New Jersey Estates/Weichert Realtors/ NJ Luxury Real Estate/ New Homes: January 2009

100 Stable Housing Markets

They are locales where both buyers and investors can cash in.

"My lament over the last several years is that people have not paid any attention to risk-related factors in real estate. The market was going up and it was 'The market will take care of everything.' That was the mind set. On the flip side now, we don't want to look at all the bad news. Well, let's point to areas that are more stable where people can think of moving to or investing in," says HomeSmartReports co-founder, Mike Ela.

Recent studies have shown migration patterns and rural locations can point to buying and investment opportunities, but HomeSmartReports examined risk factors -- foreclosure activity, property flipping, sales volatility, property history, site issues -- that can positively or negatively affect values in an area.

"There are some areas of the country that are reasonably stable and where risk factors are minimal. Over the long haul, stable areas tend to fare better from a value standpoint," Ela says.

Ela says even markets where home prices have fallen, but economic strength remains, reveal a greater potential for sound real estate investments.

Using a Collateral Risk Measure (CRM), based on a scale of 0-100, where zero is very stable and 100 extremely risky, here are the Top 20 towns scoring 1.12 or lower. Compare them with the nation's riskiest market, Detroit-Livonia-Dearborn, MI and its CRM of 46.26.

Hinesville-Fort Stewart, GA; Manchester-Nashua, NH; Lebanon, PA; Bridgeport-Stamford-Norwalk, CT; Abilene, TX; Odessa, TX; Burlington-South Burlington, VT; Cambridge-Newton-Framingham, MA; Bismarck, ND; Farmington, NM; Hartford-West Hartford-E Hartford, CT; Norwich-New London, CT; Portland-South Portland-Biddeford, ME; Grand Forks, ND-MN; Essex County, MA; Fond du Lac, WI; New Haven-Milford, CT; Jackson, MI; Jacksonville, NC; and Barnstable Town, MA.

Ela plans to soon post the complete list of 100 low-risk towns on HomeSmartReports.

Using the factors mentioned, HomeSmartReports also provides a Market Risk Score, graded from "A" to "F," based on local market factors, to rate areas around a property. Plug in your ZIP Code and get your region's grade.

Here's a descriptions of each grade.

A - Low Market Risk Conditions exist. Sales trends are consistent and market activity is normal.

B - Some Market Risk Conditions exist. Foreclosure activity exists combined with market price appreciation which may not be consistent with a low risk market.

C - Moderate Market Risk Conditions exist. Foreclosure activity and market price appreciation appear higher than normal. More research recommended.

D - Medium to High Market Risk Conditions exist. Foreclosure activity is abnormally high. Market price appreciation is higher than normal.

F - High Market Risk Conditions exist. Very high foreclosure activity exists in the area. Very high market price appreciation exists which is not normal in a high foreclosure market. Flipping activity is present, and fraud rings may exist in the area. We strongly recommend that you seek the advice of a real estate professional.


Written by Broderick Perkins
January 29, 2009 

Hot Market: Washington Neighbor Beginning Roll to Recovery

Just like its neighbors across the Potomac River, Prince George's County, Maryland, the southeast suburb of Washington, D.C., has recently begun its climb out of the foreclosure mess and is about to become one of the region's hot markets. The signs are starting to emerge in the realm of pending sales -- which is the sign of future business in real estate markets.

The county's unemployment rate lingers around 4 percent according to local data and has enjoyed job growth through recent commercial development on the Potomac River front; in addition, Andrews Air Force Base stands to gain 2,200 or more jobs through the reassignments to the area as a result of BRAC (Base Realignment and Closure). The county could gain a residual 14,000 spin-off jobs as a result of the realignment over the next 10 years, according to the county's Economic Development Corporation.

In a year of dropping prices, home shoppers have jumped off the fence of indecision and started buying houses since mid-year. At that time, the inventory flattened and has now started to match a year ago. With December pending sales up 49 percent over December 2007 (528 contracts written vs. 354 last year), the last quarter ended at 15 percent higher than a year ago.

