Boom2Bust.com

Two Sides To Every (Housing) Story

Some time ago I was interviewed by Tony Sclafani, an MSNBC.com contributor, for a piece he wrote regarding the decline of newspapers. From the article:

Chicago financial research analyst Christopher Hill says he let his newspaper subscription lapse and prefers instead to scour a variety of news sources online. That way, he says, he’s assured of seeing “both sides of the stories.” The 35-year-old, who runs the financial blog Boom2Bust.com, says he’s noticed that his blog’s commenters will call him out when he fails to present a balanced overview of a particular issue.

“There might be a story that focuses on the U.S. housing market and the source might be the National Association of Realtors — and that might be the only side of the story you hear,” Hill says.

Last weekend, I came across an article in the Chicago Tribune which I thought was a pretty good example of what I was referring to in that interview. Nicholas Riccardi wrote on June 7:

Phoenix’s housing bust has turned into a quasi-boom, a sign that its market might have hit bottom and a preview of what a housing recovery could look like.

More homes are selling than at any time since 2006. Prices are slowly stabilizing. Buyers again are in bidding wars — only this time over foreclosed houses selling at deep discounts rather than ranch homes listing for vast sums.

Riccardi’s sources? Individuals who could stand to gain from a rebound in the Phoenix housing market. From the piece:

“The free market is at work,” said Shannon Hubbard, a real estate agent and blogger. “Prices got driven down so much that people said, ‘I’m going to come out and play.’ “

Hubbard writes on BlogArizona.com:

I’m a Realtor-Investor, maintaining an active real estate license with Great American Realty, Inc. I’m also Co-owner of Homewerx Home Inspections, and Owner of BlogArizona.com.

Next, Riccardi quoted a real estate consulting firm. He wrote:

John Burns Real Estate Consulting in February identified Phoenix as “the most unique market in the nation,” where affordability was better than at any time since 1981.

While looking through the consultant’s website, I came across the following in a recent newsletter:

Will tax credits, low mortgage rates, low prices, and continued aggressive government lending turn around the housing market? We HOPE.

Sounds like they can’t wait for a housing turnaround. Here’s another one:

Mike Orr, a Phoenix real estate analyst, thinks the housing market already has hit bottom.

Mr. Orr is not only a real estate analyst, but also an agent, according to the Arizona Republic’s Catherine Reagor in an April 2009 housing-related article.

Finally, there’s the real estate professor. Riccardi wrote:

Arizona State University business professor Karl Gunterman noted the incremental slowing in a report late last month, saying it could be a sign of the market bottoming.

Professor Gunterman, who is also an officer for the American Real Estate Society, talked about the Phoenix real estate market back on October 20, 2008. From the Phoenix Business Journal:

ASU real estate professor Karl Gunterman believes depreciation is beginning to level off, but says prices still are not at rock bottom. He expects the downward trend to continue as August and September are released, but not as steeply.

Was Gunterman correct about his “theory of depreciation?” See for yourself:

Phoenix (AZ) Housing Market
Source: ActiveRain.com

I’m not writing this to bash the author of this Tribune article, or his sources. However, as I indicated in that MSNBC interview, I believe readers deserve to be given access to both sides of the story, where applicable. By that, I mean it’s one thing to write a story about the activities of the local gardening club, and it’s another to pen an article about the perceived direction of residential real estate sales and prices. One point of view is not enough for the housing piece.

Unfortunately, this is what readers are left with many times.

By not addressing both sides of the story when warranted, the journalist may be left with nothing more than a press release or sales pitch on behalf of the source(s) used.

So, is there another side to the Phoenix housing story? Well, consider the following from Bloomberg’s Kathleen Howley and Erik Schatzker today:

U.S. home prices may continue to tumble for years, according to economist and Yale University professor Robert J. Shiller.

“Our sense that housing is a wonderful investment is really damaged now,” Shiller said in an interview with Bloomberg Television today…

The Standard & Poor’s/Case-Shiller national index of home prices, named after the professor, has fallen 32 percent from a high in the second quarter of 2006.

