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Okay, a couple of things that this chart assumes:

• That from 1975 to 1999 was “normal” enough to indicate a statistical trend.   I think the case could be made that it was.
• That we’re going to eventually get back to that trend line.    I think a case could be made that we will.
• If both of those assumptions are indeed correct, then we’re heading into a scenario where we have quite an adjustment to go through in terms of a drop in peak housing values until we are back into range with that statistical trend.

What do you think?   Tell me why you think he’s wrong……

Tom Vanderwell

Values Have Dropped Only 25% of the Fall Needed to Reach Trend «

PRICE TRENDS / WAR OF THE WORLDS (Part 4): Property owners nationwide have lost only one dollar for every four dollars they can ultimately expect to lose on their home.

The good news according to the leading data series issued by the United States government is that prices have only fallen 6 percent. If you are a homeowner, you are wealthier than you knew. The bad news is you still have three dollars to lose for every one dollar which has already been lost.

The total projected fall from the Federal Housing Finance Agency (FHFA) “All Transactions Index”, which begins in 1975, shows a peak-to-trend fall of 27%. Since prices are 6% lower by this measure, prices must still fall an additional 23% from today for prices to revert to trend.

The assumption built into these estimates is that prices in the years 1975 to 1999 advanced at a typical rate. A trend line was generated to the present based upon that 25-year period. The chart depicts the divergence of the trend established from 1975 to 1999 and the actual prices recorded from 2000 to 2009.

The FHFA prediction of a total fall of 27% is far less than the total fall of between 49% to 60% predicted by Case-Shiller. Based upon the four data sets reviewed in the last few weeks (see summary below), we can estimate a total fall of between 27% to 60% from the bubble top to the long-term trend. The average of the four indexes projects a total fall of 41% from the bubble high to the trend bottom.

Looking ahead from today, the average of the four indexes predicts that property values will fall 26% from our current price levels.

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It’s cash-for-clunkers time in the real estate market.

Last week, in addition to extending the $8,000 first-time home-buyers tax credit for another six months, Congress added a new $6,500 tax-credit for move-up buyers.

The credit can be applied for homes selling for as much as $800,000, and the income limits exclude almost nobody.

You have to have lived in your home for more than five years out of the last eight, but that’s hardly an onerous restriction. And homeowners who have put down roots have equity.

Remember that capital gains on your primary residence are excluded from taxation if you have lived in your home for the past five years. But the way the government is spending money, that exclusion cannot last.

But, but, but… Your home isn’t worth what it was in December of 2005. That’s true, but it doesn’t change anything. The home that you can buy now was also selling for more four years ago.

Here’s the way things really shake out: If you have equity in your home, you can take that equity as a tax-free profit — for now. At the same time, you can snag the $6,500 tax credit. And you can do all of this at historic low interest rates.

If your house is worth $400,000 and you only paid $300,000 for it, you could reap a gain of $100,000 — which would save you thousands of dollars in taxes. If you wait for prices to go higher, you may wait a long time for a much smaller return. And the house you buy then will have appreciated, also.

I think we’re looking at a perfect storm for homeowners with equity: You can move now, take a tax-free gain, get a lot more house than you could have bought a few years ago, all financed with a low-interest mortgage. And then, next April, Uncle Sam will write you a big fat check for your trouble.

On second thought, this is less cash-for-clunkers than the taxpayer’s revenge…

 
Sell this idea! Feel free to share this idea with your clients and prospects — in your blog, by email, on the phone. This is big, and the more we talk about it, the bigger it will get. Yes, it’s insane, but for once the hardworking American people will be on the sunny side of insanity.

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I guess I haven’t reached that point in my life yet when I’m so jaded (or is it cynical) that nothing will surprise me.  I say this after reading an interesting little article in the London TimesOnline.  They had the chance to interview Lloyd Blankfein, the Chairman and CEO of Goldman Sachs.  It seems he’s convinced - or at least he’s convinced he can convince us - that Goldman serves “a social purpose.”  As a matter of fact, Mr. Blankfein is so enamored with the self-importance of Goldman that he proudly proclaims he’s “Doing God’s Work.”  Wow…

Just to refresh our memory:

• Goldman received $10 Billion in Tarp Money
• Goldman received $12.9 Billion of government money through AIG
• Goldman received $20.9 Billion in FDIC debt guarantees
• Goldman, restructured as a “bank holding company” borrows at the Fed Window (at basically no cost)

Oh, and one more thing: Goldman will be paying $21.9 Billion in bonuses for 2009.  I don’t begrudge them bonuses, after all: they’ve had a helluva year.  Although some of that might be due to their oligarchical position within the federal government.  It would be nice - every once in a while - if Goldman would send a little thank you nod our way; maybe a quick wave or even a wink.  I guess I’m saying that when you’re screwing me this bad, a little dinner wouldn’t hurt.

