David’s Real Estate Blog
• • • • •

Sales of resale single-family homes and condos and co-operatives are expected to drop 4.7 percent this year, to an annual total of 5.39 million sales, according to the Realtor group’s latest housing market forecast. That follows a 12.8 percent decline in 2007 and an 8.5 percent decline in 2006. New-home sales are expected to drop 25.7 percent this year, following a 26.3 percent decline last year and an 18.1 percent decline in 2006.

Sales of resale single-family homes and condos and co-operatives are expected to drop 4.7 percent this year, to an annual total of 5.39 million sales, according to the Realtor group’s latest housing market forecast. That follows a 12.8 percent decline in 2007 and an 8.5 percent decline in 2006. New-home sales are expected to drop 25.7 percent this year, following a 26.3 percent decline last year and an 18.1 percent decline in 2006.

Hi , we just finished up our first year of mite travel hockey for the Delco Phantoms, and boy what a busy season it was. I can’t believe how far these kids have come from the beginning of spring camp last year. As one of the coaches of the team I am very proud of all that these 6-8 year olds have accomplished. They played in a few tournaments and actually one a very prestigious one called "SILVER STICKS" which gave them an invite to Canada to compete in the regional finals. even though we had a tough time with some of the teams the experience was something we will never forget. We also got a chance to play in Central Park outdoors with team from New York, although not as grand as the Buffalo/Pittsburgh outdoor game it was cool nonetheless with a light snow falling during the game. As long as there are hotel hallways to run around in this is what mite hockey is all about.

   age was 31.

• The 2006 median household income of home buyers was $70000 compared to $74,000 among

   all home buyers nationally.

• Sixty-five percent of home buyers reported that there were no children under age 18

   residing in the home.

• Fifty-nine percent of home buyers were married couples, 21 percent single females, 11

   percent single males, and 7 percent were unmarried couples.

• Six percent of home buyers reported they were born outside the United States,

  compared to 9 percent nationally.

• First-time home buyers accounted for 45 percent of homes purchased in 2007.

• Fifty-five percent of first-time home buyers were between 25 and 34 years old.

• The median income of first-time home buyers was $57800 compared to $58,600 among

  all first-time buyers nationally.

• Sixty-eight percent of home buyers between 18 and 24 purchased a home because of

  their desire to own a home of their own and establish a household.

• Twenty-seven percent of home buyers reported using social networking Web sites, such

  as, MySpace, Facebook, LinkedIn, and Friendster. Among home buyers aged 18 to 24, 45

  percent reported using social networking sites.

Divorce. Single parenthood. Debt. Bankruptcy. These and a long list of other social behaviors were once stigmatized and kept behind closed doors away from polite society, but are now, if perhaps not completely acceptable, at least openly tolerated and in some cases, even lauded as smart lifestyle choices.

Must we now add foreclosure to the list?

The evidence is still anecdotal, but news media have begun to report that some homeowners have decided to walk away from their homes just because they have no equity and, consequently, don’t want to make their mortgage payments even though they could afford to do so.

Not long ago, foreclosure was viewed as a shameful outcome of severe financial difficulties, but today, some homeowners seem almost proud of their decision to ditch their home and their mortgage payments. Consider Stephanie Valdez, a homeowner in Stockton, Calif., who told a "60 Minutes" correspondent that she and her husband saw no point in making the payments on their house because it was no longer worth as much as they had paid to buy it.

Such behavior isn’t new, of course. Homeowners in the last real estate down cycle also signed over the deeds to their homes to their lenders in lieu of a protracted foreclosure process. But today, this so-called "deed-in-lieu" has become so much a part of the landscape that a new term, "jingle-mail," has been coined to describe those envelopes of house keys mailed back to lenders.

What’s changed in this cycle, however, is that the negative consequences for walk-away homeowners have become so minimal that the decision to ditch a burdensome home and oversized mortgage seems to make a strange kind of good economic sense.

Not only the social stigma, but also the financial pain of foreclosure has diminished. Landlords reportedly have put out the welcome mat for former homeowners despite their impaired credit. Everyone seems to acknowledge that even a foreclosure will drop off a credit report in a matter of a few years, and that then these walk-away homeowners will be ready and able to get new mortgages and purchase new homes. Expect them to do so just in time for the next upturn in the housing cycle.

In non-recourse states, lenders can’t pursue former homeowners for unpaid mortgage debt after foreclosure. And now that much of this forgiven debt can be excluded from taxable income, those who walk-away from a mortgage often can avoid the federal income tax liability as well. Not even the all-mighty Internal Revenue Service can touch these folks.

