There’s always something to howl about

Archive for March, 2009

Nest Realty, Jim Duncan’s new broker, joins the custom sign club

Long-time real estate weblogger Jim Duncan moved to a new brokerage recently — Nest Realty. As a part of their launch, they’re building custom real estate yard signs, the prototype for which you can see above.

Jim asked for my thoughts on the signs, and I’m going to go into this at some little length. All of this touches on the stuff we’ve been talking about since last week.

First, I think these signs are striking, very interesting graphically. The grid layout is sweet and fine, a very clean style of communication.

Second, I want that middle sign to be a hell of a lot bigger. My guess is that it’s 18 x 12, a very common size for real estate signs. We do our middle sign at 24 x 36. Jim’s sign is in much better taste than ours, but I need for people to know that they’re seeing a custom sign, so I think I need to grab them by the throat.

Third, my belief is that for custom signs to work, they have to have that paragraph of small text we use on our signs. The marketing objective of the signs is to stop traffic, not simply to promote a fleeting awareness of a home for sale among passing drivers. We’ve been using that paragraph of small text from the beginning, long before it was possible to make custom signs. We know from hours of observation that people slow down, stop, read the sign, take the flyer — all because they had to slow down to find out what that small text was saying.

There are some nice marketing ideas at Nest’s main web site, and the site for this particular home is worth a look. The HDR photos are incredible, and I want for them to be a lot larger.

This is a case where I don’t find the web presentation of the home to be at all satisfying, and that’s another one of the points that I hit all the time. We know from talking to our open house visitors that people will spend hours at a single-property web site if you give them hours of content to review.

I think the salesman’s job — and I’m talking now to the other thread — is to make the product irresistible: To present it in such a way that buyers can’t bear not to own it. This is what happened to you, in advance of every big ticket purchase in your life, and this is our actual job as marketers.

Meanwhile: I like these signs, and I like the kinds of chances Nest is taking. Well done.


Why should you buy real estate — and lots of it — now? Well, inventory abounds, prices are low, and interest rates are incredibly low. And there’s one other factor you might take into account…

Follow the tiny blue line. That’s the growth of the U.S. money supply. That vertical surge you see there at the right is, essentially, a doubling of the number of dollars in (virtual) circulation since August 2008. Every dollar you own will soon be worth fifty cents. And every dollar you owe will soon be worth two bucks. You do the math…


Victor Davis Hanson: “I’d prefer one gall bladder surgeon to fifty Botox experts, a good Perkins engine mechanic to 1,000 deconstructionists at the MLA, one competent chemist to fifty government attorneys.”

Victor Davis Hanson, a brilliant old Hellenist, here seeming more old than brilliant, wonders, “Who is John Galt?”

We sense we are trimmers and redistributors, and wouldn’t dare build a new dam a transcontinental railroad, a new 8-lane freeway.

Instead we would sue, file reports, argue, quit, delay—anything other than conceive a majestic idea and finish it, sighing, “It is not perfect, but damn good enough and will do.” Instead, here in California we are simply destroying agriculture by drying up its sources of water-giving life—a once brilliant farming that was the sum total of millions of brave lives from 1880 to 2000 who took a desert and fed the world.

Instead, ensconced in the Berkeley Hills or Woodside, our elites demand of better others to save for them not people, but a smelt, a minnow, or a newt-like creature that must have the entire Kings or San Joaquin River as it dumps its precious cargo out to sea.

So as scare snow melts, it goes out to the ocean, gratifying a lawyer or professor in Palo Alto that rivers flow as they did in the 19th-century, as millions of acres go fallow, hundreds of thousands lose jobs, and we feel so morally superior to those of the past who really were our moral superiors.

It is easy to dismiss our ancestors as illiberal, or with the caveat “Oh, but if we were as poor as they were, we’d have to prove just as tough”, but we still sense they were different in the sense of far better. When I drive up to see those Sierra dams poured in the 1920s, one wonders how they made such things with only primitive machines, and in contrast, are amazed with our sophisticated tools, we do so much less. 

This self-congratulatory generation can hardly, as we are learning, build a Bay Bridge again. Yet when we see on the Internet pictures of a new aircraft carrier we are stunned in amazement—we did that? We built such a powerful, sophisticated ship? We—at least someone— can actually still do things on rare occasion like that?

The American people are, to be frank, nauseated by the archetype of a John Edwards, who never created anything other than a legacy of bankrupting doctors in order to enrich himself. I’d prefer one gall bladder surgeon to fifty Botox experts, a good Perkins engine mechanic to 1,000 deconstructionists at the MLA, one competent chemist to fifty government attorneys.

For the present I think that we have enough social service bureaucrats, enough consultants, enough PhDs that will lecture how race/class/gender has made us, our air, our dogs even, so unfair. We simply are thirsty for the unapologetic doer, who never says he’s sorry for himself or his country or his ancestors, but instead thinks and plans how he can build something better and leave it for others–the age old agrarian commandment “make sure you leave a better farm than you inherit.” Where are they all, in the grave?

We all seem to stare at the rare genius under a semi, working on the transmission, or someone on a catwalk riveting a girder, or a teacher who can wade into an unruly class and say “damn it, we are going to learn calculus one way or another”.

My complaint against Hollywood actors is not that they are talentless, though many are; or that they talk in the same tones as women did sixty years ago, but that they have no imprint, no trademark of individuality. In short, to paraphrase Orwell, “If it paid better, they’d be fascists.”

I think we responded to Mickey Rorke’s brief renaissance, not because he survived while being drug-addled, or was punched out, or reckless, but because he showed, as a torn-cat, a certain dignity, a certain courage of being so very different from the norm. Yes, at this point we are so desperate for talent and singularity we will take eccentricity bordering on nihilism.

