The housing bill is NO SUCH THING.....

Well it finally makes sense and here's why: This was NEVER a housing bill. It's a banking bill. The legislation signed this week, has hidden costs and in some cases bald faced omisssions that could have helped people. Actually the bill will accomplish what the government has been trying to do for the better part of 2008: Save the banking system by hopefully stemming the tide of foreclosures.

As far as consumers go, the $7500 tax credit for those who buy homes between now and September 2009 is an absolute joke. What hasn't been spoken of is that the credit must be repaid over 15 years which ultimately makes it a loan. Say what? Isn't it this kind of thinking that got people into trouble in the first place, prolonging a penalty when they purchase real estate?

While I'm at it, shame on the National Association of Home Builders and the National Association of Realtors for not telling people about the payback aspect up front in the web site they set up to tout it's virtues. It's garbage like that which wrecks the credibility of Realtors and Builders across the country. Aside from my irritation with the NAHB and the NAR on this, there are still questions about it's affect. Do you have to take the credit? If you don't what will happen when you sell the home and the government wants it's repayment of the credit? Will consumers be responsible for documenting they did NOT accept the credit and if so who's telling them that? As usual a governmnet program has created as many questions as it answers.

The bill also placed a moratorium on risk based financing until September of 2009 as well which was just implemented within the last 30 days. What about those who got a loan in July of '08? Will this be retroactive for them or are they just..ahem..... stuff out of luck?

What about the points of the bill that are attempting to help those in foreclosure? This cornerstone of the housing legislation is intended to ease a shock wave of foreclosures. Many homeowners are in crisis because of rising rates on adjustable-rate loans. They can't meet payments, but can't sell or refinance because of falling home prices, which put them in the position of owing more money than their homes are worth.

Under the rescue plan, to be administered by the Federal Housing Administration, new mortgages must have a fixed rate for a term of at least 30 years and be no more than 90 percent of the home's value. Home equity loans will be prohibited during the first five years. In addition, the borrower will pay an annual fee of 1.5 percent on the remaining loan balance.

The program, which takes effect Oct. 1 and ends Sept. 30, 2011, is expected to help at least 400,000 distressed homeowners, but lenders are not required to participate. Financial institutions won't want to forgive any debt unless they are pretty sure the property is headed for foreclosure, a situation in which they could lose even more. In addition, the mortgage must have been originated on or before Jan. 1, 2008, and be on the borrower's principal residence.

My principle question still is if these home owners are in foreclosure, hasn't their credit been damaged so significantly that no sane voluntary lender would even agree to refinance their current loan?

I suppose this bill will help some but there are still going to be numerous home ownwers who have fallen and will never get up. Like most things that eminate from Washington, they look and sound good in the media but at the end of the day are more for show than actual benefit.

A Look Ahead....
Rarely has it been so difficult to glance forward into the real estate crystal ball as it is today. There are enormous challenges ahead both statistically and psychologically if the market is to improve. Famed motivational guru Tony Robbins was on the Today Show last week and predicted that every generation has it's defining moment of challenge and that this was ours. So be it. If you are involved with real estate in any way, here are a collection of thoughts on where we may be heading....

Supply of homes
This issue isn't going away anytime soon. Nationally and locally about 1 in 3 homes sold is a bank owned property with that percentage going up from about 23% in 2007. Think about it. 1 IN 3. Bank owned homes are overly competitive with normal resales, they wreak havoc on existing values by dragging down comp sale info and are still rising in their numbers. This may change in 2009 but not this year. In addition there are still plenty of resales that are non bank owned that must be absorbed by the market for the supply - demand line to improve.

Interest Rates
Conventional rates have gone from 5.8% in February of '08 to 6.75% as I write this on 7/26/08. Forget what the Fed will do because the market has already done it. Rates are up, will probably inch higher and will be a long term negative on the market. The only way to defeat this would be to buy yesterday. The other side of this is that rates are now dependant on an applicant's credit score. Perfect score and you may end up at 6.75%. Have a ding or two and you may end up at 7.5% for the same loan. Again, another readjustment in the market that will provide a challenge.