Shiller is famous for having warned of the housing bust while most other housing “experts” didn’t see it coming. In fact, he was often ridiculed for his comments about an impending housing bubble.

Based on Shiller’s latest outlook, it makes one wonder if we’ve really reached a bottom in housing.

Who knows? But having access to both sides of the story sure is nice.

Source:

“Bidding wars are back — at low end”
Nicholas Riccardi
Chicago Tribune, June 7, 2009

“Housing price declines head for record territory”
Jan Bucholz
Phoenix Business Journal, October 20, 2008

“Shiller Says U.S. Home Prices May Decline for Years (Update1)”
Kathleen M. Howley, Erik Schatzker
Bloomberg, June 9, 2009

Adventure Realtor?

Just how far will real estate agents go to sell property these days?

VERY FAR, as this May 22 post on Craigslist (Dublin) shows:

Washington DC Realtor coming to Ireland

Washington DC greater area professional Realtor coming to Ireland. Coming on May 24th and leaving June 1st 2009, will be in Shannon, Galway, and Dublin. If you are interested in investing, relocation, buying, leasing a Real Estate in Washington DC metro area please email me at…

Hope things worked out for this enterprising individual. Then again, there was always a Plan B…

Kidnap a leprechaun and force him to show you where his gold is.

Source: FreeClipArtNow.com

U.S. Housing Market On The Way To Recovery?

Is it possible that the gravely-ill housing market in the United States is actually starting to recover? Bloomberg’s Kathleen M. Howley wrote this afternoon:

U.S. home prices rose 0.7 percent in February from January, the first consecutive monthly gain in two years, a sign that low interest rates may be moderating declines in real estate values…

Mortgage rates have tumbled 1.6 percentage points in six months, making houses and condominiums more affordable. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 5.3 percent last week as Americans took advantage of interest rates near record lows. Home sales rose 5.1 percent in February from a month earlier, the National Association of Realtors said March 23…

The inventory of properties on the market fell to a 9.7 month supply in February at the current sales pace, down from April’s high of 11.3 months, and sales rose 5.1 percent from a month earlier, the Realtors group said.

The number of Americans signing contracts to buy previously owned homes rose 2.1 percent in February, led by a 14.5 percent jump in the Midwest and a 10.6 percent increase in the Northeast, the National Association of Realtors said in an April 1 report.

Despite all this recent good news, the patient might not be out of danger just yet. Howley added:

U.S. banks owned $11.5 billion of foreclosed homes in the fourth quarter, up from $6.7 billion a year earlier, according to the Federal Deposit Insurance Corp. in Washington. California and Florida metropolitan areas led the U.S. in foreclosures in the first quarter as unemployment and falling property values deepened the housing recession, according to RealtyTrac Inc., based in Irvine, California.

“Whatever damage has been done in California is only going to get worse because there is a glut of homes owned by lenders that aren’t yet on the market,” said Bruce Norris, a principal with the Norris Group, a Riverside, California-based real estate investment firm. “These homes are like a shadow inventory that is likely to drag down prices further when they come onto the market.”

Freddie Mac, along with larger rival, Washington-based Fannie Mae and banks including New York-based Citigroup Inc., have slowed or delayed foreclosures using various moratorium plans in the hopes that homeowners in default will be able to modify their loans.

And now, foreclosures are starting to accelerate. The New York Times’ David Leonhardt wrote Tuesday:

Fannie Mae, like many banks, is inundated with foreclosed properties. In recent weeks, banks have begun accelerating foreclosures again, after having held off while waiting to find out which homeowners would be eligible for the Obama administration’s assistance program.

Which could mean more falling prices ahead. Leonhardt added:

The glut of foreclosed homes creates a self-reinforcing cycle. Falling prices lead to more foreclosures. Foreclosures lead to an excess supply of homes for sale. The excess supply then leads to further price declines. Jan Hatzius, the chief economist at Goldman Sachs, says that the “massive amount of excess supply” means that home prices nationwide will probably fall an additional 15 percent.

