Obama Puts Real Estate On The Back Burner

Fixed mortgage rates ticked up this week as the housing market ended 2011 on a high note.  New construction of one-family homes rose 4.4 percent in December to an annualized rate of 470,000, the most since April 2010. Existing home sales increased 5.0 percent at the end of the year to 4.61 million houses, the largest amount since May 2010. Furthermore, pending home sales in November and December averaged the highest reading since the March and April 2010 period.

With all that good news I feel like I should be drawing happy faces on the next line—but the fiscal train wreck is still coming.  The American family and the American political system are cracking up.  We’ve gone so far off the track that a little good news is just that, a LITTLE good news, and certainly not enough to save the country.

It was clear in this week’s State of the Union speech that our Narsissistic President just doesn’t see these issues clearly—it’s as though he wears rose-colored glasses, and sees things as he wishes they were.  “The economy could have been worse”, said he.  And then he looked right at me and said I should thank him for killing Osama Bin Laden.  I should be grateful for his nixing the pipeline.  I should be proud of his efforts to support poorly run companies like Solara—Dane, he said, I think you owe me for all my hard work.  Really, I thought--glad you're back from another vacation, but what about spending a few minutes being a leader?
As David Brooks of the New York Times wrote, “The president is making a mistake in running a Sunset Boulevard campaign, he is convinced he is big; but it’s the presidency that got small.”

Brooks says politically the president has to resonate with voters who feel the country is on the wrong track.  Prudentially, the president has to prepare for the likelihood that the economy is going to hit another rough patch this year.  If Greece leaves the Euro or if the French banks implode or if the Iranian crisis comes to a head.  If any of that happens, the desire for profound change would be overwhelming and the candidate with only a few carefully targeted tax credits would get blown away.
Meanwhile over at the 18^th debate Republicans continued to speak with epic alarm about the nation’s problems.  They are unified behind big tax and welfare state reforms that would purge Washington and shake things up.  But they are now mired in slinging mud at each other.  Romney and Gingrich remind me of two little boys in snowsuits trying to push each other over. 

What they need is a carefully written list of topics that would be big ideas that will resonate with Americans, and which will lead the country to prosperity.  When these “presidential” issues are discussed, there are only a half dozen or so key topics: 1.)  The economic health of the United States, including employment, entitlement and foreclosure/bankruptcy laws.  2.) The support and enforcement of existing laws, particularly as they relate to the protection of our citizens and our borders.  3.) The possibility of a new tax framework that would be both simple and fair—and may as well be a flat tax.  4.) Our future international relationships—including the annual “gifts” we bestow on friends and enemies alike around the globe.  5.) The care, support and growth of our military.  6.) Support of (and preference to) American business and within that topic I include real estate.  Here our president should be, if not a defacto leader, then at least an interested cheerleader.

In his State of the Union the President was sketchy about the details of a new bailout but talked about giving every responsible homeowner an opportunity to refinance at today’s historically low interest rates.  He said on average each homeowner who refinances would save about $3,000 a year that could be spent on other needs, thus bolstering the economy.  Naturally this “opportunity” will not go to those who most need it—many of whom are on the brink of bankruptcy, so are not as the president says,“responsible”--or those who made and protected their investments by paying off their mortgages.  This bonus is earmarked for the vast middle group of folks who have been making payments on their homes, but owe more than the house is worth.  It’s only a bailout if you qualify.

Dane Hahn is a real estate professional practicing in Englewood.  He can be emailed at dane.hahn@gmail.com. by phone at 941-681-0312.  See him on the net at http://www.danesellsflorida.com/

It's the jobs, Stupid!

Houses on the Southwest Coast of Florida are getting more affordable.  I think that it’s worth looking at "what's affordable" in light of the current conditions.  The National Association of Realtors keep a ton of data on sales and determine what regions of the country have homes which are the most affordable.

They determine “affordability” by using a bunch of formulas and a little black magic, but essentially they try to determine what the average pay is in a given area—let’s say in a county like Sarasota or Charlotte.  And from that average, they would determine if the average wage earner could afford the average home.  So if the average home was offered for sale at no more than three times the annual income, that county would be deemed affordable.  That’s a function of minimum lending guidelines, which seem to draw a line at lending more than 3x a borrower’s annual income.

This takes into consideration the types of income on a county-by-county basis, vs. the types of homes and their prices.  It may also take into consideration the “bubbles” that occur in areas where jobs pay particularly well—like Hollywood and Washington, DC. and where homes are particularly expensive. (But may still be considered—by the NAR—affordable.)

