81% of America thinks their house will not lose value in the next 6 months!!!!!

Homeowners still don't get it. 81% of America thinks their house will not lose value in the next 6 months!!!!!

A new report from Zillow.com finds that 60 percent of homeowners surveyed believe their home lost value in the past twelve months. In reality, 83 percent of all homes lost value. Owners in the South were the most deluded and those in the West, understandably, were the least. And to make matters worse, 81 percent of all homeowners surveyed actually believe their home value will not fall over the next six months; this as foreclosure numbers rise and all of the action in the housing market continues on the lowest of the low end. I have not found one expert (and I know I will as soon as I write this) who claims that home prices have hit bottom. Sales, perhaps, but not prices.

http://www.cnbc.com/id/32461957


Rob Alley, Realtor at Keller Williams Charlottesville
  • August 20 2009 - Charlottesville
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Answers (141)

Oh - I get it. You are under the impression I'm not a member of the NAR and am somehow clueless about the organization. Ok, well if it makes you feel better I am a member of the NAR. I am well aware of course offerings - I simply prefer harder classes that stretch my brain more and make put me on the path to have legal competence to advise my clients. Unfortunately, I see not distinction between quality of agents in those in the NAR and those who are not. It simply means you paid dues. There are many trainings, designations and suggestions offered by the NAR, as well as by a myriad of other sources unrelated to the NAR. The ethics requirements are near identical for a state license as for a NAR member everywhere I have checked. There are lots of places where one can get a certificate or designation. I have found they do not matter at all to clients. In my experience, clients care what you know and how you can help them, not how many letters you want to put after your name. Who cares if an agent is green certified? Personally, it seems like being able to describe how solar panels work, approximate costs, how to install them, benefits versus detriments and how one might combine that with a living roof to maximize energy efficiency in a row home....well that would mean more to me than a designation. I prefer to spend my time and energy on an education that allows me to be flexible in my profession.

So do you propose higher education for all licensed agents? Do you believe that one can only be professional if they join the NAR?
  • August 25 2009
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Designations are not just letters after a name, they are in-depth training that agents receive.

A few replies below you wrote that agents do NOT get enough training, now you write that designations do not matter at all.....

Could you make up your mind? It's one or the other, cannot be both.
  • August 25 2009
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Hi All,
This economy is a mess.  Its not one or two reasons its several. 
And no, just because you bought a home before the "boom" your not ok.
Its not just the lenders fault although they did their portion.

Lets really think about it.  When a buyer uses an agent to buy a home they put a lot of trust in that agent.  However when the agent is thinking more about their commission than their client shame on them!!  Agents need to know more about financing and be more involved in the process.  I was shocked to find out that one of the other agents in my office said several of the people she sold homes to were in foreclosure!! 

Loan officers charging hi yield spread premiums when the home owner or agent doesnt even know what that is...  Get involved know what your selling know what your client can afford.   I do loan modiifications and I am appalled when I look at their settlement statement and homeowners think they paid no points or fees to look and see that in fact they did but they paid 3 points is crazy.

No this is not spam, its letting people know whats up.  Loan Modifications are happeing between 60 - 70 % of my clients get modified.  If they want help on doing it them selves Im happy to give that info.  If you are looking for someone to do a modification make sure its an attorney if you are paing an advanced fee or an aged with an advanced fee agreement.  I have come across agents doing loan modifications just to get the short sale.  That to me is fraud.  When no effort is put forth to even modify the home.


As far as the problem Ive seen most of all is people using their home as an atm.  Taking equity out as soon as its their.  So we cant put all of the blame on the lenders.  Some go to loan officers who did fraudulent loans, its all across the board.  Now the lenders are trying to stop the bleading by doing loan modifications but yet again people will try to get more than what they should.

When I blog, I do it for information purposes.

JoAnna Jensen
Pleasanton, CA
  • August 26 2009
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A few replies below you wrote that agents do NOT get enough training, now you write that designations do not matter at all.....

Could you make up your mind? It's one or the other, cannot be both.