This estimate hides a lot of variation, too. In Miami, Goldman forecasts, prices could drop an additional 33 percent, which is pretty amazing since they’ve already fallen 50 percent from their 2006 peak.

Nor is excess supply the only reason prices still have a way to fall. Nationwide, homes may not be overvalued by much. But in some cities, including New York, San Francisco, Los Angeles, Boston, Chicago and Miami, they remain very expensive. So while Mr. Hatzius and his Goldman colleagues are somewhat more pessimistic than most forecasters, the difference isn’t enormous.

Not only are foreclosures ramping up, but it appears they’re spilling out beyond the primary metropolitan areas into the secondary markets now as well. From the American Banker website today:

Foreclosure rates continued to climb in the first quarter in many parts of the country, casting doubt on the effectiveness of the Obama administration’s foreclosure prevention plan, a private foreclosure listing company said Wednesday.

“Industry efforts to date really haven’t put a dent yet in the wave of foreclosures,” said Rick Sharga, a senior vice president at RealtyTrac, an online foreclosure listing service that releases quarterly reports on foreclosure activity. “Despite the press reports we’ve had about the many hundreds of thousands of loans that have been modified or worked out or rearranged, the numbers have just kept going up.”

Sharga said that new municipalities had appeared on the map during the most recent period as areas with rising foreclosure rates, including Boise, Id., Fayetteville, Ark. and Charlotte.

“It appears we’re starting to see the problem spread beyond the primary metropolitan areas into the secondary markets,” he said, adding that while foreclosures in Detroit, Mich., were down, rates in Ann Arbor, Lansing and Grand Rapids had risen.

RealtyTrac is your destination for housing foreclosures.

Going back to the Times piece, David Leonhardt ended his article on a personal note and brushed aside any notions that the housing bust may be near a bottom. He concluded:

I’ll confess that this bearish picture isn’t exactly what I had hoped to find. A year ago, as part of a move from New York to Washington, my wife and I bought our first house. We did so fully expecting prices to continue falling (though perhaps not as much as they ultimately will, given the severity of the financial crisis). But we decided they had fallen enough for us to take the plunge. We preferred buying before the bottom of the market instead of renting and having to move again in a year or two.

Still, when I wrote about that decision last spring, I argued that anyone who didn’t have to move probably should not buy yet. Prices still had a way to fall.

They don’t have as far to fall today, but the great real estate crash is not over, either. So if you are part of the 30 percent of American households who rent and you’re trying to decide when to buy, relax.

The market is still coming your way.

Sources:

“Home Prices Gain 0.7% in February From January (Update1)”
Kathleen M. Howley
Bloomberg, April 22, 2009

“For Housing Crisis, the End Probably Isn’t Near”
David Leonhardt
New York Times, April 21, 2009

“RealtyTrac Sees Problems with Obama Mod Plan”
American Banker, April 22, 2009

Weird Housing Tales, Part 19

As usual, leave it to Chicago Tribune real estate columnist Mary Umberger to come up with some disturbing housing-related stories. Although, I’m somewhat concerned about her as she started this weekend’s column with:

It’s spring, and I’m sick of real estate/economic gloom.

Buckle up, Mary, as I have a feeling you ain’t seen nothing yet. From her piece yesterday:

A three-hour tour

You’ve heard, probably, of real estate agents who fill up “foreclosure buses” to schlep around would-be buyers to check out bank-owned properties that are on the market.

Now we have the foreclosure boat: Real estate agent Marc Joseph takes bargain-hunters on three-hour pontoon-boat tours of waterfront properties in Cape Coral and Ft. Myers, Fla. In February, the towns collectively had the second-highest foreclosure rate in the nation.

Odd job request

Here’s one sure-fire way to get those home sales moving again: A district government within the eastern Chinese city of Weifang has ordered all of its employees to buy or sell an apartment by June 30—or have their pay docked.

Reuters reported that the edict has workers so distracted that they’re unable to focus on doing their jobs.