John Lennon stirred up quite a spot of bother when he said: “We’re more popular than Jesus now.”  Have to admit though, that seems like such a trifle compared to the CEO of Goldman Sachs.  I mean, who cares if you’re more popular than Jesus?  Mr. Blankfein is angling to BE Jesus.

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This from my Arizona Republic real estate column:

The elections this past Tuesday were not a referendum on President Barrack Obama or his plans and policies. How do we know that? Because everyone associated with the Obama administration loudly insists that this cannot be so. They ought to know, right?

Senators and Representatives from states and districts that supported John McCain in the last election might have second thoughts, though, and this is very far from being a bad thing.

Americans insist to each other that they want a government that gets things done — except when they happen to be suffering under a government that is getting things done. If this election was not a referendum on Obama, it was a loud, angry shout about what the government has been doing lately.

The last time voters repudiated an over-ambitious president — the last six years of the Clinton administration — the nation experienced a period of tremendous growth and prosperity. The American people recoiled in horror from socialized medicine, and the resulting government — liberal president, conservative congress — was amazingly beneficial for the American people.

How? By getting nothing done, that’s how.

For free markets to work at their best, entrepreneurs need to be able to plan for the future. If they can surmise that prices and credit terms will not swing wildly over the next few years, they can plan their investments with a sense of security.

And if not? Not.

The Obama administration’s herky-jerky dance of currency inflation, stimulus programs, emergency bailouts and tax credits not only cannot stabilize the economy, they do exactly the opposite: They convince entrepreneurs that now is not a safe time to make plans for the future.

This goes for the real estate market, too. Buyers sit on the sidelines waiting for new tax credits. Sellers live in dread of future interest rate hikes. The Cap and Trade bill promises to complicate life for every homeowner.

So how might these elections have helped us all? It’s simple. If Senators and Representatives are afraid to act, nothing will change. And when nothing changes in Washington, everything changes, usually for the better, for everyone else.

Steal this book: I’ve written over 200 of these real estate columns. They are consistently one of the most popular features on our blogs. Many of them are dated and/or entirely Phoenixocentric. But many others are timeless and generic. If you want to use any of my columns on your weblog or web site, feel free. Three rules: Don’t change my text, credit me as the author and give me a link back to http://www.bloodhoundrealty.com/ with appropriate anchor text. Something like this, perhaps:

<a href="http://www.bloodhoundrealty.com/" target="_blank">
Phoenix Realtor Greg Swann</a> suggested I share this with you:

Am I link-baiting? You bet. The quid pro quo is free content for your site that pulls eyeballs and excites interest.

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The national Republican party is riven by an insuperable internal contradiction.

Out of one side of their mouths, Republicans wish to portray themselves as tax cutters, red-tape slashers, champions of liberty fearlessly hacking away at the slimy tentacles of the leviathan state. Ignore for the moment that they’re spineless jellyfish when it comes time to cut, slash or hack; this is how they wish to present themselves.

Out of the other side of their mouths, Republicans offer American voters an alternate set of slimy tentacles for the same old leviathan. The state they promise to shrink will simultaneously promote a nebulous family values agenda and forbid abortion. Republicans will simultaneously dismantle the Department of Education and supplant ecosocialist indoctrination with theocratic indoctrination. The leviathan state will lose the power to ban cancer drugs but gain the power to ban rap records.

Things fall apart. The center cannot hold…

Whatever the Republican party seeks to be in the states, in the counties, in the towns, what it cannot be at the national level is the party of both smaller and larger government. It can’t because as a strategy it makes no sense, and it can’t because there is no common ground between the liberty-seeking Republicans and the theocracy-seeking Republicans. Those two wings of the party can only fly apart in the long run.

