My New Blog

Below is a link that takes you to an article that I think is very helpful if your are trying to sell your home in a soft market.

http://biz.yahoo.com/brn/080112/24131.html?.v=1&.pf=real-estate

The summary points are:

1) Recognize that all markets are local.

2) Analyze who is buying and selling in your market.

3) Ask the professionals like agents and appraisers.

4) Know what your home is worth.  Ask agents and get a certified residential appraiser to evaluate it.

5) Consider strategic pricing.

6) Rebate your "commission."

7)  Evaluate whether you really have to sell now.

8) Assess the market where you plan to buy.

To read the full article click on the link. 

I just read an article by a journalist that shows how little people know about economics.  The basic thrust of the article is that the middle class will soon not be able to afford a home.    I have inserted the link to the article for your amusement.

http://articles.moneycentral.msn.com/Investing/HomeMortgageSavings/WhyYouWillNeverOwnAHome.aspx

This is patently wrong, ignorant, and silly.  The market will ALWAYS adjust to demand.  It ALWAYS moves toward equilibrium.  At present values have gone up faster than they should, and they will readjust over time.  The present situation is proof.  Home median sale prices have declined for the first time since 1968 (the time they started statistical analysis).  The balloon has burst, and values will continue to adjust to the market demand.

So if you read that article do not despair.  It's just plain crap.

This is good news for those on ARMS.  Now is the time to refinance.  Rates may go lower but I doubt they will go much lower.  Maybe another .25%.  I'm not quite sure why people are waiting so long.  So if you are reading this blog and you are on an ARM then get busy on the paperwork.

The mixed news however is that home values dropped in 2007 for the first time since they started looking at statistics in 1968.  To read the full article click the link below.

http://biz.yahoo.com/ap/080124/economy.html?&.pf=real-estate

I do a number of construction appraisals a year, and I have also been involved in designing homes when I owned my own home building business.  From time to time I come across homes that have just goofy floor plans, and most of them are designed by architects.  Six months ago I did an appraisal on a floor plan where the Master Bedroom was in the loft of a chalet, but in order to get to the Master Bath you had to walk 20' across the loft.  Dumb. 

So here are some real necessities that I have found that floor plans need to have:

1)  A master bedroom attached to a master bath on the main floor. This is a real plus in the market and provides added privacy and convenience.

2)  Two bathrooms.  We don't like to wait when we have to go.  Make sure that if you have two bathrooms there is one on each floor. 

3)  A laundry room that is very accessible.  If a one story it should be on the main floor.  If a two story it can be on either floor, but should be near most of the dirty clothes.  Don't put the laundry in the basement!

4)  A main floor bedroom and full bath. I don't know how many two stories that I have seen where there is no bedroom or full bath on the main floor.  As people get older they don't want to walk up and down stairways. 

5)  Open floor plans.  People today generally like to be able to converse with people in the living room while their in the kitchen. 

6)  Two or three car garage.  A one car garage is a real negative.  People today generally have two cars, so make sure the garage is a good size.  Garage space is generally cheap and has a good return on cost.

7)  Stay away from hallways if possible.  Hallways are a waste of space and should be minimized as much as possible. 

8)  Entry closets.  Make sure that you have adequate space to hang those coats and put those shoes where people enter and exit.

9)  Stay away from steps to the main floor.  As the population gets older steps become a real "downer".

10)  Make sure the kitchen has adequate counter space. 

11)  Do not build a bedroom off the main living room, dining room, or kitchen.  Make sure it has some separation from these areas.

If you are getting a home designed, I would suggest talking to an appraiser or someone that sells real estate to look at its design to maximize resale value.

Will we enter a recession?  Some say 50-50.  Goldmen Sachs believe we will.  Here are the following issues?

1)  A signficant over supply of houses with no buyers.  This has cut into people's confidence and equity as values drop.

2)  A devalued dollar has resulted in higher energy costs.  When people have to pay $200 per month more to drive their car and heat their homes it simply means they have less to spend on other things.

Solutions?  Some have suggested tax rebates of $500.  Will that help?  It won't solve the housing crisis because $500 is a drop in the bucket.  It might help the retailers out there, but people aren't going to make major purchases with $500 more in their pocket.  So the durable goods industry will likely be unaffected in the short run.

Slash interest rates?  Well the problem with that is that it devalues the dollar and makes oil more expensive which is the very thing fueling (pardon the pun) the problem.  I believe the FED was too slow in cutting rates in the first place.  Now they are too late, and cutting rates more may simply aggravate the situation.

Bail out mortgages?  Wait a second.  It is not the government's responsibility to bail out stupidity.  If people knowingly took out ARMS and knew the ramifications then why should we bail them out.  How about giving me a lower interest rate on my mortgage! 

I hate to say it but we probably should have a recession.  It will bring back equilibrium. 

I am making a prediction.  By March we will be in a recession.  How deep and how long it will be is uncertain.

It has been awhile since I have blogged.  My first blog was about the need for the FED to drop interest rates by 1%.  That they did.  Whether this keeps us out of recession will depend upon how bad the other aspects of the economy perform.  It looks like the FED will probably lower interest rates again at the end of January.  Unemployment has spiked a bit, and that shows that there is an underlying softness in the economy and you can be sure they will do what they need to do about a recession in an election year.  But it will also help the sting of the ARM adjustments.

At this point in our area the market has been soft.  Median prices have remained pretty constant, but median prices are deceptive because it only tells us what people are paying and not what they are getting.  Clearly from doing appraisals in the area people are getting more for their money.  And list prices in some parts of Northwest Wisconsin are coming down to attract buyers.  There remains a significant over supply, and ironically there are still some people out there building spec homes.  Go figure.  But I have seen list prices drop by ten to twenty percent.  So sellers are getting realistic.

Is it a good time to buy?  My son just bought a home in Minneapolis.  It was originally listed above $300,000 and he bought it for $232,000.  He was wondering if they should wait.  I told him that if I knew when the bottom would hit I would be very rich.  The approach to buying should be this:

1)  If you are believe the price is fair compared to what else has sold, and you plan to live in the house for over three years, then buy.  The housing market will most likely be back on its feet and you will have built up enough equity in three years that if you needed to sell you would come out on the positive end.  Otherwise you should rent.

2)  Interest rates are historically low.  Who knows if they will always be this low.  Sieze the day.

3)  Remember that when you buy a house you are buying a home.  It is first and foremost a place to live.  Yes it is an investment.  But it is a long term investment.  The days of buying a home one year and then selling it the next year for 20% more are over for a long time in the midwest.