So, What's effecting home values and the market in general??

FIVE HOUSING TRENDS WE'RE SEEING SO FAR IN 2011

Depending on whom you speak with, Home Values are still declining.... Home Values have "stabilized".... Home Values are on the rise.... The truth is, it depends!!

If your looking at housing markets in West Oakland County, or East Livingston County, in general, things are looking up. In most "Micro Markets" (a certain segment based on home size, amenities, etc) we can extract trends that might be considered showing an increase in values. In other Micro Markets, I'm still seeing annual double digit declines. So, the truth is, when it comes to real estate value trends, It Depends. (wait a minute, I already said that)

So what do I see effecting sales and values in the coming year? let's start with..

1. Home owners are holding off on refinancing.

Mortgage refinancing in 2011 is expected to experience a big drop compared with 2010. We're already seeing a marked slowing in refi applications. The prospect of higher interest rates on home loans is one reason for the outlook, but not the only reason. Most Homeowners who have measurable equity, A-1 credit and solid employment have refinanced at least once during 2009 or 2010, locking in low fixed rates and consequently, have little or no incentive to refinance again in 2011.

Those folks who didn't refinance in the last two years due to their loss of equity, unstable employment or damaged credit, probably won't do so this year either because, while still-low rates may create an incentive, those challenges will become even harder to overcome.

2. Home loans are getting harder to get.

There's no secret out there, it's become more difficult to qualify for a home loan today than it was in the past, and it looks like the only changes coming down the road are only going to make it harder.

The tight lending guidelines are the result of lenders' new Conservative attitude toward the risk of bad loans and the real possibility that while they continue to exist, Fannie Mae and Freddie Mac will force the lenders to buy back older, faulty loans, causing them to have less available cash to make new loans.

Lenders are being "Extremely Cautious" and asking for volumes of documentation from borrowers, meaning multiple credit checks, income verifications and appraisals, increasing the cost of acquiring a mortgage from the start.

Borrowers seeking a low down payment loan insured by the Federal Housing Administration (FHA) will also be subject to higher standards in 2011, due in part to lenders addition requirements, commonly called "Overlays".

3. Home buyers will remain on the fence

Now is supposed to be a great time to buy a home. Mortgage rates, for the time being, remain low and prices are the lowest in 10 years. This combination makes real estate relatively more affordable to purchase. Some folks contend that home ownership has never been more affordable.

Plenty of properties are on the market, and inflation, waiting off the horizon to take a big bounce, could boost home values over the long term. Yet many might-be buyers remain on the sidelines due to near-term doubts about the wisdom of buying a home. Indeed, a Fannie Mae survey from the third quarter of 2010 found that one third of those asked said they were more likely to rent rather than buy their next residence. So much for our Government's thought that EVERYONE deserves to own a home.

The recent destabilization in mortgage interest rates, despite the Federal Reserve's efforts keep rates low, should be an alarming event for anyone who wants to buy in the next few years. That alone, should have buyers thinking about buying sooner than later. If rate do jump up, prices may drop even more and make it all a wash, but it's still tough to consider that you may end up taking a mortgage at 7 or 8% while your neighbor is only paying 4%.

4. Home Sellers continue to face "sagging" prices.

Selling a home continues to be a challenge due in part to the loss of qualified buyers and the huge "Shadow Inventory" of homes that are stuck in the foreclosure process, but not yet on the market. As long as these dynamics and high rates of unemployment persist, so will the downward pressure on home prices.

Lower prices may attract more buyers, but many of them won't be able to quality for a home loan. Lower prices could also increase the supply of homes as more owners just walk away from their under water mortgages.

5. Struggling homeowners aren't getting much relief.

Government programs so far have a dismal track record of delivering aid to homeowners who are unable to make their mortgage payment. Our Government has thrown so much of OUR money at this problem, they could have paid off the mortgages of a large percentage of those who applied hoping to get just a little help. Predictions are that this situation won't change much in 2011, due to the intractable nature of the problem.

Homeowners who are under water on their mortgage should contact their loan servicer and ask about a loan modification. Just remember, YOU CAN'T STOP TRYING!

Some borrowers have received relief, but those golden tickets are the exception. More often, the process results in frustration, disappointment and perhaps only a temporary fix at best for the homeowner's situation. There's no guarantee that you'll get a reasonable loan modification, but you might, so it's always worth trying.

Bottom line?

If you can refinance, now is the time.

If you can purchase, now is the time.

If you can sell now is the time.

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THE SHADOW KNOWS

WHAT'S GOING ON WITH PROPERTY VALUES??

the shadow knows

There's a lot of talk in the real estate world about the "Shadow Inventory".

So, what is it?? How is it affecting the value of MY HOME??

Well, there are a couple definitions for this elusive shadow.
The first, is simply the real estate that the banks have foreclosed on, the redemption period has ended and the folks have moved out, yet there's no FOR SALE sign in the yard. Instead, the bank is paying someone to change the locks, mow the lawn, occasionally check on the security and general condition, and don't forget, they're also paying the taxes and utilities (if they've been left on). Why would they do this? I'll explain that a little later.

