Central Ohio Home Source

Vacant Home

The US Census bureau reported vacancy statistics this week, and the numbers are not good, in spite of some of the administrations efforts to improve homeownership.  There are a total of 130.6 million households in the United States, and of that, 18.9 million are currently vacant.  Those numbers are a bit higher than at the end of 2008. 

It would appear that in spite of the improvements in the housing market nationally in the last year, many more job losses have occurred in the last 12 months, which have kept the numbers stale.

Photo posted under Creative Commons: Source ExplorerTom via Flikr.

If we have learned anything from the housing crisis of the last 2 years, it is that the notion that we “deserve” a certain home or a certain lifestyle is ill conceived.  It only takes talking to an elderly relative that lived through the depression and World War II to realize that we probably have much more than we need right now.  Folks back then came up with creative ways to just survive from day to day.  There was no talk of mud rooms, outdoor living spaces, spa bathrooms–you get the picture. 

The picture above is from a fantastic, life changing book, Material World, the the photographer, Peter Menzel.   In this book, Menzel features a snapshot of life for the median family in 3o different nations in the world (the family in this picture lives in rural India.  The highlight of each section is the signature photograph, where the featured family takes all of their worldly possessions from inside their home (or hut or whatever it might be), and poses with those possessions outside their home.   If you don’t want to buy it, check it out of the library.  Most of us spend countless hours of our week thinking about what we don’t have, lusting over the latest gadget, car, our neighbors new $20,000 kitchen makeover–whatever the thing might be.  All we need to to is ponder the statistic that 2/3 of the world lives on $1.00 per day to realize that our perspective in the United States is very far out of proportion.

Take some time to make plans and goals for this year — try to include some time where you are focusing on the needs of others less fortunate than yourself.  You will feel much better about your life — I guarantee it!

It has been a wild couple of years, hasn’t it?  I am not going to say I predicted it, by any means, but it seemed a little odd to me back in 2005 when an acquaintance with a 500-ish credit score and very modest income was able to qualify for a brand new $130,000 home.  She eventually sold it short sale before it got really ugly (similar units are now selling in the $60k range - maybe a bit more).

If you have 15 minutes to kill, and aren’t planning to water your crops in Farmville, or whack anybody in Mafia Wars, check these out.  We really like this explanation of the entire credit crisis.  Check it out — it is not exactly the “Dummies” version, like I would prefer, but it boils it down fairly well for most folks.  And we like the slick computer program they used to make this (you see the same thing used in the new Ford Truck commercials naarated by Dennis Leary (I think).

**Disclaimer: In this video, the folks that default on their home are portrayed as the family that is overweight, smokes, and has more kids — for the record, that is not accurate.  I am aware of plenty of thin, nonsmokers with no kids that have defaulted on their mortgages!

Part 1:

Part 2:

Your Money or Your Life - the book

A great resolution for the new year is to READ MORE BOOKS and WATCH LESS TV.  It’s on my family’s list, to be sure.  A great book to start off with is Your Money or Your Life by Joe Dominguez and Vicki Robin.  I read this one a few years ago, and it totally changed my perspective on work and purpose.  This is a great one to read if you are really trying to establish a healthy budget and financial gameplan.  It is not going to outline it all step-by-step, but it is a great one to read if you are starting that process.   It will get your head in the right place. 

A brief synopsis:  The authors were living in the rat race, and wanted a different game plan.  They started by outlining every penny that they spent (it’s not really that hard to do, if you try), and seeing where their spending patterns were falling.   They set out a plan to reduce spending, and increase savings, with the intent to drop out of the corporate world, and be able to live on their savings, and do what they wanted to do, which means different things for different people.  Maybe it means you quit your job where you are travelling out of town 4 days a week, and take a lower paying job just down the street from your home.  Or maybe you want to retire early, and work at a homeless shelter, or build homes for Habitat for Humanity.   

If nothing else, read it to get a fresh perspective.  Its a whole lot more than the “save more, go out to eat less” drivel that alot of financial experts are pushing right about now.

Check out the authors web site here.

I just recently saw this funny video that pokes fun at the frustrating process buyers are having in trying to take advantage of the bank owned foreclosure “deals” that are out there.  Obviously, the producer of this short film exaggerates some of the frustrating factors, but most are based on reality. 