So there you have this rant.

Why are Americans hesitant, bewildered after the arrival of the Messiah?

Not for the reason our President attests about high unemployment or shaky GDP or the lack of national health care. We simply are ashamed of our profligacy; we don’t trust those who should be trusted; we put up with the crass and honor the mediocre and ugly; and we fight and bicker over the distribution, never over a share in the creation.

Hope and change, indeed.


A Few Thoughts About Mortgages…..

Since I already sent an update out earlier in the week outlining what the Fed did and how it can/will impact the economy and the mortgage markets, I’m going to focus on a couple of other topics this time.

First I’m going to talk about the four most important things to know about mortgage rates. Then, in the lower section, we’ll take a look at a good strategy to consider when thinking about when to lock in an interest rate.

The four most important things to know about mortgage rates:
What influences them – contrary to popular opinion, mortgage rates are not tied to the 10 year Treasuries any more. For years they used to be and that made predicting short term market movements easy. Now they don’t and it’s much harder. So what does impact them? A couple of quick thoughts about that: 1) Market sentiment – is the market feeling good about things or bad? 2) Political manipulation – does the market feel that Washington is trying to run over Wall Street or is it the other way around? 3) Expectations vs. reality – it’s not so much that the news is bad as it is a question of whether it’s worse or better than it was expected. 4.) Inflation/Deflation and the value of the dollar. 5) Investor appetite for mortgage backed securities (aka how good are loans performing?

Why mortgage rates won’t go down to 4%.
According to what I heard and saw, there were experts on places like the Today Show and Good Morning America who were proclaiming that mortgage rates were going to go down to 4.0%, probably by Monday. There are a couple of reasons why that won’t happen: 1) The Law of Supply and Demand – the government is literally flooding the market with additional debt. If there is more debt “chasing”fewer investors, that’s going to push rates upward. 2) The Value of the Dollar – the dollar has taken a beating in the last few days and as the dollar gets cheaper compared to other currencies, interest rates have to go up. 3) Falling House Prices – the government’s baseline scenario for the banking “stress test” calls for an additional 14% drop in housing prices this year. As the value of the collateral securing mortgage loans drops, that pushes upward on rates. 4.) Investor performance – If Fannie Mae and Freddie Mac are losing money like crazy, we will see upward pressure on mortgage rates until they return to profitability and we have confidence that the “new” underwriting guidelines are providing a good return on the investment.
Rates might go down but fees are going up – It used to be (just a scant 18 months ago,) that anyone with a credit score of 680 or higher could get the best rate possible. Now it takes a 740 or higher score to get that. There are lots of different fees and add ons and pricing bumps that Fannie and Freddie are adding which are making rates a lot more expensive when you get into the individual scenario. So, while there is a chance that rates will be lower in 3 months, the chance that many people can’t take advantage of that due to increased fees is also good. If it makes sense, grab it now.

The law of supply and demand has an impact on mortgage rates.
Supply and demand in the sense of this question: “Are there enough people and enough manpower left in the mortgage world to get things done?” The mortgage world made staffing adjustments last fall assuming this would be a slower market than it is. They don’t want to hire people back because rates could (will) go up and then they’d just have to lay them off again. So it’s going to get harder and harder to get things done and take longer and longer.

For a couple of months, I’ve been telling people that I think there’s a 60% chance that rates will go up and a 40% chance that they will do down. I’m now officially changing that. Due to two main things:

  • The Fed’s Trillion Dollar plan to begin buying Treasuries and Mortgage Backed Securities.
  • The vindictive and angry mood that is developing in Washington and on Main Street

I’m now switching to a 70/30 forecast. I believe that there is a 70% chance that rates will go higher and a 30% chance that they’ll go lower. How high? Let’s put it this way, for the next 90 to 120 days, I’d put them under the 5.5% range on a 30 year fixed. After that, I expect we’ll see them higher than we are now.

So what do you do? See below for some thoughts……

A Rate Lock Strategy

So, in light of those thoughts about the likely direction of mortgage rates, what do I recommend? A couple of thoughts:

  • If you are in the market for a mortgage, your main focus should be on minimizing risk rather than squeezing out the last little bit of profit if rates drop further. Don’t get greedy because when rates go up, they go up a LOT faster than when they go down.If you are buying a new house, lock your rate the day you have a purchase agreement signed.
  • If it makes sense to refinance, don’t wait until next week, next month or next year, do it now. You might get a lower rate but you will probably end up with higher fees so you’d end up behind.
  • Make sure your lender will lock in your rate long enough to get things done.
  • Do some simple math to determine whether it’s worth it to refinance. Loan amount X rate difference= savings per year. Closing costs/savings per year = Number of years it takes to break even. How long are you going to be in the house? Oh, and for most states, closing costs of more than approximately $2,000 for a 0 pt rate are too high.
  • If you think you are close to the 105% loan to value for the new mortgage refi plan, call your existing lender’s customer service department and ask who they sold your loan to (Fannie or Freddie). If it’s Freddie, you have to deal with your current servicer to get that program. If it’s Fannie, you are free to shop around as long as you can qualify for the mortgage.

As a friend of mine likes to say after giving an opinion, “That, and $3.50 will get you a cup of coffee.”

Tom Vanderwell


Priced Well? No Offers — Not Even Insulting Offers? My 2¢

Greg Swann just published a post lookin’ for help from the professional community for one of our own. Barry Bevis, a Realtor in Tallahassee, has a listing that’s been giving him fits. He and several knowledgeable agents around town are in agreement — the current listing price is where it should be. The house is well kept. The lot is over a third of an acre. Very nice yard, and a hot tub. He’s done just about everything right to get this puppy into escrow. Its own site. Buncha cool pictures. Even had a custom sign made. Still, no sale.

