INVESTMENT GROUPS OWN SINGLE UNIT FORECLOSED DWELLINGS- In years past, the single family (oops!– unit) housing market belonged nearly solely to the American families satisfying their All- American dream. However, between 2004 and 2010 that scene has changed dramatically. The involvement of large-scale institutional investors has dramatically changed that landscape. A recent study conducted by poll- ster ORC International for Premier Property Management Group, an investor oriented found that roughly 52 percent of all rental units in the country are now single unit dwellings; and, and are now called home by 27 percent of all renters.

Now, this is good and bad. It is removing these properties from the vacant list and from shadow inventory lists. So the properties are serving the purpose for which they were intended. However, this also has a negative side. There are now fewer single unit dwellings for sale which is driving up the prices to a point that new home buyers can’t qualify for the loans needed to buy them.

60% of single unit tenants say they are preparing to buy when they clear up the financial problem they had encountered. Only 44% of apartment and multi-unit tenants claim to plan to eventually buy. It’s a safe assumption that housing prices will be dictated by the investment firms and equity firms buying these properties as they have for the past couple of years. Many of the properties bought are within very hard hit neighborhoods, so the investors owning these properties will set the market without competition. One can only hope it doesn’t create the next crash.

NEW HOME SALES- US new home sales jumped in January from the previous month to the highest level since July 2008, a sign that the housing recovery is accelerating. The Commerce Department reported new home sales rose nearly 16% in January to a seasonally adjusted annual rate of 437,000. This was the largest percentage increase in almost 20 years. December’s sales were revised higher also from 369,000 to 378,000. One can credit this to a continued upswing in jobs, although questionable as to permanency of the job posi- tions. It appears that job creation is driven now by construction work. However, projects end and the layoffs begin. It seems the only real increase in jobs which should be considered are those that are per long term con- tracts. In addition near-record-low mortgage rates are spurring the home buying public. Somewhat an anom- aly, re-sales are at a 13 year low. This creates demand for an anxious buying market and as demand rises so will housing values. And, we hope that will be market value and not hyper price which is that which created the past several year housing bust.

NAR IS POSITIVE ABOUT HOME SALES / VALUES- NAR now is bullish on housing recognizing that sale price increases along with dramatically reduced foreclosure and shadow inventories are creating a seller’s market throughout the United States with the exception of the western states for local market reasons. The NAR attitude is that lesser available properties for sale and the more affordable mortgage rates give the buying market the impetus to enter the housing fray. The combination will promote home sales and increased sale prices. Fannie Mae economists are now also on the bandwagon of recovery and a definitive housing market increase of sales and values for 2013. Finally, they learned how to read.

SEMINAR– HOW TO DO AN APPRAISAL AND SLEEP AT NIGHT- We are sorry for those of you who were unable to gain admittance to the March 5, 2013 seminar. We were compelled to turn away many who tried to register up to 3 days prior. The response to the presentation was wonderful. Everyone became revi- talized and more prepared to enhance their success in their professional careers. As promised, we have ar- ranged for a location in Edison because of the initial response we received from appraisers within Middlesex, Essex, Union and Somerset Counties. We now will take reservations. It is on a first come first serve basis. In order to provide the best learning opportunity for the attendees, we need to keep the group small. This seminar is not to be confused with any other. Much of the content is unique based on thousands of hours of appraising and over 20 years of review appraising and professional liability representation for insurance carriers in the defense of appraisers.

Update: In 1 day this seminar is already 1/3 sold out.
Seminar Date:  Saturday, April 20, 2013
Registration:   7:30 A. M. – 8:00 A.M.
Breakfast:   8:00 A. M. – 8:30 A.M
Location:  
Fairfield Inn Marriott
875 New Durham Road
Edison, NJ

Seminar Investment : $115.00
CE Credits : * 4 Approved by NJ Real Estate Appraisal Board

Ask this question. When the state or some agency raises the use or entrance fee to something is that a tax in- crease? You bet it is. When the access to NYC is further encumbered by bridge, tunnel and ferry fees, isn’t that a tax? The worst of it is the money the commuter needs is from net income after all other taxes are paid. So, add the increases to the other taxes and one will realize that the general public, rich, middle and poor are all paying dramatic increases in tax. Remember when you didn’t pay for your luggage to accompany you on a flight to wherever? Now you pay extra for baggage, isn’t that a tax. For those who travel for business those increased costs need to be defrayed but how? Yes, by raising the cost for the goods and or services. I bet you all can come up with “costs that aren’t a tax”…really!!

