Once Upon A Time In A Land Far, Far Away....

...homes appreciated 12% per year while their owners gleefully day traded their way into multi millionaire status. We all dreamed of the day when our homes would double in value, we could buy a vacation home with no down and no reason to document our income. Ditech.com would refinance our primary residence at 125% of it's value simply by doing a drive by appraisal. Interest rates hovered in the low 6's but no matter, our generous year end bonuses were just around the corner. The lawn never needed watering and the temperatures never went below 50 at night. Our kids all made straight A's and didn't scowl at us when we asked them to pick up their rooms. The neighbor's dog didn't squat in our front yard, nothing in our homes ever broke and the roof, furnace, AC and the appliances lasted for 50 years always appearing updated and new. Cell phones for kids and text messaging were just irritations we would never have to face. Forty hour work weeks were just a distraction, the unemployment rates were 3.9% and inflation was what we did to balloons. Vacations at the beach were a given, none of our parents ever got old or needed care and our pets lived forever. Wars were what happened in history books or places we couldn't find on any map and terrorists only existed at the '72 games in Munich. Television was for families before 9:00 and we never had to shield our kid's eyes and ears because of a promotional advertisement in a magazine or on TV talked about erectile dysfunction.

What's that? The real world is now the exact opposite of everything in the previous 22 lines? Well then, it's time for me to take my blood pressure meds, make certain my kid is really at the library studying and head back to work to try and keep my job for another 30 days. Do me a favor...next time don't wake me up.

(Thanks to Brian @ 1000 Watt Consulting and Boing Boing for the inspiration)

This post is originally from June of 2007. Every day
that goes by I wonder more and more if it's not coming
true. Gary Vaynerchuk of WineLibraryTV.com is
constantly saying 'STOP DRINKING YELLOW TAIL.'
In Today's New World of Real Estate I would offer
'STOP SENDING OUT RECIPE CARDS!.'

Denny Crane says
'Who wants to be a Travel Agent?'

Welcome to my metaphor. Inspired by nearly a week of reading my new favorite blogger, Rich From Copywrite, Inc. (linked on the left side of the page), this piece is motivated by change. For my purposes, I'm speaking to the change in doing business or owning real estate. The manner of conducting a real estate sale is about to be swept away into an entirely new paradigm like a number of businesses have been in the recent past.


On ABC's Boston Legal, William Shatner, aka Denny Crane, constantly pops into scenes tossing out the painfully embarrassing, yet somewhat obvious line. In the real estate business, Denny would again be loudly asking the obvious of those of us helping to orchestrate real estate transactions and those who own real estate as an investment.

"C'mon.....who wants to be a travel agent?"

Why? Because those who conduct the business of Real Estate and those who own real estate are in the midst of a titanic shift in the process, much like the travel industry saw several years ago. For my skewed context here, there is no irony lost on the character of Crane, played by Shatner in his commercial endorsement role to PRICELINE.com . 10 years ago, the travel industry was respected, successful and storming ahead with it's service to people in every form of travel based need. America was increasingly affluent, mobile and loved to be on the move. That year, 1997, Priceline.com introduced itself to the traveling public in the form of William Shatner through a stream of wacky commercials that pushed us to point and click to find the cheapest air fares (and later in classic brand extension hotel rooms and rental cars). A decade later the travel industry has laid off thousands of workers. Essentially it's become a shadow of it's former self. Many other service industries are experiencing that as well along with the products they represent, like real estate.

Old school agencies who broker travel have basically been redefined to an Internet based business that fills a niche of customer service. The difference is there is no need to have legions of people seated at a desk to actually place the orders. There are some direct service agencies, but they are a small minority serving certain business and other pigeonhole clientele. To be fair, the change wasn't necessarily any fault of the travel industry and the huge numbers of it's successful representatives other than they never saw it coming. Who did? Can any of say we knew how the Internet was going to absolutely flatten so many businesses by the immediate accessibility it provides?