Ours is a region of two economies—our local economy and our tourism economy.  Unlike so many regions, our tourists are not just buying bathing suits and sun tan oil; they are also buying homes, even if their jobs are in London or Berlin or Rome.  This tends to skew the numbers a bit, driving some prices up and causing some very expensive homes to sell right away while other more moderately priced homes sit on the shelf, just waiting patiently for a buyer to come along.

Although we are seeing a “blip” in the sales of homes for maybe last month, there is no telling just where we are going at this moment. 

Many economists see the single biggest problem in the stalling economy as the continuing depression in the housing market, I would suggest that getting America working again will solve the housing issue.  How many people want to move, either up or down—but can’t sell the house they are in.  Most don’t have the luxury to buy their next house without selling the one they are in.  So I say jobs and the ability to borrow money is the cork in the housing bottle.

With about one-fourth of all houses in the United States in foreclosure or still underwater -- with mortgages exceeding their market price -- millions of Americans face such severe financial problems that they cannot begin to resume their normal roles as consumers, move to new jobs or finance their small businesses.  No matter how hard they wish—even pray, the market is pretty well stalled.

Many have little prospect of regaining their lost financial security. The housing bust wiped out more than half the $13.5 trillion that homeowners had in equity in early 2006, according to Federal Reserve data.

In addition, the near-halt to construction of new housing has left several million once-well-paid workers -- many of them with advanced skills and years of experience -- either unemployed or just getting by with lower-wage part-time work.

Like the troubled homeowners, most of these workers face long odds against recovering their old middle-class lives unless the industry revives.

As for financial institutions, billions of dollars in bad mortgages have become an albatross that undermines lenders' basic soundness and discourages new lending for almost any purpose. Weighed down by steep losses in its home-lending unit, Bank of America is preparing to cut 40,000 or more jobs nationwide.

The direct and indirect ties between housing and businesses of almost all kinds are a big reason for the overall lack of economic growth and high unemployment. For makers of building materials, producers of furniture and kitchen appliances and even for grass seed suppliers, the ongoing devastation of the housing market means they also have little reason to invest in expanding operations or hiring new workers.

The health of the housing market is a key element in determining the confidence and spending of consumers, more so than stock prices, because homes are more broadly held by the public.  So it came as a bit of a surprise to many that President Obama, in unveiling his jobs-creation package, said little more on the housing issue than that he would help "responsible homeowners" refinance their mortgages.

Seen any of that yet?  Me either. So far, Washington's record of dealing with troubled mortgages is not encouraging. The government's main refinancing program has helped far fewer homeowners than expected given the estimated 4 million homeowners who are still eligible.  Its loan-modification program for distressed borrowers has proved even more disappointing.

As for the private sector, the legal and economic mechanisms that are supposed to force a solution -- such as foreclosures and renegotiated deals -- also have been largely ineffective.

Dane Hahn is a real estate professional practicing in Englewood, Florida.  He can be reached at 941-681-0312 or by email at dane.hahn@gmail.com.  See him on the web at www.danesellsflorida.com.

Marketing You Home in Pictures

The data we see everyday from the National Association of Realtors always stresses that buyers start their real estate hunt on line. And with that in mind it’s critical that our listings have EXCELLENT photos.  Because—as they say—you only get one chance to make a good first impression.

The thinking is, a photo is worth a thousand words and really good photos can add to the price and value of a home because images sell.  And good photos sell better and faster.

The advertising that we are bombarded with every hour of every day is created by highly paid marketing agencies (ad agencies) and these ads are designed to tempt users of the product or service with the feel, look, and benefit of the advertised product. When it comes to selling a home, however, some sellers aren't as concerned with how their home is pictured.  They don’t realize that bad photos and weak marketing can cause their home to stay on the market longer and actually generate little or no interest.

Because there are plenty of homes for sale, one more home coming on the market can lose it’s identity unless there is something special about it that catches the eye.  With all these homes vying for attention from buyers, it only makes sense to make the marketing scream, "I am a must-see home. I 'm so pretty, I won't last long in this market."  Sell the home in pictures, I say.

Too often, professional quality pictures aren't taken. Instead, a point-and-shoot camera is quickly grabbed and put to work, or worse an assistant with a phone-based camera shoots the pictures so there are photos for the multiple listing.  Just thumb through the listings and you’ll see what I mean.  It’s true some of the quick and easy photos can be nice images, but professionals use pro cameras, lights, and editing tools for a reason. This is about making your home look its best.