But: There is a way around this: The Tenth Amendment to the United States Constitution:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

If the national Republican party were to concentrate solely on shrinking the Federal leviathan to a strict adherence to the Constitution, devolving all of the usurped tentacular powers to the states to do with — or do away with — as they choose, the party could achieve these goals:

• It would actually deliver on a promise, prompting universal amazement.
• It would present to both of its contradictory wings the opportunity to achieve at the state and local levels what they cannot hope to achieve nationally.
• It would result in something much better than campaign finance reform: A Federal government that’s not worth buying because it has nothing to sell.
• It would result in something much better than tax reform: A massive reduction in the Federal tax burden.
• It would give Republicans a lasting national agenda. Moreover, it would protect American voters from the predations of the Democrats even when Republicans are out of power.

I myself am a libertarian, and I suppose it’s important to answer the libertarian objection: Fifty small tyrannies is not preferable to one large one. This is false on a number of grounds.

First, the only devolution of power that can be effected by the Federal government is the devolution of Federal power. Whatever else you might hope to do at other levels of government must be done there.

Second, tyranny is most onerous where escaping it is most costly. So long as free-thinkers can easily move to New York or California, it doesn’t matter as much what happens in Iowa or Alabama. Moving from the U.S. to New Zealand is a much higher hurdle.

Third, the irrationality of bad laws is most obvious where comparison is easiest. If it turns out that the Iowans scare away their best and brightest with irrational laws, the Iowans will either change their ways or pay the consequences of failing to.

The Framers of the U.S. Constitution anticipated that the states would comprise laboratories of democracy, each seeking to find the best balance between individual rights and collective authority. Devolving political power from the Federal government to the states, and from there to the counties and municipalities, most closely mimics the grand idea expressed in the Declaration of Independence: The consent of the governed.

In effect, I am offering to the national Republican party the choicest cut of the libertarian steak, the insufferable confiscatory Federal nanny-state. What Republicans choose to do on the state and local levels is their business. What they will stop trying to do is to find a common national ground between Connecticut country-clubbers and Texas bible-thumpers. There is none.

Cut Federal agencies one by one, and cut taxes in lockstep. Sell Federal assets to reduce the national debt. Pass Constitutional amendments that clarify the meaning of the Preamble to the Constitution, the Interstate Commerce Clause and other clauses that weasel-wording lawyers have used to feed the leviathan. Repeal the Sixteenth and Seventeenth Amendments to restore to the states their power over the Federal government. Do everything necessary to give us the Federal government provided for in the Constitution, and then start whittling away at that. Ecosocialists and theocrats can impose their views on those who share them. Those of us who don’t can get on with the business of building a civilization.

That is a national Republican agenda that can win. It gives the liberty-seeking Republicans the liberty they seek. It gives the theocracy-seeking Republicans a fighting chance to achieve their goals locally. And it will appeal to many, many Democrats, Independents and Libertarians, each for their own reasons.

This can win. And nothing else will.

 
Further notice: I wrote this in November of 1998. Nothing has changed since then, alas, and nothing will now, either, I’m afraid.

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The Washington Post:

Under the housing program, people seeking to own a home for the first time in three years would receive an $8,000 tax credit if they sign a contract by April 30 and close on it by June 30. Current homeowners who are buying a new primary residence would be eligible for a $6,500 tax credit starting Dec. 1 if they owned their home for five consecutive years in the previous eight.

The timing is more lenient for military families who have been deployed overseas for 90 days or more in 2008 or 2009. They would have until April 30, 2011 to sign a contract.

But the measure limits the purchase price of the home to $800,000. It also imposes income caps so that people who make more than $125,000 annually and couples who make more than $225,000 would not be eligible for a refund. Anyone who collects the tax credit but sells their home within three years of buying it must return the refund.

The program is estimated to cost $10.8 billion.

The passage of the tax credit provision was a huge win for the real estate industry, which has been lobbying aggressively to extend and expand the program. They say the tax credit has helped boost sales and clear out a glut of lower-priced homes, especially foreclosures, and that ending it would be a blow to the housing market’s recovery.

