Looking Out From the Garage: February 2009

I ran across this video the other day, and I just couldn't move past it.  I'm under the weather, the kids are just starting to peek out, and Mrs. GarageGuy is holding tough, but not feeling well.  After watching this, my first thought was that every once in a while, the best plan is to NOT get out of bed in the morning. 

I'm going to sleep in tomorrow while the wife and kids go to the circus.  Hopefully I'll be ready for snow on Sunday...  But NO forklift driving for me.

I have just started volunteering for Junior Achievement. I wanted to help out in Parkview High School or Trickum Middle School, but they don't have partnerships with any of the teachers there. Instead, I'll be volunteering at Norcross High School for the time being.

Junior Achievement is a great program, and it would benefit the students to have access to this type of curriculum.

If you are a teacher at Parkview High School or Trickum Middle School in Gwinnett County, or an Administrator, feel free to shoot me a message and I'll be HAPPY to put you in touch with the right folks at JA. They would LOVE to be involved here in Lilburn.

Ken could NOT have written a better post.  He summed up much of what is happening in the current panic incredibly well. 

Please feel free to visit Ken's post to comment.

I generally don't word titles as strongly as that...  But this is important.

Interest Rates on Mortages NEED to Rise...

It isn't that we want them to rise, it is that the underlying structure is going to force rates higher.  Here are the things contributing to that coming increases...

• The Government will be borrowing more than a Trillion Dollars this year... and next year... and likely the year after that.
• China is not able to buy as much of our debt as they have in the past.
• The Federal Reserve Bank is pretty much out of options to push down rates... the Fed Funds Rate is already near 0%.

The Congressional Budget Office stated that the massive borrowing for the new "Recovery" package will force out private borrowers.  Basically, mortgage borrowers will need to compete with the government for investor dollars.  At the same time, many of the big investors are backing out of the market because of their own economic ills...  China being the biggest of those investors.  Frankly, there aren't that many ways to raise a trillion dollars.

So, just as supply and demand affects everything else, it affects mortgage rates.  The supply of money is bocoming tighter, and the demand for the same money is becoming greater.  When the demand starts outstripping supply, prices (rates) HAVE to go up.

There are two big things that go into the monthly carrying cost of a home...  Principle and interest.  Just to give a couple of examples...

• A $250,000 property, with 10% down and an interest rate of 5% makes the payments about $1207/mo. (not including tax, insurance, PMI).
• A $225,000 property, 10% down and an interest rate of 8% makes the payment about $1485/mo..  It isn't that long ago that an 8% rate was pretty good.
• If the price were to drop to $200,000, 10% down and a 14% rate... well below the peak set because of "Carter-nomics"... the monthly cost of principle and interest would be about $2133.

So, even with a 10% or 20% drop in housing prices, we could be looking at dramatically higher housing costs.

"I'll just rent..."

Let's look back at supply and demand again...  If fewer people can afford to buy homes, and the cost of carrying a home is going up, rental costs will rise at the same time.  For the last several years, rents have been kept in check because of the ease of buying a home.  Basically, the landlords couldn't jack rents because anyone could get a house.  If that is more difficult, landlords would be free to jack rents...  Currently, there is overhead inventory on rentals, but now construction is stopping on rentals, too.  That means that inventories won't be increasing going forward.

Is there danger in committing to a home right now?  Absolutely.  And there is a danger in NOT doing so as well.  Of course, if you are a cash buyer, then there are reasons to wait if the economy continues to slow.  If you are going to be seeking a mortgage, and you are in a position to get approved...  I think there is less danger to worry about.

from LilburnDwellings.com

My friend and long-time companion left us yesterday...  Yes, my T-Mobile MDA that has functioned as phone, eKey, PDA and mobile modem is done... at least as anything but a PDA.  The speaker just crapped out.  The result was a screeching sound on ALL calls... on both ends. 