As you no doubt know, photos can be deceiving.  That being said, I almost never run a photo that has not been enhanced a little.  Better lighting, adjusted color and cropping all help present the home in it’s best “light”.  But in fact, if your photographs are too heavily touched-up, you might find that potential buyers are turned off or even angry about what they see when they arrive at your home.  A talented photo editor can make the worst flaws in a home just go away, but that kind of editing is almost always misleading to a buyer.

Marketing the home by using photographs that display the strengths and how each room can come to life can help a prospective buyer see himself in the home. Think about model home flyers.  You never see a cluttered kitchen counter in a catalogue, you never see a fridge full of magnets with dozens of photos plastered on the doors, you never see a dirty hand towel hanging from a hook.  The photos that sell best are almost always of depersonalized spaces—ones that buyers can see as their own.  To make these photos, homes need a thorough cleaning and sometimes even a moving of furniture for the photos (we call that staging) to show size and flow.

Non-professional photographers often make the mistake of using harsh bright lighting.  Just turning on the flash is not always the best bet.  Bright flash photography can cause a photo to be “blown out” and doesn't give the home a warm, inviting appeal.  A good photo-editing program will add shadows or brightness as needed—and waiting for an overcast day to take shots will limit the deep shadows and bright highlights on the exterior too.

Most Realtors I know have decent digital cameras. But not everyone knows how to take great photos. If you’re thinking of selling, you can make the photos of your home, and if you are using a Realtor, just supply the photos to him or her to use in the marketing.  But remember, take plenty of photos and pick only the best ones.  And save a set of them for yourself too, once your house is sold these may be the best pictures you’ll have to remember the home.

Dane Hahn is a real estate professional practicing in Englewood, Florida and Stratham, NH.  You can reach him at 941-681-0312 or 603-566-5460 or by email at: dane.hahn@gmail.com.  

What 2012 Will Bring, Real Estate-wize

I can say with certainty that my crystal ball is still a little cloudy, but:

  

I’m pretty sure that nationally there will be an uptick in the rate of home repossessions in 2012.  The good news here is that Florida is pretty well drained of this stock, and as the vacant inventory begins to dry up, we should be in a better than average position for new sales and the return of very modest inflation in the prices of used homes.

There are many reasons for the massive backlog in the foreclosure pipeline, banks are taking months, maybe even years, to actually foreclose on mortgages in default. The administration is focusing on the backlog of homes out there and are making some wild and crazy proposals that may or may not work.  But the fact that real estate remains a hot topic is helpful to those who homes are in limbo and to buyers and investors who would purchase a home—but had been stymied with the red tape and delays. It’s pretty clear that in 2012 and beyond, the banks will work through those backlogs, which will increase the actual foreclosure rate, but should get new families in the vacant homes over the next few months.

According to the folks at Coldwell Banker here in Englewood, short sales represent more than 40% of their business.  In the coming year, distressed home sales will continue to represent an increasing share of homes on the market.  Buyers will shift from considering whether to buy a short sale to understanding that they must be educated and prepared to do a deal with a seller, a bank or both to access the full selection of homes on the market.

To make smart decisions about what to offer and what to expect on any listing they like, buyers will need this information and be willing to negotiate in good faith with patience as well as to set smart priorities and make realistic comparisons between listings based on their own personal priorities around timing, certainty and seller flexibility.

We’ve all been “dope-slapped” by the dips in home values.  In Sarasota, I have shown condos which in earlier times would have sold for over a million dollars—but today the asking price is in the $400’s.  In Englewood, waterfront homes once in the $500,000 range are selling for under $250,000.  Still, the “affordability index” often discussed by the economists at the National Association of Realtors and the Florida Association of Realtors, is showing that buying a home has never been cheaper.

The cost of borrowing money is at an almost all-time low, the cost of purchasing fine housing is also very low today.  Meaning that as the job numbers finally correct themselves, the cost of housing will likely increase disproportionately over the next 12 to 18 months.  I can’t speak for the other areas of the country which had the same “bubble” we had, and the same “burst” of their bubble—like Las Vegas--but I can speak for Florida, which I see as ready to return to a real estate driven economy.

For years, buyers and sellers have been waiting for that singular event to occur that would cause a quick market recovery.  Well, it ain’t gonna happen.  Americans love instant gratification.  We love to have our cake and eat it too.  But the days of getting rich quick (legally) are over.  Hard work, sacrifice and good realistic ideas equal getting rich slowly, and that’s the best we can hope for now.