Source:

“Some jump the gun on homes’ rehab potential”
Mary Umberger
Chicago Tribune, April 20, 2009

Weird Housing Tales, Part 18

The following has got to be the “weirdest housing tale” I’ve ever heard— to date.

Back on March 5, FOX 31 News (Denver) reported:

He bought his first home, poured $30,000.00 into it to fix up, now 6 months later Jonathon Kyte has learned his home doesn’t belong to him.

“I froze, I just pointed at it, my wife was there, we were just speechless.”

According to the city and county of Denver, Jonathon owns the dump, next door. He found out about the mistake almost by accident when he received a map which showed the unit he’s living is actually unit number 4.

But he owns the deed and title to unit number 5. Jonathon blames the Coldwell Banker listing agent for the mistake. She marketed the property and provided the key to the unit Jonathon and wife have been living in. He called the listing agent again and again but she wouldn’t return his calls. He also called the title company, “Colorado American Title,” and an employee promised to get back to him, but never did.

So Jonathon called Fox 31 News. We confronted the listing agent’s supervisor, but he would not comment on camera. He said their lawyers were looking into it.

Jonathon is now considered a squatter in the condo –he thought he bought.

And all the people who were so willing to sell it to him, are unwilling to help.

After I heard about the story a couple of weeks ago, I wondered what ever became of Mr. Kyte. I figured the next time I’d hear something new was when the other parties made the headlines for getting their butts sued off.

Not so. From Atlanta’s FOX 5 on April 7:

A Colorado man who had been living in the wrong condo for six months spent thousands of dollars fixing it up only to find out he didn’t own it. Instead the man actually held the title to the run-down unit next door. When Jonathan Kyte found out the condo he poured so much money into wasn’t his, he went to court. Kyte fought hard to keep the condo, but in the end he was forced to move.

“Every part of me is sad right now,” said Kyte.

Kyte lived in unit #4, but according the city he actually owned the deed to unit # 5, the run-down apartment next door.

“It looks terrible,” said Kyte.

Kyte blamed the listing agent for mixing up the numbers. The actual owner of unit #4, and seven other condos in the building, evicted Jonathon.

“We’ve spent all of our savings on this place. Now we’re moving out and that’s that,” Kyte said.

Kyte spent $30,000 remodeling the property he thought was his. The hard work Kyte put into renovating the condo, paid off. Kyte paid just over $45,000 for the condo he thought was his. After the renovations, the condo appraised for more than triple that amount.

The person who will benefit from the work is the doctor who owns the unit and is kicking Kyte out.

Neither the doctor nor his business partner would comment on Kyte’s plight.

Kyte went back to work trying to transform the condo he actually owns into a habitable home.

“I feel like I lost everything. Imagine if somebody stole your house. It’s not a good feeling,” said Kyte.

Kyte’s lawyer is still trying to re-coup some of the losses from the real estate company where the listing agent worked, but that could take months or even years. Kyte said he planned to sell the unit he actually owns because he just doesn’t want to live there.

Note how it says “where the listing agent worked.”

Source: OptHome.com

Sources:

“Condo owner finds out he’s been living and renovating in the wrong unit”
FOX 31 Denver, March 5, 2009

“Colo. Man in Condo Mix-up Evicted”
Amanda Davis
FOX 5 Atlanta, April 7, 2009

Low Rates Don’t Matter If You Can’t Get A Mortgage

Today I spotted the following on the Florida Association of Realtors website:

Why It’s a Great Time To Buy Real Estate in Florida!

Favorable interest rates: Do the math. Lower rates multiply a buyer’s financial power, especially now when rates are near a 40-year low. Even one/half of one percentage point difference means a buyer could save more than $1,000 per year on a median-priced home. Buyers get more home for the money – a perfect scenario for families looking to upsize.