As a real estate agent, that isn't acceptible.  So I had to go to the store to replace it.  What I really wanted wouldn't work... the Google G1...  Supra doesn't support it as an eKey.  I also really liked the T-Mobile Wing... alas, no support for that, either.  So, my choices were all Blackberry units. 

• Curve
• Pearl
• Pearl Flip

I opted for the Pearl Flip (8220).  My wife has a Pearl (8100) so I didn't want to get the same phone she had.  I knew that she kind of wanted one of these, so if I hated it, we could strike a deal.  I had to play with the keyboard for a few minutes to decide if I could handle it.  The keys of the Curve were smaller. 

So far... it is ok. 

I have the FaceBook app... and I'm sure that Twitterberry will be making its way onto the phone.  Of course I have the eKey set up (had to buy the fob which is an annoyance).  I'm curious what other things are "gotta haves".  One of my friends mentioned Vlingo when I made a comment on FaceBook.  My wife is checking out Vlingo... so we'll see... 

I'm sure that this will be providing better updates during REtechSouth. 

I'd love to hear your tips and tricks...  And for all of the iPhone people..

1. Not supported by eKey
2. Not at T-Mobile
3. Not in my budget

One last bonus.  We have the HotSpot@Home plan from T-Mobile as a home phone solution.  The cool bonus is that when I am at home... or on ANY wifi network, the phone hands of the calls from the cellular network to the wifi... and the minutes aren't used.  Cool. 

The latest plan to make Atlanta the place to live and visit (we're talking about the City of Atlanta, not the Metro Area) is to build a trolley system.

The proponents argue that the project would be ready to go quickly, would create jobs and would lower traffic on Peachtee Street... especially in the middle of the day (the people that work along P'tree might be able to hop a trolley instead of driving to lunch).  This would reduce pollution and provide a cleaner transport than busses.

Detractors argue that this isn't the most brilliant way to spend $81,000,000.  With the planned 3.6 miles of track, that equates to $22.5M per mile.  Compare this to the Disneyland Monorail System, which cost $1,000,000/mile in 1959 (that would be just under $7.3M/mile in 2009 dollars).  Further, those that think a trolley would be a good idea think that connecting the Georgia World Congress Center, GA Aquarium, World of Coca-Cola and downtown hotels would be better.  This would allow tourists and convention attendees to use the system.

So, what do you think?  Is this a good use of $81,000,000 from the stimulus bill?

from LaneBailey.com

Maybe this doesn't apply to you... maybe it does and you don't know it...  I didn't think it applied to me until this afternoon. 

I don't know how many email addresses I have.  That is ok, because as long as I get all of the mail, there isn't a problem.  But, I had forgotten about one of my email addresses... and I wasn't getting the mail from it.  And that would be 2,453 messages since Dec. 17th, 2007.  2,453 messages.

At some point, that email address got dropped from my Outlook pulls...  Outlook stopped pulling the messages from it at some point priot to Dec. 17th, 2007.  I didn't notice... I mean, I noticed, but I didn't notice.  I noticed that I wasn't getting a few email newsletters.  I wasn't getting messages from a group I was in.  I wasn't getting notifications from a forum I belong to...  But I really didn't pay attention. 

Today, I needed to move a domain.  When I needed the EPP code, I had to go find it via webmail.  When I logged in... there were 2,453 messages. 

I have rectified the situation.  I have added the account to Outlook.  And while I never forgot the address, I have made sure to never forget to collect the mail. 

What about you? 

How many email addresses do you have?  Are you sure?

And another thing...  Do you have control over your email addresses?  Are there people looking for you with a former brokerage?  Are there people looking for you at addresses you don't have anymore... and that you can't forward? You should only promote addresses of which you have control.  Own your domain.  In addition to LaneBailey.com, I have also purchased LaneBailey.info... it will be just about social networking and a curriculum vitae. 

The final thing...  Don't be afraid of having disposable addresses.  Part of the reason I have so many addresses is that I use "disposable" email addresses tied to my domains.  These are specifically tasked addresses... like one for FaceBook, one for Flickr, etc.  That way, if the address is sold to a spammer, I can drop it and apply a new address without having to change it in dozens of places.