You don’t make money in the real estate business when you sell your property.  You make money when you buy.  You can’t sell a property for more than it’s worth, so smart investors buy right, maybe 30% off the going rate, and then either wait for the market to grow, or make repairs and cosmetics to drive up the likely resale price.

Today the investors will look to acquire rentals that will return 150% of their monthly costs, and hold these homes as investments.  Flipping is so yesterday.  Ordinary citizens should relook at a refi or remodel and be content where they are for the long haul, or decide their homes no longer fit their lifestyles and their finances, divest of them and move on.

But the good news is, people will make these decisions based on what is or is not sustainable for their lives and their finances, and not based on inflated hopes about what the market will or will not do.

Dane Hahn is a real estate professional in Englewood, you can contact him at 941-681-0312 or by email at dane.hahn@gmail.com. Or see him on the web at www.danesellsflorida.com.

She Asked, "How Do I Get My Deposit Back?"

When the phone rang this week and caller ID said New York, I wondered who might be calling.  Turns out it was a gal from Long Island who had entered into a contract to have a house built near the (Donald) Trump Towers over near Miami. She explained that they had contracted to have the house built in a pre-construction deal, and put down $100,000 in escrow as the down payment.

Here her story was a little sketchy, but in a nut-shell, here was her question:  The contract was entered into and the delay to build the house was supposed to be about a year. Apparently the builder completed the home in time as scheduled.  Something happened when the house was finished and ready which caused them not to close.  Although she had answers to most of my questions, she did not seem to know why the builder had not returned her deposit.  And, obviously, she wanted to know how to go about getting the funds released from the builder’s escrow company.

Perhaps I should tell you that she and her husband did not use a Realtor.  They had met with the builder’s representative on site and concluded their negotiations there.  So in truth, they have no advocate, and really nobody helping them.  The builder had his representative and his lawyer—and maybe his escrow company.  The escrow company is normally a law firm.

The Florida Real Estate Commission, and for that matter the licensing bodies in every state have serious regulations when it comes to handling other people’s money.  I would say that there are many gray areas in real estate, but when it comes to handling funds, it’s all black and white.  You can’t co-mingle funds, meaning mixing together client’s funds with your own; you must account for every penny you have received; and you may be required to even pay a modest amount of interest on money you are holding. (This is an effort to curtail real estate companies from keeping any interest they may earn while they are holding your money.)

So my caller, went on to say that she had repeatedly asked for her money back.  The reply she got was that the builder didn’t want to return it, but offered instead to give her credit toward another unit.  Her answer: she just didn’t want to buy in Florida anymore. 

I asked her if she had ever signed a “Release and Cancellation of Contract”.  This is a form that triggers the return of deposit by the escrow company.  It’s a simple form that asks both parties to sign off on the release of funds.  If the seller won't sign off then the third party holding the escrow has no choice but to continue holding the money until there is a determination, maybe a judgement as to who gets it.

So to get a judgement, you can go to a judge and explain the situation—she was not willing to do that.  Too costly to sue a builder in Florida if you live in New York, she said.  There is a court expressly for real estate disputes, called Interpleader, but when I discribed that, it was also going to be too onerous for her.

It all sounded so one-sided and seemed so unfair while she was explaining it to me.  But then, after we hung up, I began to have my suspicions that all may not be exactly as reported.

Now I think my caller was probably asked to close on the home at about the time the Miami market had pretty well dumped.  I suspect they took a hard look at this brand new home they contracted for, and realized that it was now worth maybe hundreds of thousands of dollars less than they agreed to pay.  They realized it would be cheaper to walk on the $100,000 deposit, than to buy a house worth maybe half of the contract price.  (And if their $100,000 in escrow was 20% down, this would have been a $500,000 house, now worth maybe $245,000). 

So I now think my caller waited until the builder had sold the property to another, (so could not force them to buy it) and then decided that since the deposit was still in a third party’s hands, that she might make a claim for it, and might be able to make a case to get it back.

In any case, whether I’m right or wrong, the money in an escrow account stays there safely until all parties agree to release the funds and determine the disbursement (meaning all the funds go to one or the other parties, or is split some way, or goes to a new third party--), and that once disbursed, all parties hold the other harmless from any claims or actions.

So the money is safe, but it may not be hers any longer, that will be up to the judge.

Dane Hahn is a real estate professional in Englewood, Florida.  He can be reached at 941-681-0312 or at dane.hahn@gmail.com. See him on the web at http://www.danesellsflorida.com/