As I’ve been saying since the Government’s near shut down in July/August, America’s home buying confidence has been shaken. The National Association of Realtors Pending Home Index has been pointing to a decline in price and sales for months. Yesterday’s Case-Shiller Home Price Index, being a backwards looking survey, based on closed sales that went under contract as long as 90 days ago and even longer for short sales, is only reporting what we in the field have been seeing for the past several months: it’s slow out there. People who are not confident don’t buy houses. So “predictably not great” is just that; the numbers are off a little but they’re not exactly terrible either (unless you’re in Las Vegas, Phoenix or Atlanta where their markets remain semi-post apocalyptic). Is this in any way good news? No. Does it portend for a greater decline going forward, probably to a degree but not necessarily.
Yesterday S&P/Case-Shiller Index Director, David Blitzer said this, “Over the last year home prices in most cities drifted lower, (but) the plunging collapse of prices seen in 2007-2009 seems to be behind us. Any chance for a sustained recovery will probably need a stronger economy”. A “stronger economy”… hmmm, that’s a point to keep in mind.
So that I won’t be told that I am always looking through rose colored glasses, I must acknowledge that there are many storm warnings on the horizon for housing. Distressed sales, most notably short sales, are putting increased pressure on sales prices, and sellers have to remain vigilant in their home’s condition and aggressive on the price, but standard sales will continue to sell for more than distressed properties. They’re faster, easier and by and large in much better condition. They coincidentally or maybe not so coincidentally tend to be in superior locations to those that are distressed too. We also don’t have an enormous amount of data because sales are so scant, and the lack of data always skews any analysis. To this point, Blitzer also said this, “The markets are fairly thin, and the relative lack of closed transactions might be exacerbating the downside. The relative good news is that 14 cities saw improvements in their annual rates of change, versus the six that weakened”. Not exactly a dire statement.
But let’s face it; as long as we have an ineffectual government, haphazardly affecting legislation, instead of focusing on job creation, our economy is in the same boat as the housing market, facing that same stormy horizon.
When Bill Clinton was running for President in 1992, he had a banner in his campaign office that read, “It’s the economy stupid”. The same is true today. If we improve our employment picture, many of the problems in housing simply go away.
I recently listed a short sale in a neighborhood where every closed home in the past 6 months was a distressed sale. My husband seller, a father of two, was a customer service rep for a builder of new construction and had lost his job a little over a year ago. His mortgage payment now represented more than 50% of his family income. They tried a loan mod but were told they didn’t qualify. If he has his job, he doesn’t fall behind in his payments, and would have likely opted for the new government program of refinancing into today’s lower rates despite owing more than the home was worth, thereby lowering his payments and even infusing the economy with more of his now disposable income. While still underwater, he would almost certainly have chosen to stay in the family’s home. But he is now freelancing, going back to school and can no longer afford to stay. Conclusion? We need lower unemployment and better paying jobs. Until that happens, we should expect more of the same listless sales figures and softening prices. However, when that happens, and eventually it will, don’t be surprised to see a rather rapid recovery in most housing markets. Like Clinton said, “It’s the economy stupid”, plain and simple.
On a quick side note about the a fore mentioned short sale… we didn’t do what so many in my industry are doing which is list at a slashed price, get a silly offer and try to get the bank (who really has no clue from one neighborhood to the next) to accept, thus ultimately driving prices down further. Rather we listed at the last model match sale price, got multiple offers, countered both, and ultimately came off our price less than 1%. Because we also assembled a complete package for the lender, we are 1 1/2 weeks into our deal and have already moved through the document preparation phase and have been assigned a negotiator; had the BPO (Broker’s Price Opinion) done and been requested by that very negotiator to shorten our estimate for closing from the 6 months we prepared for, to 45 days. We will close this two lender deal, under the government’s HAFA program in less than 60 days from start to finish at a market price – not below. I preach the “3 P’s” to my sellers: Preparation, Presentation and Price. The same can be said for a short sale package. Put together a thorough package, make it easy for the lender to understand and give them a fair price and your short sale will fly through smoothly.