If you want to follow along, here are parts I and II. 

12/30/2008

1/10/2009

Once again, I took a meandering walk through the new listings in Lilburn for the last 30days.  As I wandered through, I was particularly looking for quantity of pictures and virtual tours.  The reason I was concentrating on those items was all about research that EVERY real estate agent should be familiar with regarding buyer behavior. 

Buyers largely SKIP listings without adequate pictures. 

Let's mention a few basic items.  Last year, FMLS changed the maximum number of pictures allowed from 8 to 12.  They also allow an unbranded virtual tour to be attached.  The pictures can all be captioned... 

Many MLSs across the country allow more than 12 pictures... some as many as 50.  But many local agents are used to only putting 8 pictures on a listing, despite being able to upload more than that for quite a while, now. 

Here are the numbers for the last 97 listings:

• 14 had 0 pictures,      14.4%
• 11 had 1 picture,       11.3%
• 21 has 2-8 pictures ,  21.6%
• 12 had 9-11 pictures, 12.4%
• 44 had 12 pictures ,   45.4%
• 9 had virtual tours,      9.3%

The good news is that the number of listings with 12 pictures is up sharply.  That bad news is that 53 properties from the last 30 days didn't have 12 pictures.  That isn't that many.  If an agent just shoots front, back, 3 bedrooms, living room, kitchen, 2 bathrooms, garage, dining room and something like a close up of the front door... that is 12 shots for a modest home.  And most homes really need to have a couple pictures of several of the rooms. 

The bad news is that the group that lost membership was the 9-11 pictures.  As a percentage, the growth was t the bottom end of the spectrum.  WAY too many agents aren't publishing more than a picture or two.

What can you do?

If your home is currently listed, get a look at the listing in the MLS.  If it doesn't have enough pictures, talk with your agent to find out why. 

If your home isn't currently listed, make sure that you have an agent that is going to leverage available technologies to get your home sold faster.

Midori wrote a post yesterday morning that made me do something...  She's evil that way.  ;^ )

In Midori's post, she was talking specifically about schools and teachers and being involved in our communities.  You should read it if you haven't already. 

The Ultimate Pay It Forward, Teachers Thinking About Our Future

For those of you that don't know, my father was a teacher for many years.  He taught Junior high School, High School, Middle School and College at various times.  The subjects were mostly math and the sciences, especially earth sciences, geology, paleontology and paleogeology.  He loved teaching.  Even when he wasn't a teacher, he often found himself in classrooms teaching.  He volunteered to help teachers cover subjects that he had an expertise in, where they needed more strength. 

And I can testify that he was never "off."  Family vacations were learning experiences... and history was one of his loves.   It wasn't about money... it was about passion.  I followed him around museums where he seemed to gather a crowd sometimes as he explained to me how prehistoric animals interacted, the challenges historical figures faced or the importance of some event or person.  He loved it. 

Back from the tangent...

Midori mentioned that she volunteered so much the school offered her a job.  And that struck in me.  Junior Achievement has been running ads looking for volunteers here in Georgia.  I would bet that those ads are running elsewhere as well... even if they aren't I would bet that the need is there.  I had been listening to those ads for a few weeks...  And I had been meaning to log into the website and volunteer.  Been meaning to... how many times have you "been meaning to"? 

I'm not "been meaning to" anymore.  Yesterday, after commenting on Midori's post, I went to the JA of Georgia website... in the same window.  I signed up to volunteer after looking over some of the opportunities.  A short while later, I got an email thanking me and asking what I would be willing to do.  During the last paragraph, I got a reply with my new JA contact person.  In another tab, right now, I am joining their FaceBook page.  As soon as I am done with the post, I will be emailing the person that manages volunteer opportunities in Gwinnett County. 

We are something special!