I’d like to hear from some of you about the fiscal cliff. What is interesting is this cliff has existed since the U.S. economy has been in debt which seems like forever. Where was the concern when the last four years re- flected over 6 trillion of new debt. So, it wasn’t a concern for four years, but it is now. Let’s face it our debt is not solvable. We can’t earn enough or save enough to bring us to zero debt. OK, geniuses, now what???

WHAT IS COMING- This is not the time for us to preach about real estate hap- penings and before the storm there was a list of what we wanted to discuss. But this is not the time.

ANNOUNCEMENT- I recently had a 4 hour seminar, “How To Do An Appraisal and Sleep At Night” approved by the NJ Real Estate Appraisal Board. Watch for announcements as to where it will be given. I promise it is timely, very informa- tive and advanced for serious appraisers. It is not the same format or information which I will be providing for the NAIFA in April which I urge you also to attend. If you are interested, please contact me. We will keep you posted as to dates, places and times.

NEW HOME SALES UP… AGAIN!- November was another banner month for new home sales in the U. S. The rise was 4.4% from October to a seasonally adjusted rate of 377,000 according to the Commerce Depart- ment. That’s the steepest rise since April 2010 when the federal tax credit was credited with the boost in sales. For YTY the increase is 15.3 percent however the initial time period is considered a depressed one. Economist seek over 700,000 sales per annum as evidence of an improvement.

Credit for the positive housing movement is predicated on two major factors, one being job gains and the other record low mortgage rates. Here’s a surprise, sales in the Northeast rebounded in November based on the af- termath of Hurricane Sandy. The increase was 12.5 % after the October decline of 27.3% due to Sandy. So, all you naysayers, believer it when we say that this devastation will begin the real estate boom. So, stop the crying about how depressed housing prices will be and realize you will be made whole and more. Now, I’m referring to real estate value loss not the horrible personal loss so many have experienced.

According to Standard Poor’s / Case-Shiller national home price index, housing prices increased 4.3 percent in October compared with a year ago. That apparently represents the largest year over year increase in 2 and a half years. Prices rose in 18 of the 20 cities tracked for this study.

What does all this data indicate for 2013? It’s pure conjecture on anyone’s part. All the indicators are show- ing for a strong 2013 real estate recovery which we’ve been predicting for the past 18 months. What are the pitfalls for being overly optimistic? Congress and the administration and world economics. At this juncture, all of which are totally unpredictable. A substantial unknown in this writer’s opinion is the employment sector and the continuance of extended unemployment benefits. There will be serious consequences if millions are deprived of unemployment assistance. To what degree, I have no idea. It’s often thought that there is so little that can truly affect the U. S. economy because of its size. Maybe that’s true, but in each locale most hurt by a loss of income there will be a dramatic effect. Will the rest of the country hear about it, probably not. I can tell you that southern California is coming back very nicely, Florida is also experiencing a very strong and pro- longed return in real estate values. Vegas also is doing very well. So, the first to go down the tubes are the first to return which is the historical occurrence for many years. What about the northeast? It will also come back after the dust settles with the Sandy aftermath.

There was some good news for factory activity in the mid-Atlantic region. December saw a good bounce back from the previous month. New orders were substantial. Also, a survey of new home builders reflected confi- dence in early 2013 for increased demand. That measured the greatest confidence in the past 6 years. Now, that’s impressive.

SO, NOW THAT WE HAVE SOME GOOD NEWS, LET’S ENJOY THE LAST OF THE HOLIDAY SEASON OF 2012 AND WELCOME 2013 IN WITH OUR CONFIDENCE.

