2008 Is Behind Us, Thank Goodness!

Now that the year is done, it is a good time to reflect back and also look forward. 2008 will go down as one of the toughest years in the Monmouth County real estate market since the late 1980's. The sale of single family homes was off about 22% from 2007 and prices declined as well.

Not all communities and not all types of homes felt the impact of the market equally. Those properties that fared the best were those with strong locations and those that were the newest or recently renovated. The condominium market showed more strength than the single family market, but the multi-family homes were hit hardest of all. We finished the year with the highest imbalance between supply and demand in the decade.

Where do we go from here? One thing seems certain, prices are going to continue to decline at least for the first half of 2009, possibly longer. There is just too much supply relative to demand to expect anything else to happen. So far the attempts by the government to stabilize the market have had little impact. Until such time as the demand for real estate improves, we will continue to have an oversupply of housing and declining prices. The demand for homes has declined about 40% from the levels of 205-2006.

We do have lower interest rates, about 5% on a 30 year fixed rate mortgage, and the lower rates will draw some into the market. However, the overhang of a weak economy will likely offset some of the upside of lower interest rates, leaving the impact of the rates to be marginal at best.

If you are buying, there are some tremendous values in the market, especially for first time buyers. If you are selling, the sooner you find a buyer the more money you are likely to see. No doubt you will be disappointed by the prices, but waiting will likely cost you more money.

This too shall pass, hopefully sooner rather than later. But for now, the market remains challenging and there is a chance we haven't seen the worst of it yet. Happy New Year!

Zero Percent Fed Funds Rate? You've Got To Be Kidding! What's Next?

There is no doubt that we are living in very interesting times. Earlier this week the Federal Reserve lowered the Fed Funds rate to zero, which means they are basically giving money away. Good grief! And that's not the end of it. The Fed also said they will buy up every crappy financial asset anyone wants to sell them. I guess they are also the financial junkyard of last resort as well.

What this means is that our government is doing everything possible to encourage Americans to run up even more debt than we have now. Is there anyone out there who can explain to me why this is a good idea? It seems that a major reason why we are in the economic mess we find ourselves in is a result of our borrowing from tomorrow to spend on today. How can even more borrowing solve the problem that too much borrowing caused? What am I missing? If you find yourself in a hole, isn't it better to put down the shovel and have someone get you a ladder, instead of getting a bigger shovel?

I know that our "leaders" are hoping this will stimulate economic activity, but why do I have a nagging feeling we will not get the result they are hoping for, but end up with someone much worse than recession, like massive inflation? I don't pretend to be a genius on economic matters, but I have a hard time figuring out how the bad habits that created a problem can be solved by more of the same bad habits. Will someone please explain it to me?

As a real estate broker I do see some upside to this in the short run. Interest rates on mortgages have come down and are around 5% and the rates on home equity loans are ridiculously low. There are already stories that the applications for refinances have gone through the roof. The downside of this is that the people who are in a position to refinance are, for the most part, the people who don't have their homes. Those people who have their homes for sale because they are upside down with their equity or are behind on their current mortgages can't refinance, so the lower rates will do them no good.

The government has been trying to figure out a way to support the real estate market to prevent further declines in real estate prices. So far, their efforts have failed. I suspect this latest move will fail also. No doubt that some buyers will come into the market to take advantage of the lower interest rates, but probably not enough to have an impact.

My experience over the years has taught me that people come into the market and buy houses when they feel secure and are optimistic about the future. There isn't a lot of that out there right now. If someone thinks they may lose their job, or if they are concerned about their future, they don't buy houses, even if the interest rates are very low.

And so the beat goes on. What can we likely expect over the next few months? The number of sales will likely be too low to firm up the prices, which means we will likely see prices continue to fall and with that will come a new crop of homeowners who will find themselves upside down with their equity.

Merry Christmas.

Yes Virginia, There Is Still Mortgage Money Available

One of the misconceptions that has resulted from the current credit crisis is the perception that there are no mortgages available to people who need them to buy houses. Nothing could be farther from the truth. Mortgage money is abundant and lenders are willing to lend to qualified applicants.

What has changed is what the profile of a qualified applicant looks like. Gone are the no documentation loans and most of the sub prime loans. Those are the loans you may have read about that are partly responsible for the soup we find ourselves in. Today a qualified applicant is someone who can verify that they have a job, can verify how much income they earn, have at least 10% of their own money to put toward a down payment and can prove it's their money and have credit scores at least in the upper 600's. If you fit that profile, you are likely to be a qualified applicant and mortgage money is available to you.

We do have a problem with loans to people who own their own businesses and their income is hard to verify. In the case of a business owner who isn't on a salary, the lender will rely on the tax returns of the applicant. If the business owner doesn't report all their income, they will not get as much of a mortgage as was the case when the funny money loans were widely available.

