On Tuesday we'll post the archive of Greg's appearence on 93.1 WIBC from Monday evening. You can find it here during the afternoon of 11/25.

This Too, MUST Pass...

The dust has barely settled on the 2008 election cycle and already law makers are heading towards a significant discussion over the fate of Indiana's property taxes. Governor Mitch Daniels won reelection in part on the promise that he would see through a constitutional change that would cap Indiana's taxes at 1% (for residential) and proportional amounts for investment and business properties. Speaker of the House Pat Bauer has stated (paraphrasing) that he would rather wait until he has time to further evaluate the current system, perhaps readdressing the caps issue in 2010.

To that I would offer this gracious epithet:

@#%& NO!

Here's why:

1) Indiana's housing market has been battered to a higher degree than the national norm in the last 2 years with the utter nonsense that our property tax system has become. ANY additional delay in passing this constitutional cap will cause further damage to the value of real estate in Indiana.

2) Indiana's citizenry deserves the tax relief and consistency that a cap would create and sustain. How about we let Hoosiers know their taxes are going to be reasonable and stable in the near term?

3) Indiana's local municipalities must also have financial consistency in order to plan for schools, public services and the like. Capping property taxes will go a long way to create that stability.

Speaker Bauer, in addressing the issue of the lease of the Indiana Toll road several years ago, I sat listening on my computer as you actually stated a concern you had over such a lease by wondering out loud in the house chamber 'what would happen if we ever went to war with Australia?' That lease put millions of dollars in Indiana's coffers and will end up putting people to work in our state for the better part of a decade. Mr. Speaker, stop jockeying for your personal power and whatever else by doing what is best for the citizens of Indiana. Cap the tax NOW or I as an average citizen may have to take strong punitive action like denying my wife unlimited shopping in your 6th district. Trust me...no one wants their constituents to suffer like that.

Questions? Comments? Triptophan Hotline?
317.848.GREG (4734) OR Greg@GregCooper.com

Here it comes...2008 is already on us. Subprime mortgage messes, property taxes, over supply of homes, changing Indiana property value...take your pick. It's all going to affect real estate in 2008 and what could be more exciting than hearing me talk about it? For just over a minute and a half, peer into the crystal ball with me and find out. For those of you dozing off during the video there will be a vitual class monitor walking the digital aisles with a ruler to keep your attention. As you may notice even though this is factual information, one can't take themself too seriously. On January 21, I'll have a video "state of the market" that will provide an overall summary and some specific predictions as to where we're headed this year.




As always if you have comments or questions, here's where to find me:

Greg@GregCooper.com or 317.848.GREG (4734)

Does the media have ANYTHING good to say about Real Estate?

I was recently interviewed about Indianapolis Real Estate by CNN Money for a November publication date. In having many dealings with the media in the past I've learned that you must have your facts 100% straight and present them in a clear and concise way. In essence it's like a politician speaking to the press which frankly isn't much of a surprise anymore. Business has boiled down to politics in many cases anyway. The questions that were asked were inflamatory and certainly had a direction. "Why has Indianapolis' equity growth become so anemic?" "Isn't it a terrible time to buy real estate in Indianapolis?" "Doesn't being the most affordable major city in America for homes become a disadvantage at some point?" I must admit I had to laugh at that last one. Frankly since Jim Cramer went on his tirade about Indiana real estate on the Today Show a couple of weeks ago I was surprised I hadn't gotten these questions sooner.

Cramer is the loud mouthed media darling who blathers away every night on his 'Mad Money' show on CNBC. Cramer pontificates on everything from stocks to real estate in his holier than thou mode of making every minor financial detail a looming crash and burn. He's taken the trouble to appear twice on The Today Show with Matt Lauer and both times has been less than generous to Indiana real estate investors. Most recently he was on with the National Assocaition of Realtors president who calmly and politely recited statistics while Cramer rolled his eyes like a teenager being questioned about their 3000 text messages in a month. Cramer's job is to stir up, create controvers and exacorbate the obvious to develop television ratings. What he either fails to understand or could care less about (more likely) is that people's liveliehoods can rise and fall with the headlines he creates.