National Economy - What it all means
We may not be in an overall recession but it certainly feels that way. Many would argue we are certainly in a housing recession/depression as it sits today. This is not going to be a short term dip. This retreat in the housing market has all of the potential of being a 2-3 year problem to resolve and in some micro economic markets and price points, it may run much deeper than that. Still, what it means is that now more than ever consumers MUST make good investment decisions regarding real estate. Those that do will recognize significant appreciation and value growth over the next few years. This is not like the good old days when all you had to do was buy anything when the market was at the bottom of the cycle. You still must make good decisions regarding a purchase and if you do you'll reap the rewards. If you choose poorly you may simply be acquiring a static investment that you'll end up being the caretaker of over the next few years rather than one who reaps it's benefits.

Questions?
Comments?
Donations?
Greg@GregCooper.com
317.848.GREG (4734)

Bye bye....
another piece of the American Pie.

With 3rd floor doors thrown open and the moving trucks in full process, the cynical side of me wanted to open this post with an audio of Queen's, 'Another one bites the dust.' Can't do it. There are too many real people who are going to suffer from Davis Homes' Indiana closing. I simply can't dance on their 'free with select home model purchase' neatly excavated grave. I watched several of the casualties carrying out their belongings in white file boxes Wednesday afternoon from my next door office at 3801 East 82nd Street on Indy's north side. 51 years of building homes in our city and that's it. The usual array of media trucks circled with NBC, CBS, ABC and FOX affiliates all getting their plausibly live shots from the front corner of the building.

In an odd way it's a necessity. This mess we perceive to be the American Dream is still spiraling down like a child's broken glider on a grey Midwestern afternoon. It won't start to get better until the herd has been thinned, the 'in lurch' consumers moved on and the weaker entities like Davis vanquished along the side of the free market road. There will be others. Just look at the numbers across the country.

While we seem to be getting a reprieve from the gas price monster, only now is the real carnage from the mess of our economy becoming clear. While oil prices have certainly been inflationary, which is also another shoe yet to drop, the perfect storm of a housing nightmare is only in it's early stage. In Indiana we've built over 100,000 NEW homes since 1998. That's one NEW home for every preexisting household in the 11 county metro. Can you say oversupply, class? I have countless clients who have bought in the starter home category over the last decade only to see the avalanche of new product quickly drown out their hopeful and short lived appreciation. In some ways it's hard to feel for the behemoths that are track development builders. Countless times I saw builder's own lenders take a shortfall from one home and build it in to the mortgage of a new home they were selling a particular prospect. Congratulations Mr. and Mrs. Customer. You've just become the proud owner of a $13,000 equity deficit on the day you closed on your new home.

Through all of the muck, there is a ray of light, albeit a faint one rising in the east. It's the ray that is telling of a new old day in home ownership. A day when buyers actually have to posses a down payment, a job and a savings account to buy the American Dream. It won't be easy teaching a lost generation of twenty and thirty somethings of the new old way of ownership. Hopefully when that school gets out, we won't be staring at another steaming pile of destroyed equity like we are today.

There is the edge of the chasm and there's the abyss.....
OR
the candid thoughts of buyer and seller in Today's New World of Real Estate:
_______________________________

Potential Buyer: Every home I see just isn't quite right and the prices continue to drop. Why should I make an offer now?

Seller: My home was appraised above where I'm currently priced. Why would I reduce it any further?

Potential Buyer: This home has been for sale for 10 months. Why wouldn't I offer 80%of the list price?

Seller: I know what the home down the street sold for this past Spring and our property has more amenities and a better lot.

Potential Buyer: The interest rates went up to 6.75% today. We have to offer less so that we can get in without strangling ourselves.

Seller: What do 233 foreclosures in my zip code have to do with my value?

Potential Buyer: If the market is that bad maybe we should wait until 2009 to buy when we're sure we're at the bottom.

Seller: If I don't have any showings, why should I reduce my price?

Potential Buyer: What do you mean I now must have 10% down payment instead of 3%?

Seller: We may have to end up asking Wachovia for a short sale to get rid of it.

Potential Buyer AND Seller: Let's just wait until the market changes.

Mortgage rates rose above 6.7% Tuesday for the first time in 5 years. The price of Oil is coming down and that's good but inflation has become the boogey man as Oil takes a breather in the grand economic scheme.

Food for thought: In late 2004 through mid 2005 mortgage rates hovered from 4.8% to the low 5% range. How many people are going to be willing to take on 1.5 times in mortgage amount (what it would probably take to encourage someone to 'move up') and go from a 4.8% interest rate to a 6.75% rate? That's why this whole mess is going to take some time to clear itself up....