HAVE A SAFE, HAPPY AND PROSPEROUS NEW YEAR.

An example of the investment market being totally unconcerned for the benefit of the real estate market and the general public which comprises it is a tax appellant who was chastising the township in which his condo is located for not paying attention to the run down condition of his property which he has owned for 20 + / – years. He repeatedly advised the tax board of the cost to replace the various mechanicals and short lived items ( which he had no idea of which they are). He had the photos to prove his case. It was all very interesting as long as you knew nothing about real estate values. The short lived items are those which the public is respon- sible to maintain as owners of a property. The conclusion was interesting. In his last statement he finally dis- closed that he owned the property but never lived there. It is a rental for which he was receiving a good rent despite the “poor” condition of the property. Yes, the condition for which he is responsible. It just doesn’t compute that the township or town or city tax payers should compensate someone for the lack of care for which the owner is guilty when a property is a rental. There is a case for considering the condition for a prop- erty that is owner occupied. This is one of several injustices perpetrated by unscrupulous property owners.

WEALTH IS BUILT AND THEN MAINTAINED- With all the election gibber- ish we are subjected particularly when it comes to “who should be taxed”, here are some interesting statistics. Forbes recently printed its 2012 list of the wealthi- est people in the world. The entry amount is $1.1 billion. There are 400 people who made the list. The combined net worth is $1.7 trillion up from $1.5 trillion in 2011. Realize that the top 400 wealthiest people can’t scrounge enough money to pay about 1/10th of the U. S. debt. Wow!!!

Here is a very interesting fact particularly for those politicians who think being wealthy is a curse and demands they pay a much larger share of their holdings than all others. Over 70% of the top 400 earned their wealth from “SCRATCH”.

TIGHT INVENTORIES IMPACTING HOME PRICES- The National Association of REALTORS, has been stating that there is strong evidence that lesser inventories in some locations has had a positive impact on median home prices. This stands to reason. The lesser the inventory the demand becomes more prevalent, thus, house sale prices rise because as said earlier, competition is now in play. This past week, the California Association of REALTORS, has confirmed that this is now the case in that state. Its statistics show that home sales have declined but the positive affect is the prevalence of higher home sale prices. So, it’s not a phenom- ena or a statistical anomaly; it is the application of “competition” . When there is demand for a product and there is a paucity of supply, the value of that commodity will rise. The key to this occurrence is balance. As a wise man once told me, “everything in moderation”. Yup, Pop, you were right again.

INTERESTING STATISTICS- The following reflect some interesting facts but they need to be placed in per- spective. The increase in home loan modifications and short sales is on a steady rise, but that’s not really what you are seeing. Based on the excessive time needed to complete a modification and / or short sale, the rise in the recent couple of years is based on the applications of up to 2 – 3 years prior. So, the system shouldn’t be patting itself on the back for it’s exemplary work. It was very flawed and apparently there is still some serious doubts as to it’s responsiveness. But it does reflect something positive. Families have been able to preserve a good portion of their credit for future real estate and other investments or needs. And, new families have been able to find affordable housing and each sale brings with it an increase in capital improvement purchases and labor needs. So, we are on the right track and we must hope it continues.

Fed Reserve Chairman, Ben Bernanke stated that when home prices rise, Americans feel wealthier. As we un- derstand it, this is what promote spending for a multitude of items which spurs inventory growth and jobs. Bernanke was supported by Sal Guatieri, a senior economist at BMO Capital Markets when saying, “We have a real housing recovery taking root and that has positive implications.”. However, there is a consensus that the labor market must also improve to add impetus to the housing recovery. They do work hand in hand. This is the rationale that the purchase of housing will create need for a variety of then related items, which can add impetus to the job market.

A study by IBM Smarter Commerce supports the previous statement we made. There is a marked increase in home improvement sales thus, Bernanke’s position of American’s feeling wealthier when new home sales are up may be absolutely on the money.

