Beware The Shadow
February 18th, 2010 categories: Market Trends, Real Estate News
For months, we’ve been expecting the next wave of foreclosures to hit the market. With a record number of homeowners defaulting on their mortgage payments, it’s bound to happen sooner or later. According to yesterday’s headlines from Housing Watch, we’ve got a “shadow inventory” of almost 1.8 million homes that are on the brink of foreclosure. Of the 1.6 trillion in existing mortgages packaged into mortgage backed securities by Wall Street, approximately $425 billion worth are “extremely late” on their payments.
Despite the best intentions at assisting distressed homeowners, bad mortgage debt continues to rise with little hope of reigning it in. The tough job market and high unemployment rates serve to add fuel to the economic firestorm. After all, it’s difficult to pay the mortgage without any income.
The current shadow inventory estimate is about half of the entire market of homes for sale, according to Housing Watch. Additionally, there are many other homeowners who have hesitated putting their home on the market due to market uncertainty. In essence, this only clouds the housing market’s supply and demand picture. Our local Fredericksburg, Virginia area isn’t any different than the rest of the nation. We’ve got plenty of foreclosures on the market, and many others waiting for the market to turn.
Current estimates indicate that existing foreclosures , and the additional shadow inventory, will take nearly three years to sell at normal market absorption rates. Can you imagine what will happen to home prices once the shadow inventory, and other would be sellers put their homes on the market? Normally, I’m not an advocate of predicting the future. But, in this case, with an overabundance of homes, and current economic conditions, something has to give.
When that time comes, do you think the sound we’ll hear is the shattering of the price floor for homes? If so, let’s hope we’re not caught unawares. We’ve certainly had plenty of warnings.
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Built for Military Home Sellers
February 11th, 2010 categories: Real Estate News, Relocating
Since the height of the market in the summer of 2006, homes prices across the United States have fallen a great deal. Many homeowners who purchased prior to that summer, and now have orders to move, are faced with the prospect of selling a home that may now be half the value it was when purchased. Fortunately, there is hope.
As part of the American Recovery and Reinvestment Act of 2009 (ARRA), the Department of Defense (DoD) expanded the Housing Assistance Program (HAP) to provide benefits to service members who are moving (in military jargon, PCSing – Permanent Change of Station), among others.
To be eligible for HAP, military members must have, 1) Purchased their home prior to 1 Jul, 2006, and 2) Have PCS orders dated 1 Feb 2006 thru 30 Sep 2012.
Have you heard of HAP? Many service members have, but few homeowners understand just what it takes to sell their home using their Housing Assistance Program entitlement. To educate service members, DoD and the Army Corps of Engineers have provided specific, informative guidance on their HAP website.
The website explains, among other things:
1. Who Is Eligible
2. How to Apply
3. The Benefits HAP Provides
4. Where HAP is Implemented
In addition, applicants are able to download the necessary application package to be sent in for eligibility. Their FAQ (Frequently Asked Questions) section, not only responds to the questions most of us have about applying and how the process works, but also provides updates on the Expanded program.
HAP is providing other ways for eligible members to get answers to their questions. Coverage is handled by the three regional offices in Savannah, Fort Worth & Sacramento. They do answer their phones and are ready to reply to questions about the program. As well, representatives from the National Program Office will provide informational briefings if requested.
In the Fredericksburg and Stafford area, C21 AdVenture has been fortunate enough to host HAP’s Assistant Program Manager (PM), Mr. Donald Chapman, for an informational briefing last month for local Realtors. While his presentation answered some of our HAP questions, the opportunity to ask questions was the perfect opportunity for him to dispel some of the misconceptions held about the program by those in attendance. As a follow up, he’s returning in March to speak to a much larger audience of local military homeowners.
HAP leadership is pedaling as fast as they can in their attempt to inform military and civilian home owners who qualify, how to apply and participate in this timely offering. To make this program work, all involved need to know what the requirements and expectations are. Most endeavors take a little time to get off the ground, and this one is no exception. They’ll certainly be bumps in the road for sellers and buyers who participate in this process. Preparing yourself, by using the resources HAP is providing, may go a long way in making those bumps a bit more tolerable.
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How Did You Determine That Listing Price?
February 2nd, 2010 categories: Market Trends, Real Estate News
Successfully selling homes isn’t rocket science. Or, is it?
Does a home sell itself, or is smart marketing the key? Or, is it a little of both?
While most of us realize that targeted marketing is a sound sales strategy, it is tough to sell a lemon in any market. But most would agree, rarely is a buyer willing to pay more than an item is worth, unless of course, there’s more to the item than meets the eye. But, that is seldom, if ever the case. Wouldn’t you agree?
Attempting to accurately price homes requires consideration of various factors including:
1. Home Inventory
2. Current Market Conditions
3. Recent Comparable Property Sales
4. Condition of the Property
As many who provide valuations of property will tell you, any good Comparative Market Analysis (CMA) will provide a property owner with an accurate price window for his/her property. If we’re comparing like properties, it is hard to go wrong with a CMA. But, if you’re expecting an apple to be the same as an orange, you could be in trouble! So, where do those inflated listing prices come from? The owner? Yes, at times. But, unfortunately, often, the blame lies with the Realtor.