No sale? Not even an insultingly low offer.

I went to the listing’s site. Plenty of info, and many photos, easy to navigate, and easy to get ahold of Barry. He obviously cares, and has clearly gone the extra mile as he markets this home. So what’s the problem? What might be going unaddressed?

Before continuing, let’s be real here. We’ve all been where Barry is with this listing. How many of us have scratched our heads, totally mystified by a listing that simply seems to defy a mountain of empirical evidence dictating it should’ve sold a dozen times by now? I have, many times. It’s maddening. Shortly after studying what Greg Swann does to market his listings, I had an epiphany — well, actually two. For me it was a good news/bad news joke. On one hand I was elated to have stumbled onto such a gold mine — which is surely what it is. On the other hand, I felt like such a doofus as I mentally compared his method to mine. But as often admitted, I’m ‘Japan’. I’ll steal anything cool and make it mine — screw my ego. Thanks Greg

First, I realized as experienced as I am, and as many properties as I’ve sold in the nearly 40 years of my career, I still couldn’t carry Greg’s jock when it came to the nuts and bolts of marketing listings from A to Z. The guy is head and shoulders above anyone else I’d studied.

Then the second epiphany hit me like a ton of bricks.

How likely is it you’d be able to market a Kobe beef cheeseburger to a guy who’s been eatin’ burgers exclusively the last 10 years, but recently decided he wants and can afford a juicy porterhouse steak? It occurred to me the answer was — not freakin’ likely.

So quick! Check the fridge for a fresh steak, or you ain’t makin’ the sale.

It’s my contention this is what Barry’s seller is attempting to accomplish. He’s in a mildly upscale neighborhood with what I’ve always called an “I Love Lucy” home. I spoke to Barry while writing this, and he agrees with me wholeheartedly. Off the top of his head, he said homes offering what his doesn’t, are moving for $20-40,000 more than his listed price.

Epiphany: My firm needed to have an experienced interior designer on call. It’s been the best arrow we’ve added to our quiver in I don’t know how long. A miracle worker. I won’t list her resume here, but trust me, it’s impressive.

I told Barry of an eerily clone-like example my firm faced just last month. Sean Purcell, a brother Bloodhound contributor, is an eyewitness. Sean didn’t see the house before ‘Julie’ had her way with it, but he saw it after, and he also saw how quickly it sold.

Like Barry’s listing, this home’s area sported prices roughly 15-20% above San Diego county’s median — nice, but just a tad above average. It had been a rental for eight years. We advised our client to sell and move his equity outa Dodge and into an out of state growth region. As usual, we followed Greg’s marketing methods almost word for word. During this process we brought in Julie, our designer.

Note: Our policy when listing clients’ income properties is as follows: You must do what Julie says, or we’ll refer you to another local broker. Period. Don’t believe me? Sean just closed a sale on a listing I referred to him for that very reason.

Anywho, nothing sold in the neighborhood in less than 90 days. There were several expireds and many active or pending with 100-150 day market times. Here’s what Julie recommended our client do to obtain top dollar very quickly.

1. Eliminate entryway coat closet, thereby making the hallway bathroom roughly three feet bigger at one end.

2. Erect pony wall in master bathroom and change the way toilet faced, so as not to give showering spouse a front row seat to you know what. These two easy design changes made room for a fairly large storage closet at the end of this bathroom. Very nicely done.

3. Finish the garage in drywall.

4. Eliminate 18-20 inches of the wall separating the living room from the kitchen. That part of the wall wasn’t necessary, plus it had a claustrophobic affect. When done, it was amazing how much difference it made to what you saw. The living room looked bigger and airier. The transition from living room to kitchen no longer seemed like a prison passageway. It was amazing.

5. This one made our client’s eyebrows raise a bit. Julie hated the way the covered patio looked, and the affect it had on the living room and dining area. She told him to raise the actual cover on the house side, so it rested and was anchored on top of the roof, instead of coming out of the wall below the eaves. This move had an even better affect than shortening the interior wall. It allowed far more light to enter into the living and dining areas, which only added to the feeling of openness. It also made the patio itself feel much roomier.

6. Re-floor 70% of the home with hardwood laminate.

7. Repaint everything inside that didn’t move or talk. The outside was fine.

The total cost of all this work was give or take $15-16,000. My son and I, mostly Josh, spent much time studying the neighborhood to establish value. Our opinion before the above work was completed — $385-400,000 max. The highest, and most recent comp was $408,000 and that one took two price reductions, and over three months to sell.

We listed the home on a Friday (last month) and entered escrow after a couple counters on Tuesday morning. Our listing’s price range was $429-449,000. Realtor bylaws prohibit me from revealing the sales price. What I can tell you is that the offer came in 2-3 days after being published on MLS. It established a new high for the area by a significant amount. Our client got back all the money Julie made him spend and more. (almost 2 to 1)

That’s what I told Barry his client might wanna consider doing. He’s trying to sell a really nice burger to folks in the market for a steak. Not gonna happen, in my opinion. Home buyers want what they want. If Barry’s seller eliminates the negatives, he’ll then be marketing steak to hungry steak buyers.

Make sense?


Put Down The Pipe – And Step Away From That Lease Agreement

Yesterday’s Unrealistic Sellers Are Today’s Unrealistic Landlords

Just when we thought we had finally convinced all potential sellers that the real estate market was in a crisis – and that realistic pricing was the only way that a sale could be consummated – we now must deal with the unrealistic landlord.