Yep. Those pushing homes will tell prospective homebuyers now is the time to buy, partly because of low mortgage rates. Problem is, the aspiring homeowner might not qualify for a home loan. According to Bloomberg’s James Sterngold last week:

Brian Wickert, a mortgage banker in Butler, Wisconsin, prides himself on screening applicants carefully. That’s why he was stunned when a customer who sailed through four home loans tried to do a refinancing in January, only to be rejected by three national lenders.

The borrower’s credit standing and income were solid, said Wickert, 47, president of Accunet Mortgage. The problem was that, with home sales plummeting along with prices, the appraiser couldn’t find the required three comparable sales in six months within a one-mile radius.

“The business has gotten tougher than I’ve seen it,” Wickert said. “The person who has decided he wants to give himself his own personal economic stimulus package by refinancing at low rates is being stymied by the rules and the fees. Too many people are being excluded.”

Bankers around the country say one reason the housing market hasn’t stabilized is that while mortgage rates have come down, hurdles have gone up. Rising default rates and bank losses have made lenders more risk-averse, leading to higher fees, increased insurance rates and difficulties refinancing loans.

The average rate on a 30-year fixed mortgage dropped to 5.07 percent for the week ending Feb. 26 from 6.63 percent for the one ending July 24, according to data compiled by McLean, Virginia-based Freddie Mac. Meanwhile, the percent of mortgage applications that led to closings fell nationwide to 59 percent in the first half of 2008 from 66.3 percent in 2006, the most recent period for which data is available, the Mortgage Bankers Association reported…

“Underwriting standards have changed from lax to too tight,” said Lawrence Yun, chief economist at the Chicago-based National Association of Realtors. “The pendulum is swinging too far the other way. We can’t stabilize the housing market if buyers can’t get reasonable mortgages.”

Sterngold pointed out a number of obstacles for those looking to get mortgages these days. From the piece:

Those not covered by the Obama plan will have to contend with lenders requiring higher FICO scores than in the past or charging upfront fees to borrowers with scores once considered excellent. San Francisco-based Wells Fargo & Co., the second- largest U.S. home lender, boosted the minimum score for Federal Housing Administration and Veteran Affairs loans it makes through brokers to 620 on Jan. 27 from 600…

Another strain on consumers is a planned increase by Fannie Mae of add-on fees called loan-level price adjustments, which lenders often pass on to borrowers. Someone with a 699 FICO score borrowing 80 percent of the value of a home used to pay 1 percent in price adjustments. As of April 1, Fannie Mae will raise that to 1.5 percent. For a borrower with a 659 score, the adjustment will climb to 3 percent from 2.25 percent…

Another issue is that mortgage lenders have eliminated jobs, slowing down the approval process.

So much for low mortgage rates…

Source:

“Low Mortgage Rates a Mirage as Fees Climb, Eligibility Tightens”
James Sterngold
Bloomberg, February 27, 2009

Tough Times For Housing Industry Trade Associations

From the Chicago Tribune’s real estate columnist Mary Umberger this weekend:

The National Association of Home Builders announced it’s cutting $11.5 million from its operating budget and eliminating 52 jobs. The Washington-based trade association, citing declining income from membership and trade shows, said, “The stark realities confronting our association and industry cannot be ignored.”

A spokesman said the organization is in the process of tallying its membership and won’t have final numbers until January; it previously reported 235,000 members.

Meanwhile, the National Association of Realtors says its membership is down by 125,000 since this time last year. Nonetheless, in early December, the trade group reported a still-hefty membership roster of 1.2 million. When the housing boom began in 2002, the group had 800,000 members.

Source:

“A little gift of Zen for the holidays”
Mary Umberger
Chicago Tribune, December 21, 2008

One-Third Of First-Time Home Buyers Use No Money Down In 2007-2008

You’d think some people would learn a thing or two from the Great American Housing Bust. Chicago Tribune real estate columnist Mary Umberger wrote this past weekend:

Each year, the National Association of Realtors meticulously surveys thousands of real estate consumers in order to get an idea of which ones, exactly, got to the closing table, and how they did it.

