"I don't know Dear, the prices have gotten so high, even with low interest rates,
we're not going to qualify for a home near the children's schools."

FOUR YEARS LATER, prices are lower than ever.  Even lower than ever interest rates are no incentive for the average American with a brain to feel secure in investing in a piece of real estate today.  Investors are making opportunistic buys of REO properties for rehab or rentals. 
               

FAST FORWARD TO 2011.

CATASTROPHE #1.  THE REAL ESTATE INDUSTRY IS MORIBUND!

TARP, STIMULUS, ETC.
  The government made the decision to save the financial industry and the Wall Street Gangs rather than home owners who were damaged far more.   (It's my blog and I'm entitled to my opinion.)

THERE IS NO 'MOVE-UP" MARKET!  Home owners who would sell and move up or down are prisoners of their mortgage.
MORTGAGE APPROVAL.  Financially secure home buyers find that obtaining mortgage approval is harder than ever.  
GSEs and HUD have increased the cost of mortgages to a point where many consumers no longer qualify for a home in their area of choice. 

FOUR YEARS LATER, about 40% of the American consumer has damaged credit due to the loss of their home, loss of their job, loss of their credit.  This huge population of American consumers will NOT be buying homes for years.

WHAT IS UNDER WATER??
Middle America

CATASTROPHE #2.  THE AREA OF THE UNITED STATES THAT BORDERS THE MISSISSIPPI RIVER (Ten States).  See the map of the massive flood area HERE.  Does anyone reading this believe that this flooding catastrophe will not cause a further deterioration of the economy??  Just a few of the future damages include:

Loss of Income.  Many will face temporary or permanent unemployment as areas try to recover the physical damages to their businesses and homes.

Loss of Shelter.  Thousands of area residents are in shelters with their homes partially or totally under water.  The structural damages to these homes will, in many cases, permanent cured only by destruction and rebuild.   

MOLD!  Yes, that dreaded word mold.  The American public became aware of the long term harm done by flooding when, about 10 years ago. Pennsylvania suffered a catastrophic flood.  Insurance companies were slow to respond to the damage claims and homes sat for weeks or months before the process of clean-up and repair/rebuild began.  That was the first time the American public, and Lenn, became aware of the word stachybotrys.  Since that time and as a result of publicity of the health problems associated with mold, insurance companies respond faster.  Let's hope the insurance companies respond swiftly this time.  The areas and damages are MASSIVE.  I also made it a broker policy that states "We do not sell homes with visible mold growths".  Sure, that's a matter of risk reduction for my company.  It's also a fact that I will not be a party to a real estate transaction that puts children in danger due to toxic mold.  Adults can take care of themselves.

 

       Family

 

                            "Sorry Honey, Lenn says we can't go inside of this house."
                                     "That's O.K., I read the information she sent.   
                                  No need to expose the children to potential harm."

IS MOTHER NATURE DOING A BIT OF "PILING ON"??

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Maria Morton 05/11/2011 04:34 AM
  2. Jane & Jeff Daley, PhD 05/12/2011 04:56 AM
  3. David Monsour 05/24/2011 03:21 AM
Topic:
Mortgage / Finance
Groups:
Silent Majority
AR Twitter Users
Real Estate Trends
31 Days of May Challenge 2011
Tags:
mortgage mess
flooding of the mississippi river

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Show All Comments
Rainmaker
1,817,029
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

Lenn, we've talked about flood maps before whether it's the economy or the property and it is more than upsetting to see this continue to impact our economy...great feature for all to digest...

May 12, 2011 02:43 AM #69
Ambassador
3,037,678
Anna Banana Kruchten CRB, CRS, Broker, Instructor
HomeSmart Real Estate BR030809000 - Phoenix, AZ
602-380-4886

Unfortunately the numbers are much higher here in AZ - closer to 60% of homeowners are under water , if not more.  It will take many more years before we pull out of this mess. I too went through the S&L mess and this is much much worse - especially in the harder hit states.  As for the water - that has been on my mind since I've been seeing it on the news.  Our mold expert says - 24 hours and stuff starts growing - at more than a few days to week - toast. To think of weeks and months of what these folks will be dealing with is heartbreaking. And the cost to everyone - and so many will be out of work.  Tough times ahead for a long time to come....