But critics of the program, including some economists, say the program is far too expensive. They say that most people who used it would have bought homes anyway. They attribute the uptick in home sales in recent months more to low prices and record low interest rates.

Questions for the lenders: The tax credit for move-ups doesn’t commence until 12/01/09. What about first-timers? Can they be under contract now, or do they need to wait until after the end of the month.

More: Do I read this right? Can you “move up” after having rented for the last three years?

I hate this, of course. The real estate market can’t shake out if we won’t let it. But as listers of higher-end homes… Thus does the legislature make whores of us all.

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I actually feel kind of bad for the should-have-known-better folks who voted for Obama. It was obvious to me last fall that he was a false-flag candidate, a stone liberal masquerading as a centrist. And I understand that, for true stone liberals, he’s actually been somewhat of a disappointment. But for people who can do math, their misplaced faith in Obama has to sting twice, once for having been so dreadfully wrong, and once again because snarky assholes like me just won’t let it slide.

But here’s the good news, from my point of view: Last night’s results may have the immediate impact of putting the brakes on all this tax-and-spend stupidity. The larger stupidities will endure, of course, but we just might have gotten ourselves shut of the home-buyer’s tax-credit last night. Surely this is an event worth celebrating.

This is Instanpundit.com’s Glenn Reynolds in today’s New York Post:

But [Obama] was right the first time about not being ready for the Oval Office. As president, he seems confused and a bit distant on the issues, leaving the details to congressional Democrats and an ever-growing number of “czars” while he golfs and launches attacks at Rush Limbaugh and Fox News.

With the economy tanking (unemployment is much worse after Obama’s deficit-swelling stimulus than Obama’s advisers predicted it would be with no stimulus at all), with the promised post-partisanship dissolving into witch-hunts against hostile media and the promised post-racial America devolving into the awkwardly staged “beer summit,” with the “necessary war” in Afghanistan the subject of endless dithering and the promised “smart diplomacy” materializing as a series of awkward missteps by Hillary Clinton, the froth has become a lot less frothy.

Republicans, who were prepared to give Obama the benefit of the doubt a year ago, now can’t stand him. Independents who voted for him are deserting in droves. And Democrats don’t seem that happy either.

The good news for Obama is that he doesn’t have to run for re-election for three more years, so he still has a chance to get his feet under him. But for Congress members facing elections in a year — including but not limited to the famous “blue-dog” Democrats — the lesson of this week is that Obama can’t save their seats if the public is unhappy (and, equally, that Obama probably can’t hurt them much, either). So what Obama wants is nice, but it’s what the voters in their districts want that will control.

That makes Obama’s health-care “reform” package look iffy and his other big plans for remaking America look even iffier. With the hope having faded, enthusiasm for change seems much diminished. From a mythic figure, Obama has shrunk to an ordinary politician — and, so far, not an obviously deft one. It’ll be politics as usual from now on, and we can thank Obama, at least, for making politics-as-usual seem not so bad after all …

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This from my Arizona Republic real estate column:

As I write this, the entire real estate industry is on tenterhooks, waiting to see if the $8,000 first-time home-buyers tax credit is going to be extended.

It’s not really a tax credit, it’s a taxpayer-funded subsidy, a “gift” extracted by force from everyone who does not buy a house under the program. The money taken from taxpayers — either now or later by deficit spending — is money that cannot be spent or invested elsewhere.

And it’s not as though this were a zero-sum game. The actual marginal sales — the home sales that would not have happened without the subsidy — may have cost taxpayers from $40,000 to $75,000 each. And as huge as those numbers are, they ignore the interest cost of the borrowed money, the opportunity costs of mal-investment and the compound interest value of those opportunity costs.

Government action cannot create wealth. At best, it moves wealth around. At worst, government destroys wealth by taking it away from the very people who have new ideas and new technologies to invest in.

But as bad as this tax credit is, it’s only temporary. Someday it will end. The mortgage interest tax deduction — which almost no home-owners actually get — is forever. The government dominance of the secondary mortgage market — FannieMae, FreddieMac, GinnieMae, etc. — is forever.

And here’s the real kick in the head, given all we’ve been through in the real estate market over the last eight years: The National Association of Realtors reports that 59% of all new home loans this year were underwritten by the Federal Housing Authority, the Veterans Administration or the U.S. Department of Agriculture.