Average prices have dropped from an average last January 2008 of $300,000, to about $250,000 for December 2008. If the county follows the pattern of its counterparts in Northern Virginia, prices will reach a level that buyers can't refuse and flood the market.


Written by M. Anthony Carr
January 30, 2009 

Simplify and Focus

ONE WORD

Begin by choosing one word for the year that will be the star you are aiming for. My word for 2009 is Relax. Much of my work on my own life and with clients these days is guided by The Law of Attraction.

For years I have planned, strived and fretted about attaining my goals. It has become increasingly clear to me that all that activity has made it harder, not easier to get where I want to go. By relaxing, I can be more flexible and take advantage of the downstream current, instead of paddling upstream frantically!

I asked the question recently of my Facebook friends and some of their words for the year are:

 

• Focus

   

• Consistency

   

• Bliss

There is no right answer here. What is it that you want for your year? Use it as a guiding star to measure each day if you are aligned with what is important to you.

ONE THING

Now, if you'd like to keep it simple but take this one step farther, try this exercise. I find my coaching clients already know what will make the most difference and what is most important in becoming more successful, but sometimes aren't conscious of having a structure to implement focus. So I ask them at the beginning of each year these two questions:

 

1. What is the one thing, which if you did it consistently, would make the most difference in your business?

    

2. What is the one thing, which if you did it consistently, would make the most difference in your personal quality of life?

It is amazing when I ask these questions how quickly I get answers. Most of us know exactly what we need to do! The benefit of this is it gives you focus every day on taking action on the most important activity.

This tactic is aligned with what Stephen Covey, author of The Seven Habits of Highly Effective People, has identified as IMPORTANT vs URGENT. Thomas Leonard, the father of modern coaching, used to say that you could toss all business planning if, each day, you focused on improvement. He said, at the end of a year, this focus would probably exceed all rational business planning.

Once you have answered these two questions for yourself, post the answers somewhere that you will see them every day as you work or play. Perhaps a sticky note on your computer screen or car visor. Or a daily reminder on your smart phone or Outlook program. As you plan each day, incorporate that one word concept or important activity into your planning for the day. It will be a very good year!


Written by Joeann Fossland
January 28, 2009 

Real Estate Outlook: Obama Effect

For example, the bellwether poll of consumer confidence -- conducted by the University of Michigan -- has just come out and it found consumer sentiment up by two percent in January over December. The component of the index that's based on "expectations" -- do you expect the economy will start improving? -- was up by three percent.

Now you can argue that January's bounce had nothing to do with the arrival of a new president and economic team in Washington, and was barely a notch over December's number. But the fact is: the arrow pointed up not down. Given the country's high expectations about the new administration, documented in every major poll on the subject, higher consumer confidence shouldn't be all that surprising.

Also, the massive economic relief package coming from Capitol Hill within weeks is virtually guaranteed to create jobs, and put more money into millions of households' pockets through tax breaks. You can argue that the stimulus package cannot possibly work its magic quickly enough to alter the course of the recession.

That's debatable and the full story won't be known for a year or more. But for housing, there's no question that a tax credit with teeth, nonrepayable and with a use-it-or-lose-it deadline, can only spur additional sales, maybe several hundred thousand over the course of the coming 12 months, according to some housing group estimates.

Meanwhile mortgage rates remain under five percent -- at least for applicants with solid credit and a downpayment. Inflation is close to zero: the CPI urban index dropped by seven tenths of a percent in December, and the energy index was down by eight point three percent.

Finally, the latest data from southern California --the epicenter of boom and bust -- confirms that market by market, there are signs of rising home sales as affordability improves. According to MDA DataQuick, southern California sales last month were up by fifty point five percent over a year earlier. The flip side of that improvement: prices were down thirty-four point six percent.

Doomsayers may not be impressed by sales turnarounds, but anyone who sells -- or buys real estate and is looking for a great price -- can't afford to ignore positive signs.