GSE- The Government Sponsored Enterprise (GSE), being Fannie Mae and Freddie Mac have completed about 129,000 foreclosure prevention actions in the second quarter of 2012. This brings the total since 2008 to 2.4 million, Please note it doesn’t say they did it successfully, they just brought it to a conclusion. You gotta love political rhetoric. Supposedly the two agencies completed 50,373 loan modifications, 36,496 home for- feiture actions, most being short sales and 36,343 repayment plans. Unfortunately, those I know trying to get modifications and short sales complete have been unsuccessful and / or are still waiting for nearly 3 years.

HOMEOWNER’S INSURANCE- A book can be written about this and probably has. It is seriously suggested that each of us do some research to see what is really covered. If you have a dog on the “no-no list”, a dog bite likely won’t be covered. If building codes require you update your house if repairing damage, it may not be covered by your insurance. Make a list of concerns and please do you homework. You will find unsettling results that you need to change or add with a rider. Al- though many situations may be covered you need to keep reading. If your pipes freeze and burst during the winter in your vacation home, you may not be covered if you did not take provable steps to have avoided the problem. And if your house is totally destroyed by fire you will find the coverage is for the depreciated cost of the improvement excluding the foundation. Ouchhhh!

SPACE SAVING TO THE UMPTEEN DEGREE- This bathroom is in a 375 square foot apartment in Sweden. This is ingenious and does provide all necessities in a very limited space. Hey, you gotta do what you gotta do!

AND THE RACE IS ON!!- It’s on to the final month of tax appeals, at least for county ones. The state ap- peals go on and on and on, etc! Speaking today to one of the very astute and highly respected participants in the process, I was told that everyone in the process from tax assessor’s staff to the attorneys handling appeals are totally drained. Tempers are being lost and the process is bastardized by inexperienced appraisers and at- torneys; and yes, less we forget by those attorneys who are trying to pay for their kids college educations in just this one season. Sad, isn’t it, but so very true. Hey, this doesn’t mean that all those involved are fall into those categories. Some of the appraisers and attorneys are fantastic. They are most importantly conscientious and are professionally prepared and driven. These are the ones whose clients get fair treatment with the least out of pocket costs. One attorney with whom I negotiated appeals in the last couple of weeks said, that hiring appraisers with each appeal is over. The explanation was that most of the time the reports were not defensible. This attorney is one of the most informed and honest ones with whom I’ve had the pleasure of negotiating. This attorney goes to each of the properties and does the homework to be very well informed and prepared. It’s great working with this person. I only wish that this attorney could be cloned. The whole system and all parties would benefit enormously.

The attorney for the municipality with which I work is absolutely fantastic. The professionalism is unequaled and the command the attorney has of real estate is astounding. This person is better at real estate than most appraisers I know or have encountered in the years. So, I guess it may be safe to say, that the system may not be at fault….the participants at various levels are the real problem. The public is also a problem but it’s be- cause they are not well informed; and, how can we expect them to be when there are inept participants giving them advise. One of the attorneys for whom I have a lot of respect said, “How can we tell a client that the pro- fessional they hired is inept. After all , the credentials are in place.” He’s right.

Well we now have some more evidence that there is movement to lend strong credence to our theory here, that the real estate market is making its way back. This past week Corelogic reported that 700,000 homes have emerged from negative equity positions between the 4th quarter of 2011 and the beginning of the 2nd quarter of 2012. This movement represented a 1.5% reduction of houses underwater; or from 25.2% underwater to 23.7%. In the one quarter there are underwater houses dropped below 12 million. Ladies and gentlemen this is significant and very positive.

To give further impetus to the recovery, the following is offered. There are an additional 2.3 million borrowers who have less than 5 percent equity in their properties which are considered “near—negative equity mortgages. When added to the negative equity position before the upward tick the overall equated to 28.5 percent of all mortgaged properties. However, the near negative-equity property owners only tally to 1.9 million at the end of the 1st quarter which is a reduction of 400,000 properties. As property values continue the rise, that number will decrease as the equity factor rises above the 5 percent mark.
What do these percentages really mean? It means that this turn around decreased the dollar value of negativeequity properties to the tune of $51 billion from $742 billion to $691 billion. It is also found that those in the worst case scenarios have 2nd mortgages and it was indicated that there underwater position was $35,000 greater in negative-equity position or $82,000 to those without 2nd mortgages at $47,000. This equates to a comparison of 39 percent (those w/ 2nd mortgages vs 19% for those without 2nd mortgages.