What this means is that a huge number of homes will have been sold this year with down-payments ranging from 3.5% to -5%. Six out of ten new mortgages are essentially nothing-down loans.

The U.S. government wants to buy your vote by making home-ownership easy. But the net effect of government intrusions in the real estate market is to create a standing wave of foreclosures amid steadily-declining home values.

 
Steal this book: I’ve written over 200 of these real estate columns. They are consistently one of the most popular features on our blogs. Many of them are dated and/or entirely Phoenixocentric. But many others are timeless and generic. If you want to use any of my columns on your weblog or web site, feel free. Three rules: Don’t change my text, credit me as the author and give me a link back to http://www.bloodhoundrealty.com/ with appropriate anchor text. Something like this, perhaps:

<a href="http://www.bloodhoundrealty.com/" target="_blank">
Phoenix Realtor Greg Swann</a> suggested I share this with you:

Am I link-baiting? You bet. The quid pro quo is free content for your site that pulls eyeballs and excites interest.

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Technorati Tags: First Time Home Buyer Tax Credit, Government Bailout

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Really quickly. A lot of us have various opt in methods. Free books, blog comments, FB adds.

What are we doing with that noise? Hello.  Call them.

Objection #1 “But I Can’t Find A Numba”

OKAY, fine.  You can’t find a number.  Sergey and Eric made this little website, it’s a good starting point.  So is linkedIn.  So is Twitter.  Search your lists.  Search everything you do, and yeah, you can “find a numba.”

It’s not hard.

Some hints:  a lot of people are in the 90 and 9 in your fb list.

A lot of people are in linkedin.

A lot of people are attached to someone else.

Objection 2: But, Daddy, They’ll HAAAAAAAAAATE me.

Twice, maybe.  Twice I’ve called people and gotten some sort of jerk face.  Offense that I’d dare call them.  I call  about 15 people a day.  75 a week.  I have had a bunch of people I got no interest in, that’s for sure.   I have a bunch of people that I can’t stand…another given.   And a bunch of people that want the free stuff.  No sweat.

More often, I call people, decide that they are morons and don’t pursue anything.  With them.  I call, they’re not interesting….to me.  See, calling about 75 people a week gives me options.  I don’t need to chase every imbecile or get anxious about stuff.

…I don’t have any Boiler Room Jedi Mind Tricks.  I don’t even currently have a script.  I’m not that good…I step up to the plate and take my hacks.   And that’s enough to make me a living that has been six figures 9 out of 10 years 2006, friends was the bad, bad year  I know you all were laughing, but I was rocked hard by the IRS, my own ego, and a bunch of rental properties that were imbecilic.

Objection 3:  I shouldn’t have to sell.  I’m such a great blogger that they should come to me.

Okay fine.   Look, they did. They came, saw and commented.  They gave you love, they gave you some confidence.  Now pick up the phone, and close the deal.  They are BEGGING to give you their money.   Go grab it.  They voted yes, checked that box.

You need to call and CARE ABOUT THEM.  Give ‘em some value, sell to help, do the best you can.  Nobody’s perfect.  Not one soul.  The Nazarene gave us all some grace because nobody’s perfect.  Look, I like people that I pick.  I picked my wife, I picked most of my best clients.  Hunting people down gives you options.  Finding and serving the best people you know how to serve…is the surest path to riches.

Now, I’ve done some dumb stuff, I’ve had well intentioned process screw ups, and this year I was too slow to react and have a good customer service pattern.  Fixed that now, mostly.

Objection #4: But I hate Cold Calling!

Dude, stop.  This is not cold calling.  You’ve served helped and added value.  This is nothing like cold calling.   At all.   This is followup.  You introduce yourself, politely, assume nothing, and call to connect and to help.  Don’t be attached to the outcome.  You’re following up.

Hell, they might have been to embarrassed to call about their question and you’ll be helping them…doing them a favor.

Just don’t be attached to an outcome, be there to help not to make a sale, and focus on them, not you.  Amazin’ what happens if you do this.

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If you are on the far left, there is no need to read any further, for what I am going to say, is from a capitalist “conservative” mindset (which only means to left wingers that…I must be a hate monger for not wanting to extend the first time home buyer tax credit to those poor innocent people who can’t afford a home in the first place).