An article in a recent Business Week reviewed William Poundstone’s new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It). In it, Poundstone examines both the psychology of buyers and sellers, and the logic used when placing a value on a product or service. The author argues that pricing is anything but an exact science. In his words, ”In the new psychology of price, values are slippery and contingent….” According to the article, many “clueless” consumers are vulnerable to the marketing or sales practice of anchoring. Anchoring, in its purest form, is the act of using of a high priced item that may never sell, in order to make a lesser priced similar item much more attractive. Often, the same manufacturer may sell two like products, one tagged with a designer name and price, the other, a “great deal” at almost half price. The “cheap” one sells like gangbusters!
Since it’s hard to ask twice as much for a similar home, overpricing occurs far too frequently. The good news is, that high price tag makes all the rest of the homes look lots better! The bad news is, the anchor model is probably going nowhere.
While pricing or valuing a home isn’t quite as easy as 1-2-3, accuracy is a result of using the proper comparable properties when determining the listing price of a home. But, if instead, you believe your property to be priceless, and list it accordingly, don’t be disappointed if you find the price you’re offered is only what the educated buyer thinks it is worth.
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Appraisal Changes Come Due
January 12th, 2010 categories: Market Trends, Relocating
In September of last year, the U.S. Department of Housing & Urban Development (HUD) announced a change to FHA appraisal validity periods. The announcement was met with unanimous approval from all sectors; lenders, home owners & buyers, and yes, even appraisers.
The change to appraisal periods involved decreasing the validity time for FHA appraisals from six to four months for both existing homes and those under construction. Since the first of this calendar year, 2010, the new standard has been in effect. Why does the change matter?
For those of us that have faced selling properties, only to encounter difficulties with the appraisal, this reduced turn around time, or reduction of validity time, couldn’t have come sooner. Because, no matter the soundness of an agent’s estimation of a property’s value, it is the appraiser’s that matters most.
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Is a 31 Percent Failure Rate Acceptable?
December 28th, 2009 categories: Market Trends, Real Estate News
“Incompetents invariably make trouble for people other than themselves.”
Larry McMurtry
Did you see the news? Yesterday’s New York Times carried an article detailing the results of recent federal mandated licensing exams for loan officers around the country. The results thus far are anything but encouraging. According the Times article, ”31 percent of the roughly 10,000 people who took the national test from July 30 to Nov 30 failed it, and about 27 percent did not pass the state-specific component.”
While there are those (you can trust that the dissenters aren’t those depending on the expertise of their lender) who question the industry’s testing, many others appreciate the attempt at accountability. Is it odd to expect those who provide you a service, especially one you pay for, to know what they’re doing? One would hope not.
In the effort to clean up the mortgage industry and answer critics’ claims of of its ”poorly qualified” loans officers, the testing mandate includes both a federal and state national exam that covers federal laws, general mortgage knowledge, the loan-origination process and ethics. While I have to applaud the “after the fact” efforts to ”fix” a disfunctional mortgage loan process, why did it take a crisis to prompt such measures?
The question that leadership in any industry or profession needs to ask itself, is, what are the minimal acceptable standards required by those licensed to perform or practice? Would I want them (the practitioner) to provide that service for me? What if had to pay them for their service? Would I trust them to provide me, or a relative or friend, advice? As we’ve all heard, “many people will only do what’s required.” Let’s hope, when it comes to your trusted advisor, you’re getting at least what you’ve paid for. And, if not, who will pay for their neglect?
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What’s In Your Stocking?
December 24th, 2009 categories: Real Estate News, Relocating
Well, Christmas is finally here. On this Eve of what many consider our most celebrated, and certainly costliest holiday, what are you hoping to find in your stocking, or under your Christmas tree? According an associate of mine, for men at least, they’re looking for something electronic. She informed that men always seem to want the latest electronic gadget. Women, according to her, are much more practical. Hmmmm, interesting.
So, what is your latest Christmas wish? Somehow, I doubt that it’s A Christmas Story’s Red Ryder BB gun. But, who doesn’t look forward to opening what’s under the tree? For many, Christmas is a time of celebration and renewal. Both, spiritual and personal. A wonderful opportunity for family to get back in touch with one another. For cards from distant friends. And, for others, the focus of the holiday is on giving.
What if we all were more like George Bailey? You know, Jimmy Stewart’s role in the Christmas favorite, It’s a Wonderful Life. The movie’s main character, whose dream was to travel the world, but never quite got there. Instead, he was continually helping others less fortunate than he. With money, and time, and his tireless efforts. He certainly gave more than he got. Wouldn’t you agree? Of course, George Bailey was a movie character, not a “real” person. But, if he was, who would he be? Do you know someone who fits his description? What about you?
As this year draws to a close, I’m reminded during this Christmas season of giving, that whether fulfilling our duties as professionals, as Realtors, we have a responsibility to give more than we’ll get. And while there are those transactions that make us all wonder why we ever chose this profession, looking back, it’s easy to realize the benefits clearly outweigh the challenges faced. Let’s hope that the case for many of us.
Merry Christmas!
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