Entries from December 2007 ↓

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Sometimes it takes a cup of hot coffee to be dropped in your lap from the McDonald’s drive thru to remind us how insane reporting is and how they revel in fear, uncertainty, and doubt. The real estate world has been turned upside down over the past couple of years as the media pounds the drum first created by Chicken Little that the sky is falling.

But then the numbers are released by a group such as Standard and Poor. They also highlight the negatives to gain the attention of the media. However, inside their numbers are some amazing statistics. Since 2000 the 10 ten real estate markets have doubled in value. Los Angeles and Miami have both seen over a 240 percent improvement even with double digit declines from the past 12 months added in.

You do not see these numbers coming out of Katie Courics mouth on the evening news, do you? But the numbers do not lie. If we had markets that are facing declines from 2000 that would be news. Even lowly Detroit is still priced over their 2000 housing prices and that is a city that is being decimated as the auto industry collapses.

So when we start 2008, remember this:

Housing prices in most major cities are still showing long term gains even in the face of a difficult market.

All markets that have such huge appreciations have to retract or stabilize. That is basic economics. So remember to not get sucked into the negativity and present to your customers the benefits that have been accrued since 2000, not the negatives of 2007.  

Top 20 Metropolitan Areas Housing Price Changes

City            App from        Change
                2000            Oct 06-07

Atlanta         133.79          - 0.7%
Boston          169.34          - 3.6%
Charlotte       133.98          + 4.3%
Chicago         163.12          - 3.2%
Cleveland       115.93          - 4.5%
Dallas          124.44          - 0.1%
Denver          136.08          - 1.8%
Detroit         108.15          - 11.2%
Las Vegas       208.68          - 10.7%
Los Angeles     249.50          - 8.8%
Miami           244.35          - 12.4%
Minneapolis     161.24          - 5.5%
New York        205.48          - 4.1%
Phoenix         200.72          - 10.6%
Portland        185.10          + 1.9%
San Diego       217.02          - 11.1%
San Francisco   202.03          - 6.2%
Seattle         189.86          + 3.3%
Tampa           206.38          - 11.8%
Washington      226.71          - 7.0%

The lack of credit is putting the screws to the commercial real estate market. If you think we are having big issues qualifying home owners for mortgages,  the residential market is down right easy compared to the commercial market.

The tightening of lending standards has crippled many of the markets. Of course, there are those that will capitalize on the tougher market conditions and new vulture funds are being formed. These funds will offer cash to beleaguered sellers to try to steal properties over the next year.

“In 2008, I expect to see [lenders] reprising properties on a grand scale, saying you can have this at 30 or 40 cents on the dollar” for certain buildings in some markets, said Christopher Carroll, managing director of Cohen Financial LP, a Chicago-based financial-services firm. “Now, investors are putting together funds they’ll use when they think values have hit bottom.”

With the credit market crippled and underwriting criteria tightened, commercial property prices and sales volume have fallen steeply in the past few months, according to a mid-December report from Real Capital Analytics, a New York-based real estate research firm. Exactly when the floor for commercial property prices will be reached is anybody’s guess. via chicagotribune.com.

The market for REO properties is just not in the selling of them. With the average cost for unloading a foreclosure is $60,000 for a bank there is a great deal of money on the table in servicing REO properties. The Washington Post has an  interesting article discussing the different ways people are making money in the REO market.

“Everybody right now is trying to get into REOs or they’re trying to make a buck off of someone trying to get into REOs,” said Michael P. Krein, president of the National REO Brokers Association, a 10-year-old trade group. “It’s a cycle we’ve seen before.”
When the market is thriving and foreclosures are few, the REO industry shrinks. When the market sours and foreclosures soar, the industry expands because of a lender-driven hiring spree.
The hiring starts in-house. When foreclosures rise, lenders beef up their teams of asset managers. Those managers hire people to handle the logistics of selling those homes. read the rest at the  washingtonpost.com.

Click here to for a Free Foreclosure search in your area if you are still interested in getting into the foreclosure game to find properties near your home.

Re/Max 2000, one of the larger brokerages operating out of Gilbert, Arizona has shut down 13 of their offices. The firm is facing difficult circumstances with a slowing Phoenix market and to “save the company” they have ceased operations in these offices.

What I can not understand is why they let go the agents? Paying for office space and support personnel is expensive obviously in a slow sales market, but why kick all of your agents to the curb. That seems so old school thinking.

I would have consolidated the support services for the agents that want to remain in another office, provide remote access to the agents for the services they need, and allow the agents to keep beating the bushes for sales.

Sure, closings and some support services would need to be held at locations that take a longer drive but the concept of a real estate office is a bit passé in the internet world.

“The market has impacted us tremendously, and it was something we basically had no control over,” Kline said. “We cannot any longer invest our personal resources into the business.”
The closure puts 350 agents and 20 other employees out of work.
But Kline’s attorney, Dax Watson, said owners are mulling options for reopening the franchise on a smaller scale.
“It appears there may be some opportunity to save Re/Max 2000 and work through some of these issues,” Watson said.
He said Dave Liniger, co-founder and chairman of Denver-based Re/Max International Inc., flew to Phoenix to meet with Kline to discuss options. He said Liniger and other employees from Re/Max’s corporate headquarters plan to meet Wednesday for further discussion. via BusinessWeek.

This makes my blood boil. New York overall has such ridiculous property taxes to pay for the bloat of civil service and government payrolls and services. Now that they have squeezed all of the blood out of the stone that the senior population in these cities can afford, they are looking to have them work for low wages to pay off the debts.  