Look it's no secret what I do for a living so that being said I do have an opinion that does have some degree of bias. Post disclosure, here's what I believe to be true based on many, many outside observations of our real estate market in it's current state. It's what I said to the CNN Money reporters and numerous other media pundits over the last several months:

"Those individuals who purchase real estate in the Indianapolis market in the next several months will look back on it as one of the best financial decisions of their lives."

There are those who are more optimistic than I am and have offered those opinions freely. Moody's Financial has repeatedly listed Indianapolis as one of the top five cities poised for a huge financial rebound in it's housing market. At the top of their list:

1. Dallas-Fort Worth (through 1st Q 2009) - Growth rate: 6.4 percent

2. Indianapolis
Growth rate (through 1st Q 2009): 6.3 percent

"Indianapolis is riding a few trends that are bringing about an early recovery in its real estate market. While Indiana's capital city did join in the housing boom this decade, prices didn't reach the stratosphere. Indianapolis still suffered through the downturn, though: Building permits for new homes dropped 30 percent from their peak in 2005. But the housing market hit bottom earlier here than in most parts of the country - during the last quarter of 2006. Now, with the local economy poised to grow faster than the national average over the next two years, house prices are projected to post a respectable gain."

For those naysayers, and there are many, mark this time down. Let's have this talk again in 24 to 36 months. Let's have it again in 60 months. Time will indeed tell if hysterical television talk show hosts or sound economic decisions will rule the day in our real estate market.

QUESTIONS? COMMENTS?
greg@gregcooper.com
317.848.GREG (4734)

Art in the streets....
Scenes from the Carmel, Indiana International Arts Festival 9.22.07.

The festival started Saturday morning with a Chinese Dragon Dance and parade. Over 200 vendors exhibited and sold their art from paintings to sculpture. There were musical stages and great food served througout the weekend. This was the festival's 10th year and 2nd since moving back into Carmel's Arts and Design District.














Random thoughts for the week actually related to the real estate business....

The Interest Rate cut has NOT yet helped everyday mortgage rates to a significant degree. The short explanation is that there are far too many other factors pushing rates up right now for it to help. If inflation stays in check, look for another potential 1/4 point rate cut next month when the Fed meets again.

Indianapolis August Home Sales stats are in.....and it's not good news. The 11 county metropolitan area sales were down over 18% with Hamilton County getting hit the hardest with a 21% drop from a year ago. Prices have moderated and it is a great time for someone looking in the long term to make a tremendous purchase.

Nationally the numbers aren't as statistically bleak but still very disconcerting. New-homes sales tumbled in August to the lowest level in seven years, a stark sign that the credit crunch is aggravating an already painful housing slump. Sales of new homes dropped by 8.3 percent in August from July, the Commerce Department reported Thursday, driving down sales to a seasonally adjusted annual rate of 795,000 units. That was the lowest level since June 2000, when sales clocked in at a pace of 793,000.

Covering old ground but....IF YOU ARE A HOME SELLER you must ask yourself two critical questions:

1) Do I have the motivation to sell? Are you willing to moderate your price to meet the demand of the market?

2) Am I willing to recognize the equity I'll be building on my new home as a result of the slow market? Those moving up now should see great value growth in their new purchase as a result of buying in a challenged market.


As always you can email me with questions at GREG@GREGCOOPER.COM or call me @ 317-848-GREG (4734).

You just never know who you'll run into at the Starbucks in Carmel, Indiana.