Questions? Comments? Donations? Greg@GregCooper.com or 317.848.GREG

Coversation Of The Week:

Expired Listing Seller: "I'd like to speak with you about listing my home"

Me: "Certainly....tell me about your property's history"

ELS: "Well it's been for sale for a year with no showings and no price adjustments."

Me: "Are you aware of the available inventory, how many homes have sold in your price point and location?"

ELS: "No....but I built homes for several decades and I know what this property's worth."

Me: "Have you had an appraisal?"

ELS: "No....by the way you're not going to be one of those agents that keeps telling me to lower my price, are you?"

Me: "Why would I actually want to waste your time with nonsense about supply and demand, inventory absorption and silly little things like how buyers actually feel about your property?"

ELS: "Good....I think we're going to get along just fine...when can you come out?"

Me: "I can be there just after nine on Monday, July 21st, 2010. Looking forward to seeing you. One more question Mister ELS....are you aware that we're in the most challenging real estate market since the '70's?"

ELS: "No but I've got the entire Pable Cruise collection on vinyl. I loved the '70's!"

To think some people believe we Realtors are overpaid.

Questions? Comments? Donations? Greg@GregCooper.com or 317.848.GREG (4734)

Well someone else finally said it.......


I've made some fairly strong statements in the past 60 days about this being the most challenging housing market in the past 50 years and in response several of you have taken the liberty of 'disagreeing' with me. This morning's Wall Street Journal (7/14/2008) takes it a step further.

The worst housing market since Herbert Hoover was in office?


There are some dead straight answers to what to do to sell your home in this piece and many of you will not like them. There remain two distinct constants right now in our market place. First, price, read fire sale price, sells. Second, until all of us call this for what it is...that being a housing depression, it will not resolve itself by market forces. The sooner we all recognize this for what it is the sooner we it will begin to correct itself. Anything else is just fools gold.

Indymac's takeover by the Feds is just another example of banks in trouble. The good news is the customers get their money through federal guarentees. The bad news is that IndyMac wasn't even on the national list of over 160 lenders that were in trouble. No doubt they got hammered by the incredible number of California foreclosures because of the roughly 40% reduction in many Cali property values in the last 30 months. Regardless of the reason, it's not good. Fannie Mae and Freddie Mercury are far bigger shoes that could drop but hopefully won't. With their enormous influence, even just having the Feds step in to save them would be hugely negative in it's psychlogical impact right now. Personally I'd pass on any more bad news.

INTEREST RATES......hovering around 6.4% to 6.5% on a conventional 30 year fixed with Jumbo loads floating in and out of the 8.0% range. Mortgage rates have gone up and will continue to do so. How high they go will determine how long it takes our housing problem to resolve itself.

Questions? Comments? Donations? Greg@GregCooper.com or 317.848.GREG (4734)

Buying a bank owned home is no cakewalk
From Inman News and Tara-Nicholle Nelson

Q: I'm in the middle of buying a house that is a bank-owned foreclosure. It seems like every step of this escrow has been problematic, and I'm wondering if this is a sign that I should not buy this house. For example, we were supposed to close escrow in 30 days, but it's been more than 45 days since the listing agent told us that our offer was being accepted, and I'm just now signing documents. Now they're saying the bank still could take weeks to sign their documents. Is this normal?

A: All across America, Realtors are hearing a low, anguished drone -- like a really loud, really bad case of tinnitus. That sound is the wailing and gnashing of teeth of untold numbers of innocent home buyers in escrow, those brave (but smart) souls who have gotten past their "buyer's block" and decided to take advantage of this buyer's market. What is causing all this toil and trouble? The dramas and traumas of doing a deal with the bank: buying REO properties (foreclosed homes now owned by the bank).

If you are buying anything but a luxury home, REO listings comprise a huge proportion of the homes available for sale in almost every geographical market. So are short sales, but many buyers and Realtors simply refuse to consider short-sale listings (whether this is right is an issue for another column) because they have a relatively low probability of closing and the elements that increase the likelihood of closing are largely out of the hands of the buyer and buyer's broker.

Expect that the bank will not negotiate on price or repairs after your offer is accepted. Expect that the bank's escrow company or closing attorneys will be inefficient and make mistakes, requiring total and complete vigilance on the part of you and your representatives.