Of course it could.  Ask someone with reading comprehension skills to explain what she's been saying about how the "designations" are like getting a degree from a diploma mill.
  • August 26 2009
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So why does NAR offer classes and oportunities to attach letters after your name? If these designations actually were required then their benefit could be argued. Instead they are by design intended to improve an agents marketability. Call me cynical, but I learned early on what NAR was all about. Not only did I have to join to have a chance (MLS access) but shortly afterwards the PAC solicitations began. The NAR stood tall yelling buy, buy, buy without regard to the obvious warnings and all the while collecting more and more dues from it's members. I dream of the day when the monopoly is really challenged and NAR's stranglehold on the industry with it's MLS control faces real competition. How refreshing for the public we claim to protect might it be if say Google, Microsoft or some other entity with very deep pockets would come along and offer an alternative. Education and designations are fine, but as has been said before, "You can't fix stupid.". For the record, there are more than just a few bad apples out there. This repeated satement never accounts for the rotten, dead or just plain disgusting.
  • August 26 2009
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As Pitt pointed out, my statements are not mutually exclusive or in opposition to each other.
Viv - I would really like to see what you have to offer by joining the conversation and engaging in meaningful discourse instead of trying continually to prove me wrong (which is unlikely to happen in this forum).
I think there is guilt on all sides, but honestly - I really fault the homeowners the most. Because nearly all of the problems in this mess could have been solved by people reading what they were signing and taking it to an attorney to explain if they didn't understand it. I do not believe the banks should be getting bailouts, because obviously they were aware of the risks or they had failed risk models. I think everyone should step up to the plate and take resposibility for their role in the nonsense.


So, leaving out of the discussion any obvious fraud and criminal issues....Homeowners: Why on earth did so many not even read the contracts signed? Like noted by JoAnna, why continue to use your house like an atm? And if you did use your house like an atm (which I will admit to personally having done in a bind), why do you think people should lower your principal or take a loss based on this? I do realize not all homeowners are in this position, but many asking for help are.
Agents: Why did so many think they had the legal competence to explain the contracts being signed? Why were you thinking of short-term interests (today's commissions - or rather yesterdays) instead of long term (dealing fairly and ethically within the scope of your license, not advising people to buy "as much house as they can", finding lenders who do "creative" lending etc, etc)?
Lenders: This group is sort of like smokers to me....ok so you started smoking 50 years ago and maybe you were hooked (financially, based on your business model) in this case before you realized how bad it is. There were signs and warnings that all sorts of people who were not industry proficient could see in these tactics, why the blinders? It was noticable to Things like the "liar/drug dealer" stated income/assets loans (which I have one of) were designed primarily for small business owners (which I am alongside having a real estate license) who have a hard time documenting income, and have good credit scores. (Not to be confused for the cook at a mexican joint making <40k year, with a sub-par credit score for a 400k+ offer that an agent was trying to push on one of my sellers.) There is a low-risk market for these loans, but the guidelines need to be strict - not based on gaining market share.


Most importantly - what will fix this and keep it from happening again? I don't see any way to fix this in a short horizon, but perhaps there are some lessons learned that can be applied to going forward? Laws have changed relating to who must be licensed in lending. Buyers will be buyers. As agents, do we need to have entrance requirements that involve hands-on experience/mentorship in contracts, basic real estate law, doing CMAs, other suggestions?
  • August 26 2009
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The correct answer is; people are self-centered & materialistic, & Realtors are people too!!!!
  • August 26 2009
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As agents, do we need to have entrance requirements that involve hands-on experience/mentorship in contracts, basic real estate law, doing CMAs, other suggestions?

Yes at he very least.
  • August 26 2009
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Vivian, I will be happy to recommend you to my friends and family as a Model Realtor for the National Association of Realtors, if they are looking in the western DC area. 

I believe that we can both agree to that.
  • August 26 2009
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>>>Taking equity out as soon as its there.<<<

JoAnna,

You are right on the money - this is exactly what many homeowners did. They took out as much equity as they could when the market was up because they thought that prices will climb up forever, and now they complain.
  • August 26 2009
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Thank you, hpvanc.
Your Family and Friends will receive the best service possible, as all my clients do.  My priorities are very simple: they are my clients' priorities.
  • August 26 2009
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When do you folks find time to work?....
Just a quick note from a lenders perspective regarding the "greed" mentioned and the blame cast towards lenders in general:


Back in 2004-05 when 30 year fixed were at 40 year lows I had a hell of a time selling 30 year fixed. Why? Because many of the buyers couldn't qualify for the house. And the agent would usually say "Brand X Mortgage Co can get them in"...and Brand X did.
I lost a tremendous amount of business from realtors because as a lender---you're only as good as your last deal.
The buyer wanted to buy, and the agent wanted to sell the house, so pressure was put on the mortgage guy to "get them in" and pressure was put on the appraiser to "make it work". And everybody knew you could "always refi back to a 1% start rate" or "always sell the house for double".