WELLS FARGO BAN – This major national lender announced this week that a settlement was reached with the U. S. DOJ as to the lawsuit filed in 2009 and then a portion in 2010. The settlement is for $125 million to borrowers who are thought to have been wronged during their mortgage process. There is also private agreements between Wells Fargo and some cities, as Baltimore, in which the bank has agreed to provide funding for rehabilitation of some areas of the city. The stated amount of $50 million will be shared with other major areas. Even North New Jersey, albeit I doubt any of those monies will get to the upscale areas. They are for likely Paterson and other similarly troubled locales. However, $50 million among 8 areas, as Trenton, Baltimore, areas of San Francisco, etc. will get very little assistance. Another great deal negotiated by the DOJ. Wells Fargo has also discontinued as of July 13th all Wholesale Mortgage Funding. They no longer accept any mortgages from independent mortgage brokers as they are the ones Wells Fargo created their problem leading to the lawsuit from the DOJ. Of course Wells couldn’t be guilty, just ask them. I guess their underwriting guidelines were perfect and their review process for appraisals was beyond reproach. Hey, believe that and I’ve got waterfront property in the Everglades that you’ll just love for your kids to take a dip any time they want. Don’t worry, the gators and pythons are all kid friendly. As an aside, did you know that it is estimated that Florida Everglades has over 100,000 Burmese pythons which are humongous. Now there is a new python on the block the African python which is very aggressive to including humans. They are somewhat smaller than the Burmese and they like each other, enough to mate and create what is expected to be the super snake which is a man eater. The newcomer is not fully in the Everglades yet. They are in Miami-Dade, in backyards and near the city. Eating cats and dogs and whatever else gets in their way. Just as the market is picking up.

About dangerous things, let’s get back to Wells Fargo. The usual rhetoric is being spewed by its executives as to how they are committed to serving the public and insuring they are given every opportunity to own a home and do it safely, blah, blah, blah. And for those who believe this worn out diatribe, they should be committed. To think that the are concerned about the people and not their bottom line is ludicrous. Try missing a payment with them and see just how much they care about you. Truthfully, no one has enough fingers to point at everyone who was responsible for the real estate meltdown. From the buyers and sellers to the banks, inept and crooked mortgage brokers, to the inept appraisers and greedy real estate brokers right to the attorneys who turned their heads and title companies which just ran with the crowd. Everyone, ladies and gentlemen.. They were all guilty.

Were people taken advantage? Yes! Were banks mislead by Realtors and appraisers? Yes! Did attorneys and title companies blinded by being inundated with closings to really pay attention to what was happening? Yes! The major lenders as a Wells Fargo, have the least excuse. They allegedly had in place multiple fail safe systems which they bragged about. Where was their underwriting and appraisal reviews. Where were their high paid economists? They were in place but obviously not prepared to read the market that was truly so obvious to a good number of professionals. So, now a multi billion dollar bank is going to pay out a pittance to their accumulated wealth to “make things right”. Let’s see, if they have to pay money out they can just raise fees or rates to the consumers that they are “oh, so worried!” Here’s that property in the Everglades again.

TIME FOR SOME HUMOR-
During a recent interview on CNBC, Warren Buffet said he could end the deficit in 4 minutes. “You just pass a law that says that any time there is a deficit of more than 3 %, all sitting members of Congress are ineligible for re-election.
The 26th amendment (granting the right to vote for 18 year olds) took only 3 months and 8 days to be ratified. Why? Simple? The people demanded it. That was in 1971—before computers, e-mail, cell phones, etc.
Of the 27 amendment to the Constitution, seven (7) took one (1) year or less to become the law of the land— all because of public pressure.”
He suggests a Congressional Reform Act of 2012—-
1. No tenure / No pension ( you collect a salary while in office and none when your out
2. Congress (past, present & future) participates in Social Security (all funds in the Congressional retirement fund are to Social Security immediately)
3. Congress can purchase their own retirement plan, just as all Americans do.
4. Congress loses its current health care system and participates the same as the public.
And there is more. Clearly, this is not humor but maybe our government thinks it is.