Well it's coming again to the business of real estate...this time precipitated by the current down turn in the Real Estate market. Anthony Robbins, motivational speaker and infomercial guru has written that 'things don't change when conditions are comfortable....change occurs when pain is present.' If that's the case, change is a full blown tidal wave heading directly for us. Dropping values due to foreclosures, excessive new homes supply, a sub prime mortgage fallout and other secondary factors are the norm today and it will affect most all of us. Falling equity in homes has driven the discount service brokerage movement in the past year and they will continue to gain strength (much to the chagrin of many of my colleagues). They will not, however, replace the affect of the most successful brokers but rather will feed upon those individuals who continue to try and charge a premium fee for less than top shelf service. It's the classic Wal Mart - Nordstrom example. The middle is disappearing to be replaced by the most cost effective (discount) and the very high end.

Real Estate brokers and their companies must learn to do things differently. The effect of the current market downturn will demand that. Watch the numbers in the winter of '07-'08. The quantity of Realtors in this country is going to take a major nose dive (not all would think that's bad, I know). Likewise, the manner in which we all make investment decisions about real estate is also going to change. Dwindling demand for 'vinyl village' types of homes and increasing demands for prime locations will be highlighted. In our area, lots and neighborhoods with character (water front, heavily wooded, golf course) will be the most coveted for more than aesthetic reasons. At this moment they are the only locations selling at a premium and as the public becomes more and more aware of this as a business issue, their demand will rise even faster. The days of buying something slick, shiny and new just for those reasons will soon be a secondary decision. Consumers will be forced to look at the investment first which is not how many decisions have been made in the past. Consumers who blindly buy property for any reasons other than investment first will quickly become the 'travel agents' of the real estate marketplace. I can almost hear Denny Crane's thoughts on that......as painful as they may be.......

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

A few thoughts for President Obama

On Monday night October 6, I sat in on a radio economic round table (listen) hosted by WIBC's Steve Simpson with a number of individuals who are far more versed at the bigger picture than I am. Denny Smith, a co founder of the Mutual Fund Store in Indianapolis; Linda Conti, vice president of wealth management of David A. Noyes company, business writer John Ketzenberger of the Indianapolis Star, Dr. Catherine Bonser-Neal of IU's Kelley School of business and yours truly were voicing our opinions on all things economic on 93.1 WIBC, Indianapolis. From the inside I must say it was a fascinating discussion. The summary of it all which I hope our next president hears through the noise that he will be bombarded with is this:

Don't raise taxes.

Don't raise taxes anywhere on anyone at any time during your first term if you hope to have a second. I understand you feel that high earning individuals should pay more. This is not a philosophical plea. This is factual, empirical, statistical, uncomfortable.

Don't raise taxes.

We can argue all day long about why we're in the mess we're in but one of the opinions that came through loud and clear last night from this very wise group of people for whomever the next president is was:

Don't raise taxes or you may crush our economy.

Senator Obama many people liken you to another charismatic leader we once had, John Kennedy. President Kennedy made a historic speech to the New York economic club in 1962 that still resonates today. His major point was this:

"The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system — and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes"

Please take a moment and read the entire text of one of the more prolific economic speeches ever delivered in our country. Senator Obama despite your desire to raise taxes as you've stated, we can only hope you will defer to the greater good of our populace and at the very least keep things where they are. There's going to be a LOT of pain over the next several months. Let's not add to it.

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

Why is anyone surprised?

Last year about this time when we were dangling on the edge of the financial chasm, many of us in the real estate industry were raising the red flags about the housing market. Yes, there were some Realtors, real estate companies and trade organizations (read: National Assn. of Realtors and National Home Builders Assn.) that were still, uh, shall we say shading reality because they were simply too afraid to shoot straight. They were afraid that if they told you the truth that it would all become a self fulfilling prophesy and it would make the markets worse. They did you a terrible disservice by not telling you the truth.

