The media’s damage to confidence, psychology…

Has anyone been able to listen to an entire newscast lately without hearing that “One-fourth of homeowners are underwater!” Think about that term.  “Underwater” conjures up an image in my head of someone going down for the last time, gasping their last breath. It almost implies that the mortgages of such families instantly become due and payable and they’re going to lose their homes.  In fact, most of them are current on their payments and aren’t even trying to sell their homes.  Is it a great surprise that in a declining market, so many people who bought their homes a few years ago with no downpayment or perhaps 3% down now owe more than their home is worth?  Why does the media have such a negative bias about the real estate market?  When stocks plunged a few years ago, I don’t recall hearing that “investors are underwater on their investments!”

It’s probably inappropriate to paint “The Media” with such a broad brush.  Some are better than others in this respect.  Consider these two headlines, printed within a day of each other. Our newspaper’s headline was “Toledo home prices fall at 3 times national rate in first quarter.”  It was factual, median sale prices dropped 12.5% in the quarter, largely because of our unusual activity in lower end investor and foreclosure properties. That is not the same as saying that your home declined in value by 12.5% in the quarter, just that those particular units that sold in the first quarter compared with different units that sold in the first quarter of 2010 were lower priced.  The statistics do not compare the same homes year-to-year! Therefore, perhaps market activity, not median prices, should be the focus.  Example:  with nearly the same quarterly decrease in prices (9%), the headline in Sarasota was “Southwest Florida home sales up 11% from 2010.”  They somehow focused on the positive, a significant improvement in unit sales, while here we read about the negative number, which was actually better than many other Ohio cities . . .

Markets are markets, they go up and they go down.  We have every expectation that like the stock market, the real estate market will recover, unless we allow the media to convince us that the sky has fallen on one of this country’s greatest foundations.

Epilogue: After posting this opinion came the inane cartoon in the Blade’s 5/12/11 Pages of Opinion which essentially suggested you are crazy to consider buying a house.  What on earth can be the motivation for their campaign against home ownership?

How is this possible?  Home prices may be up modestly in some parts of the country over that period of time – even double digits in a handful of the most volatile markets.  However those percentage gains are being measured against the shell-shocked lows of late 2008 and early 2009. Statistically, even the slightest increase in depressed median prices can look impressive.

So why doesn’t it seem like our own personal equity holdings have done this well?  The simple answer is the Fed’s rising equity finding is mainly good news for residential real estate; however the increase is not attributable solely to positive events.  The Fed makes its’ basic calculation the same way homeowners would:  You subtract your total mortgage debt from the estimated market value of your home; the remainder (if you have one) is your net equity.  The Fed has access to information about mortgage debt holding of banks and non-bank lenders, and uses a variety of governmental and private real estate data sources to obtain their quarterly values across the country.

There is no dispute that a 17% increase is a move in the right direction at the very least.  Values of homes are no longer on the downgrade nationwide and household debt loads are decreasing.  None of this necessarily helps the people still stuck with homes that are underwater or those who have lost their homes to foreclosures.  But for everyone else that cares about real estate, the latest Fed numbers suggest that the equity crash is over and a rebuilding with smarter credit habits is underway.

Another common misconception when shopping for a loan is believing that the company with the lowest interest rate is the best deal.  Although the interest rate is a large part of buying a home, another factor that you need to be aware of are the fee’s that the company is charging you for your loan.  Just because the interest rate is low doesn’t mean that it is the best deal.  Always find out what the closing costs are along with the interest rate on the type of loan that you are applying for, and then make the decision on which is the best deal for you.

Among the key findings of the survey: Of the 60% of individuals moving into rentals, 24% were previous homeowners who are renting temporarily while they look for a new home to purchase. Underscoring this finding is the fact that for many of these families, foreclosure was not the reason for moving—in fact, the number of consumers who moved due to foreclosure dropped by 70%.

Furthermore, many of these families stayed in the area (one in three made a short distance move of 100 miles or less), opting to remain in a location where they already know their schools, shopping districts and prime neighborhoods.

“While the housing market continues to flux from month to month, we’re seeing strong, continued interest as consumers looking to move start their research with us,” said Relocation.com Chairman and Founder Sharon Asher. “These findings suggest that more Americans may be poised to re-enter the housing market this year.”

The Relocation.com survey was conducted in early June 2010 and is a continuation of consumer surveys conducted since March 2009 to gauge moving and relocation attitudes and behaviors.

TV news in particular deals in sound bites, sometimes airing a few brief words from an “expert” for the sake of credibility.  But the fact that experts find their way onto television shows does not necessarily mean they’ve done their homework.  One perfect example:  last week one of the major network morning shows interviewed their “Financial Contributor” to discuss the mortgage market.  She said, among other things, that “ . . . you MUST have a credit score of 740, while the average American has a 600 credit score, or you will not get a mortgage.  And you MUST have a 20% downpayment. . .”  Hogwash! The most popular mortgage loans right now are FHA loans requiring 3.5% down with credit scores above 600!  Conventional loans may be more restrictive, but the message viewers were left with was that it is nearly hopeless to think you can get approved.

If you know someone in the Toledo real estate market with these misconceptions, please direct them to the “Financing” button above to speak with Ann, Emily or Greg.  They will explain the LOCAL mortgage market to you, and you may be surprised what an incredible time it is to be looking for financing.

Danberry March Leaders

Danberry is glad to congratulate our top agents this month! Keep up the great work!

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