Thursday, January 27, 2011

2010 Residential Real Estate Report: Residential Observations and Projections

Here is an except from the 2010 Annual Real Estate Report (the local residential observations and outlook).  If you want a complete report, contact one of our agents. They will happy to send one your way.

Tippecanoe County Observations and 2011 Outlook


1. Observations

a. Tippecanoe County experienced almost identical patterns, successes and challenges associated with the Federal homebuyers’ tax credit as the nation, as a whole. All told, it had the effect Congress desired: to offer a fast and simple jump-start to the housing segment of the national economy. Did it, in and of itself, establish momentum upon which we still prosper? Probably not, but that is okay. I believe our current optimism is based more on small, but sustainable, improvements in core components of our economy (jobs, consumer confidence, business investment, etc.).

b. Mortgage loan underwriting standards continue to become more stringent. Documentation is required at every level of the approval process. Personal financial or credit activities outside of the norm do not unilaterally prevent a loan from being approved, but they make the process lengthy and stressful.

c. Appraising property is a challenge for both the appraisers and the users of the final document. Lenders are establishing tighter definitions of what qualifies a property to be a comparable sale; distressed sales, when used as comparable sales, drag down value; and the final appraisal is often underwritten/reviewed by an individual without the knowledge or experience of the local or regional appraiser who performed the assignment. We are seeing longer completion times and more appraisals below the sale price. Like many trends, this will pass and appraising standards will become more balanced.

d. There are bright lights on the local economic horizon. Many of our local employers are experiencing increased sales, creating demand for higher levels of production. They include, but are not limited to Wabash National, Caterpillar and SIA.

e. Both new hospitals are open, operating successfully, and receiving strong community and regional accolades.

f. We live in a state that leads the nation in strong fiscal control. The state will face large challenges as its legislators seek ways to create a balanced two-year budget, but we begin from a position of financial strength and respect. There are many states that would be happy to trade their financial positions with Indiana’s.


2. Projections

a. Economic progress will become more sustained and less sporadic.

b. Net job growth will equal the number of new workers entering the market. Unemployment will not decline significantly. However, the factors leading to job growth will continue to improve: GDP, the length of the average workweek and consumer confidence.

c. The state will find a way to balance our budget, but it will require cuts in dollars allocated to education and establishing new forms of tax revenue (i.e. sales tax on selected services, more user fees)

d. Existing home sales will increase by 2-4% with most of the growth coming in the $150,000 to $300,000 price range.

e. New housing starts will increase at the same pace, almost exclusively in existing developments

f. Home values will not increase in 2011, but on the other hand, they will not go down.

g. Buyer activity at the top end of the residential market will continue to be subdued in 2011. Confidence in this segment of the market will be the last to come back.

h. 2011 will be a year of moderate and mostly consistent improvement. The economy will need three to four years of gradual improvement to reach a new and sustainable healthy plateau.

Wednesday, January 26, 2011

2010 Real Estate Report

Our company released its 2010 Annual Real Estate Report.  If you would like a copy, send me an email and I'll promptly send you either an electronic or hard copy, whichever you prefer.

Charlie Shook
cshook@shook.com
 

Wednesday, January 19, 2011

Company History

The co-founder of our company, Robert Shook, was a traveling salesperson in the early 1900's.  He sold Hoosier cabinets to individuals and builders who were upgrading their kitchens.  A small sample of his product is still in our resource room.  His home town was Dwight, Illinois, but his territory included parts of Indiana.  His son, Charles Shook, attended the University of Illinois and graduated in 1915 (his sheepskin diploma hangs in our office). 

With the encouragement of his wife and son, Robert decided to get off the road and plant roots in a new location.  His favorite destination while selling cabinets was a college community in Indiana named Greater Lafayette.  He was particularly impressed with its bustling downtown area and the reputation of the University.  So after Charles's graduation, the three Shooks moved to Greater Lafayette and opened a two personal commercial and residential real estate company in the Lafayette Loan and Trust Building.

Since those days, The Shook Agency, now known as Coldwell Banker Shook, has played a vital role in shaping our community.  96 years later, Shook continues to be the leading real estate brokerage company in Greater Lafayette and is proud to be a home for outstanding real estate agents who are leaders in their  profession.

For more information about our history, check out our website at http://www.shook.com/.

Friday, January 7, 2011

An Op-ed piece in the New York Times

I can't resist reproducing an Guest Editorial Alex Perriello, president of the company that owns Coldwell Banker (and a great real estate guy) placed in Wednesday's edition of the New York Times.  He offers a pretty nifty idea for the 25% of American homeowners who's homes are worth less than the mortgage balance.

OP-ED PAGE – NEW YORK TIMES


“Home Team”

By ALEX PERRIELLO

Published: January 5, 2011

Three years after the mortgage crisis began, there are still 11 million to 15 million homeowners who owe more than their home is worth, meaning that about 25 percent of all mortgage holders are underwater. As a result, foreclosures continue to mount; many homeowners can’t make their payments and are tempted to simply walk away from their debt. Meanwhile, the lenders and investors who own the loans are unwilling to work out a deal if, as is usually the case, it means losing money.

Fortunately, there is a solution. Rather than be at odds, homeowners and investors should partner in long-term equity-sharing arrangements.

Here’s how it would work. Let’s say a homeowner purchased a house in 2004 for $300,000 with no money down, and the property is now worth $150,000 — a 50 percent drop in value.

In an equity-sharing arrangement, the lender would write a new loan for $150,000, retire the original $300,000 loan and, to make up for that loss, take a 50 percent deeded ownership interest in the property. The homeowner would also agree to split 50 percent of the net proceeds of any future sale of the property with the lender. The new arrangement would also include a buyout provision, so that if the homeowner ever wanted to take over the lender’s share, he would simply pay the lender a predetermined amount of cash.

Such a plan would be relatively easy to put in place, assuming the lender held the loan in its own portfolio. In most cases, however, lenders immediately sold their loans to investors and merely performed loan-servicing duties like collecting monthly payments and sending statements.

In those instances, the lender would have already made its money when the loan was originated, the proceeds from the new loan and the 50 percent deeded interest in the property would go to the investor, not the lender. The investor would also benefit from any future sale or when the homeowner exercised the buyout provision.

Equity-sharing would be a boon for everyone involved. Homeowners could stay in their houses and preserve their credit (assuming they stay current on the new loan). The neighborhood would avoid a foreclosure, which can depress property values. And the lender or investor could participate in the upside potential when the house eventually sells. Best of all, it wouldn’t cost taxpayers a dime.

A major reason the mortgage mess has gone on so long is that homeowners, lenders and investors assume their interests are at odds. An equity-sharing arrangement would bring all three onto the same side — and help solve America’s foreclosure crisis.

Alex Perriello is the president and chief executive of a real estate franchise organization.