Now, some people also include properties where the owner is in default and the bank just hasn't dropped the hammer on the foreclosure process yet. Then add to that, the properties where the banks have started the foreclosure, but the "owner" is waiting out the redemption period, while saving their money for rent for the next place where they'll live.

But really, just how much real estate are we talking about here? Well, this past spring, it was estimated that there were 7 MILLION properties likely to have been seized by lenders that have yet to hit the market. That could have a disastrous effect on listing inventories, 1.35 years worth, IF NOT ANOTHER HOME ADDED TO THE MARKET. High inventories will collapse prices, knocking another 8% off homeowner equity, with a domino effect on the sick economy.

Since late 2009, home values have tended to somewhat stabilize, and even show a slight increase in a few markets, due to a decline in inventory as the banks held properties back and while our Government was paying people (tax credit) to buy now, rather than later. The banks can't hold these properties on their books for ever, and as our Government will also cover the bank's losses, they'll will begin dumping houses into the inventory. When that happens, we'll see home values take another big hit. Some of the number crunchers say that it's going to take 3-4 more years to clear out the bank inventory, as new foreclosures repopulate both the public MLS inventory and the shadow inventories. Until these bank properties are down to just a blip on the radar again, they will continue to force the values of all real estate down, eating away more of what's left of our equity.



OOPS!!
I almost forgot to explain WHY the banks (and our Government, through "Fannie Mae & Freddie Mac") are hanging on to these houses.

The first reason ( and the most common excuse) is that these banks truly care about our home values, so they aren't flooding the market which would make most real estate almost worthless.

Personally, if I thought that were true, they'd be offering their homes for sale through reputable Realtor firms, at or near market value, rather than dumping them at "wholesale" prices through agents and Brokers who's only concern is "how fast can I make a commission on this one". Don't get me wrong, there are a hand full of good, ethical agents and Brokers working the REO (bank owned) listings.

The second reason put out there, is that the banks are carrying these homes on their books at the foreclosure "Value" (which in almost every case is way more than their market value), thus propping up their bottom line, allowing the CEOs to collect more of those big bonuses for doing such a great job, even though 1 out of ten families no longer own a home.

What's going to happen when these institutions dump all these properties and their bottom line turns very RED?? That's a story for another week....sorry...

HELPING THE HARDEST HIT??

This past week, Jeniffer Granholm, our lame duck Governor of Michigan, announced that the Michigan State Housing Development Authority (MSHDA) with the help of banks, Credit Unions and non-profit counseling agencies, will launch a statewide program to help eligible Michigan homeowners avoid foreclosure by participating in the State's new Helping Hardest-hit Homeowners Fund.

The dollars for this, is part of the new $2.1 BILLION of federal money that the President has pulled out of the air to help homeowners in 10 states keep their homes. The fund aims to assist those in states that have seen average housing prices decline by 20% or more.

President Obama unveiled the Hardest Hit Fund in February to help folks struggling with home value decline, and a tight labor market and a near double-digit unemployment rate. The program is just one of several that the administration launched to combat the nation's housing crisis, but like their other initiatives, this has been met with criticism.

So finely last month, (only FIVE months after announcing the program) the treasury provided Michigan, along with California, Arizona, Nevada and Florida, a combined $1.5 Billion from the fund. The states expect to help thousands of homeowners by offering subsidies to the unemployed, reducing loan principal and offering incentives for short sales.

The State expects the $154.5 million program could "help" more than 17,000 households, including thousands who are currently drawing unemployment benefits. The program would also help owners who are behind on their mortgage payments because of a temporary layoff or medical condition, and those who have jobs, but have lost income. (GEES, THAT'S MOST OF THE POPULATION OF MICHIGAN)

The program began this past week and was met with frustration, as the State offices received 30,000 calls by 10:00 a.m. the first first day, causing it's phone system to crash. Officials say because it's not mandatory for lenders to participate, the state was still waiting to hear from large mortgage servicers. They said homeowners must apply for the program through their lenders, not the State.

Eligible homeowners can obtain more information by calling 866-946-7432 or visiting www.Michigan.Gov/Hardesthit .

Is this government handout going to save the housing industry in our state? NO!! Not if there aren't any JOBS for those 17,000 unemployed/underemployed homeowners to return to.

Is this going to stop the five year slide in home values?? Not as long as the banks, Fannie Mae and Freddie Mac are holding thousands of foreclosed homes in their "shadow inventory".

In Milford, Highland and throughout the Huron Valley area, along with most communities in Oakland County, Real Estate values have actually increased during the first quarter of 2010, but considering our government was paying people (through tax credits) to buy a home, we can assume that growth is going to disappear by the end of quarter three of this year.

Bottom line is, until the government stops manipulating the housing market and the interest rates, and allows business and industry to function freely, resulting in REAL job growth, there will be no true sustainable recovery of home values.

But hey, what do I know.....