To extend the tax credit is simply going to increase the national debt load beyond what taxpayers can already afford to pay, yet weakening the economy even deeper.  Simply put I’m sick and tired of Realtor’s wanting the extension of the tax credit because it only benefits a few parties to a transaction instead of bettering the country.  We need to look at the big picture.  The fact is the tax credit must end at some point in time; that is a fact!  Realtors need to put their own personal interest aside and do what is best for this country, not themselves!  Extending the FREE money tax credit will only increase the pain of debt until the US dollar is worthless.  So the FACT is…Americans must be willing the do the tough thing!

What is the tough thing you might ask? well, for me,  I have refused to work with buyers looking for the tax credit!!! YES, you heard me correctly.  I know that if I am against the tax credit, then I must ACT as I believe.  I BELIEVE the government should not be handing out any of my money “tax payer money” to try and stimulate an economy that is FALSELY INFLATED in the first place.

How about this for a thought.  How about Americans need to live their WAGE so no tax credit is needed!  Here is my thought for the day.  WHAT IF, your home cost 125k instead of 300k?  what if you drove cars 10 years old with no car payments?  Could YOUR WIFE be a stay at home mother for her CHILDREN if this were the case?  Would the 10% unemployment rate drop to near zero if Americans lived their wage so mom could stay at home if she chose to with her babies!

Your thoughts?

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…today is probably the day to make contact with your state’s U.S. Senators.

(Incidentally, if you want for your political communications to have maximum force, you have to do more than write a check. You’ll get double the impact is you make a photocopy of your check — and then mail the photocopy to your candidate’s opponent. This should be very effective over the next two years in “purple” districts.)

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Time to take a look at the second installment in the 7 things series.   If you recall, last time, we looked at the fact that, in a rapidly changing market like we are, 6 months ago is ancient history.    What someone paid 6 months ago…… Well, just read about that at 7 Things – Part 1.

So what’s Part 2 about?   Here’s what I wrote last time:

2. Don’t worry so much about what you paid for your house. Instead, look at the difference between what you can expect to sell your house for and what it’s going to cost you to buy the new one that you want. I expect you’ll find that those are much more important numbers (unless you end up without any equity, in which case you don’t sell).

There are a couple of things that I think still hold true and one big thing that I think doesn’t hold true any more.    First the things that hold true:

• If you are selling one home to buy another, the most important number is not what you paid for the existing home, the most important number is the difference between the two homes.   If the value of your home has fallen by $40,000 but you’re in a situation where you can buy a newer home with less maintenance and 1000 square foot bigger for a “net” difference of $20,000, then it might very well be a good deal.   
• If your family situation has changed (i.e. – We got married and are expecting our second set of twins in the last 2 years! – Yikes!) then what you paid for your house doesn’t matter.   I’ve got a client who is negotiating on a house where the seller has to sell within the next three weeks but they are “hung up” on what they paid for the house.   If you need to do something, don’t worry about what you paid for your house, just focus on what the financial and logistical aspects and make the move.    I’m working with a client who is relocating for a new job.   His new position is a nice enough “step up” from his current position that they sold their home for approximately 20% less than they paid for it and still be able to buy a new house.   He told me that while he didn’t want to sell his house for less, the overall picture of the move is “the right thing” for them at that point.

Now, the one big thing that has changed since last year.   Let me lay it out this way:

• On March 4, 2009, Bloomberg reported that More than 8.3 Million Home Owners were underwater. 
• On October 20, 2009, I was on a conference call where Dr. Nouriel Roubini said that if housing prices drop another 7 to 10% over the course of the next year, by the end of 2010, there will be 25 million home owners who are under water.   Oh and he said that it’s almost guaranteed that they will drop because of the imbalance between supply and demand.   There already is too much inventory, credit is still tightening, foreclosures are still climbing and jobs are still getting eliminated.   That means the inventory problems aren’t going to go away any time soon.

Let me make that perfectly clear.   There are approximately 51 million home owners in the United States who have mortgages on their homes.   By the end of 2010, almost half of them will owe more on their homes than what they are worth.

If you’re sitting in a coffee shop reading this on your laptop, look at the guy at the table next to you.   Now look at the guy on the other side.   1 out of the 2 of them owes more on his house than what it’s worth.    Ouch.