Audrey Davison lives alone, gets a $620 Social Security check each month and worries about the sharply rising taxes on her four-bedroom house. Davison, 76, raised her family there and after 43 years, she really doesn’t want to leave Greenburgh.
Greenburgh doesn’t want her to leave, either.
The town is pushing a program that would let seniors work part-time, for $7 an hour, to help pay off some of their property taxes.
“People shouldn’t have to sell their house, move away to a place with less taxes, leave behind their family and friends,” said Town Supervisor Paul Feiner.

… The proposal has caused a stir in Greenburgh, a town of 90,000 in Westchester County, which has the nation’s third-highest homeowner property taxes. The plan would be unusual if not unique in New York, but similar programs are considered successes in Colorado, Massachusetts, South Carolina and elsewhere.

Davison, who suffers from arthritis and sciatica and needs a walker to get around on her bad days, said she pays about $12,000 a year in property taxes - perhaps $2,000 to the town - and has already taken out a reverse mortgage to pay her bills. via My Way News

Think about it, you have a senior paying 12,000 dollars on her home. Now if it is a mansion that is one thing but I sincerely doubt it. It is easier to turn them into indentured servants to pay off the debt created by an out of control bureaucracy.

My mother in law is in the same boat. She lives in a nice condo in upstate New York. She could sell it today for about $150,000 dollars. Her taxes are $9,000 dollars in a region of the country that is not doing so great. The pressure to pay these taxes every year are a sore point in her life.

The problem that these governments are going to have to face is that people will vote with their feet to stop paying these taxes. Where I live a $150,000 dollar home will pay about $2,000 in taxes and that is before the senior exemptions. Think of that, the regional governments in New York have to collect $7,000 more to supply the services in New York than Georgia.

Tell me we could not get rid of a lot of waste very quickly if people really cared to up there. Instead, making seniors work to pay off the debt is a better solution to these blood suckers.

Last one out turn off the lights.

If you are wondering why so many new homes were built recently, it may be a by-product of the technology boom. Wired has an article that places the blame on the housing boom on techno-lust, but I just attribute that to the prism that they see the world through.

However, this paragraph is telling. According to a study cited by Wired over 74 percent of people wanted a new home. That could explain the skewed numbers builders looked at, but with the inventory of existing homes the math does not add up.

Of course the amount of homes in unsold inventory does not add up so logic may not play a part in the equation.

Still, you’d never guess it when shopping for real estate. That charming 1920s three-bedroom craftsman wasn’t built to accommodate all these new devices, much less modernized subsystems like updated electrical, solar power, or flexible plastic plumbing. Which is one reason Americans have come to prefer new homes to pre-owned ones. Check out these numbers: In 1993, just 48 percent said they hoped their next house would be newly built. By 2004, that number had grown to 74 percent. via Wired

Merry Christmas!

This is a sad sign of the tough foreclosure market across the country, the Foreclosure Dog. There has been a large upturn in the  amount  of dogs that are being turned into animal shelters across the country as people are forced to give up their homes and the ability to care for their pets.

Both dogs we have had over the years are pure bred mutts. They did not come from a pound but instead from friends who do animal rescue. I am a dog lover and think that having to make the brutal decision to get rid of the family dog because of economic problems must be an absolutely miserable experience.

If you are in a position to adopt a dog their are many in the local animal shelters. And some may be foreclosure dogs.

Last week, the Franklin shelter recorded its own record number — 360 dogs in a building meant to hold 250. About half were surrendered because of their owners’ economic problems.
In December 2005, when foreclosures were lower in the county, only 12 owners surrendered their dogs. Last December, 209 were turned in, 28 of which came during the four days before Christmas.
Franklin County Commissioner Mary Jo Kilroy said foreclosure dogs tell the bigger story. “That’s an incredible marker when you’re giving up a member of your family,” she said. via The News Journal

Who says sales in Northern California are slowing down…

Locksley Hall, the  12 thousand square foot mansion owned by mining magnate, has sold for full price. The Marin County home overlooking San Francisco Bay was originally bought for a mere 5.5 million dollars but extensive upgrades totaling an estimated 32 million dollars enabled Robert Friedland and his wife to sell the home for the full listing price of 65 million dollars.

The 1895 mansion, on a crest with sweeping views of San Francisco Bay, sits on an acre on Belvedere Island, about a half-hour drive north of downtown San Francisco. Called Locksley Hall, the 12,000-square-foot mansion has a wraparound veranda, and there’s a pool and a caretaker’s studio. The sale accord includes the home’s furniture, confirms listing broker Olivia Hsu Decker, co-owner of Decker Bullock Sotheby’s International Realty via RealEstateJournal

In a sad story, Rick Hendricks of Beloit, Wisconsin, died after falling through his garage roof. The 66 year old was the founder and CEO of ABC Supply and the 91st richest man in the  United States.

The self made billionaire fortune was built by consolidating many of the suppliers of roofing  and building supplies across the country. Hendricks also through his Hendricks Development Group owned over 20 million square feet  of real estate.

Rock when he fell through, the sheriff’s department said. He suffered massive head injuries, according to his company, ABC Supply Co. Hendricks was the founder, chairman and chief executive officer of the company, the self-described nation’s largest wholesale distributor of roofing. The Beloit-based company does about $3 billion in business a year.
Hendricks had a net worth of $3.5 billion in September, according to Forbes magazine. That made him the country’s 91st richest person, according to the magazine’s ranking of American billionaires. Hendricks, the son of a Janesville roofer, worked side-by-side with his father growing up. A high school dropout, he started his own roofing business at age 21, according to his biography on ABC Supply’s Web site. via  ajc.com