Home Owners Associations have a special place in my heart.  They help maintain a nice standard of living in many areas - they make sure there are no junk cars, no unmowed lawns, and no trash to embarrass neighborhoods.

On the flip side, they tend to nag over even minor infractions.  For example, a Realtor in my office was complaining last week that a condominium he had listed would not sell because he is not even allowed to put a sign in the window.  (My thoughts are it probably won’t sell because nothing is selling in that specific condo complex given the recent crime and gunshot activity, but that’s another story!)

HOA’s can also be a ginormous pain in the wallet.  Dues from $50 (if you can get off cheaply) to $400 - depending on where you live, of course - will cover things like outside maintenance, insurance on the outside of structures (roofing, brick, vinyl), and management fees.

But what happens when there are a large number of vacancies due to foreclosure, abandonment, or home owners refusal to pay (the subsequent foreclosure won’t help in the short-run).  Some HOA’s are increasing their fees - forcing paying residents to make up the difference.  That doesn’t sit well with The Market Ticker,

Here’s what’s being claimed:

As a result, the remaining homeowners have become secondhand sufferers in the foreclosure crisis, experts said.

No, their foolishness was buying into such a community in the first place.  HOA’s have their place where the essence of the development is shared resource that has to be apportioned among the homeowners.  For instance, townhomes or condos where the roofs (and sometimes entryways, driveways and parking facilities) are shared, and therefore shared responsibility is mandatory for those items.

Genesis goes on to explain that home owners can vote to kill the HOA and it does NOT prevent people from being able to obtain title insurance when they sell.  Go read the whole op ed (caution: some strong language).   If I had to pay up to $200 per month on an HOA fee, I’d be the one carrying the petition around to eliminate the HOA.

Federal officials are very concerned about the July numbers for people purchasing real estate.  The drop could be an indicator that the housing market is teetering on the edge of another massive drop in the real estate market.

As a result, there is again discussion on reviving the home buyer tax credit, but the Obama Administration has not yet moved forward on that plan. Instead, relief is being given in the form of refinancing programs along with an emergency loan program for the unemployed, according to MSNBC.com.

“It’s too early to say whether the tax credit will be revived,” [Housing and Urban Development Secretary Shaun] Donovan said in an interview on CNN’s “State of the Union” program. He said the administration would “do everything we can” to stabilize the shaky U.S. housing market.

Relief at this point would be welcomed by possibly one out of ten home owners, real estate agents included!

Home sales plunged in July, according to the National Association of Realtors.  The loss in sales was somewhat expected as the federal tax credit finally ended (under contract by the end of April) and given the job losses of recent months.  However, the degree that sales fell was unexpected - to its lowest level in 15 years. MSNBC.com reports,

July’s sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.

The question is, how long until a steady housing recovery?  While not an economist, I’d argue that the housing recovery will solely depend upon recovery of the job market.  With first-time unemployment filings hitting 500,000 last week - the worst report for the year - there’s still a lot farther to go for a full recovery.  Until people feel confident in their jobs being secure, the likelihood of major purchases like real estate and cars will be low.

While there is some housing activity, I expect the recovery to stall for another six months as we get through the dark winter months.

For about a year, houses sold in local markets across the nation were running into appraisal issues.  Real estate agents often comped (or priced) the property at one amount, but when the appraiser came in they thought it should be valued at significantly less amount.

We’re starting to see fewer lost transactions due to appraisal issues as real estate agents and appraisers are coming closer to their price opinions.

In addition, other parties to transactions outside of the appraisers duties are stepping up to reevaluate the value of real estate.  If the home is a VA sale, the agents have the right to send supporting documentation to demonstrate why the price can be comped higher.  The documents may include recently sold real estate outside the immediate area of the home listed, thanks to the 2003 Tidewater Initiative.

The Tidewater Initiative gives a point of contact the opportunity to challenge an appraisal if the appraiser notifies them that the appraisal will come in under the sales price.  The appraiser can not disclose that appraised amount and the contact person has two business days to provide additional sales information to support the sales price.

However, this initiative doesn’t always kick in as real estate agents face the new reality of home values just not being as high as they were two and three years ago.

That said, it’s still shocking ot hear about a two thousand square foot house selling for $140,000 when just months ago it could have sold for $180,000 and up.

About five years ago, real estate was selling at a very fast clip.  Housing prices were growing by about 4 percent every year and it took but a little wheedling with an appraiser to make the contract value stick.  But five years before that, housing was fairly steady.  Values did increase, but at a more moderate rate of 1 to 2 percent per year.

Given that values grew by about 20 percent in a five year stretch - what would’ve taken 10 years to do previously - and given that values have dropped by about 20 percent across the nation (30 to 40 percent in some places), I expect the housing recovery to take about 10 years in all.  This is not based on any economic studies or actual hard numbers.

The bottom line is that the old way of selling homes - absent a run on houses by buyers because of easy loans - is the new way.  Buyers must save a down payment, they might expect to again pay closing costs (depending upon the seller), and they’ll have to verify they have job security before being approved for a loan.

