Tuesday, March 13, 2012

Is The Housing Market Actually Recovering?

Everyone wants to know if the housing market is truly showing signs of a recovery. There are conflicting headlines every day. One day, we hear sales are up. The next day it is reported that prices are down. Is the real estate market coming back? The answer is ‘yes’ and ‘no’.

There are two aspects that must be evaluated: house sales and house prices. They will not recover at the same time. Sales are already increasing rather nicely while prices will still soften in many markets through 2012.

Home Sales

The National Association of Realtors (NAR) issues a Pending Home Sales Report each month. We can see by the graph below that sales have been increasing nicely over the last twelve months. Real estate professionals across the country are reporting that activity has increased compared to last year. The sales side of the recovery is starting to show great promise.

Home Prices

Many price indices have shown that national home prices are continuing to stumble. Even with demand increasing, we must look at where the supply of housing stock stands. Though ‘visible’ inventory (homes currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (Foreclosures about to come on the market as a result of the National Mortgage Settlement). This increase in inventory will outpace the increase in demand and thereby cause prices to continue to soften in many parts of the country.

Bottom Line

Housing is coming back. However, sales will come back before prices. We will not see prices appreciate until we work through the oversupply of homes on the market.

Monday, March 12, 2012

The History of March Madness

Interestingly enough, the term March Madness has been around to describe basketball tournaments since 1939. However, it initially described the Illinois State High School tournament, not the NCAA tournament. Over the years, it has become associated with the NCAA tournament to the point where it overshadows its true roots.

Illinois Roots

Peoria HS, 1908 State Champs

“March Madness” was born in Illinois. The annual tournament of high school boys basketball teams, sponsored by the Illinois High School Association, grew from a small invitational affair in 1908 to a statewide institution with over 900 schools competing by the late 1930′s. A field of teams known as the “Sweet Sixteen” routinely drew sellout crowds to the University of Illinois’ Huff Gymnasium. In a time before television, before the college game became popular with the average fan, before professional leagues had established a foothold in the nation’s large cities, basketball fever had already reached epidemic proportions in the Land of Lincoln.

The term March Madness is actually a registered trademark held jointly by the NCAA and the Illinois High School Association. Illinois, and the rest of the world, can thank a man named H.V. Porter for coining the term.

“Porter was born in Manito, Illinois and grew up on a farm near Washington, (Illinois). Graduating from Illinois State Normal University, Porter taught at high schools in Mount Zion, Keithsburg, and Delavan. From 1919 to 1928 he served as principal of Athens High School. But it wasn’t until 1928, when Porter was hired as assistant manager of the Illinois High School Association that his career blossomed.”

“A gifted writer, Porter published an essay named March Madness in 1939 and in 1942 used the phrase in a poem, Basketball Ides of March. Through the years, the use of March Madness picked up steam, especially in Illinois. During this period the term was used almost exclusively to the state high school tournament. In 1977 the IHSA published a book about its tournament titled March Madness.”

“Becoming a member of several influential committees including the National Basketball Committee, Porter helped develop the fan-shaped backboard that was used at the high school level from the 1930s through the 1990s and the molded basketball that, free of the laces that made dribbling difficult, revolutionized the game. Porter also spearheaded the effort to write basketball and football rule books specifically for high school competition.”

Porter’s Words

Most importantly, though, Porter became editor of the IHSA’s magazine. Nearly every magazine contained an article or essay from the editor himself. The Illinois state high school basketball tournament grew to become a statewide icon in the 1930′s. It was in 1939 when Porter wrote an affectionate essay in the IHSA’s magazine titled “March Madness“. The term itself is thought to have come from the old English saying, ‘Mad as a March Hare.’ The essay’s punctual line was,

When the March madness is on him, midnight jaunts of a hundred miles on successive nights make him even more alert the next day.”

After that Illinois position, Porter left the IHSA to become the executive secretary of the National Federation of State High School Associations. In 1942 he wrote one last literary contribution to the IHSA’s magazine, a poem titled “Basketball Ides of March“. The poem, below, is truly inspirational:

Basketball Ides of March

The gym lights gleam like a beacon beam
And a million motors hum
In a good will flight on a Friday night;
For basketball beckons, “Come!”
A sharp-shooting mite is king tonight.
The Madness of March is running.
The winged feet fly, the ball sails high
And field goal hunters are gunning.

The colors clash as silk suits flash
And race on a shimmering floor.
Repressions die, and partisans vie
In a goal acclaiming roar.
On a Championship Trail toward a holy grail,
All fans are birds of a feather.
It’s fiesta night and cares lie light
When the air is full of leather.

Since time began, the instincts of man
Prove cave and current men kin.
On tournament night the sage and the wight
Are relatives under the skin.
It’s festival time, sans reason or rhyme
But with nation-wide appeal.
In a cyclone of hate, our ship of state
Rides high on an even keel.

With war nerves tense, the final defense
Is the courage, strength and will
In a million lives where freedom thrives
And liberty lingers still.
Now eagles fly and heroes die
Beneath some foreign arch
Let their sons tread where hate is dead
In a happy Madness of March.