That means a number of things that are different than last time:

• There will be sustained upward pressure on foreclosures. 
• There will be marked lack of geographic mobility.   A lot of people who would consider and/or actually relocate to get a job/a better job won’t be able to because they can’t sell their house.   Or they’ll relocate, give the old house back to the bank (lots of credit ramifications – topic for some other time) and rent.
• Over the years, the “old rule of thumb” was that the average home owner would move every 7 years.   Now with almost 50% of the homeowning population “trapped” in their homes, we’re going to see people staying in their homes a LOT longer and we’re going to see a lot less move up buyers, a lot less move “over” buyers and a lot less downsize buyers.    That’s going to accentuate the inventory problems and keep downward pressure on house prices.
• That also means that there will be a lot less opportunities for builders, Realtors and lenders because of the decreasing mobility of the American population.

So, on the one hand, things are similar to what they were last year in that if you are going to make a move, what you paid for your house isn’t that important, it’s the difference that matters.   But, for more and more people, the changes in the market since last year mean that if they want to move, they have no good options.   They can stay put or they can do the short sale/foreclosure/rent for a long time option.

The market is different than it was in the summer of 2008.

Tom Vanderwell

P.S. Stay tuned for Part 3 – Is this the market for Do It Yourselfers?

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From Politics Daily, the you-just-can’t-make-this-shit-up section:

Four-year-olds are adorable, trustworthy, and, having never owned a home before, fully eligible for the first-time homebuyer tax credit that Congress passed in 2008.

As a result of that loophole and numerous faulty reporting mechanisms, a House panel learned Thursday of tens of thousands of cases of fraud in the tax credit program, including more than 500 instances of people using their children — including a four-year-old — to apply for the credit to get around income caps and a requirement that the purchaser has never owned a home.

Together, fake or faulty claims for the $8,000 refundable tax credit may have cost the government up to half a billion dollars so far, investigators told the Ways and Means subcommittee.

Russell George, an inspector general with the Treasury Department, told the subcommittee about the most brazen instances of bogus claims that he had come across since the IRS created a filtering system last May to weed out suspicious applications.

George said he had found nearly 20,000 returns for people who may not have actually purchased homes; thousands for people who already owned homes; 3,200 taxpayers who could not prove they were in the country legally; and an unspecified number of IRS employees wrongly applying for the credit.

It is completely implausible to me that anyone could expect anything other than disaster from government-run anything. I like to say that governments are only good at one thing — killing people — but even that isn’t true of the U.S. government: The Army expends 20,000 rounds of ammunition for every confirmed kill. No worries, though:

This week Sens. Chris Dodd (D-Conn.) and Johnny Isakson (R-Ga.) began a push to expand the credit to all homebuyers and extend the deadline, now set for Nov. 30th, to July 2010.

Good plan…

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I had coffee yesterday with a long time friend of mine who works for a local title company.   We were talking about a variety of things, including some of the new stuff I’m working on on the web.

The topic came around to the $8,000 First Time Home Buyer Tax Credit.   He said to me that he’s had 3 different Realtors tell him that on December 1, the value of all of their listings is going to drop by $8,000 each.

Let me say that again, on December 1, each of the houses that they have listed is going to drop in value by $8,000.   Why’s that?   Because the first time buyer credit is going away.

Now let’s look at a couple of things (according to this story):

• It’s called a FIRST TIME HOME BUYER tax credit.
• According to these Realtors, it has inflated (or kept up) the prices of homes by $8,000.  So does the buyer benefit or does the seller?
• Somewhere less than 50% (according to the last stats I’ve heard) of the buyers qualify for the tax credit.
• But 100% of the buyers are paying paying $8,000 more.
• And the government is paying $43,000 for every additional sale we’re getting.

Now, do you really think that it’s such a good idea any more?

Oh, and in reality, the prices of the homes aren’t going to wait until December 1 to drop.   Realistically, if you haven’t signed a purchase agreement by Halloween, it’s going to be very difficult (but not impossible) to get the deal closed by the end of November.

All is not as simple as it seems.

Tom Vanderwell
Technorati Tags: $8, 000, First Time Home Buyer Tax Credit

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