What has happened is that we have returned to the lending standards that served us so well before this decade. It's true that those standards do take a number of would be buyers out of the market, but in the long run, we will probably be the better for it.

Weakening Economy Takes It's Toll On The Real Estate Market

With the month of November at an end, the effects of the weakening economy on the already weak real estate market are becoming more evident, and the impact has been negative. For November, the closings of single family homes declined from 357 in 2007 to 232 this year. That is a decline of 35%. For the year, sales of single family homes around the county have been off by about 21% on a year to year basis, so the November numbers show a further weakening of the real estate market.

Closed sales are a trailing indicator of real estate activity because the closed numbers reflect deals that were actually struck 30, 60 or 90 days earlier. New contracts, called pending sales, is a more current indicator of sales activity, so let's take a look at those numbers. In November 2007 there were 352 pending sales reported in Monmouth County as compared to 245 for November 2008. That represents a decline of 31% year to year. That is not as bad as the closing figures, but still represents clear evidence that the weakening economy is having a negative effect on the local real estate market.

What does all this mean and what can we expect as we move into 2009. Sadly, there is no evidence that the real estate market is showing signs of improvement. The oversupply of housing, relative to demand, is the highest it's been this decade. Because of this, it is likely that prices will continue to decline well into 2009, at the very least. Will there be more buyers in the Spring? Yes there will. But those buyers will likely be buying at lower prices than we see today. What to do?



If you are a seller, time is of the essence. You find yourself in a race against time for every day that your house doesn't sell means you are likely to get less money when it does. We have many clients that tell us they "aren't in a hurry" or "we don't have to sell" or "we don't have a gun to our head". Those people will probably wish they had been in a hurry. If you are a seller and want to attract the next buyer for your type of house, make sure you offer the best value based on the asking price. You have to price your house to stand out from the competition. You must make your home a "no brainer" in the mind of a buyer. As we advise our clients, this is a market that requires a strong stomach and bold action. This is not a market for half hearted sellers.



If you are a buyer, you should only pursue those homes that meet your lifestyle needs and are absolutely the best value, based on the asking price. Since prices are likely to decline again next year, you should only buy if you plan to be in the home at least five years. If you only see yourself in the home for a period less than that, you should not buy! This is a market that does require a buyer have faith that prices will stabilize and once again go up. Though we don't have these markets often, they do test one's faith in the future.

Is There Anyone Who Will Represent Us?

Although this is a real estate blog, I feel compelled to comment and vent my anger at the Bailout Mania that is sweeping through our government. It seems that our "leaders", and I use that word very loosely, have completely lost their minds and can't move fast enough to bail out everyone, whether it be companies, individuals or governments who now find themselves between a rock and a hard place.

The more I listen to the "experts", the more I am convinced that nobody in a position of authority has a clue on how to get us out of the mess we are in. You need to look no further than our Treasury Secretary, who less than two months ago said the world would end if we didn't agree to buy toxic assets from troubled banks, now says we don't need to buy them at all! Think about this for a minute. Our habit of borrowing from tomorrow to pay for today has, in large measure, brought us to the point we are at. What is our government's plan to rescue us? Borrow even more money from tomorrow to pay for today! This is nuts!

You would think that once it is clear that nobody has the answers, caution would be the order of the day. But no, instead we throw caution to wind and race to spend money we don't have to bail out people who can't be rescued. We are bailing out banks, insurance companies, probably auto companies, those unfortunate individuals who are in trouble with their mortgages, and probably city and state governments as well. We are at the point where we are no longer talking tens or hundreds of billion of dollars, but are now talking in the trillions. And these trillions of dollars are dollars we don't actually have. This can't possibly end well.

But not everyone is in trouble. There are people in the country who have made it a habit to live within their means. IS THERE ANYONE IN OUR GOVERNMENT LOOKING OUT FOR THOSE OF US WHO HAVE USED OUR HOMES AS ATM MACHINES, WHO HAVE NOT MADE IT A LIFESTYLE TO BORROW FROM TOMORROW TO PAY FOR TODAY? It would appear not. Isn't anyone willing to stand up and be the voice of us that don't have massive credit card debt, that have gone without at times because we didn't have the money to pay for it, that have made a habit of saving some of what we earn because it is the right thing to do?

This whole economic situation is not only sad, it is downright maddening. What is most frustrating is that those of us that have lived our lives in an economically responsible way are going to get stuck with the tab for the disaster that our government seems intent on bringing upon us!

Mortgage Bailout Plan Is The Government Version of Predatory Lending

The mortgage bailout plan unveiled yesterday, designed to "help" homeowners in financial difficulty stay in their homes, is a perfect example why we should board up the windows and barricade the doors whenever the government attempts to come to our rescue.