Written by Kenneth R. Harney
January 27, 2009 

Disclosure of Existing Offers May Be of Help to Seller

It comes as a surprise to many buyers and sellers, and often to their agents as well, that - absent any specific agreement to the contrary - the existence and terms of an offer may not be treated as confidential.

Some listing agents, however, are not always eager to share information about existing offers. There are various explanations for this. A rather obvious one is that the existing offer may have been solicited by the listing agent himself. He has little incentive to work the market to see if he can find a competitor who will bring in a better offer than the one he himself has procured. Doing that would generate less commission for him. (Yes, this does illustrate one of the potential problems with dual agency.)

A more prosaic reason for a listing agent to be uninterested in letting others know about an existing offer is that he may simply want to avoid the extra work involved with more offers. Getting offers presented on a short sale or an REO ("real estate owned" - a foreclosed property) is generally a more involved process than bringing one before Mr. and Mrs. Typical Seller. In the best of circumstances there is still an institutional procedure to be followed, and during standard business hours at that. And then it takes longer to get an answer.

Suppose the situation where the listing agent doesn't have an offer of his own. In all likelihood, even if a price does get bid up - a result that is better for the seller - it isn't going to make a significant difference in the listing agent's commission. So why bother?

Not all real estate agents are Realtors®; but, if the agent in question is a Realtor® -- one who thereby subscribes to the Code of Ethics of the National Association of Realtors® (NAR) - he will need to be aware that the Code has something to say about this situation. Standard of Practice 1 - 15 of the Realtor® Code says: REALTORS® in response to inquiries from buyers or cooperating brokers shall, with the sellers' approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose whether offers were obtained by the listing licensee, another licensee in the firm, or by a cooperating broker.

Two things are important to note about this Code of Ethics requirement. First, such disclosure must come with the seller's approval. If the seller doesn't want these matters disclosed, then the listing agent must not do so. But what if the seller simply hasn't been asked? Clearly, then, the seller has not given his approval. But the seller should be asked. That is a conversation the listing agent should have with the seller fairly early on.

We have noted that it is generally in the seller's interest for competing buyers to know that there is another offer or offers. The seller should be made aware of the pros and cons when he is asked whether or not he would approve of disclosure. A failure to discuss this with the seller might be deemed a breach of fiduciary duty.

Secondly, it is to be noted that, if the seller has given approval, then the existence of other offers is to be disclosed in response to inquiries. There is not a general affirmative duty to disclose the existence of other offers to those who do not ask about it. This is also true of the duty to disclose the agency source of the other offer(s). That information does not have to be volunteered if there is no inquiry.


Written by Bob Hunt
January 27, 2009 

Washington Report: Expectations for Housing

Number one: Foreclosure relief. In comments on CNBC, Barney Frank, the House Financial Services committee chairman, predicted that Congress and President Obama would devote as much as $100 billion of bailout money to help financially-stressed home owners out of foreclosure.

Under one option, the government plans to encourage lenders to reduce delinquent borrowers' principal balances and payments in exchange for a federal guarantee that they'll incur no additional losses, even if the borrowers default again.

Another approach will be mass modifications not only of delinquent loans but for non-delinquent borrowers heading for payment problems because of job loss or income declines.

A second high priority: Passing legislation allowing bankruptcy judges to step in to prevent foreclosures by unilaterally reducing the monthly payments, interest rates and principal balance for owners who file for bankruptcy.

A third item that's likely to be passed quickly: A return to last year's higher mortgage limits for high-cost areas around the country. That would be welcome news to borrowers, Realtors and builders in California and along the East Coast, where Fannie Mae, Freddie Mac and FHA limits could return to as high as $729,750 -- up from the current $625,500.

Several other items on the agenda that you can expect to see during the early months of the new Congress: Passage of long-stalled anti-predatory lending legislation that would toughen penalties for lenders or brokers who put home buyers into mortgages they couldn't afford.