The guys that made the video are in Southern California, where the market for bank owned foreclosures is actually super hot right now, so the “714 offers” part may be closer to reality there than it would be here in Columbus, OH.  But buyers here are experiencing cases where a house recently listed goes into contract within a couple of days, and they are “left out in the cold”.  It is generally the homes that are in good areas, but are priced very low that get snatched up quickly.  

Buyers (and their agents) need to realize that Listing agents owe their full duty and loyalty to their clients, which in this case happens to be a bank.  When they are dealing with agents representing bank owned foreclosures, the agents are following the guidelines and directives of the bank.  The communication lines are often delayed a bit:  an offer can be submitted, but not get an answer back from the bank for two or three days.

It helps to know your market.  This means you need to understand the house values in the neighborhoods in which you are searching.  Know what is selling, know what is not selling and why.   So if you are looking for a home in a certain subdivision, and most homes in that neighborhood that are in good condition are selling for $150,000,  a bank owned foreclosure (in similar condition) in that neighborhood will NOT sell for $80,000.    The listing agents that the banks hire are going to be very savvy, and WILL know the market.

Well, the final days of opportunity for the $8000 first time homebuyer tax credit are upon us.  If someone wants to close by 11/30, then he or she (or they)  must be ready to rock and roll right NOW…  Most importantly, have that loan officer on speed dial, and make sure that he or she has all the pay stubs, credit pulled, etc., so that when that offer is accepted, all the dominos will be ready to fall to get that house closed in time.

Now, I just had a conversation yesterday with a buyer who had been talking to their loan officer.  The loan officer said, “I heard a rumor that they were going to extend the tax credit and even make it larger than the $8000 that it is right now…”  WHAT??  RUMOR??  Rumors are generally not a good thing to pay attention to, especially when it comes to major life decisions.   That “rumor” is what the National Association of Realtors, and many others in the real estate industry are suggesting.  But I highly doubt that this loan officer in question has a red phone to the White House, or to every Senator and Representative.

Nothing is guaranteed!   That tax credit may go away, and NOT come back.  (If I had to guess, I would say that it will continue or come back in some shape or fashion.  But there is always a chance that other spending initiatives will take precedence (like the proposed Healthcare plan), and your representatives will come to the realization that all of this money has to come from somewhere, and that possibly homebuyers will have to go back to the way it was for all but 2 of the last hundreds of  years of home ownership, and NOT get a cash gift from Uncle Sam.

Just my 2 cents today…

Photo posted via Creative Commons via Flickr…courtesy of e_walk.

Some of you may have heard recent reports that existing home sales are up.  You also may have heard that the Federal Reserve chairman announced, “The Recession is Over…”.  But, it may be a “jobless recovery”.  OK, sure.  That reminds me of the thinking that my 10-year old nephew exhibited when he saw a billboard for the citywide strongman competition, and he confidently announced, “I am going to enter that and win!”. (He always was an extremely confident boy!).

The “recession” may be “over”, but the volume of bank owned foreclosures has increased dramatically.  There were efforts in the early part of 2009, encouraged by the administration, to postpone many foreclosures and attempt workouts for delinquent borrowers.  But those have been minimal, at best.  

So, what does all this mean?  Plenty of bank-owned foreclosures are in the pipeline, ready to hit the market.   Not good news for your property value, if you are in a neighborhood that had a huge runup in prices from ‘04-’07. 

Fannie Mae and Freddie Mac recently announced that they collectively have over 100,000 homes that they need to sell, a number that has doubled over last year. 

Here is a quote from Fannie Mae’s announcement (keep in mind that REO=Bank-Owned Home):

“While temporary suspensions of foreclosure transfers and recent loan modification efforts reduced the rate of growth in our charge-offs and REO acquisitions during the second quarter of 2009, our provision for credit losses includes expected losses on those foreclosures currently suspended…”

Clear as mud, right?  Well, in plain english, they have been postponing the inevitable, and now the chicken has come home to roost (or however that saying goes…). 

Here is link to that article on Fannie Mae Foreclosure data.

If you need a refresher, Fannie Mae and Freddie Mac are nicknames for pseudo-government organizations that were founded to purchase loans from banks, in order to free up money so that those banks can make new loans (Banks are required by law to have a certain amount of cash reserves on hand, just in case).

What does all this mean? Just be on the lookout for more bank owned foreclosures coming.  Even though most will probably be in Nevada, California, and Florida, we will see our fair share here in Columbus and Central Ohio.