I’m not talking about the professional Leona Helmsley kind of landlord – they’ve always been around. No, I’m talking about the unrealistic sellers who are instructing their agents to continue to market their properties for sale… AFTER they have rented them out to unwary tenants.

Don’t get ahead of me, now. I know that this concept is not new. Home managers have been around for years… and they provide a great service to home sellers by furnishing the home – keeping it in showing condition – paying the utilities – maintaining the yard – all while being prepared to move out with 30 days notice.

Of course, home managers enjoy deeply discounted rents.

And therein lies the rub. The unrealistic seller wants market rent – while marching prospects through the home. A few days ago, I wrote a quick post about our new GAR lease, more specifically about Section 20 which reads:

Upon 24 hours advance notice to Tenant, Landlord shall have the right Monday through Saturday for 9:00AM to 8:00PM to access Premises of Property to inspect, repair, maintain the same and/or to show the Property to prospective buyers. In the case of emergency, Landlord may enter Premises or Property at any time to protect life and prevent damage to Premises and Property. In addition, during the last ___ days of the term of the Lease, and during any period when Premises is being leased from month to month, Landlord may also place a “for rent” or “for sale” sign in the yard or on the exterior of any dwellling on Property, may install a lockbox and may show Premises to prospective tenants or buyers. In the event a lockbox is installed, Tenant shall secure jeweelry and other valuables and agrees to hold Landlord harmless for any loss thereof. For each occasion where the access rights described above are denied, Tenant shall pay Landlord the sum of $_______ as liquidated damages; it being acknowledged that Landlord shall be damaged by the denial of access, that Landlord’s actual damages are hard to estimate, and the above amount represents a reasonable pre-estimate of Landlord’s damages rather than a penalty.

Not only are the unreasonable sellers wanting to install turnstiles on their rental properties to march prospective buyers through – they got those wishes inserted into the pre-printed portion of the new lease. Unfreakingbelievable.

When I was first presented with this new lease a few days ago, I laughed almost hysterically when I read that section… wondering aloud why they would put such language into the pre-printed portion of the lease. Who in their right mind would agree to such terms without a major concession?

I forwarded the lease to my client, informing him that this was a pre-printed portion of the lease… and that it probably was not the landlord’s intention to place such a limitation on quiet enjoyment.

I was wrong. The landlord does wish to continue marketing the home in search of a buyer… and the first lease draft included language that allowed the landlord to terminate the lease with 60 days notice – while only providing one month free rent to my client for the inconvenience.

The funny thing is that if my client desired early termination – they wanted him to pay ALL of the remaining monies that would be due for all remaining months. In other words, they wanted my client to be a home manager who would smile while grabbing his ankles.

We countered this draft stating that unrestricted access was unreasonable – but that we would agree to monthly inspections as well as showings to actual BUYERS who place an offer contingent upon physical inspection… after all, that’s how commercial rental properties are handled with tenants in place. Tenants are entitled to quiet enjoyment, after all.

They came back wanting to secure showings with a one-week notice. “Are you serious?” I asked, “’cause you’re never going to get a tenant to pay market rent with all these inclusions.”

My client said if they would cut the rent 20%, he would agree to it. The unrealistic landlord would only agree to a 4% reduction. Needless to say, we will not be signing a lease with this landlord.

The sad truth is that there are many other potential landlords who are also angling for such an arrangement, as evidenced by my conversations with their agents. Many more than I ever thought were possible.

One agent told me that her client wanted to put a lockbox and a sign on the property 90 days before the end of the lease. Another said that his client wanted to continue marketing the property for sale from day one of the lease. Neither were offering reduced rent. The latter has had an empty rental for five months.

If you are a potential unreasonable landlord – catch a clue. If you want a home manager – get one. Don’t waste everyone’s time trying to get a tenant who will live in your proverbial glass house for full rent. Think about it – do you want the moron who would agree to those terms living in your house?

If you are a potential tenant – get the advice of a broker or attorney before signing your rights away… unless, of course, you ARE a broker or attorney.

If you are an agent who is trying to perpetrate these unreasonable conditions while expecting market rent – you should be ashamed of yourself… especially if you’re offering a ridiculous co-broke.

And if you are an agent representing a tenant client – it is your responsibility to ensure your client understands the ramifications of all of the conditions in the lease… including what could happen if the landlord defaults on the mortgage.

I think I’ll start asking the listing agents to send me a draft of their leases before showing their listings. After all… why should I let them waste my time?


The Financial Post: “Aging self-serving demagogues who have spent decades warping the U.S. political system for their own ends.”

Is this the end of America? Canada’s Financial Post:

Helicopter Ben Bernanke’s Federal Reserve is dropping trillions of fresh paper dollars on the world economy, the President of the United States is cracking jokes on late night comedy shows, his energy minister is threatening a trade war over carbon emissions, his treasury secretary is dithering over a banking reform program amid rising concerns over his competence and a monumentally dysfunctional U.S. Congress is launching another public jihad against corporations and bankers.

As an aghast world — from China to Chicago and Chihuahua — watches, the circus-like U.S. political system seems to be declining into near chaos. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: Is this the end of America?

Probably not, if only because there are good reasons for optimism. The U.S. economy has pulled out of self-destructive political spirals in the past, spurred on by its business class and corporate leaders, the profit-making and market-creating people who rose above the political turmoil to once again lift the world out of financial crisis. It’s happened many times before, except for once, when it took 20 years to rise out of the Great Depression.