A key part of the bill creates a suitability test for new mortgages. Loan originators would have be able to document how the terms of a new mortgage serve the best interests of the borrowers.

A little farther down the road: The Obama administration is expected to consider reforms for the federal financial regulatory agencies, and to figure out what to do with Fannie Mae and Freddie Mac, which are both now in federal conservatorship.

The banking regulators have been widely criticized for being too passive during the excesses of the housing boom years. Rather than reining in banks with large subprime and Alt-A production and exposure - Indy Mac and WaMu among others -- they did little to intervene and avoid what turned out to be multi-billion dollar losses.


Written by Kenneth R. Harney
January 26, 2009 

Summit Accommodators Files Bankruptcy

Summit is not the only 1031 company in the US that has run into financial problems. Most people including real estate agents assumed that Summit deposited the funds in bank accounts insured by the federal government. This is the practice of most 1031 accommodators, but not all accommodators. Also, there are no government requirements or oversight agency or regulations to insure they do protect the clients' money through depositing the money in a federally insured account.

The 1031 accommodation industry operates largely unregulated. Summit was loaning money to Inland Capital, some 13.7 million, which in turn loaned on speculative real estate development. With the turn in this real estate market, Inland Capital clients cannot repay the loans to Inland Capital. Thus Inland can not pay Summit and Summit can not pay the people that entrusted money to them in a 1031 exchange. Many of the principles in the Inland Capital organization are the same as Summit 1031 Exchange. The result of this mess is a lot of people who are at risk of not getting their money; capital gains taxable liability since the money is not there, and purchase transactions that won't close because there are no funds.

The action we need to take as a real estate agent or investor is to be sure you know the company that is holding your money or your client's money. Be clear about where the funds are held and what type of protection you have in the event of a problem. What is the company's philosophy of "escrowed" funds?

Finally while I do not pine for more government intervention I do think that the consumers are not protected in most states because of a lack of rules and regulations with regard to the 1031 accommodations. Most states have zero regulations and rules. We, in the real estate industry, are regulated more on earnest money deposits that are held for 30-45 days than the 1031 accommodations are on large precede deposits that they hold for 180 days. That seems to be contrary to logic. We need to band together as in industry of professionals and get involved in this public safety issue. We need to require out legislatures to enact laws that protect the public and require safe guards, regulations, standards and even potentially licensing of this industry.

I appreciate any support that you can give us in this battle. You can rest assured that I am personally doing everything I can to move this issue forward. I have talked with many people in the industry in the last week raising awareness of this issue. I have had discussions with my local and state Presidents of the real estate boards. I have talked to the real estate commissioner in my home state of Oregon. I have called the President of NAR to express my concern for this issue. If we all take some action together we can better protect the clients that we care about and serve.


Written by Dirk Zeller
January 22, 2009 

Where's Your Pooled 1031 Exchange Account Invested?

I'm adamantly against pooling, yet most intermediaries pool their client's money. By pooling, I mean the placing of all the client's exchange funds into one account. The reason they pool is that by investing a larger amount of money, they're able to obtain a greater return. Of course the intermediary is going to keep most of the interest, which is the whole point of pooling to begin with. In fact, the more the account earns, the more they earn.

The very real and obvious incentive then is for the intermediary to maximize the return. And as we all know: the greater the yield, the greater the risk. Now, don't get me wrong; I am not saying these intermediaries too aggressive on purpose, or that they even know there is any risk in what they are doing. Yet there may very well be greater problems in their investments than even they know about. And if they DO know, they certainly aren't going to tell you.

Let's assume that the entire account is invested in a so-called money market account. I say so-called because there are different types of money market accounts (how many of you even knew that?). What you think is a true money market account may, in fact, be something entirely different. The SEC limits the investments of a true money market account to short-term instruments that mature in less than 13 months, with the average maturity of the fund less than 90 days.

