Rising Home Prices – Really?

July 28, 2009 Leave a comment

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Like it or not, one of the most pessimistic (some would argue realistic) housing economists of our generation, Robert Shiller, will probably always be associated with the worst housing downturn since the Great Depression.  He was one of the first outspoken people to warn us of an impending ’housing bubble’ as far back as 2003.  At that time, most economists scoffed at his assertions and at his newly created S&P/Case-Shiller home-price index.  He was like that single, stray cloud that blocked your personal sun on the beach on an otherwise beautiful day.  Annoying, but if you waited long enough, it would pass and the sun would return.  One small problem - Shiller’s cloud grew into a full-fledged thunderstorm that very few people saw coming.

His S&P/Case-Shiller home-price index has been quoted far and wide as the definitive read on the housing market.  For months, it hasn’t been a rosy picture, but today that sun returned to the beach.  For the first time in three years, his index showed an increase in nationwide housing prices of .5% for the month of May.

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Tryin’ to Understand the Economic Crisis

July 27, 2009 Leave a comment

 

Everyone and their brother has an opinion or theory on how the country got into this economic situation.  Some people blame Wall Street, the financial institutions and banks; other people take direct aim at REALTORS®, builders and mortgage companies; still others impugn the American consumer and their fixation with obtaining easy money with no strings attached.

I found this short video enlightening, insightful and explains the economic predicament about as well as any that I have read, heard or seen.

Related articles of interest:
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Lancaster City Bucks National Trend

July 15, 2009 Leave a comment

 Lookin' good Lancaster!

In a story that appeared in the Intelligencer Journal/Lancaster New Era today, the Lancaster City Council Finance Committee touted the city’s recent positive trends in real estate activity and growth:

Despite a significant decline in the real estate market nationally, the city saw only a 0.5 percent drop in real estate transfer taxes last year.  That shows a strong interest in living in the city.

And, the transfer tax decrease comes from comparing 2008 to the previous three-year average.  Those three comparison years, 2005-2007, happened to be the city’s best three years ever.

And the city experienced a 10-year high in the number of building permits issued, with $115 million in new construction activity in 2008.  That level of investment is the third highest in city history, behind only 2006 and 2007.

New businesses are opening downtown, redevelopment is continuing in the northwestern quadrant of the city and the new Lancaster County Convention Center and Marriott Lancaster at Penn Square Hotel recently opened. ¹

This is great news and should be shared with all Lancastrians - – - so why did it appear on page B4 buried at the bottom of the page?  The front page of the newspaper ran the following four stories:

  1. Jurors Hear 911 Call – Story about a local murder trial (negative slant).
  2. Good Man Who Got Greedy is Jailed – Story about a banker who swindled friends and customers (negative slant).
  3. Fumo Gets 55 Months in Prison – Story about sentencing of Pennsylvania lawmaker for corruption (negative slant).
  4. Welcome Back , Potter – Frivolous piece about the latest installment of J.K. Rowlings’s newest movie (fluffy slant).

Surely the powers that control which stories that are run on page one of the Intell/NE  could have found a small corner of the front page to trumpet the accomplishments of its own city?  I guess that’s the reason why I’m not working at LNP as a newspaper editor.

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¹ Harris, Bernard. “City Audit Shows Positives and Negatives.” Intelligencer Journal/Lancaster New Era [Lancaster, PA] 15 July 2009, Metro Edition, Local Section : B4.

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New Home Valuation Code of Conduct (HVCC) is a Quagmire

July 12, 2009 Leave a comment

What a mess!

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The real estate industry has been operating under the new HVCC guidelines for a couple of weeks now and we are beginning to see the ugly results of this misguided set of government regulations.  In a preliminary report issued this past week by the National Association of REALTORS® (NAR), it finds that the HVCC is having an adverse impact on housing markets.

Before I get into the actual results, let me spend a minute and tell you about what this new set of guidelines was supposed to do.

The HVCC was intended to promote independence in the appraisal process and, thus, help ensure that appraisers and the appraisal process may be relied upon as part of sound underwriting for financial institutions.  What that actually means is that the loan officer who is working on your loan no longer orders the appraisal on your home.  It is done through the lender who either has an in-house process for appraisal management issues or, more often, it is done through something called an Appraisal Management Company (AMC).

While this may not seem like a big change to you if you are buying a home, it can possibly be a much bigger change than you might think.  Prior to May 1, loan officers, REALTORS® and appraisers all communicated as needed regarding your home and home financing and it wasn’t uncommon for everyone to be on the same conference call if needed.  But now that the HVCC rules are in place, the only way the loan officer or REALTOR® will know who the appraiser is is if by chance the appraiser calls them.  In other words, no one talks to anyone to clarify anything!

Now, on to the findings of NAR’s analysis:

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Lancaster’s Real Estate Market Improves

July 10, 2009 Leave a comment

The gap between the 2008 and 2009 real estate markets in Lancaster County is down to a razor’s edge.  On Wednesday of this week, the front page of the Intelligencer Journal ran the following story:

Market Here For Housing Gets Better ¹
Numbers for pending home sales improve

The housing market in Lancaster County continued to rebound in May, creeping ever closer to 2008′s level, local Realtors reported Tuesday.

The number of pending home sales here was down only 2.5 percent from the May 2008 figure, the smallest gap so far this year, according to the Lancaster County Association of Realtors.

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Advance! Advance!

July 1, 2009 Leave a comment

Keep movin'!

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In a report released today by the National Association of REALTORS® (NAR), the Pending Home Sales Index advanced for a fourth month in a row.  Granted, the increase was only 0.1% from April to May, but it was still good news.  In addition, the index continued a four month positive trend which is the first time that has happened in nearly five years.  On an even brighter note, the index rose a whopping 6.7% when you compare it to May of last year.

We do need to temper our enthusiasm; however, because a rise in sales contracts may not yield a like increase in completed sales.  Lawrence Yun, NAR’s chief economist said, “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions.”

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“It’s in the Dirt” – The Low-Ball Offer

June 9, 2009 1 Comment

"And the payoff pitch is - - in the dirt!

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I consider myself a ‘casual’ baseball fan.  I watch a couple of games a year on TV and maybe take in a minor league game every once in awhile.  While most guys attend games to watch balls fly out of the ballpark (“Chicks dig the long ball!”), I’m more cerebral and love a good pitcher’s duel.  There is nothing like watching a pitcher that has total control over his pitches as he nibbles at the corners of the strike zone trying to get a batter to swing at a bad pitch, or if they make contact, will weakly dribble it into an infielder’s glove for an easy out at first base.  However, there is a fine line between nibbling at the corners and just throwing a pitch away.  It’s hard to define, but you know it when you see it.  The same applies to submitting an offer on a listing.  There are some offers that cause the seller to take a good hard look at (and occasionally take a swing at) while there are others that are real head-scratchers.  As in baseball, the low-ball offer that is a waste of everyone’s time is hard to define, but I know it when I see it.

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WARNING: Overpricing Your Home is Hazardous to Your Wealth

May 11, 2009 Leave a comment

The health of your money is at stake!

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The typical homeowner wants to get the most money for their home when it comes time to sell.  That’s just human nature.  So the natural inclination is for them to price their home for sale above their home’s true market value so as not to leave any money on the table.  Seems like a wise move on the seller’s part; however, this strategy is loaded with pitfalls that will actually lead to less greenbacks in their back pocket.

Keep in mind that the seller of real estate does not determine what it actually sells for – - – buyers do (see my previous post).  So with that in mind, let me review the dangers associated with overpricing a home when it is put on the market for sale.

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