As I walked across the parking lot to my car, I vaguely recognized the figure standing about 20 feet away. While he was slouched and shaking a bit from his illness, Muhammed Ali was as pleasant and approachable as any public person could be. Having no shame about interrupting his day, I walked up and introduced myself. He smiled and graciously agreed to a picture. His wife was inside getting coffee as they traveled from their home in Michigan to Lousiville on a family matter. We took several photos of which this is the only one that I actually look reasonable enough to post (scary thought). Muhammed playfully put his fist to my chin and smiled for the first one, then realizing I had the 'you've just met an international icon' stupid grin on my face, I retreated to a very basic side by side. As we did this a bus load of High School students stopped nearby and began to pile out. Several of the teen agers recongized him and came over as to visit. As he began the first of numerous new photo ops while being hugged by the cute 17 year old females, he looked at me and in a whisper said "Can't disappoint my fans." His huge grin told the rest of the story. I laughed out loud, thanked him again, and backed away. Even though his body is failing him...his mind is still there in full force.

Random thoughts actually pertaining to the real estate business......

1) Interest rates are coming down. Look for the Fed Chief Bernacke to lower rates at least a quarter discount point next week and maybe as much as a half to combat the national housing market problems. Between the rates falling and the lower demand/increasing inventory, there are great buys to be made in the housing market right now.

2) Two critical questions every home seller must ask themselves in order to successfully navigate the market. First do you NEED to sell? If you don't have the stomach the adjust your price to meet the sliding market, you should give serious thought to postponing your move. Having said that, if you're a move up buyer, the timing is still good. If your current home is worth 3% less than a year ago but you'll buy something else up the price ladder at a less value also, you will still be pleased with your decision over the long haul. That's what real estate is now....a long term investment. Flippers had best be following the CYA strategy in this market because it's tricky.

Secondly, as a seller do you have the equity to sell? If you bought a home a year ago with little down, you probably don't have the position to sell in this market. Reconsider your timing or the possibility of leasing the home if the risk is acceptable.

We have acutally had to decline certain potential homes to sell with people who wanted to list with us because they were simply not in a postion to recognize a sale in our current market. If someone bought two years ago at the peak of the market and has their home mortgaged above what they actually paid for it, we probably can't help them and yes, you cannot believe how often this occurs.

On that note, a recent title company survey on the closings they conducted across the USA in 2006 revealed some startling data. Of all of the closings, over 38% were done with ZERO money down by the purchasers. That means that most of those buyers were upside down in the equity in their homes from the day they closed. Is there any wonder why we have the delinquency rates we do right now relative to mortagages? Is it any surprise that lending criteria will get tighter as the next 12 to 18 months rolls by?

What you see is not always what you get. Online home shopping presents its own unique set of challenges.

It's so easy to shop online for just about anything these days. You can use Google, Froogle, Yahoo, or any of the shopping search engines to find everything from recliners to shoes, airlines tickets to t-shirts. More than 85 percent of home buyers start their search for a house online as well. The only problem is that things on the Internet are not always what they seem.

That's not such a big deal when it comes to a $60 pair of shoes. But it can be quite problematic when you're talking about a house priced at $350,000. Based on the e-mail I've received over the last couple of years, I've come up with a list of six mistakes home buyers make when shopping online for real estate, and the mortgage they need to pay for it:

Mistake #1: The house you see online is the house you get.If you saw a house advertised on television, you'd wonder exactly what you were buying for your money. But find a house online and that skepticism goes away. Some buyers feel confident enough to make an offer for a home they've seen only online.
What's that about? If I was writing the description for a property I was trying to sell, I'd make sure it sounded as fabulous as possible. The only point of writing that description would be to get a prospective buyer through the door. So when you see a photo of a house online that looks interesting make an appointment to see the property in person. That way, you'll know what you're buying is real.

Mistake #2: A beautiful photo, virtual tour or video means the house is in perfect condition.There are things you can see in a photo, virtual tour or video -- and then there's everything you can't see. Clearly visible is the décor. But the structural and overall physical condition of the property may not be as apparent. Don't assume that a fresh coat of paint is simply covering a dingier coat of paint. Instead, when you walk through the property, keep your eye out for red flags, such as water stains, bad smells, a freshly painted basement (which could be hiding mold or moisture stains), doors that don't shut, and cracks bigger than 1/8 inch wide.