May 12, 2011 02:58 AM #70
Rainer
103,754
Michael Deery
Citywide Financial Corp - Pacific Beach, CA

Great piece Lenn. Here is also required reading, it is the latest from Matt Taibbi of Rolling Stone magazine discussing "The People vs Goldman Sachs", Goldman represents everything that is wrong with the current financial system in America, from blatant stealing from clients to being protected by their friends in high seats in the Govt. Until someone gets held accountable the system will chug along to the detriment of the points you make above Lenn! Here is a link to the article, well worth the read

May 12, 2011 03:37 AM #71
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Ben.  Strangely enough we haven't been hit with the HVCC matter.  We refer buyers to loan officers that don't go there.

Ginny.  Thanks.  Knowledge is power, even when it's not positive.

Anna.  Tougher than many realize at this point.

 

May 12, 2011 03:44 AM #72
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Michael.  Good article indeed.  Thanks.

May 12, 2011 03:49 AM #73
Rainer
22,499
Alan Mackenthun
Bridge Realty - Shakopee, MN
All is not lost. Those banks and insurance companies that walked away with all the TARP money will need to compensate people for much of the flood losses. The investors swooping in to scoop up rentals are removing a lot of the excess inventory from the market. With the republicans taking over the hours just a few short months ago, the federal government is at loggerheads again which should limit the things that it can now do and should reduce some of the fear of uncertainty in the market. I don't trust that they'll make the adult decisions that are going to be required to solve the countries debt issues promptly, but at least the conversation is heading in the right direction. If we can at least stop digging the hole deeper, we'll be in much better shape. The greatest outstanding issue I see is the continued devaluing of our currency by the fed. Price inflation and rising interest rates are sure to follow. It's not going to get a lot better quickly, but as people realize that we all need to take responsiblity and address the issues we'll work through the problems and get back on track.
May 12, 2011 04:31 AM #74
Rainer
117,860
Beverly Femia
BlueCoast Realty Corporation - Hampstead, NC
Broker Realtor Stager - Greater Wilmington, NC Are

I cannot buy into the paranoia thing because it just give too much credit to the bumblers that got us here.  And, it's a BIG bunch of bumblers, so big that calling them out one by one gets tiresome and it get me crazy.  Out of control greed is the core of how we got here and that hasn't changed one whit.  As for control, Goldman Sachs and their ilk are in control and all they've cared about is making money which won't change unless they are held accountable.  I'm waiting....  

Nothing is going to get better any time soon in housing but I would like the same satisfaction with the lenders that I have now about Bin Laden having "paid his dues."  I'm not advocating sending the Seals into Goldman Sachs but a few "perp walks" would be a good start.   

May 12, 2011 04:35 AM #75
Rainer
4,658
Michael Carson
Carson Home Inspection - Menifee, CA

It was my experience during the "boom" that most of the people placing a large down payment had simply sold a previous home and took the free money to "upgrade" their style of living.  The comments about us as a nation buying too many toys is also a situation I see daily.  During the boom I told anyone and everyone willing to listen that this market will crash.  Simple equations of median home price v.s. income.  And the fact that if you did not own a home prior to the boom you basically needed to be a plastic surgeon to afford an entry level home in your area.  Whenever you eliminate the potential for new buyers to enter the market it will eventually come down.  The problem I saw (here in California) was that most people were too willing to ignore the obvious facts. On paper their home was still going up.  Wall Streets greed was fueled by individual greed and now we are where we are.  I do agree that some of this was likely planned out as I am but a simple high school graduate and could see the writing on the wall.  The "experts" had to have some idea long before it got out of control... and because no action was taken it just appears somewhat planned.  But what bothers me is when I go to do a bankruptcy appraisal and the clients have boats, toyhaulers, ATV's etc. with only a moderate/average income.  Then they complain to me that the bank bent them over so to speak.  Wall Street may be to blame, but we as a nation need to be accountable for our actions.  - And yes, NO MORE SPENDING!!!

May 12, 2011 04:45 AM #76
Rainmaker
1,022,445
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Lenn, good post.  In reading some of the responses it's amazing how many only focus on the negative.  Of course if those readers are underwater themselves, it stands to reason.  I'm one of the lucky ones I guess.  I sold my house 11/09, put the money in the bank and have been renting ever since.  In my case it made no sense to continue paying on a martgage trying to recoup the $300 K that I was down.  By selling it easily saved me $50k.  Luckily, I have a great condo to rent, but of course I'd love to buy.  Unfortunately, now no one will lend me the money or I'd be paying less than my rent for a mortgage.  And even with money in the bank.  So that's my sad story, which isn't sad in comparison to others'. 

And so we now have a booming rental market. Good rentals go quickly if they are clean, updated and move in ready. Sound familiar?!

Not in our lifetime will we see this kind of economic crisis again and nothing in the past has compared.  Boy these times are achangin'! 