Albert M. Cerone, IFAS, FELLOW, CTA

APPRAISAL REGULATIONS- This is a serious point of contention for me, as I deal with professional liability matters on a weekly basis. Congress had yet an- other hearing on appraisal regulations. The House Committee on Financial Oversight’s subcommittee on Insurance, Housing and Community Opportunity held the hearing. The two major participants were one of the directors of the GAO and the president of the Appraisal Institute.

The focus of the hearing was the Appraisal Management Companies (AMC’s) impacts on the appraisal industry and consumer safety. I’d like to cite all of what was stated but it is sophomoric and repeat rhetoric. In short the intent of the Dodd—Frank Act set forth the need to insure that appraisers are not coerced. Well, the lenders latched onto this quickly and some genius decided that AMC’s will act as the intermediary. That was bright! Yes… for the lenders not the appraisers or the public. The lenders re- moved themselves from the line of fire and responsibilities in dealing with the appraisers. More importantly it removed them from direct liability for whatever goes wrong using the appraisers as the “fall guys”. It placed the AMC’s in that spot but when all this was concocted there was little control the feds had over these new intermediary companies.

Somehow, everyone neglected to think about or simply chose to remain quiet that the AMC’s are a business; and ,businesses need to make profits. So, now we have a money grabbing enterprise that caused the increase of fees to the public and reduced fees to the appraisers. Let’s see! How many people want to do the same job this week as they did last week but for 30—40% less in fees? And, for relationships (lender, AMC & appraiser) that took less from the appraiser’s fees they increased the fees to the public which is now getting lower quality appraisals at a greater cost. Fannie, Freddie and FHA no longer re- quire the Cost Approach which is one of the approaches to value; and, the general appraisal industry is thrilled as it is one less time consuming effort. Of course that makes one rely upon the Sales Comparison Approach which Congress thinks is great and so do the yes people involved in the hearing. Unfortunately, the economic times of the past few years resulted in very few good Market Value sales on which appraisers can rely, so the SCA quite often results in a non-supportable value opinion. There are many more rentals today for obvious reasons but rarely is an Income Approach seen for a residential property. So, the American public is relying upon disgruntled appraisers cutting time and satisfying ridiculous requirements on providing them with a supportable and defensible appraisal predicated on an approach that far too often has non-comparable sales on which the final value opinion is based.

It is my understanding, but I don’t have proof that some of the lenders actually own some of the AMC’s which in my mind is a conflict of interest. It was better having the lenders deal directly with the appraisers. By the way, there are lenders out there that only used certain appraisers but not because they could coerce them but because they wanted the best. Those best are now doing appraisals for other reasons because they can’t tolerate the new arrangements.

One must be naïve to believe that there isn’t coercion yet. AMC’s need to have loans close in order for their clients, the lenders to continue to use them. So, with the lack of true comparable appraisers are watching the sale prices and try to stay very close but often somewhat less because they are afraid of their liability exposure. Appraisers are easily removed from an AMC’s accepted list if too many of their appraisals preclude the closing of a loan. We’re right back where we started.
There’s more but for another time. In the mean time, may all of you have a
Happy 4th of July.

AND ON THE LIGHTER SIDE- From Steven Wright, an erudite comic scientist and forwarded to me by a wonderful friend and educator….
1. I’d kill for a Nobel Peace Prize
2. Borrow money from pessimists—they don’t expect it back
3. 99% of lawyers give the rest a bad name
4. A clear conscience is usually the sign of a bad memory
5. The early bird may get the worm, but the second mouse gets the cheese
6. Ok, so what’s the speed of dark?
7. Depression is anger without enthusiasm
8. Experience is something you get until just after you need it
9. To steal ideas from one person is plagiarism; to steal from many is research
10. The problem with the gene pool is that there is no lifeguard