Meanwhile, the homeowners can avoid the risk of more negative equity and eliminate the cost of owning and maintaining their home from their household budget. And since the property now belongs to an institution rather than another family, why not strip the fixtures and sell them for cash on your way out of town? (Read a recent AP report of a California homeowner caught doing this.)

But while the consequences of all this jingle mail may be minimal for the fair-weather homeowners, various other people will pay the price.

Lenders, institutional investors and individual shareholders will get stuck with the financial losses that result when borrowers irresponsibly refuse to pay their mortgages. Nearby homeowners will suffer the ill effects of foreclosed, vacant and uncared-for homes, which create blight, attract squatters and put additional downward pressure on home prices. And let’s not forget the children of walk-away homeowners, who are exposed to a lifestyle that depends on irresponsibility and irrational debt.

Moreover, walk-away home ownership perpetuates the sad modern notion that a home is neither a lifelong place of residence nor a long-term investment, but instead, just another disposable consumer product that differs little, if at all, from a television set or a tube of toothpaste. Buy it. Use it. And then lose it.

If legions of upside-down homeowners simply decide not to make their mortgage payments, the idyllic "American dream" may be exposed as no more than a fantasy, and at the end of the day, the bedrock notion of home ownership as good public policy may be placed in jeopardy. That’s yet another potential negative outcome of the current mortgage crisis that should give pause to anyone whose livelihood depends on real estate.

Delco TV, which airs on Comcast Community ChannelSafe Sleep for Baby video informs families that placing babies on their backs to sleepSafedoor-hangers that can hang on a door knob to remind families and all caregivers to placeSafe Sleep tips in addition to information on theBack to Sleep door-hanger, send an e-mail including your name and mailingstuartm@co.delaware.pa.us or call the County Office of Intercommunity HealthBack to Sleep Campaign call 1-800-505-CRIB(2742) or visit

.Delaware County Cribs for Kids at (610) 497.7344.

The rate cut by the Fed today is immediately significant for anyone with a line of credit. Also, anyone with an adjustable rate mortgage that is tied to prime will benefit at their next rate adjustment. However, it will probably be a little while before this works its way through to benefit new originations of fixed rate mortgages.

Here are the top ten ways any seller can practically guarantee their home will expire:

1. Not serious about selling. A sage once quipped, "Money is only important when you don’t want something enough." Real estate expert R.L. Brown said that if half of the 58,000 sellers in Maricopa County (Arizona) removed their for sale signs we would be at normal inventory levels. Actions speak louder than words in this market. Discretionary sellers should wait for a less competitive environment.
2. Improper pricing. A home properly priced is half sold. No amount of full color ads, glossy flyers, multiple photos, virtual tours, agent luncheons, Goodyear blimps, pom-pom girls or Saint Joseph statues will compensate for the wrong, timid retail price.
3. Not listening to your agent. Attorneys believe if you represent yourself, you have a fool for a client. Doctors don’t self-diagnose. Professionals use professionals. Even though most people believe they are experts on raising kids and real estate; full-time, career pros usually know what’s best. Listen very carefully.
4. Micromanage the marketing. Just because you sold cookware in college, carts in California, or carpeting in Cranston does not qualify you to second-guess your agent. If you had a real estate license years ago, tell your children about the "good old days." Share your concerns and timelines, but leave the details to the listing pro.
5. Don’t stage the property. Someday shag multi-colored, sculptured carpeting will come back. Whitewashed cabinets, Navajo white walls, linoleum flooring, southwest décor, lots of personal photos and Elvis paintings on black velvet should be removed. And, oh by the way loose the long sideburns.
6. Let Fido run loose. Recently, I entered a house and two frisky, friendly black Labs ran to sniff me. Unfortunately, I had light gray dress slacks on that day. Both wet stains lasted for hours. Until that day I didn’t realize dogs enjoyed chewing the tassels on expensive loafers.
7. Talk to the buyers. Life gets lonely at times. Why not ask the buyers where they grew up? Or how much they qualify for. Tell them about the vacant rental next door. Or, the sex offender who left the area. Maybe they could baby-sit next weekend! Why not share war stories, horror movies or meatloaf recipes?
8. Sell personal items. Wow, maybe the buyers want to buy the patio furniture, rotary lawnmower or life size statue of Saint Anthony. You only have four more boxes of Girl Scout cookies to sell. Why not ask for a donation for the March of Dimes, the Humane Society or the local PBS station. Remember the saying, "loose lips sink ships?"
9. What’s that smell? My house doesn’t smell of pet odors, baby diapers, curry powder, garlic, fried fish, coconut incense, cigars, manure, mulch, dairy farms or low tide. The buyer must be confusing my castle with a track home.
10. Avoid feedback. What do buyers know anyway? Imagine the fact they don’t appreciate my barbed wire fence, heavy duty rebar, backyard bomb shelter, airport runway views, lights from the power plant, hum from the high voltage lines, railroad tremors, scorpion skeletons, termite mud tubes and pet snakes.