During the tournament’s “Golden Era” of the 1940′s and 1950′s, “March Madness” became the popular name of the event. It was an era of some of Illinois’ most legendary teams, including the undefeated 1944 Taylorville squad and Mt. Vernon’s unstoppable back-to-back champions of 1949 and 1950. But the one champion remembered more than any other is tiny Hebron, a school of only 98 students, which won the tournament in 1952.

It wasn’t until the early 1980′s that fans of NCAA basketball began to use the term to describe the playoff series that takes place at the college/university level. Most historians would agree that March Madness was popularized in the college arena by Brent Musburger, a CBS sportscaster who had worked in Chicago for many years prior to joining CBS.

Wednesday, March 7, 2012

Real Estate Commissions: You Get What You Pay For

Does it makes sense to pay a full commission to your real estate agent in today’s market? Sellers, buyers and even agents are debating what should be charged to assist a consumer in completing a real estate transaction. Forget what the actual amount of the commission is. The bigger question is whether you should pay a ‘full fee’ when hiring a real estate expert to guide you through the complexities of today’s rapidly changing housing environment.

If a full fee was the rule in 2006 when completing a deal was so much simpler, why would you now consider cutting the fee of your agent in today’s tumultuous market? You are depending on this person to help you reach your goals in a sale or purchase. In 2006, buyers were willing to pay almost anything to a seller just to get into a home. Banking entities seemed to be willing to mortgage any property for any buyer. The process was rather simple.

Today, a person looking to buy or sell should be willing to pay a full fee for two reasons:

You need an expert guide if you are traveling a dangerous path

The field of real estate is loaded with land mines. You need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a buyer willing to pay fair market value for your home at a time that there are mass inventories of foreclosures and short sales will take a true real estate professional. Finding reasonable financing can also be tricky in today’s lending environment.

Experts in any profession do not discount their fees; especially when the job is becoming much more difficult.

You need a skilled negotiator

In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible re-negotiation of that off after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.

When an agent is negotiating their commission with you, they are negotiating their own salary – the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family? If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal.

Bottom Line

We believe that famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.


KCM Crew 3/7/2012

Tuesday, March 6, 2012

Where Are Rents Headed?

People are delaying the decision to buy a home because they are not sure where prices are headed. If they buy and prices continue to soften, they feel that they will not have purchased at the optimal moment. They reason that, if they sit and wait, they can’t be hurt. This thinking assumes that a non-decision comes without consequence.

The normal retort to this thinking by people bullish on real estate is that prices may soon turn to the positive or that interest rates will start heading upward. Buy now before the cost of buying increases! Today, we want to look at this from a different angle. We want to alert our readers that their housing expense is about to increase if they continue to rent.

Currently, in most parts of the country, buying is less expensive than renting. Plus, purchasers can lock in their housing expense for the next thirty years by buying now. They will get a sensational price and a record low interest rate. What will happen if they continue to rent?

The Alternative to Buying

If a family continues to rent, they are looking at a housing expense which will rise with the market. Rental costs increase by 3% a year historically. But today’s rental market favors the landlord to a greater degree. Below is a graph of how rental prices have increased recently and where they are projected to go over the next few years based on a report from Marcus & Millichap.

Bottom Line

Hoping to save by delaying the purchase of a home may result in higher housing costs while you’re waiting, thus achieving the exact opposite result. Check with a local real estate professional to determine the best option for you and your family.

Monday, March 5, 2012

House Prices: Window of Opportunity is Closing!


There have been conflicting opinions as to where housing prices are headed. We want to give our opinion on this subject for the short term. We believe sellers have a window of opportunity for the next 90-120 days in most parts of the country in which to sell their homes for maximum price. We believe there will be increased downward pressure on home prices throughout the rest of the year.

Why renewed downward pressure?

Any item’s price is determined by ‘supply and demand’. In many parts of the country, existing housing inventory has dropped to historic norms in the last few months. However, an inventory of distressed properties (foreclosures and short sales) will be coming to market this year. This inventory has been delayed for over a year as the Federal and state governments crafted an agreement with the five largest banks and mortgage servicers to establish a roadmap for how a foreclosure must be properly completed. That agreement, the National Mortgage Settlement, was reached two weeks ago.

What Impact Will the Agreement Have on Foreclosures?

Brandon Moore, chief executive of RealtyTrac, explains:

“The settlement sets forth clear guidelines for lenders and servicers to follow when foreclosing, which should allow them to push through some of the delayed foreclosures from last year.”

How Many Foreclosures Could We Be Talking About?

Mark Vitner, a senior economist at Wells Fargo Securities tells us:

“The settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled.”

What will this mean to home prices?

As this inventory comes to market, it will impact prices in two ways:

  1. It will bring to market discounted competition for buyers
  2. It will impact the appraisal values of all homes in the area

Which States Will Be Impacted the Most?

The states that have the largest backlog of properties currently in the foreclosure process will be the states that will see the greatest price depreciation.

Bottom Line

There is a window of opportunity currently which sellers should take advantage of. Waiting until later this year will not guarantee a higher sales price. If anything, in many regions of the country, it probably guarantees the exact opposite.


Courtesy of Keeping Current Matters 2/27/12