(Photo Credit: 8 Mile Rd House by swainboat, via Flickr)

I laugh everytime I watch this video.   There is always a bit of truth in every comedy bit.  Where is the truth here?  OK, fellas, it is our better half’s who do the real deciding!

Enjoy.

(This guy probably DOES have cattle)

I recently finished up reading Thomas Stanley’s, “The Millionaire Next Door” (OK –I confess, I actually listened to the Book on CD in my car — but it was the COMPLETE, UNABRIDGED version!), and it really did shed some fresh light on my take on the housing market in Columbus and Central Ohio over the past 5 years or so.    Now, I originally read this book back in 1999, before the huge bubble, and its subsequent “burst” (although check some of our past posts on whether or not Central Ohio had a “bubble”). 

If you have not read the book, here is a very brief synopsis.  Thomas Stanley and his associates are sociologists specialize in studying the rich (whom they define by how many millions in the bank versus gross income).  They set out to find out what characteristics and behaviors typified the wealthy.  What they discovered was that most millionaires (the self-made variety) don’t really look, live, or consume like millionaires, thus the title.  Here are some things they discovered about the folks they studied:

• Millionaires tend to live WELL below their means
• Most drive conservative American automobiles
• Most have never paid more than $300 for a watch
• Most tend to be very frugal

Now, on to my local perspective.  The title of my post refers to a line in the book, where the authors were interviewing a Texas millionaire who made his fortune in oil and other investments.  He used the line to refer to those folks in Texas who looked and acted wealthy, but didn’t have the massive herds of cattle to back it up:  “Big Hat, No Cattle”. 

We have had a 5 year run in our Market, and across the country, of folks acting like they could afford a certain level of home, without the true means to do so.   They were aided and abetted by Real Estate Salespersons, Mortgage Lenders, Builder Salespersons, etc., who assured them that they most certainly could afford the home. 

Case in point:  how could a salesperson convince a recent high school graduate and her little sister that it would be wise to not just move out of their parents home, but BUY A BRAND NEW HOUSE??!!  What happened to rent a 2 bedroom, $500/month apartment?   But I don’t fault those two girls.  They were manipulated by the system. 

What about a newly married couple with two small children buying a $250,000 new build home on a $50,000 household income, with no downpayment?  

In Stanley’s book, he notes that most of the “high net worth individuals” live in neighborhoods, not populated by CEO’s, Doctors, and Attorneys, but more likely plumbers and teachers.

Now, the Columbus, OH market was less speculative than those in places like Northern California, Las Vegas, Phoenix, and Florida, where you had that same $50,000 couple signing a no-doc loan (one where they didn’t need to provide any documentation of their income) on a $500,000 mortgage, with no downpayment.

I think that homeowners in our market have gotten a dose of reality over the last 18 months or so, and it will take a while for all of the wrongs that were perpetrated on our housing market buy uninformed or unscrupulous members of the real estate and lending industry to work themselves out.  Those neighborhoods that have seen waves of short sales and foreclosures will soon find new families filling up those empty houses, and values should level out, and get back to the slow, steady growth that has characterized Ohio for the last 100 years.

After a fresh look at this book, this should definitely be required reading for every child before they graduate high school.  The future housing markets will benefit from a more educated customer base.

Photo courtesy longhorndave via Flickr. Photo posted via Creative Commons rights.

Photo via Flickr

The Ohio Department of Education just released their latest rankings of all school districts in Columbus and Central Ohio.    Not much has changed since last years’ rankings.  Our focus today is how the “quality” of the school district correlates to the average home price in that community.  We have been saying for years that school district is an important consideration when selecting a neighborhood in which to live, even if the buyer is single, or newly married, and does not have children yet.   Although some communities can vary from this trend, just look at the list (one was published in the 8/25 Columbus Dispatch), and it is fairly clear to see that there is a connection.  

The #1 Ranked School district in Central Ohio is Upper Arlington, which posted an “excellent with distinction”, meeting all the states required standards.  Upper Arlington real estate has also seen the most minimal effect in value over the past 3 years.  (stats to follow)  Is this sheer coincidence?  No, clearly not. 

When it comes to home values in Central Ohio, school district matters.    Always keep that in mind when shopping for a home.  (oh, and don’t forget to note what your property taxes will be in that new home as well!)

Photo posted via Creative Commons, courtesy krispdk