The 10,000 consumers who responded to the latest survey revealed a couple of things about first-time buyers. Their numbers grew in this 2007-08 study—not terribly surprising, given that first-timers were unencumbered by having a house to unload. First-time buyers accounted for 41 percent of all transactions, up from 39 percent the year before, and up from 36 percent in the 2005-06 study.

But many first-timers managed their deals in a way that I find troubling, given that we’re now reminded every single day that easy credit is what led us into our current national financial bind: A huge number of them bought with no money down—34 percent of all first-time buyers financed 100 percent of their purchases. (Among all types of buyers, 23 percent purchased with 0 down.)

Hope these new homeowners keep their jobs in the 2008-? U.S. Recession. Otherwise, there’s going to be a lot more jingle mail down the road…

Find your place at Apartments.com. View photos, floor plans, take a virtual tour and more!

Source:

“No down payment? Buyers still able to score homes”
Mary Umberger
Chicago Tribune, November 30, 2008

Weird Housing Tales, Part 14

If it’s a weird story about housing you’re after, look no further than the Chicago Tribune’s Mary Umberger. The columnist always seems to have plenty of them. She wrote this past Sunday:

Stockton, Calif., has become one of the most foreclosure-plagued cities in the country, with one in every 25 households involved in the process. One of the sad side effects has been a tidal wave of unoccupied—and untended—homes, where parched lawns have turned brown from neglect. Whole neighborhoods suffer.

Entrepreneur Nick Terlouw has come up with a way to turn the lawns green again, if not exactly in the way that nature intended. His Greener Grass Co., which works with real estate agents who are trying to sell foreclosed homes, will actually paint the lawns green, an effect that lasts up to four months, according to various California media reports, some of which have actually offered up his service as a gardening tip.

The company uses a water-based green dye and an insecticide sprayer to treat the lawns, at a typical cost of $200 to $300 per application. Locals say the treated lawns may tend to look a little too green compared to the genuine thing, but the overall effect is an improvement.

Like that spray-on hair from those late-night infomercials, right?

Source:

“North Shore not exempt from market slippage”
Mary Umberger
Chicago Tribune, October 26, 2008

Quotes For The Week

2007 is like 1929 or World War II, a very important year. It’s the year when the credit bubble burst, and when the credit bubble burst the economic implications are very negative.

-Marc Faber, in a CNBC interview from Tuesday, October 21

Thank you realtors. Thank you mortgage brokers. Thank you bankers. Thank you Congress, SEC, Bush, Dodd, Mozillo, Perry, Fuld, FBI, flippers, appraisers, homebuilders, MSM, housing porn shows, and above all, thank you Alan Greenspan and the Fed. You Wrecked America.

-HousingPANIC’s Keith, in a post from Friday, October 24, 2008

U.S. Senate Passes Housing Bailout Legislation

“Progress” continues to be made on the next major bailout. According to Bloomberg tonight:

The U.S. Senate passed a $300 billion plan to help thousands of Americans keep their homes and tighten regulation of Fannie Mae and Freddie Mac in an effort to ease the worst housing slump since the Great Depression.

The legislation, approved 63-5 today, would let an estimated 400,000 struggling homeowners avoid foreclosure by refinancing their subprime mortgages into fixed-rate loans backed by the government. The measure also offers tax incentives to potential homebuyers and sets aside $4 billion to help communities buy foreclosed properties.

Chicago’s Mayor Daley moonlighting as a real estate agent? Yeah, I guess I can see it…

“‘Got House?’ Oh, I’ll give you house!”

Source:

“Senate Approves $300 Billion Plan to Stem Housing Foreclosures”
Brian Faler
Bloomberg, July 11, 2008

From Jingle Mail To Buy And Bail

First, there was “jingle mail.” Now, it’s “buy and bail.” Nick Timiraos of the Wall Street Journal wrote yesterday:

Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.

“I can find the same exact house as what I live in right now for half the price,” says Augustine, 44, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn’t want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago.

In markets hit hardest by falling home prices and rising foreclosures, lenders and brokers are discovering a new phenomenon: the “buy and bail,” in which borrowers with good credit buy a new home—often at a much lower price—then bail out of the “upside-down” mortgage on their first home.