I would have preferred we just get the bad news out there and get past it. The sooner you as a consumer know the facts, the sooner you can deal with them. Oh no, we couldn't possibly do that. It may discourage someone from signing a listing agreement, buying a home or taking a job transfer which would require either or both of the first two from happening. So in the Fall of 2007 we were in the midst of a vast oversupply of inventory and a looming credit crunch and yet some just kept saying they were expecting a turnaround by mid 2008. As a result homeowners who had their homes on the market held out hope that things would get better this year. They delayed making price adjustments and artificially inflated what consumers would be have to pay for a home. Consumers spoke loudly and clearly:

"We will not buy that which isn't an incredible value and even then we're not going to jump without giving it a lot of thought"

That was in June. By August the fear and increasing rate of decline had escalated the buyer's tolerance level. Now, we're almost in total stagnation with where the markets are. Frankly there is incredible clarity in Today's New World of Real Estate at this moment in history.

If you are a seller and hope to get to the closing table, you had better be a fire sale or take your home off of the market. You will only hurt yourself by burning days on the market in an environment where cash is king and buyers are God. If you are a buyer, understand you are in this for the long haul. Real Estate is still a GREAT long term investment. Buy with care, pay incredible attention to lot and location and look ahead past the next 24 months and you will recognize what I've been saying for the last year:

Those that purchase now will look back in five years as having made one of the best investments of their lives.

That is unless Nancy Pelosi chooses to give another speech about who's fault this all is. Then all bets are off.

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

Why We SHOULD Pass A Bailout Plan!!

I am a free marketer. I don't believe in theory in bailouts. Having said that, I hope that everyone listening gets the message that we MUST fix this massive problem that has come out as a result of the housing market crash or else.

To get everyone on the same page, from early 2005 to late 2007, there were roughly 14,000,000 mortgages written in the U.S. Of those about 7,000,000 were subprime. As that's occurring oil goes from $60+- a barrell to $140 a barrell, inflation storms in, the economy begins to tank, more and more homes get foreclosed on, lenders go under, investment houses go under and voila....here we are...and here's what is going to happen if we don't pass some type of bailout:

1) Foreclosures are going to skyrocket. (Government takeover would save millions of homes from foreclosure).

2) As foreclosures escalate, fewer people buy refrigerators, carpet, couches, new roofs, etc.

3) Unemployment goes double digit....at least 10-12%.

4) As foreclosures mount, Americans who own homes could lose 30% of the value in their properties. As an example, in Carmel, a fairly affluent area, there are currently 223 foreclosures. If there's no bailout, the preforclosures numbering about 450 would fall into foreclosure and triple the number of those for sale. That would affect every sale and price point in Carmel and frankly every area of our country. Every price point would be driven a long way down and it would take years, perhaps a decade for it to recover.

While you may not be in favor of a government bailout, this is serious stuff. Don't waste your breath blaming on any one political party or individual because it's MUCH MUCH deeper than that. If we do not act, it's going to be a very ugly time in our country's history.

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

Lehmans and Fannies and Bears. Oh My!

For most people, the failure of Bear Stearns, the reorganization of Fannie Mae and Freddie Mac, the failure of Lehman Brothers,the sale of Merrill Lynch and or the survival of AIG is more than a bit confusing. Wall Street and quasi governmental lending instituitional failures have little resonation here in the heartland, but they should.

Right now, the crisis of confidence in the American financial markets is the overwhelming challenge in Today's New World Of Real Estate.

Selling homes is about one thing: Getting the Money. Right now getting the money is becoming more difficult by the day. Every failure at any magnitude erodes the belief that consumers and investors have in bank liquidity. That makes getting money that much harder for the average consumer. That makes selling homes that much harder. That makes value recovery that much harder. That makes any of us in the business of real estate that much crazier.

Make no mistake: It absolutely affects everyone involved in the real estate business.

While things will stabilize from what they are as this is written, the psychological affect will linger long after the fact and potentially be an instigator in future bank health. How many more will there be? How much tougher will it get in the credit markets because of the newest failure (Lehman)? If AIG fails in the next week what other bad news will that propel into reality?

Essentially it all summarizes what I've been saying for the better part of a year. If you are a seller, you had better price aggressively and get out. We are close to the bottom but there's far too much instability to trust things will improve before mid 2009 and then only in guarded measure. If you're a buyer, the time is right both in value AND in terms of interest rates, now hovering in the upper 5% range which can no longer be taken for granted.

Fasten your seat belts......it's going to be wild ride that's not for the faint of heart.

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

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)

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)