September Market Update

The big continuing question is: Are the last four months a real bottom and bounce up or just an illusion? The answer is a little of both. There is no question we are at a bottom, the bigger issue is how long will we stay here and is there a chance of a second "dip" down (i.e., a "W" vs. a "V" recovery). The second dip will be largely dependent on to what degree the government extends or adds to the current housing stimulus efforts. A reduction of the stimulus will cause a downward dip.


If there ever was an example of government dollars and intervention at work, the current housing market is it. There are four key government support elements at play and a fourth private sector effort that contribute to the improving housing numbers we are seeing both in Michigan and across the country.


1) The First Time Home Buyer Tax Credit, creating over 400,000 sales out of a national total of 1.4 million (both NAR and Moody's stats)
2) The government's financial support of Fannie Mae, Freddie Mac and the FHA - Contrary to what the average person may think, these are the chief buyers and creators of mortgage products, not banks. FHA mortgages constitute nearly 70% of all John Adams mortgages.
3) Low interest rates, created by a near zero % federal funds rate and the government's purchase of most of the mortgages being made (since other financial institutions don't want to buy them, without the government purchase, rates would have to rise to entice others to buy).
4) The banks current direction, with both a stick and carrot from the government, of a slower release of foreclosed inventories into the market, helping to stabilize home values.


Keep in mind these improving numbers have not yet moved up enough into the middle to upper range home values. That will not really take hold until employment stabilizes, giving two income families (one of the core engines to move up buyer growth) the confidence to sell and buy and the mass of former owners, now renters, the ability to become home owners again.


In Michigan, the overall market in the next 12 months is most likely to be either the same (extended stimulus) or down (not extended), so regardless of the outcome of the stimulus programs, Sellers still need to price aggressively, focusing as much on current competition as comparable sales. Buyers should be aware that an extended stimulus will benefit them but it will, combined with the banks holding back their inventories, also help dry of the current supply, making the best buys more scarce.


As a company, beginning in June, each month has been successively better for us, extremely hectic, but better. The sales are unprecedented in their complexity and in many cases, anxiety. Collectively, each of us, our clients, mortgage, title and staff feel like we are walking up a sand dune, three steps forward and two back. But we are making great progress and in that effort helping people that have never in the past 70 years needed us more.

Here are our numbers for the month, as usual, better than anyone else. Also two very important bragging points, our Traverse City offices were named the Hottest Real Estate Company buy the TC Record Eagle and John Adams is now the number one FHA lender in purchase mortgages in Southeast Michigan!

FAQ about Foreclosures and HUD Homes

As the fall sets in and the year comes to a close, the First Time Homebuyer Tax Credit is also winding down. To take advantage of the credit you must get your home under contract within the next few weeks. Many buyers are finding themselves in a position where a foreclosure is the home of choice, even if that was not the original intention. Here are some frequently asked questions and answers about foreclosures that may be helpful in this crunch-time...

Q: What does "REO" mean?
A: Real Estate Owned. It's the term the banks use to identify their foreclosure properties. These properties are also considered distressed properties.

Q: How is a HUD property different from any other foreclosure?
A: HUD homes are FHA-insured loan foreclosures. The government owns them. The properties are classified as "insured" or "uninsured". Those that are insured are in good repair and FHA will insure a new loan for a new buyer for the home. Uninsured properties are typically fixer-uppers, and the buyer will be responsible for his or her own financing. Find out more on their website at www.hud.gov.

Q: What are some general guidelines for your market?
A: Many of the properties that are listed require an earnest money deposit of $1000 and are sold "as is". Many REO properties will sell for cash or with a variety of financing including FHA, VA, and conventional financing. One should remember that many times an REO property will be in a somewhat distressed condition.

Q: How are foreclosure properties identified on the MLS?
A: Certain MLS systems have a selection box on their profile form for bank-owned property and others do not. They are listed just like any other property. The best way to find them is by working with a real estate broker who specializes in this kind of home, or by searching the web. Search available listings through www.ourforeclosurehomes.com.

Q: How will the bank determine the selling price? Will banks accept less?
A: When negotiating with asset managers at a bank for the purchase of a foreclosure, they are considered professional sellers. An asset manager will work hard before a property is ever listed to determine fair market value. They order appraisals and hire a broker to advise them about the property's condition and value. Then, they price them accordingly and may or may not accept less.

Q: Will the banks repair the properties that are distressed?
A: Sometimes. The asset manager in charge of the property will confer with his broker prior to listing it to determine if it is a good candidate for repair or rehab. He will then proceed with a marketing strategy - either "as-is" or "repaired". The as-is properties are priced much lower, and the bank typically does not make repairs for these. They feel any repairs should be the responsibility of the buyer since the property's price is already discounted.


If you have any further question, please contact us and we will gladly assist you.