This makes me mad every time I see it. Either the National Association of Business Economists is full of people with no real business experience or fools.

This is a headline from a major online Real Estate publication,

"Economists See Credit Problems as Bigger Threat than Terrorism."

I know they were all alive just seven years ago when terrorism cost the lives of three thousand American citizens. That headline goes beyond sensationalism. It is rude and insensitive.

The article goes on to say that one in three members of the NABE, "…Said the housing boom can be described as a ’serious National bubble." Then later in the article three in four said they would "buy a house today if they intended to use it as their primary residence."

Would someone please tell these academic fools that housing is local in nature? While many major markets suffered and are suffering from the over-zealousness of investors followed by the over-zealousness of foolish sub prime lenders; there are many markets that are healthy and many more that are suffering a softening but nothing close to a collapse.

These gloom and doom headlines supported by a minority of questionable economist opinions feed the problem they are describing. While the facts support the opposite conclusion. Even the economists own research supports the opposite conclusion.

In the same article, "Asked to look five years into the future, 42 percent expected US home prices to remain flat, 41 percent said prices would rise." How did 34 percent of the same group call this a bubble that is fed by a threat bigger than terrorism.

Let’s give credit where it is due. "59 percent still say there is no national housing bubble, only significant local bubbles. Another 8 percent said there’s no bubble at all and that the market is functioning correctly."

Hooray for those groups. They got it right. There are some local bubbles where there were hundreds and thousands of development parcels and homes developed and built in anticipation of future sales and the sales that were feeding that demand was investor speculation (Boise and Sarasota to name two).

In late 2005 and through 2006 the investors realized that the boom was being fed by their own demand so withdrew. This left a tremendous inventory in some cities or areas of cities.

Unfortunately, in 2006, the secondary market lenders realizing that they had allowed a foolish combination of underwriting standards for the previous five years or so immediately followed this. They were buying loans that allowed buyers to have both, little or no down payment and marginal credit. How this happened (and who should be prosecuted for it) is a mystery that will likely to remain such.

The result was that in some communities around the country, particularly where there were high priced homes and with less sophisticated buyers; many of these mortgages were used to purchase homes. That created additional pockets of excess inventory which stalled prices in those areas.

Now in the fall of 2007 the majority of lenders loaning jumbo loans, over $417,000 have stopped funding these high-end loans for some period. This will further increase inventory and dampen prices in some areas.

Notice the language, dampen prices in some areas. Most of the country is experiencing a normal buyer’s market that normally follows a long healthy seller’s market.

The latter group of economists put it perfectly. The market is functioning correctly. In 1986 after two to three years of a soft buyer’s market not unlike what we are experiencing now (Although it was driven by different causes.) there was a long strong period of a healthy seller’s market with steady appreciation.

There was a momentary softer buyer’s market around the Gulf War in 1991 (although not caused by it) followed by over a decade of a healthy buyers market that lasted until 2006. If we learn from history strong seller’s markets last longer than softer buyer’s markets.

So again, the economists got this right. The same article said 58% of the economists predicted a ‘meaningful’ recovery in U.S. housing markets before the second half of 2008 or in the second half of 2008. The majority of the other 42% predicted the recovery in 2009.

This is completely consistent with history. This two or three years of soft buyer’s market with slightly flattening prices will likely be followed by five or more years of a healthy seller’s market with equally healthy price appreciation.

REALTORS® all learned in their first Real Estate class that the market is driven by supply and demand. As long as there is an increasing population of people with reasonable or better incomes, the demand will keep the market healthy.

Add to that the fact that the Federal government repeatedly states that they realize that the Real Estate market is critical to the health of the economy and they will do whatever is necessary to keep mortgage money available.

It all adds up to a principle residence continuing to be the safest and smartest investment for a person living in this fabulous nation. (Just be careful of areas that have experienced rapid appreciation for more than twenty-four months. There could be a windfall or just a fall looming.)

If you are associated with Real Estate, please separate the sensationalism from the truth. If you are in most communities in this country, everything is pretty normal. Prices are appreciating a little slower but still appreciating. Houses are on the market longer. Buyers are fussier. Yes, it is tougher to sell Real Estate. But you still have one of the best jobs in the world with more personal freedom and opportunity for success than any other business person or professional on earth.