Think Big Work Small. Daily video updates

Retail Banker LO's Income Under Fire - 05.24.10 Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales

These guys are a great way to start the day. They're a good resource for what's happening in the real estate industry.

They always have some information for the Realtors, Loan Officers, Appraisers and the buying public about what's going on today.

WHO SETS THE VALUES??

So who really sets the value of a piece of real estate?

Is it the buyer with a mortgage pre-approval letter, negotiating with an informed seller?

Is it the Realtor who performs the CMA for a seller?

Is it the Buyer Agent, guiding their buyer?

Is it the appraiser, who gives an opinion of value, regardless of the purchase agreement?

Is it the Bank's underwriters, who review the PA, the Appraisal, the buyer's financials?

I'd contend that any one of these people may have a hand in determining what the value of a certain parcel in a transaction is.

But, looking at value from another angle, let's consider the cash rich investor who has no pressure to buy for shelter. One who is investing his own money. One who doesn't need the permission of a bank to leverage his 5 -10% against the lender's money. This guy weighs the pros and cons of each property, calculating the return on investment. This is where the true value of real estate comes from.

An appraiser shows the bank an opinion of value based on history. Buyers and sellers get upset because values are growing again, and their deal is being "killed" by a review of deals in a crummy market.

Give me an informed cash buyer any day. They are the one's that truly set the values.

Throughout Milford, Highland and the rest of the Huron Valley, the market values have stabilized for now, and in some neighborhoods, values have even started to show slow growth. That growth will continue to be slow and methodical, not like the big spikes of the '90s, because this time, we're coming off the biggest crash of our life times. The banks aren't going to let you leverage "their" money to speculate in the new growth market like they did before, so if you're thinking of bidding up an offer on what seems like a great deal, be ready to bring cash, not a pre-approval letter with you.

The question everyone asks their Realtor

SO... HOW'S THE MARKET??

This is an often asked question to Realtors and Appraisers (and maybe the produce clerk).

But just what is it that people want to know? A few years ago, I think the underlying question really was, "So, how much has my great real estate investment increased in value this month?"

Today when I'm asked, I'm really hearing "Has the value of my terrible real estate investment stopped plummeting yet?"

We all know an agent, that when asked this question ALWAYS says "Things Are Great" while maintaining their silly grin. We've all gone through the seminars where we've been taught to be positive, no matter what. But I guess, depending on what side of the closing table you're sitting on, things may be great once in a while for you.

The truth is, Milford, Oakland County, Southeast Michigan and the entire Country has just experienced the worst decline of residential real estate values in modern times. Most markets I work in have shown a bottoming out of the decline during the past 6-10 months. Some neighborhoods have even had a slight rebound in values. Several markets are still in decline.

I just finished a market study for a six square mile section of a township in Oakland County. Just during the past three years, that area has lost 65% of its value. The good news is that for the past 10-12 months, there has been a steady increase in values (30.7% improvement from the bottom point) that brought it back UP to that 65% loss mark. Looking at the chart at the top of the page, it doesn't look like values could have dropped any further during that first quarter of 2009.

It doesn't show here, but the in April and May of this year, the median sale price was actually higher than the listing price. It's not really a "Seller's Market" being reflected, but the bank owned homes being listed so far below their true current value, that the investors and first time buyers were actually bidding up against each other to win the property. This has been a wonderful opportunity for those segments of the market, but the private home owner who is just trying to get their home sold is losing more value each time one of these under priced bank properties sells.

So, how's the market? ..... Tell me, are you a buyer or a seller. Then I'll let you know.

Another real estate blogger for the Huron Valley

OK... On occasion, I would hear from some folks that I should be blogging. With 17 years of full time real estate experience in Milford, Highland and other southeast Michigan communities, I've advised hundreds of buyers and sellers, concerning their real estate needs. Some of them think I should share with others.

Then there's my 5+ years of real estate appraising. Now, that's a whole separate world. The in-depth analysis of sales and listing data, teaches me more each week about what successful real estate sales and valuation is all about. As a State of Michigan, Certified residential Appraiser, I'm on the HUD roster of approved FHA appraisers. I also conduct appraisal services for property tax appeal, estate settlement, divorce and bankruptcy.

The training required for these two intertwined professions, plus the education that comes from over ten years of holding a Broker License, has made me the "Go To" guy at the office. Take note of my E-mail address and phone number, and consider me your Go To guy for your real estate questions or needs.

My blogs WON'T be long, drawn out ramblings of every thought I might have ever had on a particular topic. Unless the need arises, you won't here from me more often than once a week. There may, on occasion, be links to the truly knowledgeable experts in the field. And, someone out there will be able to relate to my writings, as I'll be drawing from my experiences and observations.

I'll try to keep my thoughts and comments limited to the real estate industry, but heck, I love politics, Christianity, my home town (Milford), and of course, my family, so I may veer off point on occasion.

Your feedback will always be welcome. If my comments have stirred a question, please post it, as others may be thinking the same thing.

So.. for you friends and clients out there that thought that I should blog, here you go. If I receive too many complaints, I'm passing your names to the readers, so they'll know who to blame.