Many of us have small businesses.  We are the gas in the engine of capitalism.  We make the bulk of the jobs.  We make the bulk of the income.  We pay the bulk of the taxes.  We are also the parents.  We are also the community leaders.  And WE have the opportunity and responsibility to instill these values in the next generation. 

So, Midori reminded me that I needed to "do something"... and more importantly, I needed to stop "been meaning to" do something.  I'll learn some things, too... 

Final thought...

There are 135,798 members of A|R at this particular moment.  About 20% are active enough that we actually blog and interact here.  That is 27,160 real estate agents, mortgage professionals, inspectors, stagers and others.  Generally, as connected and blogging real estate professionals we are influential, connected and good communicators. 

Whether it is JA or some other group.  Imagine the impact that we, as Active|Rain members, could have.  Imagine the impact that we could have if the NAR or the NAMB or the NAHB got behind this.

It is gaining popularity among some in the political class.  The idea is being floated to change the law and allow "cram-downs" on owner/occupant loans. 

Cram-down:  Basically, on many commercial (investment property) loans, a bankruptcy judge can alter the terms of the loan during a bankruptcy proceeding.  Let's say that the property has deflated in value and won't support the payment it once did, the judge could lower the balance of the loan to allow the owner's payment to cover servicing the new lower debt.  In effect, the new value is crammed-down the throat of the mortgage lender. 

For most of the rest of us, if we do end up declaring bankruptcy, the same option doesn't exist.  In effect, a home owner would be able to stay in the house, and the bank would write down the value of the loan to reflect the "new reality".  This is already how it works forcredit cards.  And the idea seems to be getting a lot of traction from some members of Congress. 

On the positive side, this would allow many that would otherwise face foreclosure to stay in their homes.  Instead of being at the mercy of the banks, judges would be to to quickly and efficiently change the terms of a loan unilaterally.  Right now, home owners might wait for months to be told no... or worse, might have to produce some arcane piece of paper and join the line again to wait months to hear the next hurdle. 

But there is a giant negative...  And it seems like a lot of the people that are proposing this as a solution to ease the foreclosure crisis are ignoring this completely.  The effect of risk on interest rates.  With increased risk come increased cost.  And we aren't talking about pennies here, either.  Take a look at a few different types of loan products and the costs associated with each of them. 

• Regular owner/occupant mortgage.  5.188% $1100/mo. Payment
• Commercial Property 30yr. mortgage.  7.62% $1415/mo. Payment
• Credit Card Rate highest risk.   12.65%   $2160/mo. Payment

In the case of a traditional mortgage, the bank can be reasonably assured that they have a shot at getting the money back that they loaned out.  They certainly have risk... especially now... but it is low by comparison.  They either get paid in full, take back the property, choose to lower the principal on the loan or choose to alter the terms. 

With the commercial property mortgage, there is a higher risk for the lender.  If the borrower were to have a financial problem landing them in some sort of restructuring, they could have the value of the loan modified, the terms altered or they could end up taking back the property.  But, instead of choosing to do it because it is a good business decision, they can be forced. 

Credit cards are unsecured.  In the case of a bankruptcy, the balance can be dramatically altered, or even wiped out.  The risk is very high.  So, despite the fact that the banks are borrowing the money at a very low rate, they have to jack it up in order to cover the default risk of the borrowers. 

Give me the "Executive Summary"

In a nutshell, if "cram-down" provisions were placed into the bankruptcy code, the interest rates would have to rise in order to cover the increased risk.  Also, remember that most investor loans require 20% down because mortgage insurance companies don't like them at all. 

So, not only would rates go up, but down payment requirements would also go up.

Do you think either of those things would help the real estate market?  Prices would drop a LOT more than they would otherwise.  A lot more borrowers would be in precarious financial situations.  The government would end up fueling the very thing they are trying to stop.  

But worse, think of the people that have NOT made mistakes... the ones that haven't even bought yet.  They would be penalized MASSIVELY for the irresponsible acts of those that bought homes they couldn't afford.  That $315/mo over 30 years is more than $113,000!