So now it's back to old school basics. Full Income, full asset verification. And with millions of homes in the foreclosure pipeline, and the Alt-A loans that are just NOW starting to reset, you can expect little appreciation for the next 3 - 5 years. (see: 1990 RTC bank failures and look at housing prices from '91 until '98).

With that said, we can all thank our lucky stars that every year a new wave of first time buyers hit the market wanting to move outta mom's house. The tax credits have certainly helped, and hopefully they'll be extended. That initial wave will eventually stabilize the market (although it could take a decade or more to help revive areas like Vegas, Florida, or California)
  • August 26 2009
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>>>The buyer wanted to buy, and the agent wanted to sell the house, so pressure was put on the mortgage guy to "get them in" <<<

Doug,

What you said is all true - agents cannot make a living unless we have buyers who are approved for a loan and are ready to purchase. It's that simple.

We were discussing here 2003-2006 years, the housing boom and the bust that followed.
The problem with the lending industry during these years was that it was approving loans which borrowers were NOT able to afford: loans with 50%+ loan-to-income ratios, interest only loans where a borrower could barely afford the interest, much less the principal e.t.c.

Once buyers had those loans approved, it was impossible for REALTORS to convince them that they did NOT need to use the entire loan amount just because it was approved - agents, by law, cannot give financial advice, but even those agents who talked about the risks of taking on too much morgage, they were not listened to.

Many buyers were buying homes for the maximum amount their lender approved them for, even if it was the most irrational decision of their lifetime - and no agent was going to stop them.

So, yes, lenders were guilty of approving those irresponsible, no downpayment, 50%+ LTI loans. 

If it makes you feel better, blame it on Alan Greenspan for low interest rates that made it all possible.   
  • August 26 2009
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If it makes you feel better, blame it on Alan Greenspan for low interest rates that made it all possible.

So the crack dealer blames the chemist for all of society's ills?

(I blame Greenspan, too, but I do so without any blood on my hands.)
  • August 26 2009
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Once buyers had those loans approved, it was impossible for REALTORS to convince them that they did NOT need to use the entire loan amount just because it was approved - agents, by law, cannot give financial advice, but even those agents who talked about the risks of taking on too much morgage, they were not listened to.

This is crazy! Do you really think agents were trying to convince them not to use the full amount? I know first hand the opposite. Either your ignorant or a complete liar. By the way, Viv's picture scares the crap out of me.
  • August 27 2009
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I personally witnessed many agents telling people "buy as much house as you can", "it's a sound investment", "prices only go up"....ugh! I walked away from several deals that I knew were bad juju and let someone else have the commission on their head. But I am also overboard with my ethics. I don't think that I could have slept at night if I had sold houses knowing at the time the deals were inked that they were going to go into foreclosure. To date, I don't believe any sale I was a party to ever has gone to foreclosure.


It was a little like going to a high school party and watching people do beer bongs. You have the agents, the lenders, tv shows, and everyone in the room yelling...and the poor soul doing the beer bong that has every right and responsibility to not do it, but does anyway. You can't make someone sign a contract (or chug a bong) - they must choose, and ultimately bear the consequences.


There have been lots of good deals in the past few years, and there still are now, but it dependson your life, priorities, financial position, market and the individual property. If I thought there was nothing else good in real estate, I would get out. I must say, I am happy to be in Philly right now instead of Seattle. It is a lot easier to make a sale and feel good about it when you know the buyer has gotten something for a monthly payment less than market rent on a like property. I am surprised by the amount of agents that make blanket statements about appreciation - when in some areas prices are fluctuating quazi-hourly.
  • August 27 2009
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Damon,

Lawyers have bad reputation....are all lawyers crooks?
Teachers are blamed for inner city schools....are teachers the only ones to blame?

What is etraordinary about the real estate industry is that we are a "Brady bunch." Literally.  Because real estate is based on TRUST - especially in a multicultural society. 
Buyers and Sellers choose their agents based on trust - not necessarily on experience, or long years of service, or designations, but on trust. 