Through the next five to eight years, I anticipate the housing market to be like it was in the 1990’s.  If sellers were able to sell then, they can do it now.  If real estate agents were able to make a living then, they can do it now.  And if buyers could save then, they can do it now.

To save, buyers may need to take on a second job for a year or two.  To sell, home owners may need to be realistic about their pricing.  To keep clients happy, real estate agents will need to pay attention to the details, respond to all aspects of a contract in a timely manner, and remember to stay in touch with their customers.

Everyone must find a way to walk the path of the new way - the old way.

Home ownership rates have slipped according to the Census Bureau.  In 2004, 69.4 percent of Americans owned their own homes.  Today, the home ownership rate is 66.9 percent and it’s expected to drop to 62 percent by 2012, the lowest its been since 1960.

According to USA Today, between six and eight million people could lose their homes in the next two years because they are now behind on the mortgage payments.

The push to own rather than rent now is being questioned. “A large percentage of households are not responsible enough to handle a mortgage payment,” [John] Burns [of John Burns Real Estate Consulting] says. “Growing homeownership is a great goal but you have to grow the percentage of households that are responsible.”

More stringent financing requirements may prevent some from buying.

I somewhat disagree with this.  While there are some homeowners who are just not responsible, it must be taken into consideration that there has been considerable job loss in the last two years.  I have heard a lot of people say the unemployed can always work flipping burgers or greeting customers at a big discount store, but a minimum wage job will not be enough to pay $1000 p/month mortgage (and that’s a cheap mortgage).

Figure $7.25 p/hour x 40 hours p/week = $290
$290 x 52 weeks p/year = $15,080
$15,080 / 12 months p/year = $1256.66 p/month

After paying the mortgage, you have $256 left to pay utilities, car payment, gas, insurance, food, etc.  Sorry, but the argument that anyone can flip burgers doesn’t cut it when it comes to saving your house from foreclosure.

After the devastating last few years of tsunamis, earthquakes, and floods, it is important that emergency housing be designed that can sustain survivors.  Shelter that is easy to deploy, affordable, and durable is very much needed for potential future emergencies.

To that end, the people at IM Design introduce us to Unit 0322,

Once initial needs are met, such as providing a safe shelter, the home owners can personalize their containers at their own pace and budget – adding a window here or there, painting the interior and eventually purchasing the simple affordable exterior cladding and pitched roof we’ve designed.  The concept is to provide stabile growth and allow the home owners to transform the container into their home.

Besides this, I also like the In-habit designs that can be shipped immediately… particularly the tent and the cocoon.  The cocoon for shelter until “help” arrives and the tent for safety while areas are being rebuilt.

I’m glad there are people looking out for us…

I saw a home on my local MLS a few moments ago that for some reason made me want to check to tax records and look at the history of the home.

The 1600 square foot home sold in 2004 for $151,990.

Fannie Mae bought it back this year for $130,000.

It’s now on the market for $104,900.

The 33 percent price drop is pretty indicative of the current values of homes in one neighborhood in my city.  And it’s a really pretty house, to boot. Ouch.

Mortgage lenders have been foreclosing on a lot of homes these past couple of years.  Some flip the houses immediately - putting them back on the market as a foreclosure or REO (or real estate owned aka bank owned).  However, others are holding on to the inventory they’ve acquired through foreclosures, jingle mail, or deed in lieu of foreclosures.

Why would they hold?  To not flood the market with a huge wave of foreclosures is one theory.  However, Les Jones and his bouquet of weeds links to this story from the real estate channel that emphasizes another possible reason,

With the expiration of the first-time buyer tax credit on April 30, there are now two main props keeping the housing market afloat.  One is the growing percentage of home sales financed by Federal Housing Administration (FHA) loan guarantees.  The other is the refusal of banks to put on the market foreclosed homes over $300,000.

… Even more crucial is that selling substantial numbers of expensive homes at discounts of 50% or more would compel the lenders to take substantial losses which have been avoided by keeping them off the market.

The theory Les proclaims is worth reading all the way through, but here’s part:

If a bank holds a $500,000 mortgage they can pretend it’s still worth it, even if it would sell on the market today for $300,000. If all those mortgages were marked to market (value), the banks would be declared insolvent. The FDIC would march in, close the bank, and either sell it to another bank or shut it down and pay the depositors.

I suspect we’ll see more bank implosions if banks continue their marked to market strategies.  I can’t get a $300,000 loan on a home worth only $175,000 in today’s market.  The lenders are holding out so their accounts balance, but for how long?

Thanks for the heads up, Les.

Builder confidence in the housing market remains low, especially since the federal tax credit incentives have ended.  A score below 50 means a negative outlook and this month’s number was 14 - the lowest it has been since March 2009.  According to MSNBC.com,

Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale in May fell to 213,000, the lowest level in nearly 40 years. And, at the current sales rate, it would take 8.5 months to exhaust that supply. In a healthy economy, new home inventory takes about six months to exhaust.

The good news is builders are not anticipating that the economy will fall back into a recession, but the recovery will be slow and drawn-out.