Sales and Resales

Although it's true that the real estate market is improving, the actual degree of improvement is less than one might suspect, since so much of what is selling is selling, falling through, and selling again.  At our sales meetings, we've had agents report up to three "repeat" sales in a single week.  There are a variety of reasons for these resales.  Some of the problems are mortgage issues, either of credit or of appraisal.  Some involve other contingencies that are never met, or renegotiations based on inspections.  There are a few, however, that boggle the mind.  One was a person who lost his job the day after the offer.  One was a couple who decided not to move.  The office winner, though, has to be the couple who completely disappeared, after a completely clean contract was accepted.  If anyone has seen these people, who had even brought their parents to see the property, please let us know!

I'm telling these stories so that sellers know better than to count their chickens before they hatch. To add cliche on top of cliche, just remember that it's not over til the fat lady sings!

Are Prices Starting to Rise?

As with many things, prices are local--very local. In addition, price indices are rarely apples-to-apples comparisons.  They usually take prices on one date and compare them to prices as a whole on another date.  For example, the Case-Shiller Index actually takes the total sales of all the property in a city and compares it to the total value of the property sold in that city in an earlier period, to calculate the rise or fall of real estate values over a period of time.  That means that it's hard to know what would happen to one specific property when it got sold or resold.

In the current market, sales are being driven by first-time homebuyers and are strongest at the low end of the price spectrum.  Overall, prices are flat or still falling slightly, although this does lag in time, due to reporting delays.  However, we are beginning to see appraisal problems again, which had not been occurring in recent months.  That indicates that prices are rising, thereby pushing up sales prices above levels of past reported sales, which are used by appraisers to calculate value.

What's the bottom line?  Prices at the lower end are being squeezed by supply and demand factors, and are probably heading up.  Higher-end sales are still waiting for that phenomenon to take place.

Help from the Government?

President Obama has proposed some new rules that would allow homeowners to refinance in many cases where that has not been possible up until now.  The main hurdle has been the appraisal--often, homeowners who have the ability to pay have not been able to take advantage of lower rates, because their homes are "underwater" (worth less than the mortgage, or worth less than the amount that they could refinance for).  His proposal would allow homeowners who are current on their mortgages, and have been for the last six months, to refinance without an appraisal (it does say "in most cases", and I'm not sure what that means).  His stated goal is to lower people's monthly payments and free up the extra cash to circulate into the economy and improve sales of other goods and services.

I see two problems with this.  One is that such homeowners would be allowed to convert their loans, at their option, into 15-year mortgages.  Since such a move would raise, rather than lower, their payments, I fail to see where the extra cash goes into anything except a different loan.  Secondly, the idea that banks are being told to refinance without qualifying appraisals seems ironic.  Isn't that supposedly how we got into this recession in the first place?  So, we tell them to make loans that don't meet the criteria that we just tightened?  And, if those loans go bad, and we can't blame the banks and their greed, whom do we blame?

It's clearly frustrating for good credit risks to lose out on lower rates because they are paying their mortgages regularly, and I understand that.  Somehow, though, the whole program has the ring of having started with some White House staffer complaining about not being able to refi his/her house, and then letting policy people hash out a compromise so that the banks would be happy with the result.  It seems to me that we have done that too often already.