Mistake #3: Assuming the neighborhood is as nice as the video tour.If a seller has created a video or taken a series of snapshots of the exterior of the home, it's possible you'll get a feel for what the neighborhood is like. Again, don't assume that what you're seeing is real. Savvy buyers will spend time walking the streets of a neighborhood, getting to know the housing stock, local store owners, recreational opportunities and schools. There's no substitute for using a little shoe leather.

Mistake #4: Believing that a fabulous Web site means you're dealing with reputable professionals (agent, title company, lawyer, home inspector, etc.).
It takes about $50 and a few hours to put up a fairly impressive-looking Web site. Maybe the company behind that Web site is reputable -- and maybe it isn't. But if you just go by the graphics and design of the Web site without checking to see who the folks are behind the beautiful pictures, you won't know who you're dealing with.
Whether you're looking for a real estate agent, title company, real estate attorney, home inspector or other player in the real estate industry, you should take the time to do your due diligence and find out everything you can about the individual and the company he or she works for. Real estate agents, brokers, attorneys and title agents are all licensed by the state. You can start with the agency or department that licenses these professionals in your state, and then use an Internet search engine to dig up more information, such as complaints or lawsuits that have been filed against the company or individual. Don't forget to pay a visit to the professional's office. You can tell a lot about someone depending on where they work, and how long they've been in business.

Mistake #5: Believing a written description of a property or neighborhood is accurate if you read the same thing in enough places.
It doesn't matter how many times you read the same description of a property, you won't know it's real until you've been there and seen it in person. Remember, just because an agent says the condo has a "lake view" doesn't mean you'll have a full water view. It might mean that if you stick your neck out the window and turn, you'll see a sliver of water.

Mistake #6: Believing the interest rate you'll get at the closing is the same that you've seen online.
One of the most popular mortgage scams is the "bait and switch," and it's even easier to get away with it on the Internet. Here's how it works: You'll see a great interest rate online and when you call to follow up, you'll be told either that the rate has expired (at which point the lender will try to sell you on a more expensive loan) or that you've qualified for it. If you've "qualified" for the rate, you'd better check your mortgage documents thoroughly at the closing to make sure the rate you thought you were offered is actually the rate that is on the papers you're signing. Once you sign the papers, it's a lot harder to get the lender to live up to his or her initial mortgage commitment. (Of course, you'll have a stronger case if you have that rate quote in writing.)

PLEASE PASS THIS ON. This is a redundant note that I'm sending to every member of the Indiana General Assembly including the Governor. This would be the perfect place for the "can you hear me now?" cliche...if it weren't so painful. This is an open letter from the CEO of the Indiana Association of Realtors with a rather stunning admission in paragraph four.

"In some (Indiana) counties over 40% of closed transactions are foreclosed properties."

Let's hope someone is listening.

July 13, 2007
Dear IAR Member:
As more counties have completed the property assessment process and mailed tax bills, the flaws in the current property tax system have once again been brought to light. I wanted to take a minute and update you on my perspective on the situation, as well as what your Association is doing to address it.
Some of the tax increases were expected due to the elimination of the inventory tax, the implementation of the assessment process known as trending and other factors, but the magnitude of the increases has been higher than anticipated. Urban areas have been particularly hard hit.
IAR has been in daily contact with the Governor, his staff and leadership in both the House and Senate for the past several weeks, urging immediate action. Our two-part message has been to convey the seriousness of the situation for our markets statewide and to reinforce our long-standing policy goals found in this Property Tax Reform Guiding Principles document.
I don’t need to tell you all the tenuous nature of the residential market. Many counties continue to report declining market activity, and perhaps more distressing, foreclosure rates of an extreme level. In some counties, over 40% of transactions are foreclosed properties. Instead, I would like to spend the rest of the letter outlining our goals in order to help prepare you for conversations with your clients and elected officials.
Short term, we have advocated a restructuring of the rebate that is now in place. Rather than spread those dollars over all taxpayers, it makes more sense to target them to those seeing the largest increases. We think the State could offset increases in excess of 20-25 percent with the dollars currently set aside for the circuit breaker. Local government has a role to play in the short term, as well. The State has given local government the ability to adopt an income tax, a tool that could provide substantial, lasting relief. Urge your local unit of government to use that tool.
Long term, meaningful and lasting reform MUST happen. It also must be rational. One of the most frustrating aspects of our property tax system is its complexity. Discussions of levies, rates, circuit breakers, assessed value, trending, homestead credits, homestead deductions, gross this and net that can make one’s head spin.
The media is often unable to cover the debate in a meaningful way, and elected officials at all levels use the complexity to avoid blame and confuse the issue.
Here are my thoughts on how to ensure the viability of our markets and ensure economic opportunity for homeowners, investors and businesses alike:

