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It seems as though 2009 has started out with great uncertainty. There are many issues at hand that will be and are affecting the local Real Estate market. I have observed many disturbing trends and I see quite a few new trends and regulations that will further pressure the real estate market. But first, 2008 ended in a manner that I thought it would. If you look at my projections page that I developed back in May of 2008, you will see that the projections were dead on. What I thought would occur and stated in previous posts regarding foreclosure is occurring. The main problem I did not foresee,  is the material part BANKS are playing in this problem.

I have been witnessing a transition that has made its way into the political arena. This transition is the placing of the “appraiser hat” and “its liabilities” from the Certified Appraiser to the Realtor. This is being done on short sale and REO negotiation transactions. The banks believe this is about saving a buck. However, I ask you the Realtor, after speaking with some lawyers ,  who bears the liability for the accuracy of the BPO’s and who bears the liability for the financial affect of these BPO’s? I do not believe that the Realtors have realized that this additional hat that has been placed on them can present additional liabilities in the future. I wont go too much into the specifics of this, it would take way too long. But I do expect that over the next few years we will be hearing about issues involving inaccurate BPO’s that were relied upon and that created a financial hardship to individuals.

In regards to the recent report from local media outlets that December 2008 “exceeded” December 2007 sales numbers by 6%, I say “so what”. Please refer to my projections page and look at the December trend over the past 9 years. There is not anything here to get excited about unless you want to put on your rose colored glasses. A majority of the sales in December were REO and Short Sales. This is drowning out the typical sellers of the past. These typical sellers of the past are what we need to focus in on in order to identify a sign of a healthy market again. And this brings me to the major problem that is being made worse by the BANKS. Until a significant step is made to stem the foreclosures by whatever means, “all of us”, will be affected by others. If you need to compete in the real estate market as a seller you must consider the REO and short sale as a competitive alternative. Why would a buyer pay more for the same item? And back to my previous point, if the decision makers are relying on inaccurate BPO’s in their negotiations, then there is a financial hardship being placed not only on the prior owners of these transactions, but on every single typical homeowner in the market area, just so the BANKS can save a buck.

There is some good news that might help out. The current administration is considering pushing through a bankruptcy law change that would allow judges to modify and alter the original mortgage and loan. If passed, I guarantee that it will stem this tide of foreclosures on the market and expedite the return of our Real Estate market to health. Now, I even began to believe the empty rhetoric by the banks last year, that they will work with individuals to modify their loans. And I know many believe, that it is the borrowers fault. However on the first statement: when I am in the field I continually hear horror stories about how banks are treating those affected by foreclosures. Not all banks area working with borrowers and some do not return calls nor attempt to make contact. This is important, as until there is a return to typical listing and transactions every homeowner will be affected. The REO and Short Sale must be contended with by a typical seller. I cannot emphasis enough, the importance of getting these type of dwellings off the market and preventing more.  On the second point, I have met person after person that tells me the story of how they were steered into bad loan terms. I could sit here all day and recount story after story of how borrowers did trust loan officers to do what was in there best interest. When an individual is a trained professionally in a field that another is not, please tell me who will win out in any type of negotiation. (IE. a seasoned realtor vs. an 80-year-old client, or a 15-year mortgage vet vs. a first time homebuyer). I am not saying that everyone is bad. I am saying that the argument of “its’ the borrowers fault” is not a strong point at all. There was plenty of rope given out by the banks, in an irresponsible manner, for everyone to hang themselves and bring their neighbors with them. Hopefully, there will be more meaningful changes to our bankruptcy laws that will stop more homes from coming on the market as REO’s. Another alternative would be for the banks to transition the homeowners in default to immediate tenants. Please tell me why this could not occur.  I hope something meaningful is done soon since there is 1,000ib gorilla sitting out there and his name is “foreclosures not on the market” along with his 2,000ib brother named “2009 lis pendens” ( see my prior posts ). 

There are new regulations that will be put into place this year that will have unintended negatives consequences to our real estate market. The major one is the HVCC ( Home Valuation Code of Conduct ). This is being met with opposition from every major and minor professional group, from Bankers to Appraisers to Mortgage Bankers to the FDIC and more. However, due to the lawsuit of Cuomo V. FNMA, it will be in place this year. It will disallow anyone from picking, paying or communicating with any appraiser in a Federal related mortgage transaction. And the fees are being dictated to appraisers by appraiser management companies (AMC). These companies (  there are four big ones ) , have contracted with banks as approved appraisal management companies. The fee that will be charged to the borrower will be quite more than what the appraisers are paid. And there is no outlet for appraisers to compete openly for business in price. The ability for an appraiser to operate, market and compete for business will cease to exist. There are no AMC guidelines for qualifications. There are several appraisers on these lists that are in the wrong business. And you as the Realtor will be stuck with whomever you get regardless of their abilities. The goal of the HVCC is admirable, however, it has become quite clear to those familiar with it, that it is a detriment to the Real Estate Industry. More and more control is going to the big banks in the real estate market. Earlier this month Chase ended all relations with typical mortgage brokers. This means that a good mortgage broker whom actually brokers the best price, and terms for the customer is out of business with Chase. This trend is across the board and is expected to continue. I believe we should be weary of the control being placed into the hands of those we are bailing out. Their past decisions in regards to loans that should not have been made , bring into question the overall integrity of their position in the market.

Another new regulation that has been pushed back is the RESPA change in regards to builder concessions to buyers for utilizing affiliated services. This one is very good for our market as it takes the control out of the builders’ hands and creates more competition. However, the regulatory geniuses out there postponed it. I know many bad situations that have occurred due to builder-affiliated services for closing costs. It seems as though when a regulation is good it is not realized and when it is bad it goes through.

Another external threat to the market this year will be the continued unemployment levels. The basic core to our local market is as a service industry. We in West Central Florida provide more services than goods. If unemployment levels continue to increase, the amount of actual individuals that come here goes down and the services offered follows directly.

On the upside, as our values decrease so should our property taxes for this year, as the new tax bills will be reflective of the 2008 values. However, it is expected that local governments will face extreme financial difficulties when property taxes are their major revenue source. I would expect to see an increase in the mileage rate. Yes, you can quote me on that. In regards to homeowners insurance, if you haven’t had your property appraised recently, then YOU ARE PAYING TOO MUCH FOR INSURANCE. You are probably over-insured. The possible offset will be if State Farm drops their coverage on over 1 million homeowners, and gets out all together, then the competition will be less and less competition means less motivation to compete on price. I heard a report the other day that it is expected to decrease the rates. Well let me tell you this, I have State Farm and they were and have been far lower than almost every other company I shopped over the past 5 years. So please tell me how this move will drive down the price. Of course if you hold the supply-demand curve upside down, it might indicate that scenario.

All in all, I believe that 2009 will present our Real Estate market with more challenges and difficulties. Those that do not acknowledge them and those who are not quick to react to them will be met with defeat. Those that possess the creative abilities to think outside of the methods of the past will succeed. What worked in 2008 for most, I expect will not have worked the same once we end 2009. I am currently working on a new trend analysis for 2009. I hope the trend analysis for 2008 was useful. It should allow you to know when to market, what to budget and how to adjust your strategy in the market on a month-to-month basis. I look forward to more of your comments and if there is any specific research you should desire, as always I will be more than happy to assist you. I will publish your specific research and there is no fee for it.