Past success, however, is no guarantee of future recovery, especially now when there are daily disasters and new indicators of political breakdown. All developments are not disasters in themselves. The AIG bonus firestorm is a diversion from real issues, but it puts the ghastly political classes who make U.S. law on display for what they are: ageing self-serving demagogues who have spent decades warping the U.S. political system for their own ends. We see the system up close, law-making that is riddled with slapdash, incompetence and gamesmanship.

One test of whether we are witnessing the end of America is how many more times Americans put up with congressional show trials of individual business people and their employees, slandering and vilifying them for their actions and motives. And for how long will they tolerate a President who berates business and corporations as dens of crime and malfeasance? If the majority of Americans come to accept the caricatures of business as true, then America is closer to the end of its life as a global leader, as a champion of markets and individualism.


There are no second acts in American real estate listings: It’s priced right, prepared right, presented right — and the house still won’t sell. What do you do now?

Barry Bevis in Tallahassee is looking for help. And he’s willing to pay for it.

He has a listing that he’s having trouble moving, and he’s looking for marketing ideas to draw the attention of a buyer.

Here’s Barry’s note:

I have a great listing that just won’t sell…

I’ve given it my version of the Bloodhound treatment: Custom Sign, Website, URL and lots of photos. You can see the home by clicking here.

It’s in a preferred neighborhood with parks and shopping within walking distance. It has been well maintained and is priced well — according to comps and other brokers feedback. It has a great yard and a hot tub!

The negatives: After a year of trying to sell I know them! Small Master bath and No Half Bath. Tile Counters in the kitchen — our area prefers Stone. The cost to cure these “issues” is beyond what the seller can do.

We did start with it priced too high. The seller was “not in a hurry” and wanted to try a higher price. I said okay because he is a friend — knowing all along that it was a mistake. Now its in the ballpark and would appraise at the new list price.

I get a couple of people in a week — and loads of website traffic. But no offers. Not even obnoxious low ball offers.

So the seller keeps asking me what to do… Besides lower the price. So this month we are dropping the price 1K a week, a 4K price drop. That will make it show up on any buyers automatic web searches as “Price Reduced.” We are also offering to pay a point to drop a buyers interest rate, likely below 5%.

What else should I be doing?

I’m looking for ideas to ignite interest in this home and get it sold. I’ve got a $100 AMEX gift card to the most creative idea. Greg and I are the judges.

Step up and tell me what to do!

This is a tough problem, one I wish I were unfamiliar with. F. Scott Fitzgerald said, “There are no second acts in American lives.” One of the jobs we’ve paid particular attention to is writing a second act for our listings: What do you do when you’ve done everything according to plan and then — nothing happens. I’m as eager as Barry is to hear your suggestions.


The Fed Translated…..

Well, it’s time to do a little Fed translating again.   This one was a big one, so settle in and let’s translate it.    As usual, my comments are in bold and italics.

Release Date: March 18, 2009

For immediate release

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract.  The economy continues to contract – no surprise there.  But ask yourself, if the economy continues to contract, then why is the stock market rallying?

Job losses, 651,000 jobs lost in February,  declining equity and housing wealth over 20% of the homeowners with mortgages are underwater, and tight credit conditions not only in mortgages, but home equity loans, credit cards, car loans etc., have weighed on consumer sentiment and spending.  Weaker sales prospects and difficulties in obtaining credit businesses are having a harder time getting credit too. have led businesses to cut back on inventories and fixed investment.  U.S. exports have slumped as a number of major trading partners have also fallen into recession. This isn’t just a US recession, it’s pretty much all across the country.  Although the near-term economic outlook is weak gee, that’s an optimistic outlook of things, don’t you think?, the Committee anticipates anticipates?  Is that sort of like I anticipate that I’ll become a millionaire by the time I’m 45? that policy actions to stabilize financial markets and institutions translated – more bailouts, together with fiscal and monetary stimulus translated – the Fed’s printing press will be working overtime!, will contribute to a gradual resumption meaning we really don’t know when things are going to turn around of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued but they don’t say for how long inflation will stay subduedMy estimate is that we’re looking at 12 to 18 months before the economy recovers enough for inflation to become an issue.   Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.  Inflation could persist below rates that best foster growth and price stability?   Why don’t they just say that they are concerned about deflation?   Frankly, because it would scare the crap out of already spooked markets.

In these circumstances, desperate times call for desperate measures, the Federal Reserve will employ all available tools We’re not holding anything back folks.   All artillery is aimed at the problem and we’re going to keep shooting and shooting and shooting.  We don’t care if it’s the wrong type of gun, well maybe we do care but we can’t do anything about it, but we’re going to keep using all of the guns we have! to promote economic recovery and to preserve price stability.  The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent no surprise there – it’s not like they could drop it any further…… and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. extended period of time – if rates are going to stay low for an extended period of time, that means that we shouldn’t expect the economy to recover any time soon.   To provide greater support to mortgage lending and housing markets, support to mortgage lending and the housing market?  How?  By providing more of the “crack” that got us in this mess in the first place?   Or by making sure that Fannie, Freddie and FHA survive and stay open?  I’m hoping that it’s keeping Fannie and Freddie and FHA open with reasonable, responsible lending.   the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion – in case you are keeping track, that’s a paltry $50 Billion more than what was originally spent on TARP 1 and it was spent without any debate – of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.  Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.  In case you haven’t calculated it, I did.  What the Fed announced today works out to $119,863,013.69 per hour over the course of the next 12 months.  The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. We’re going to start buying loan packages (securities) secured by all sorts of loans because we desperately need the consumer and the small business to start getting further and further in debt.

The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of evolving financial and economic developments.  Hopefully this means that they are scared out of their minds by how much money they are borrowing!

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen. 