Homeowners are able to pull off this gambit—which some lenders and real-estate agents call mortgage fraud—by taking advantage of mortgage-lending practices that allow them to buy a new primary residence before their existing residence has been sold.

And with the lending industry in disarray as it tries to restructure millions of mortgages, some boast they are able to pull off the strategy with ease.

The best part of Timiraos’ piece?

In some cases, homeowners are coached through the buy-and-bail process by real-estate agents and brokers who see nothing wrong with it…

“It’s just a business decision,” says Linda Caoili, a Sacramento real-estate agent who is working with Augustine and others who are considering walking away from their mortgages. “If you’re upside-down $250,000, why would you keep it? It just doesn’t make sense.”

Readers- fraud or fair play?

Source:

“Some owners plot walking away from foreclosed home”
Nick Timiraos
Chicago Tribune, June 15, 2008

Realtors Getting Kicked When They’re Down

These days, I may not be so happy, after all
After all that I have gained
I still feel sad when I’m all alone
I may have felt that path? Decay?
I may not be so swift, after all
All the chances you have given me
I just let you go

-The Rentals, “These Days” (1995)

As if the times weren’t tough enough already for Realtors, I came across the following by Mick Weinstein on Yahoo! Finance:

Realtors, Kiss Your 6% Goodbye!

This week, the Justice Department and the National Association of Realtors reached a settlement in the antitrust case against the NAR’s monopolistic hold on home listing information. It’s a victory for Internet-based and discount listing services and another stake in the back of traditional brokers attempting to recover from this downturn.

And then it got ugly. Weinstein added:

Media expert Jeff Jarvis says this means good riddance to real estate agents’ familiar 6% commissions: “The only reason… that Realtors could hold onto their high commission for such little value and work is that they kept information away from the marketplace, making it inefficient. This new economy can now come to real estate sales as information become freer. Oh, it’s not fully freed yet. But I do believe that the combination of this settlement and what it does to empower discount players and the depressed real estate market will combine to finally shove dynamite up Realtors’ rears.”

It’s interesting to note that, according to Mary Umberger of the Chicago Tribune, the national median income for a member of the National Association of Realtors was $42,000 in 2007, down about 11% from 2006. Umberger noted:

For newbies, the numbers were worse: NAR members with two or fewer years of experience earned a median of $10,500 last year.

Tough times indeed…

Sources:

“Housing: A Train Wreck in Slow Motion”
Mick Weinstein
Yahoo! Finance, May 30, 2008

“Assessing the wages of a downturn”
Mary Umberger
Chicago Tribune, June 1, 2008

FHA Chief Shoots Down Housing Bailout Bill

Here’s another great piece that was suggested to me. As you may have heard already, the U.S. House of Representatives passed a bill last week that would enable struggling mortgage holders to refinance into more affordable loans guaranteed by Uncle Sam. The legislation, spearheaded by House Financial Services Chairman Barney Frank, would require a significant expansion of the Federal Housing Administration (FHA). Well, according to Luke Mullins of U.S. News & World Report, FHA Commissioner Brian Montgomery is a bit leery of the proposal (understatement of the year). Mullins wrote yesterday in “FHA Chief Criticizes Rescue Plan”:

Montgomery expressed his opposition to the legislation recently passed by the House:

As one colleague described it, it is “on steroids” because it throws sound underwriting out the window. It moves us toward a federalization of the mortgage market, forces taxpayers to pay for bad loans, and doubles FHA’s portfolio, adding hundreds of thousands of risky loans in a Byzantine process that will take years to sort out and create a regulatory nightmare.

Besides risking the wrath of the powers-that-be in our nation’s capital, I must admit that I’m impressed that he said this within a room full of real estate agents at the National Association of Realtors Midyear Legislative Meetings and Trade Expo. I haven’t seen an obit for him, so besides a few claw marks, I’m assuming Montgomery survived the ordeal.

You can access Mullins’ piece here.