But then there are enhanced money market funds which are allowed to invest in other types of securities in order to 'enhance' their return. This might be sub-prime loans (now worth pennies on the dollar) or it might be structured investment vehicles: entities that issue commercial paper. What if the issuer can't repay their outstanding paper?

So what intermediary would be so foolish as to use enhanced money market funds? Unfortunately, many have indeed invested their clients' exchange proceeds with such "safe" big-name companies as Legg Mason, Sun Trust, Wachovia, Bank of America, Northern Trust and the Janus Funds -- all of which have recently had to put money into their money market funds (even though they are not legally required to do so) to keep them solvent.

Not all of the big names have stepped up to take care of the problems in their own funds. In the past, both Community Bankers Mutual Fund money market account and General Electric's Asset Management account closed and paid investors only 96 cents on the dollar. The State of Florida, which operates an enhanced money market account for its communities which have excess property tax funds to invest, previously suspended withdrawals completely. It didn't have enough liquid cash because of problems with the enhancements in their fund.

Wait, it gets worse. There is also an investment vehicle called Auction Rate Securities, (or ARS's) which are long-term maturity vehicles that until recently had weekly auctions where purchases and sales were transacted and interest rates were adjusted. These auctions have ceased, making these securities unmarketable. This is what the title company's pooled exchange account was invested in, and which ultimately brought down the company - and this isn't the only 1031 pooled account, and it isn't the only major title company intermediary that had purchased ARS's!

Interestingly, one of the most common responses many of the intermediaries (including the one that just filed for bankruptcy) offer when asked about possible problems with their pooled account is "we're too big to have problems with our account." Oh really? Bigger than General Electric? Bigger than the State of Florida? Or Enron, WorldCom, Bear Stearns, Countrywide or AIG?

Pooled accounts can bring down even billion dollar companies - remember that the next time you let your intermediary pool your money. Instead, make sure that your exchange funds are in their own account, in an FDIC member bank, and that the name of the account includes the words "for the benefit of" and your name in order to make it clear they're your funds. You may earn less interest, but at least your funds will be secure.


Written by Gary Gorman
January 21, 2009 

Real Estate Outlook: Change Anticipated

Equally important, the outlines of the Obama administration's and Congress's plans to turn around the housing markets just became clearer. Tops on their list: Ending the foreclosure epidemics in some parts of the country through ambitious new programs designed to rework the terms of hundreds of thousands of mortgages that are now unaffordable.

In a letter to Congress last week, Lawrence Summers, Obama's nominee to head the National Economic Council, said the incoming administration plans to use portions of the remaining $350 billion in "TARP" -- or "Troubled Asset Relief Program" -- money to rework monthly payments for what Summers called "responsible home owners" now facing economic challenges in the recession.

Though Summers did not go into detail, the program is likely to be based on FDIC chairman Sheila Bair's proposed "mass-modification" concept that the Bush administration rejected last Fall.

Versions of that program might include widespread principal write-downs -- outright reductions in home owners' mortgage balances -- and guarantees to lenders in the event borrowers re-default.

The Obama administration is also likely to institute an immediate ban on all foreclosure actions, possibly for three months, and is certain to enact bankruptcy reform legislation allowing judges to modify mortgage terms to forestall foreclosures.

Why's this important for anyone involved in real estate? The key to stabilizing local markets, say most economists, is reducing the numbers of new foreclosures and other distressed-price transactions.

Foreclosures lower property values in surrounding neighborhoods, wherever they occur. That discourages potential buyers -- who don't want to plunge in as long as prices are still declining.

If the new administration and Congress can successfully reduce the numbers of new foreclosures, there's an excellent chance that the current combination of low prices and record low mortgage rates can have the effect they should be having: Spurring new sales.

Add in still another factor: Congress may create a new and improved tax credit -- one that's not repayable and covers all home purchases, not simply first-time buyers -- and we just might be looking at a FAR more positive outlook than a lot of people could imagine.


Written by Kenneth R. Harney
January 20, 2009