Tom here – a couple of additional thoughts about what happened today:

  • What I’m calling the “Big Gun” theory – Many people, present company included, are surprised that the Fed came out with this big of a move this month.    They had been anticipated to leave some of that “in the bag” for future use.   However, they didn’t.   They pretty much shot their entire arsenal full of ammo right now.    Is that dangerous?    Well, if you are being attached by an angry rhino, you need to use all of your ammo and hope that you kill it.   If you miss, then you’re in trouble.
  • We saw a very nice .25% drop in rates immediately after the Fed’s announcement. 
  • The amount of money the government is throwing at the economic mess is truly astounding.  Eventually this is going to come back and “bite” us.  How is it going to bite us?  A couple of things:  Higher interest rates due to the increased perception of risk in the government’s ability to eventually pay off these debts.   Higher inflation due to the government’s overuse of their printing press, and higher tax liabilities as the government attempts to pay the bills.

So what’s my thoughts and recommendations from here?  A couple of thoughts:

  • Past efforts by the Fed to buy mortgage backed securities have not had the stimulative effect that they had hoped.   Remember the talk about buying rates down to 4.5%?  We’ve never been closer to that than we are right now.
  • The law of supply and demand is working against the Fed.  How so?  By borrowing as much money as they are, they are flooding the market with short term Treasuries.   Do you think the Fed is sitting on $1 Trillion in cash they can use?  Nope, they need to borrow it.   The supply outpaces the demand and rates go up.

I’m going to go on record and say that the efforts that the Fed announced today will do a couple of things:

  • Keep Fannie, Freddie and FHA open and operating.   This is a very good thing for the housing market.
  • Give us a nice, but relatively short term drop in mortgage rates.   How short?  I’m thinking that within 1 to 2 weeks, we’ll see rates inch back up to around where they are now.

I was “chatting” with David Gibbons from Zillow tonight and he very nicely brought up the “glass half full/glass half empty” analogy.   His point was that he felt I’m taking too much of a negative viewpoint.   Here’s my take on why I write and what I say on these type of topics:

  • This is a very confusing time and like I told a client this afternoon, it’s a time that will be studied in history classes for years.
  • While I don’t have all of the answers (not even close), there are many people who have a lot less of an understanding of what’s happening than I do.  If I can help others understand it better and prepare and act on things better, it’s a win win situation.
  • Now is probably the most important time in the last 20 years for clients, referral sources and potential clients to have the type of advice and understanding that it takes to make sure they handle their real estate and mortgage needs correctly.  That’s why my mortgage blog is called Straight Talk About Mortgages and Real Estate.

My recommendation would be to lock all loans because no one knows how long we’ll see the advantages of this dip, so grab it while you can.

Tom Vanderwell


The Wannabe Cosmopolite

I choose to live in a big American city because frankly, I stick out like a sore sport in most rural settings and my accountant says we can’t afford London. One of my earliest pre-school memories was a Trenton to New York City train ride with my mother on a blustery Saturday morning.  How much of  that early 1960s day trip I accurately recall and how much is anecdotal family filler (pulled, kneaded and peppered over the redolent decades around my parents’ kitchen table) I’m not quite sure.  Still, certain sepia frames have been imprinted in my mind for life— gazing up at the sky scrapers whose dizzying heights give me vertigo to this day; creeping like a mouse through the bowels of  The Museum of Natural History, terrified of the mummies and the smell of all that marble; seeing  a man get his arm tore off by a taxi cab while standing at a busy Broadway corner…I’m pretty sure; sitting on a New York City phone book for a child’s eternity at  Mamma Leone’s, waiting for the dessert course to arrive.  Feeding the ducks in Central Park.  Observing  the landscape artists with easels and tams, their turpentined pigments slathered on thumb-holed palettes, probably all long dead by now but  full of  abstract perspective on that day.  Not peeing my pants for the entire afternoon.

A similar ferment churned in my gut when I first strolled the arrondissements of Paris; same thing along the canals of Rome; and Gaudi’s Barcelona.  And while I can easily inhale the woodsy fragrance of say, a Walden Pond (or even Dyer, Tennessee) without much complaint, I am clearly no Thoreau.  Once you think you see a guy get his arm torn off in Times Square, you can never really go back to the suburbs.  Not entirely.

As each year strikes like lightning, I find myself  being both drawn to, and repelled from, the urban twist of what once was Sandburg’s Chicago with its animal sense of outcome and yellow inner eye… ‘ hog butcher for the world.’  Liebling’s Second City.  On a calm evening the whispers can still be heard beneath the newer, vertical townhouses that just 40 years ago were stockyards.  On the hottest of days, the mephitis still rises from the soil. I had a listing down there once (before the market downturn) for over 500 days. At the very end, everyone involved got slaughtered.

I read each morning, with curious attention, as my real estate compatriots post their streaming routines on Twitter, Facebook, and the Blogosphere du monde. I imagine what it would be like to mentally attend a ‘Four Day Foreclosure Conference in Fresno’ or physically prepare ‘REO Listing  Paperwork til Midnight’  in Raleigh or hobnob with @townsquare.  I find myself, instead, cherry picking the downtown Chicago buyers I wish to work with from our own brokerage website registration and passing along the rest. I attend to only one listing these days; a favor to a friend.  I’ve become an Accidental Realtor of sorts, sitting on a virtual phone book in my iPhone, waiting for the big hogs to fatten.  The Entree. I sell metropolitan real estate because (aside from luxury yachts and illegal drugs) it’s the biggest ticket item around here that pays a commission large enough for my wife and I to live comfortably in our empty nest, still do some social good, and travel the world—or at least the country. (We’ll be in Phoenix this April for Unchained.)