Expecting a tumultuous transaction not only prevents surprises, it serves at least two other purposes. First, it will stop you from obsessing over whether your transaction is "normal" and incessantly wondering why your transaction is so rocky, trying to detect some cosmic or karmic significance of the delays and irritations that can be par for the course in REO home-buying. Secondly, it will force you to focus on the vision you are trying to manifest -- the vision of your life in the home after escrow closes.

As such, smart REO buyers obtain exhaustive inspections and really pay attention to their inspectors' reports. With that said, even the normally simple task of obtaining inspections can be a source of drama with REOs. It's common for the utilities to be shut off, and getting them back on can take time and coordination with an overwhelmed listing agent.

Unfair to you, the buyer? Yes. Want to buy an REO property? Then suck it up and live with it, just long enough to get through your escrow. And keep in mind that most REO sellers are amenable to working with first-time home buyers' programs, down-payment assistance programs, providing closing cost credits, taking 100 percent financed offers, and otherwise helping home buyers in ways that individual sellers may not, so the pros of buying an REO can be plentiful.

When REO transactions drag on and on because of the bank's representatives, I've heard buyers ask, "But I thought the banks want to get rid of these properties? I'm trying to take it off their hands -- why don't they want to make it happen faster?"

My reply? Yes, as an institution every bank "wants" to get REO properties off of their portfolio. That is, it is a formal goal of the institution to get them sold. However, any individual transaction relies not on the motivations of the corporate entity, but on the competence, urgency and day-to-day effectiveness of a bunch of individual humans who are not always hard-wired or being compensated in a way that aligns their motivations with the speedy completion of your particular escrow. Will it get done? Probably so. How fast? Depends on the individuals involved.

In the final analysis, if you make sure you're getting a good enough deal to be worth the possible extra stress, you can come out of an REO transaction like a mom coming out of labor -- feeling the effects, but knowing it was well worth it!

Who are your buyers?

All right sellers....it's your day here on America's Real Estate channel.

With all of the confusion about today's home buyers, let's try and quantify who exactly a 'buyer' is in Today's New World Of Real Estate.

Today's buyers are thoughtful, contemplative and VERY cynical. They have been looking at homes for some time and can't seem to find the urgency to make a decision. They trudge through homes for weeks repeatedly finding what would be a good choice only to walk away from every possibility because 'surely we can find a bank owned home for 50 cents on the dollar.' (Pssssst.....here's a hint: You can't. Banks are horrendously backlogged on foreclosed inventory and have no idea what their properties are worth. Odds are slim you'll get them to come to your price and you'll have to wait weeks for them to actually respond to your offer while you miss other good choices).

Today's buyers are not concerned about interest rates, comps or your investment as a seller. 'Hey, time's on our side,' as I was told last week by a prospective buyer....and you know what? They're right. Come Labor Day in Indiana and in many real estate markets across the country there's going to be a sense of desperation in the air. Sellers are going to wake up on September 2nd and realize they could be staring at another winter of paying the bills with no promise that next April things will be better.

Regrettably my trade association, the National Association of Realtors, has wrecked their credibility this year. They and their chief economists stood with stone tablets high on the hill this past January and proclaimed:

'The down market will turn this summer!' 'We are near the bottom.' 'Things will improve in the last half of 2008.' 'Stay calm....all is well!'

When they stole the line from the Titanic's cellist it was obvious they were too clueless to know better. What they have done is a tremendous disservice to home sellers across the country. They created false hope instead of motivating sellers to get their homes priced agressively enough to sell in the most challenging market in 40 years. That's right...this is worse than the late '70's.

Things will improve eventually.
My best guess is we will see some stabilization next Spring with better times ahead in 2010 but NOT before the current foreclosure and inventory mess get cleaned up by natural market forces.

If inflation caused by the high fuel prices pushes the mortgage rates up significantly, then ALL BETS ARE OFF FOR A HOUSING RECOVERY. I would also reiterate what I have stated countless times on this blog: Those that buy during this time will absolutely look back on it as one of the best investments they're ever made.

Those that keep wandering the path from house to house will still be wondering when the bottom will arrive long after values have turned and are heading back up.

Which one will you end up being?

Questions? Comments? Donations? Greg@GregCooper.com or 317.848.GREG (4734)

Hamilton County Named Best Place In America To Raise A Family.....

Read the entire Forbes.com story HERE

See where other places in the country ranked HERE:

Other than that......it's a holiday so next week more on the grind of Today's New World of Real Estate. For now Happy Birthday America!