1. Eliminate township level assessments, move to county assessment
The wild and inequitable inconsistencies in assessments, documented by the Indiana Fiscal Policy Institute study supported by your Association, remain part of the problem and are a contributing factor to the unacceptable increases we are seeing now. Assessment responsibility should fall on the County Assessor.

2. Update technology and adopt a uniform data system statewide
The State must enforce 21st century data and appraisal practices in assessment offices statewide, as well as effectively monitor and evaluate results. Should the State find the standards and/or results lacking, they should act to correct practices and equalize assessments where necessary.

3. Modernize the local government structure
Indiana has the third most units of local government in the nation. We have the third most townships at 1,008, the third most sub-county governments at 1,575 and the fourth most municipalities at 567. Many of these elected officials effectively answer to no one and spend taxpayers’ money with little or no oversight. Eliminating them will simplify local government and provide a much clearer picture to taxpayers as to who exactly is spending their property taxes and what they are buying.

4. Reduce reliance on property tax
This is perhaps the most difficult piece of the reform puzzle. There are two choices. Since about 75% of the property tax dollar goes to education and public safety, dramatic cuts would need to be made in those services to achieve substantial savings. Such dramatic cuts are not generally supported, as they would have an adverse affect on the quality of life and economic development potential of the state. The second choice is to provide local governments with alternative sources of funding. This is the more viable long term solution, and IAR will continue to advocate for broad based taxes such as sales and income as a substitution for property taxes.

We also need to understand that the call to reduce reliance on property taxes carries risk for our industry. Two specific examples come to mind. Some legislators have mentioned a real estate transfer tax as a substitution for property taxes. Others have mentioned broadening the sales tax base to tax services, including real estate services. In both cases, the housing market would be harmed, and IAR will remain vigilant on your behalf to insure that these ideas do not gain traction.
In closing, feel free to share these thoughts with your local and state elected officials. It is crucial, after more than three decades of trying and failing, to finally reform Indiana ’s property tax system. Homeowners and all other property owners are counting on it.

Sincerely,
Karl F. Berron
CEO
Indiana Association of REALTORS®

Of Vanishing Neighborhoods and Growing Opportunities.

"Let me tell you how it will be
There's one for you, nineteen for me
'cause I'm the taxman,
yeah, I'm the taxman

Should five percent appear too small
Be thankful I don't take it all
'cause I'm the taxman,
yeah, I'm the taxman"

--George Harrison

Marion County's tax nightmare may be Hamilton County's boom. That's right....Washington Township - Marion County's massive tax woes may end up becoming a benefit for Hamilton County. After a short time of having the full impact of the new propety taxes in place, the calls are already coming in from individuals who are seeking relief. There are many areas of Indianapolis affected but one that seems to have been hit especially hard is the Meridian Kessler/Broad Ripple area. More precisely, the Washington Township geography that sits in the Indianapolis Public Schools district. Since school taxes account for 55% of the property tax total, IPS revenue requirements are significant to those who live in its jurisdiction. Now, many of these homeowners are contemplating moving north of the Marion County line.