At the end of  Henry James’s life the historians say he finally realized that no matter how much a man loved his adopted foreign city or how long he claimed residence to a particular Transatlantic society— unless he was actually born there, he never quite belonged.  Again, not entirely.  I’m not sure where I’ll wind up at the very end.  I can’t really recall where I came from, come to think of it.   I suppose for now I’ll just stay put here in the Midwest and wait for this house I sold myself to at least reclaim some of its original value. As long as I’m paying the property taxes on time, the City of Chicago promises not to tear off my arm. Not entirely.


The quest for all the world’s riches is over: It’s in your iPhone…

The feature set for release 3.0 of the iPhone operating system was announced yesterday, but I think the photo above says just about everything that needs to be said.

Yes, that’s the iPhone serving as its own graphic equalizer user interface in order to maximize the performance of a third-party peripheral.

There is no one else in product design who thinks like this.

The huge benefit of naming things is that it enables us to conceptually separate this from that, to isolate particular objects or ideas so that we can think about their unique properties and potential.

The outrageous curse of naming things is that we tend to force-fit whatever it is we’re thinking about into the shoebox we’ve crafted for it by naming it.

Do you see? A public hallway is a shopping mall, and vice versa, but few of us can think of both at the same time. A mobile phone powerful enough to please Steve Jobs is going to be powerful enough to do almost anything, but only people who think like Steve Jobs can find the almost anything inside the phone.

Every other smart phone on the market is just a phone with some gadgets slapped on as afterthoughts. The iPhone is well on its way to being almost everything…


Just Because You’re More Visible Doesn’t Mean You’re More Valuable

What really is the role of technology in real estate today?  So much of the discussion regarding the evolution and use of technology today seems to be centered on SEO – what ever you do, make sure Google finds you.

You have a blog or website.  It has super SEO powers.  It attracts many prospects.  So do hundreds – maybe thousands of other agents.

Sounds great.  You’ve found me.  Now what?

When consumers find me, what makes them want me? Regardless of whether or not potential clients find me via the phone book, website or as a result of a conversation a past client had at a cocktail party, the real question isn’t necessarily how they found me, the question is – once found, what do I offer to my clients that meets their needs like no other broker can?

What is your value proposition?  Your value proposition transcends your marketing message – it provides tangible, measurable ways in which you meet the needs of your clients, prospects and consumers.

What is the role of technology?”  You can’t answer that question until you know what your client’s needs are and how you meet them.

The role of technology is merely a tool to provide a medium which delivers the desired results to your clients, prospects and consumers.

The emphasis on technology has been entirely too focused on how consumers find you and not enough on why they want you.  Just because you are more visible to potential clients does not make you inherently more valuable.  If you have a blog or website, is it aligned with meeting the desired results of your clients, prospects and consumers?

Having an IDX link or other MLS search tool isn’t unique.  In fact, search in general isn’t entirely unique.

If you’re found, what makes them stay?

What if a purely technology solution met the needs of consumers?  It’s possible.  If you can’t make it clear how you meet your prospects needs, someone or something will.


Who Needs Sit-coms?

I’ve always enjoyed well written television comedy and I’ve wondered lately why I’m not seeing as much.  What happened to the writers?  Believe it or not, they all moved to DC and are writing for our Congressmen!  Oh sure, there’s a dark edge to the lines they write, but it’s classic television comedy just the same.  The congressional outrage reported in this AP story on the AIG bonus debacle is a perfect example.

AIG notified all involved, over a year ago, that these bonuses were contractually due and payable this quarter.  Former President Bush knew, current President Obama knew, the various financial players in the administration knew and Congress knew.  But that doesn’t prevent Senator Chuck Schumer, D-NY, from issuing this power-drunk one liner: “If you don’t return it on your own, we’ll do it for you.”  (If I had written the scene Sen. Schumer would have exited the room directly after delivering this tour de farce but before going through the door he’d stop, turn and say “I’ll be baaaack.”

Turns out Treasury Secretary Timothy Geithner did meet with AIG CEO Edward Liddy in hopes of discovering ways Mr. Liddy could renegotiate the contracts and all these bonuses, but Mr. Geithner “recognized that you can’t just abrogate contracts willy-nilly” according to President Obama’s chief economic advisor Lawrence Summers.  (Apparently, you can only do the old willy-nilly abrogation of contracts on mortgage lenders using BK judges.  Don’t you just love this juicy sub-plot on the importance of consistency running throughout the program tonight?)

At this point enters Representative Barney Frank, D-Mass, quite possibly the most culpable legislator in the current mortgage crisis.  A less confident person, living in such a LARGE glass house, would probably keep a lower profile but not our crazy Uncle Barney.  “The time has come to exercise our ownership rights.  We own most of the company.”  What??  I thought the administration was taking shares in the companies only to ensure that taxpayers are paid back.  Do you mean to tell me they are going to start running these companies tooI’m shocked, shocked to find (this) going on here.  Rep. Frank closes by pointing out that the government should not pay these bonuses (thus breaking a legally binding contract) because the employees contractually entitled to these bonuses “…didn’t live up to (the) contract.”  For pure laughs, it’s hard to beat someone lauding the sanctity of a contract by… breaking a contract.

The most chilling line was delivered by Representatvie Tim Ryan, D-Ohio, who co-sponsored a bill to tax 100% of the bonuses.  He was not satisfied writing a punitive and selective piece of taxation – the very contemplation of which breaks any moral or ethical boundary of democracy, but he invoked the memories of Stalin with this bit of noir: “We will use any means necessary.”  (Cue the dark organ music.)