Forgive me for saying the obvious, but if your agent did not provide you with the finest service, you are pointing at YOURSELF because YOU are the person who chose your agent.....

Wait. There is more. If you truly dislike real estate agents so much, all you have to do is take 60 hours of training and pass the exam, and you can sell yourself! Not only for yourself, but also for your Family and Friends!
All you have to do is to choose a broker to hang your license - it's a law, must be affiliated with a broker.

There are benefits to an easy entry and no obstacles to obtaining a license - so you can represent yourself if you choose to. It's a perfect system!

Buyers and Sellers choose their own agent that they know and trust!

  • August 27 2009
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Vivianne,
(One of the) points I was trying to make was: as a lender that focused on traditional A-paper products (vs sub-prime), I was losing business because I would tell an agent their buyer could not qualify (at record low 30 year fixed rates)...and the agent would simply call Countrywide or WaMu and Presto!---pre-approval for 10 times the annual income. Of course when the next buyer came in, I was considered "too conservative" or it was assumed we  "coudn't get the deal done".
For the few (very few) times an agent would express concern over whether a buyer could really afford the house, there were 10 agents asking if they "could go up another $100k" without any regards for their ability to repay. So I do place a fair share of blame on RE agents, as well as lenders that sold the junk and the buyers who were duped into buying them.
Option ARM's and/or No Docs permitted this bubble to inflate. But any time I questioned the rationale for doing these loans buyers and agents alike would all glaze over with the same kool-aide look...and claim "we can always refi back to 1%!!"
  • August 27 2009
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Doug,

Educated buyer is probably the best defense. I'm not sure how exactly it should be accomplished. Higher penalties for real estate agents, including loss of license, is probably another option. Real estate agents  are not supposed to give legal or financial advice, unless they have a license. 

Another defense is a strict Loan-to-Income ratio. If those ratios were observed, there would be no problem with risky loans....

Of course, what is risky for one person may be perfect for someone else. How do you regulate that?Take, for example, Hybrid Option ARM ( the one that allowed negative amortization). I cannot imagine a  homebuyer, in the right mind, taking a hybrid Option ARM with negative amortization, and yet that loan product was perfect for some buyers. Or else, why would lenders make it available, in the first place?I am certain that somewhere there is a non-investor, primary residence homebuyer who was offered and signed Option ARM with negative amortization, because they thought the boom will go on, they will refinance or sell before the boom ends, and the home prices will only go up in value.One could argue that abundance of loan products, like that one, is exactly what got us into trouble in the first place, because it allowed investors and gamblers to purchase homes with easy credit and thus artificially inflate home prices by increasing demand and competition.  That scheme could not possibly last forever.Loan products are NOT at fault – personally, I think it is GOOD that there is an abundance of loan products, literally for every situation and all circumstances, as long as those who take those loans PAY with their own funds for the RISK involved, NOT WITH TAXPAYER MONEY.
  • August 28 2009
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Doug,Part II of the answer (only 2,000 characters allowed)
 Imagine I have signed a Buyer-Broker agreement with two clients. One client is convinced that Option ARM with negative amortization is exactly what he was looking for, it works perfectly for his situation – who are real estate agents to decide what is best for that buyer? This is LENDER's responsibility.

Now another scenario, imagine I have signed a Buyer-Broker agreement with another buyer who also takes Option ARM with negative amortization – and in heart of hearts I just know this is NOT good, a miracle would have to happen for it to work. Being an ethical person who likes a good night sleep, I try to find a way out of the Buyer-Broker agreement. My client senses that, and complains to my BROKER. Some brokers are better than others, but guess whose side MOST brokers will take? Rarely the agent's – and I say that from personal experience.

Never mind that real estate agents are Independent Contractors who pay their own taxes and most/all business expenses, have NO paid vacation, NO 401K, and NO health benefits – many brokers treat real estate agents like employees. This is NOT to say that brokers do not have many business expenses – being a real estate broker is more expensive that most people realize it.

Taking away real estate license from agents (and brokers) who commit fraud, but also protecting agents who DO want to do the RIGHT thing and protecting their Independent Contractor status are viable options.

Homebuying is for adults. Responsible adults.
  • August 28 2009
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ZILLOW needs to work on their HTML.....

You work on the reply, leave spaces between the paragraphs so it is easy to read, then click the Submit button and all the spaces are GONE...EDIT button sometimes helps, but not always.

