Who Knows

Confusion reigns supreme!

How many pundits does it take to predict the direction of the housing market? Sounds like the start of a bad joke, doesn’t it? Well, it is a bad joke.

On any day you can find an article, hear a news story, or stumble upon something on the internet that directly contradicts the “enlightening” story you’ve just read or heard yesterday. The big question homeowners have is “when will this housing crisis end”. Well that depends. The answer depends upon who you ask and where you are.

Why does it depend upon who you ask? Because the person answering may have a vested interest in providing an answer that motivates you to certain action. If you ask an agent are home prices in my area going to improve in the next twelve months, and you are a potential seller, what reply would encourage you to sell today? If you ask that same question and you are a buyer, what answer would motivate you to buy now? Now you get my point. If a seller thinks the market is continuing to slide, then there is added urgency to get out now. If a buyer thinks the market is going to be stronger, the reverse is true.

Are you beginning to see why there is so much spin coverage of the housing market? No wonder we are all dizzy.  In the next year, the level of distortion will be amplified as both sides of the political spectrum gear up to make us feel optimistic or pessimistic about our future.  Remember above where I said there are two prongs to determining  the answer to “when will this housing crisis end”.  Well, the second  determinant factor was “where you are”. And from this you can determine a realistic prognosis for your future. The real estate market has not uniformly taken a beating across the country, the state, the county or even within the City of San Diego. Recovery of the market will not happen all at once on any given day. There are some areas that have hardly felt this downturn and there are some that may not recover for 10 years or more. Don’t let market news confuse you, get the facts for your local community.

Does my Realtor have a clue?                                          

I met with a client the other day to try to help her determine a value for her home. I had reviewed the sales data for her neighborhood and advised her that the home should sell for a certain price. She thanked me for my input and then told me she planned to interview other agents. I told her that was a good idea and said that I would follow up with her the following week. Wow, was I surprised when she told me the other real estate agent had told her that her home should sell for $60,000 less then the figure I provided. I then explained in detail how I arrived at the valuation for her home.

Don’t make a $60,000 mistake! This market is complicated. It takes a careful, thoughtful analysis, not a simplistic approach, to determine the value for your home. The CMA (competitve market analysis) is often delivered as if it were the final word on value, when in fact it is only one small piece of the puzzle. If you are thinking of selling your home you may want to check out my advice to sellers.

The EB-5 Immigrant Visa Program allows individuals to buy their way into the USA.

Why would the sale of a commercial shopping center in Clairemont, to Egyptian investors, get me thinking about this? I do not know if the individuals involved in this particular transaction participated in the Visa program, but it sure seems to fit the bill.

If you are a foreign investor with $1,000,000 (or $500,000 if you are willing to invest in a Regional Center in “target employment areas”) you can obtain a magic ticket, a Green Card, giving you Permanent Residency Status in the US. The catch is your investment must benefit the economy and create at least 10 full-time jobs.

Now here is the really strange part, you don’t have to engage in the day-to-day management of the business, the jobs can be direct or indirect (isn’t that a clever twist)and you don’t have to reside in the same area as your “investment”.

If you live in a country that is under-going massive change and challenges, what would you do? Of course, you would need to have amassed the resources to buy into the program.

How do you, as a citizen of the USA, feel about this? Who do you think are the people that have the most assets to help them invest here? The people in the streets, or those previously connected to the powerful?  Immigration is such a controversial topic. Being a nation founded by immigrants we have certainly changed our tune. Remember the poetry of Emma Lazarus ” give me your tired, your poor, your huddled masses yearning to breathe free”? Should it be revised to say “give me your cash and keep your masses yearning”?  I think the entire immigration policy of the US needs to be re-examined. Oh, but where to start? 

Are you in a panic over the real estate crisis?

Or are you watching the market with interest, but are relatively unaffected by what is happening? It could be because of where you live, but it could also be what you live in. I have been analyzing sales data, zip code by zip code for San Diego County. I have been looking at which zip codes have the highest percentage of distressed sales compared to the homes  in which a seller has equity. In addition I have looked at that data by type of property; single family homes, townhome style condominiums, and stacked condominiums (with units built on top of each other).

What I have found is pretty remarkable. As expected I learned that some communities have a significantly higher rate of distressed sales than others, but what is notable is that the distressed sales are disproportionally higher in condominiums, with the highest losses concentrated in stacked units, across all zip codes. Why would that be? I have a theory that all of those clever developers that were heavily into condo conversion projects during the “boom years” could also render a guess.