Lest you think I’m being unbalanced quoting only Democrats, this comedy ends with Republican Senator Charles Grassley, R-Iowa, going for broke on the last line of the day.  In most sit-coms this last line is milked for a few extra seconds’ laughter while all the actors stand in place and laugh.  So come on and laugh along with them:

“Obviously, maybe (the AIG executives) ought to be removed.  But I would suggest the first thing that would make me feel a little bit better toward them if they’d follow the Japanese example and come before the American people and take that deep bow and say, ‘I’m sorry,’ and then either do one of two things: resign or go commit suicide.”

Ah, yes.  The always funny hari kari.  Cue the laugh track.


“What do you mean, stop the party? We haven’t ripped off the new neighbors yet!”

One of the fun devices in Part III of Atlas Shrugged is something author Ayn Rand called “the policy of the microsecond.” Despite the high-flown philosophical claims of the looters, their actual motivation was never anything other than “the expediency of the moment” — one absurd rationalization after the next, justifying theft and visiting the consequences of that theft upon its victims.

Just about a month ago, as a comical palliative for the housing mess, I wrote this as a joke:

[I]t would make great sense to make immigration to America easier and faster. Imagine having neighbors who work hard, pay their bills on time and can spell correctly!

That’s the logic of the policy of the microsecond. We don’t want to stop stealing wealth from innocent people. We don’t want to amend our ways and do better going forward. We don’t want to undo the awful damage occasioned by centuries of accelerating criminal government. No. All we want to do is find a way to get through this crisis. We’ll worry about the crisis caused by this “solution” — the crisis of the microsecond after this one — later on.

So guess what happens? I might have been joking, but we live in a world beyond satire. From the Wall Street Journal:

The Obama administration should seriously consider granting resident status to foreigners who buy surplus houses in this country. This makes more sense than the president’s $275 billion housing bailout plan, which Americans greeted with a Bronx cheer.

The federal bailout forces taxpayers to subsidize overextended homeowners who bet on ever-rising house prices and used their abodes as ATMs, and it doesn’t get to the basic problem — the huge inventory of excess houses. We estimate that 2.4 million houses over and above normal working inventories are left over from the 1996-2005 housing bubble. That’s a lot, considering the long-term average annual construction of 1.5 million single- and multi-family units.

Excess inventory is the mortal enemy of house prices, which have already fallen 27% since the peak in early 2006. We predict another 14% drop through the end of 2010 if nothing is done to eliminate the surplus.

Doing nothing to eliminate the excess inventory might well push the recession through 2010 and into a depression. Declining home values, for example, are eliminating the home equity that has funded oversized consumer spending for years.

As consumers retrench, production is cut, payrolls are slashed, and consumer confidence, incomes and spending are savaged in a self-feeding downward economic spiral. But if the government buys surplus houses and sells them at low market-clearing prices, other house prices will drop, destroying more home equity and driving many more mortgages under water. Bulldozing excess houses would be an inefficient end for perfectly habitable structures.

A better idea is to offer permanent residence status to the many foreigners who are clamoring to get into the U.S. — if they buy houses of minimal values (not shacks). They wouldn’t need to live in those houses, but in order to remove the unit from the total housing market, they couldn’t rent them. Their temporary resident status granted upon purchase would become permanent after, perhaps, five years, if they still owned the houses and maintained clean records. The mere announcement of this program might well stop the ongoing collapse in house prices, especially in cities such as Las Vegas, Miami, Phoenix and San Francisco, where prices are down 40% — but where many foreigners like to live.

Read that again — “where many foreigners like to live.” That sounds pretty sick and cynical, doesn’t it? But did you catch this? “Declining home values, for example, are eliminating the home equity that has funded oversized consumer spending for years.” The game is to exploit the new chumps in order to continue exploiting the old chumps!

The American economy is addicted to stolen money. We are so far removed from honesty and integrity that, in preference to admitting our awful errors, we would rather conjure up cynical schemes for bilking foreigners, innocent rubes who want nothing more than a better way of life — and who foolishly believe that America still is what it once was.

We didn’t have the guts, when America was born, to denounce the slave traders. And now they’ve taken over…


Seven Deadly SEO Sins for real estate pros…Vanity

Over next few weeks, I am going to post on several topics. An email a friend received this weekend was the perfect segue into something that I really wanted to point out.

Notice, please, that I am not jumping down Zillow’s throat for this blatant attempt at using people’s vanity to get them to take an action that they otherwise wouldn’t. That’s what marketers DO…online is no exception. SEO is no exception. Eric Bramlett included it in this post Linkbuilding basics. That’s an OLD post. Stroking egos is NOT a new marketing technique.

But this isn’t the first time I have warned people about widgets and badges either. Why do these guys still do it?

Hint: It works

Another reason is: Both my post and Bramlett’s are older posts so it bears repeating. Don’t link to local competitors or those who compete with you locally. Locally related high ranking sites linking to you are GOLDEN to an SEO effort. Google has no way of evaluating if those links are coming from a competitor or not. They don’t care.

For those who may be saying: “I don’t get it.” Here’s the linked e-mail above through an SEO’s eyes…

We like you. We’ve chosen you as a LOCAL EXPERT. (SEO eyes: You have a blog or site that has good standing in the search engines..we want a link…) Click here to get a badge (SEO eyes: link included) to put on your site PROCLAIMING how good WE think you are. (SEO eyes:Yet the message to the search engines is EXACTLY the is how good YOU think WE are–hehe–nicely done! My competitor is now linking to me!).

Therein lies the rub. And the lesson, IMO.

Vanity is a Deadly SEO sin. Building your online authority requires you to measure it the same way that the search engines do…by those who link TO you (deeds) and not by being caught up in the praise of flattering words (words).


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