What has been proposed is little more than a government version of predatory lending. Here are the basics as I understand them. Homeowners who are delinquent on the mortgages and have no equity in their homes can get a loan modification whereby the rate would be adjusted to 3% and the total housing payment for the homeowner would not be more than 38% of the monthly income. All this is based on a 40 year amortization schedule. So good so far.

Now here is the bad (predatory) part. Nothing is being done to change the mortgage balance. Let's say you bought the house for $300,000 and the mortgage was $280,000 and now the house is worth $200,000. That means your have negative equity in the home of $80,000. Let's also assume that the rate adjustment with the payment limit would equate to a $180,000 mortgage. If you stayed in the home for forty years, which is unlikely but possible, you would still owe the lender $100,000 at the end of the mortgage.

If you sold the house, which is more likely, you would have to pay off the full mortgage amount of $280,000. Since the average family moves every 7 years, what are the chances that the prices will stop falling and then appreciate enough to get the value back to around $300,000 before you move? Not likely.

The government thinks this workable based on the notion that housing prices inevitably go up. Isn't this the same assumption that got us into this mess in the first place? This program will do little more than postpone the day of reckoning that troubled homeowners are currently facing. It is very unlikely to solve their problems. Isn't it ironic that we listen to our elected officials to rail against the predatory mortgage companies, yet feel it is OK to offer the same kind of garbage in the name of "assistance"?

As a real estate broker, I want to see the market improve ASAP. I wish this sounded like a solution, but it doesn't. It sounds like another reason why government intrusion into the private sector is likely to make a bad situation even worse.

How to Hire the Right Agent if You Are Selling Your Home

If you are selling your home, hiring the right agent has never been more important. With prices declining, you are in a race against time. The longer it takes for you to sell your home, the less money you are likely to get. Over my 30 years of experience, it has become apparent that most homeowners really DON'T know what to look for or know what questions to ask when interviewing agents to represent them. So here is my attempt to give you some perspective as to what look for before hiring an agent to sell your home.

1. Look for an agent with experience. That has never been more important than now. If you can find one, get an agent who has worked through Buyers' Markets in the past. That won't be easy, the last one was back in the early 1990's and few agents have been in business that long. If you can find one, they often have a perspective on how to be successful in this market that agents who haven't been through it just don't have.

2. Look for an agent with a proven track record of production. Sounds pretty obvious, but the truth is that roughly 50% of the agents in our local Board of Realtors have gone the entire year with zero business transacted. If you get one of those, guess what, the chances of selling your house are remote. When you talk to any agent they will tell you they are productive, but make them prove it. Have them show you copies of the MLS sheets for every transaction they have been involved with over, lets say, the last three years and have it be a copy that shows that they were either the listing or selling agent.

3. Look for an agent who has success with sellers. We deal with buyers and sellers as real estate agents, and although the priorities are often similar, they are seldom the same. Many agents who are productive in a general sense, are not successful with sellers. In fact, it has been my experience that most agents prefer working with buyers, especially in a Buyer's Market. Make sure the agent you hire is at least as successful with sellers as with buyers.

4. Look for an agent who does business in your area. Knowledge of the local market is critical. Make sure the business an agent does is in your market. It is not critical that the agent has sold a house on your street in the last year or so, but is important that the agent is doing business in your area. I have encountered owners that think because an agent sold a house on their street in the last year, that somehow that makes them more qualified than one who hasn't. What if that sale was the agent's only sale in the last two years, or their only sale in the local market or has never successfully marketed a listing before? Clearly that agent is probably not the most qualified to handle your home.

5. Look for an agent you feel you can trust. If you don't feel you can trust a person, you shouldn't do business with them, simple as that. A good agent wants the client to get the most money they can for their house and will make recommendations to help the client reach that end. Sometimes those recommendations are not music to the client's ears. If you don't trust your agent, you are less likely to follow those recommendations. The truth is, there isn't much point to hiring a top flight agent if you are going to disregard their advice.

6. Look for an agent you can communicate with. Without the ability to communicate with one another things are not likely to go well, regardless of your motivation or the agent's track record. Be sure that the agent listens to your point of view and that you can understand the information and points the agent is trying to convey to you.

Did you notice what is not on the list of things to look for? How about the agent's opinion of the value of your home. The truth is, what the agent thinks your home is worth is not the most important criteria but is often the one that homeowners rely on most heavily. My experience has been that owners will very often hire the agent whose opinion of value is most close to the owners opinion of the value of their home. Guess what? Most owners have an inflated view of the value of their homes. If you hire an agent based on their opinion of value, you will likely overprice your home and it either won't sell or it will take longer to sell and you will get less money. It is quite likely that the best agent will have one of the more conservative estimates, if not the most conservative estimate, of your home's value.

There you have it. If you follow these guidelines you will have a much better chance of getting the right agent to market you home and will likely get the best price the market will bring you. If you don't follow these guidelines and get the wrong agent, you have only yourself to blame.