Is there a way to prevent it from happening?

  • August 28 2009
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Option arms were intended for the self employed/contractors who have fluctuating income and needed flexible payment options. I had one for a while - most months I paid off the "to pay off in 15 years" amount, some months I had to pay the minimum due (which is a neg am option). The problem was when they allowed them for people that were not in this situation...and those people not in a flexible income situation (rather, they were in a "low-income" situation) were silly enough to sign the paperwork without reading &/or understanding it.
  • August 28 2009
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Negative amortization can occur when an ARM loan has a monthly payment CAP which could result in monthly payments NOT high enough to cover the interest due ( much less the principal).

In a conventional mortgage, say, 15yr or 30 yr  fixed,  monthly payments are high enough to pay the interest and reduce the principal on the mortgage.

However, on option ARMs with negative amortization, monthly payments do not cover all the interest costs - lenders ADD the unpaid interest to the principal balance. 

Thus, it means that even after many payments, the borrower could owe MORE than at the beginning of the loan.
  • August 29 2009
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I think everyone still keeping up on this thread knows what a neg am loan is.
  • August 29 2009
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In that case, there should be no misunderstanding as to why the housing crisis is as severe as it is.

  • August 29 2009
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>>>The problem was when they allowed them for people that were not in this situation...and those people not in a flexible income situation (rather, they were in a "low-income" situation) were silly enough to sign the paperwork without reading &/or understanding it.<<<

This is NOT necessarily true.

ARMs with negative amortization were often taken by investors who purchased for "flipping" and by primary home borrowers in ALL income levels - home buyers who were simply purchasing more than their income could support. 
It does not apply only to low-income borrowers - there were buyers who purchased mega-mansions, when they could comfortably afford a much smaller house. 

Maybe they thought they'll win a lottery.... or the sky will open up and pay off the mortgage....
  • August 29 2009
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Just wait until the 8000 tax credit runs out, shazam, another 8k off the value of your home.  Maybe 81% of America is on drugs, or believes everything they see on TV.
  • August 30 2009
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Profile picture for Mr Caveat
i'll chime in again

Once buyers had those loans approved, it was impossible for REALTORS to convince them that they did NOT need to use the entire loan amount just because it was approved - agents, by law, cannot give financial advice, but even those agents who talked about the risks of taking on too much mortgage, they were not listened to.

I think everyone still keeping up on this thread knows what a neg am loan is.

In that case, there should be no misunderstanding as to why the housing crisis is as severe as it is.


okay, so the entire real estate industry is built on trust, like the brady bunch, except when it comes to info you don't want to hear? Realtors are barred from giving financial advice, barred from steering people into homes that wont go into bk six months later when the teaser rate jumps from 1% to 1.25%? so i am very very curious. what am i trusting you to do? do you honestly believe that your buyers don't expect you to look out for them? that as a client i shouldn't expect an agent to show me houses that i could reasonably afford? is that your position?

i'll tell you what, the next time you get a buyer who "wont listen" you say to them "if you buy this house you will not have it three years before you lose it in foreclosure" i can be pretty sure that your client would trust that matter of fact statement at least as much as they did when you said "in three years you can do a cash out refi and use that to pay for the difference." "this property will be worth double what you paid for it in 5 years, then you can take that and get another better house"

  • August 30 2009
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Profile picture for Mr Caveat
Maybe 81% of America is on drugs, or believes everything they see on TV.

81% of America probably does believe everything they see on TV... when has TV ever let us down before?

doh
  • August 30 2009
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In my head flippers are the same as low income. If your income depends on your ability to sell a house, that income is not realized until sold and you have no income (although you may have income from other sources). Plus they watched too much cable. My dad (literally) wrote the book on flipping - before anyone used that word for it. In those days you only did a good job of it if you paid cash for the property....then you weren't totally screwed if it sold in more months than you planned.

The intent of the stated/stated pick-a-pay neg am possible loans was for people with difficult to document and fluctuating incomes, not those with low or no income. When they were used outside of this realm they became problematic.
There are lots of problematic loans though and the neg am is a very small chunk of what is wrong. I'm guessing people who took out mega-home equity loans to take vacations and buy cars (spending imaginary money) are much more at fault than flippers with neg ams.
  • August 30 2009
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