In looking at just a few examples, it's easy to see why people are fed up. In Carmel's burgeoning Arts and Design District, a $150,000 home recently sold will pay $1680 total in property taxes in 2007 for the tax year 2006. A similarly priced home at 5600 north in Marion County's Washington Township will now pay $3940 for essentially the same square footage. While no one seems to have been fully aware of the consequences of last year's legislative actions regarding taxes, the results will end up being devastating. In shifting a portion of the tax burden from business to residential, the goal was to be pro business and encourage future growth. The timing was not well thought out. I suspect it will end up being a moment that haunts us for years to come.

For starters, the psychological impact of the tax increases is already in the minds of the consumers. You can't close that Pandora's box. Then you move on to the practical side where prospective purchasers can no longer qualify for homes based on how much higher the monthly tax bills will be. Finally, there's the burden to the sellers who must credit back all taxes due to purchasers at a potential closing on the sale of their home, possibly in the thousands of dollars.

We must also look into the crystal ball. Taxes this much higher will decrease demand and subsequently reduce value. As this occurs, homeowners will be petitioning tax authorities for lower assessments based on comparable sales, thus reducing revenues even further. Then the cycle starts all over again with a need to raise rates to make up for the decreasing total revenus based on a lower overall tax base. It's an ugly prospect that will take years to resolve, if at all.

To conclude, a word about relevance. If I hear one more person tell me we pay so much less in taxes compared to our neighboring states, I may commit a felony. While that may be factual, it is a TERRIBLE argument for our current state for this reason: You cannot raise taxes on a given area/property 60-80-100% or more in such a short time and not destroy their value. Raise any property's taxes by 100% in one year and then tell a prospective purchaser that it's still much lower than what Illinois pays and watch their response. Watch it as they turn and walk away from buying because of the radical change from a few short years ago. This is a mess not soon solved. In every mess there's opportunity....and Hamilton County may just be positioned to take advantage of the brewing storm to the south.

Here Comes The Other Shoe.......

It's been several years since the Indiana State Supreme Court ruled on behalf of a small number of Lake County Indiana tax payers that the previous system of assessed valuation was unfair. As thousands of Hoosiers pay their tax bills over the coming weeks, we will all be asking how the system can STILL be this off base.

First, virtually none of the hundreds of homes that have sold in the last year that I have reviewed are being taxed at their recent sale value under the new bills (which is the actual point of having the state assess by MARKET VALUE). While not all counties have a defined example, it appears the new distribution of tax burden is going to become a major pressure on those who pay property taxes in Indiana. We have heard examples through our partners in the lending and title business that a number of real estate transactions have fallen apart at the closing table as the new tax burdens became clear to prospective buyers. Many municipalities in Hendricks County have had 50% increases in taxes from the last tax year. For many home owners, that is a painful increase. For some, it is a catastrophic one.

Here are a couple of examples from Hamilton County that have come to light. A $325,000 home previously taxed at $2410 for the entire year will be paying just over $3000 per year due on July 1 of 2007. Remember the headlines about a 'rebate check' we were supposed to receive to blunt the extreme shift in residential taxes? From the tax bills we have seen there is no mention of a rebate, only that the credit passed by the legislature has been assigned half to the Spring and half to the Fall of each tax bill. Think there may be some confusion on this issue?

The result of all of this could be a new round of foreclosures in the state of Indiana. People who were close to the edge before are going to get unceremoniously shoved over the cliff if their taxes increase 40-50%. The last thing Indiana's economy needs right now is a hammer to the value of it's home owners. This scenario, if it plays out as it seems, will be a nightmare for Indiana tax payers and real estate owners. It will blunt the first time home buyer market with higher payments, it will suppress most potential equity growth and essentially send the overall real estate market into dormancy. It would ensure that the current slow market we are in would last well beyond 2008.

I hope we're all wrong about these bills....that there's something more to them that will change their net affect both this year in years ahead. The message to our legislators should be loud and clear: Fix this mess NOW! If not that boot may be coming down hard on all of us who have believed in the American dream in the Hoosier State.