May 12, 2011 04:49 AM #77
Rainer
356,225
Ray Waisler
Finance of America - Atlanta, GA
NMLS #6621 - Specializing in Jumbo FHA & VA

Lenn, I can't begin to tell you amount of calls I get weekly from clients wanting to refinance, but are underwater and it really saddens me that I can't help them take advantage of these low rates.

  Some mention "what about the government programs?" The sad truth is that most people don't qualify or the programs are so restrictive that by the time the lenders add their risk based pricing disincentives, there is no savings to be had.

I fear this will continue for many years to come and the mold issue will only serve to exacerbate the situation.

 

May 12, 2011 06:11 AM #78
Rainmaker
67,119
Brenda, Ron, Lee Cunningham & Tara Keator
West USA Realty - Phoenix, AZ
Realtors, Homes for Sale - Phoenix Metro

The map Jamie posted is amazing.  Your post is so right on...

May 12, 2011 08:19 AM #79
Rainer
248,050
Gerard Gilbers
Higher Authority Markeing - Asheboro, NC
Your Marketing Master

Lenn, I'm glad you added the flooding in the post. I had not seen the maps that Jamie posted - looks like I need to move!!

May 12, 2011 01:01 PM #80
Rainmaker
2,432,899
Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

My home is underwater too, but we have no plans to sell anytime in the next 10 years or so.  Hopefully we will be in a better position as a country.

May 12, 2011 04:25 PM #81
Rainer
37,556
Kimberly Brandon
Smart Moves Real Estate - Venice, FL
Broker/Owner

Great blog - we do live in troubled times.  

May 12, 2011 05:39 PM #82
Rainer
69,204
Robert Courtney
Lihue, HI
Century 21 All Islands, RA, CDPE, MCRE, CIAS

Lenn - I am with you.  Let us say what we mean.

May 12, 2011 06:04 PM #83
Rainmaker
1,623,395
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Wouldn't it be nice if everyone used common sense - so we didn't need a rule for everything?

Wouldn't it be nice if our people in congress used common sense? Right now, I'm not so sure they even have any to use. Maybe they've been politicians so long that they have no concept of working for a living.

I'm with an email I got recently. It said: "Go Green! Recycle Congress."

May 12, 2011 06:53 PM #84
Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Alan M.  That was a mouthful, but at least you're thinking.

Beverly I LOVE PERP WALKS.  We do need to see more of them.

Michael C.  Sorry. I can't read long paragraphs. 

Jan.  In the eyes of many, myself included, renting a place to live will NEVER be a satisfying substitute for owning a home.

Ray.  Indeed.  The government programs were written to EXCLUDE rather than to INCLUDE.  YES, the mold issue will be pervasive.

Brenda and Ron.  Thanks.  Some things to think about.

Gerard.  Many have no plact to move.

Evelyn.  Same here.  This was NOT my plan.

Kimberly.  That we do.

Robert.  HA!  You can count on that.

Marte.  Good one. I love that and it's so true. 

 

 

 

 

May 12, 2011 11:07 PM #85
Rainmaker
1,431,803
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Three or four years ago my feeling was a contract is a contract and I had little sympathy for Short Sales.  However, as I have watched the big boys feeding at the public trough while they destroy the economic fabric of this country it has made me sick.  I am so far to the right I make Rush look a little pink - I am a big time free market capitalist, but we don't have a free market capitalist system anymore.

I don't think mother nature can beat us in the long run, but our government is trying hard and may do it.

May 13, 2011 06:57 AM #86
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Gene.  Hurray.  One for our side.  The consumer's side.  The American home owner's side.

Sometimes it takes a while for injustice done to the American home owner and all of us to be fully recognized.

Glad you had an awakening.

May 13, 2011 08:54 AM #87
Rainer
7,845
Madison Carlson
RE/MAX Excellence - Long Beach, WA

I have to agree with many of you that the economy is showing signs of recovery but not in the way most people want it. We are seeing a number of jobs increasing, homes are more affordable and interest rates are at their lowest. But the price of homes are still falling....why? My theory is that ultimately what goes up must come down and until the housing market completely hits bottom we won't begin to see prices rise for at least another year or so. Also, buyer's who are entering the market are mosly investors or first-time home buyer's and are viewing the purchase of their prosepcetive home to lose value before is gains any value. I think there are a lot more buyer's out there than is thought, they are just hiding afraid of this "economic state" we are all in. I don't think this slump will last long but I don't think we will bounce right back either. That is the difference between myself and most brokers. 

May 14, 2011 09:32 AM #88
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