What does any of this mean? Depends on whether you are looking to buy or sell. Buyers can determine where the “crisis” exists and where most likely the bargains will continue to be found. Sellers can easily see what their competition is and determine if the majority of homes in their area are distressed sales. This can be used to help determine a selling price that will hold up under the critical eyes of a real estate appraiser. Want to know what is going on in your neighborhood, shoot me an email and I’ll send you the report.

Get involved in San Diego’s future, join your local planning group.                  

Do you ever drive by a location in your community and see a redevelopment project underway and wonder “what the heck is going on here?”.  You do a little investigating to discover that it is something you feel is, unneeded, unwanted, or downright detrimental to your community. Guess what, in most cases, it’s too late for your voice to be heard.

We have busy lives, and we have “outsourced” the decision making for these things to individuals who serve on local planning commissions. If you care about your community and the direction it’s headed, you can make difference by getting involved.

If you live in the County of San Diego check out these groups to see how you can help build a better future for your community. In the City of San Diego your local planning groups could use your ideas!

I have been reading a very comprehensive report on the foreclosure housing crisis.

This report, produced by the Center for Responsible Lending, is written in user-friendly language and very clearly describes how we got here, who has been affected, and where we are headed.

As I have said before, these reports are extremely useful in getting a handle on the big picture, but not necessarily helpful in understanding your real estate world. I have been analyzing sales data for the last three years by zip code, comparing the percentage of distressed sales (short sales and bank owned properties) against the total transactions. The results are eye-opening.

Eye Opening Data

 If you would like to receive a report on what is happening in your area, let me know. I’d also love to hear what you have to say about this thought provoking report.

In California real estate agents and Realtors (see Real Estate Terms for that distinction) must disclose to both buyers and sellers, the nature of their agency relationship with the client. From this point forward I will use the term agent to describe both types of sales agents.

In essence an agent may have a fiduciary duty to the buyer, the seller, or both parites. It is perfectly legal for an agent to represent both in a transaction, but is it really fair to the clients involved? Often an agent that represents a seller will introduce a buyer to the property, prepare an offer, and negotiate an agreement between the parties. Many buyers feel they may get a better deal because the listing agent works hard to get the seller to accept the offer. The agent may even imply that is the case. The agent is entitled to the full commission offered by the seller and does not have to share it with an agent representing the buyer – great deal for the agent. But what happens when an issue arises wherein the buyer and seller disagree. How does an agent that owes fiduciary duty equally to both parties effectively advocate for either side. Seems like a Catch 22 situation to me. At that point your agent becomes more of a moderator and not a true advocate for you. I believe in giving 100%, why would you settle for less?

Are you a homeowner that is “upside down” or “underwater”?

You can afford your mortgage payment, you have no financial hardship, but you are thinking about walking away. You haven’t yet, but you are considering it.

This article, written in the spring of 2010, is one of the best I’ve found in looking at this situation. It is lengthy, but well worth the time to read. He proposes an idea that one mortgage servicer, Ocwen Mortgage has since implemented.

What is it that keeps you from throwing in the towel and walking away. If your mortgage lender were to offer you an equity sharing proposal in exchange for a reduction in the principle amount of your loan, would you do it? If not why not? As Professor Zingales states in his article:

Today, the matter is far from theoretical for the 15.2 million American households holding mortgages that exceed the value of their homes. It will help determine how many of them choose to “default strategically”—that is, walk away from their mortgages even when they can afford them, because they’ve determined that it’s no longer worth it to keep paying. And that, in turn, will help determine the future health of the American housing market—and thus of the U.S. economy.

No pressure, but it appears that the future of the U.S. Economy is resting on the choices we make today. Looking forward to your comments.

Thanksgiving is my favorite holiday.

 This year I plan to do something new. I’ll be joining family and friends in Balboa Park for Father Joe’s Thanksgiving Day 5K. This event will benefit Father Joe’s Villages, a wonderful charity that helps the homeless. Then I’ll be stuffing (pun intended) my face with all the wonderful holiday fare. I am fortunate to have family here in San Diego, but many are not. If you know someone who might be spending this holiday alone, set another place at your table. If you are looking for something to do you might find something of interest here.