Archive for January, 2010

On the ethics of “strategic default”…

Strategic default: When homeowners make a “business decision” to walk away from their underwater mortgage (and home), not because they can’t afford it, but because it’s no longer in their financial interest to keep paying on it.

At least two recent media pieces have focused on that practice, and are worth a read/listen.

The first is from the NYT (January 23). An excerpt:

…millions of American homeowners are “underwater,” meaning that they owe more on their mortgages than their homes are worth. In Nevada, nearly two-thirds of homeowners are in this category. Yet most of them are dutifully continuing to pay their mortgages, despite substantial financial incentives for walking away from them.

A family that financed the entire purchase of a $600,000 home in 2006 could now find itself still owing most of that mortgage, even though the home is now worth only $300,000. The family could rent a similar home for much less than its monthly mortgage payment, saving thousands of dollars a year and hundreds of thousands over a decade.

Some homeowners may keep paying because they think it’s immoral to default….

But does this really come down to a question of morality?

A provocative paper by Brent White, a law professor at the University of Arizona, makes the case that borrowers are actually suffering from a “norm asymmetry.” In other words, they think they are obligated to repay their loans even if it is not in their financial interest to do so, while their lenders are free to do whatever maximizes profits. It’s as if borrowers are playing in a poker game in which they are the only ones who think bluffing is unethical.

The second is the January 29 edition of NPR’s Planet Money podcast. The attorney interviewed in that podcast asserts that defaulting is not against the law; that violating a contract is not illegal; that courts have never allowed punitive damages for breaking a contract.

And yet…I’m having trouble squaring the notion of “strategic default,” of breaking a contract simply because it’s no longer in one’s financial interest, with the fact that the person gave his word that he’d repay the loan.  Do his financial interests trump his word? Does the fact that it’s a business deal give him an out?

As one of my Mississippi REALTOR® friends suggested to me the other day, “Our whole civilization is built on agreements. If we stop keeping agreements, we stop being civilized.” And she added, “It’s bad to be without assets, but it’s worse to be without self respect.”

What do you think?

Washing your baby while you do the dishes may not be a good example of ways to be efficient, but here’s something that is:  Hook your cell or landline phone into a system that transcribes your voicemails into text.  You’ll get your voicemail as an email that you can read, with audio attached.  It’s kinda like magic.  You can still listen to your voicemail by dialing a number, but you won’t want to.  In fact, you’ll wonder how you lived without this new system for so long.

At the last RE Barcamp DC, I gave a session on how to do just this using several different solutions. I got some of the best thankful hugs after that session I’ve ever received.

There are a few providers that you can use to swap out your standard Verizon, AT&T, Sprint, etc. voicemail out for.  You almost certainly didn’t realize that you even could swap out your voicemail system, right?  I mean, isn’t voicemail just part of the cell phone?  Wrong – they’re 2 different systems.  When you miss a call, it’s routed from your phone to the voicemail system.   The carriers would love you not to realize you have the power to swap your VM system out for a 3rd party provider that does the job better, but you do, and you should take advantage of that.  And you can do this with many landline phones, too, not just cellphones.

Here are a few solutions for switching to a transcription-based VM system: Google Voice is free, but the transcription quality is poor.  It’s also still in a private beta, so you’ll need a well-connected friend to send you an invitation.  Another option is SpinVox.  However, the solution I like the best is PhoneTag, which is usually $29.95/month.

VAR has been able to work a deal out with PhoneTag for VAR members, for unlimited transcriptions at $25.49/month and you get a 1 month free trial.  You can sign up for the preferred VAR rate here.

I don’t have any relationship with PhoneTag; I’m paying just like everyone else (in fact I have 3 accounts for 3 user’s phones) but I’m sure what I’m about to say is going to sound like an ad, because it really is that amazing:

Voicemail Transcription Will Make You a Better Realtor and Save You One Week in Productivity Every Year.

And I’ll go further out on a limb and say that if you don’t do this, you have nobody to blame but yourself.  You can lead a horse to water…. well, you know the saying.  Something about an ostrich in the sand, too.

Most of the most successful, productive and moneymaking Realtors I know are already doing this.  In fact, they probably won’t be too happy that I’m publicizing this tip, because we all consider it a secret weapon that gives us an advantage over our colleagues in the rest of the industry.

Here’s why it’s so important that you do this, now:

1) Have you ever had to listen to a 2 minute message from a home inspector, listing agent, buyer’s agent, client, etc. with another 25 messages waiting for your attention, only to find out at the end of the VM that it should really be handled by someone else?  If you’ve been active in the business, I’m sure you have.  That doesn’t happen to me anymore.  In fact, I haven’t listened to a voicemail in over 2 years.  I read all my VMs as emails.  And since the audio is attached to the email, I can just forward the email to the party that has to deal with the issue and ask them to read / listen to the VM.  I can scan a 2 minute VM literally in seconds while you’re spending 2 minutes listening to it, frantically trying to jot down that phone number while you’re driving.

2) I can forward my clients the text of messages left for me that pertain to them.  There’s nothing that convinces clients like actually being able to read the actual words spoken by a home inspector, settlement agent, lender, etc.  I spend a lot less of my time relaying information and instead just pass it along from the source.

3) The people who left the messages are impressed when I forward them their own VM as an email.  I know this sounds kind of dumb, and this won’t last forever as it gets more popular, but for now people have a kind of sense of wonderment that you were able to read their VM.  And when you’re competing against other agents in multiple offer situations, you need all the props you can get.  Showing that you’re a technologically sophisticated agent goes a long way.

4) You can even specify specific VMs for specific people.  So if you’re doing a deal with a certain agent named Sally, for example, you can leave a greeting message just for Sally to hear when she calls!  Talk about impressing Sally – when she calls you she hears something like “Sally, thanks for calling, I really want to make sure we get this deal done, so please don’t hesitate to text me or call me until midnight tonight” type of thing.  As far as I know, Frank LLosa of FranklyRealty pioneered this approach.  Sadly, PhoneTag doesn’t offer customized greetings as far as I know, although some of the other providers do (maybe add them in the comments section).

To be perfectly frank, switching to voicemail transcription is something that NAR should be helping all its members do.  There’s just no reason to listen to VMs on your phone anymore.  You can always listen to the attached audio in the transcribed email if you want to get the intonation of the person who left the message.  So NAR, if you’re reading this, having NAR members read their voicemail would be a huge boon to our industry in many ways – we would be seen as more credible, it would cut down on miscommunications between parties, it would make us all more efficient, and it would impress clients.  And to to top it all off, it’s not an incredibly complicated infrastructure project that costs millions of dollars!  It’s just a simple switch that gives agents vast, immediate benefits.

And to you companies out there like SpinVox and PhoneTag – you should be marketing to the real estate industry hard, because we can all really benefit from your products.

Here are some example photos I pulled randomly from the web showing how the voicemail transcription works:

Above is an example of a PhoneTag account, with the VM’s waiting for you in the account.  You can also just read the VMs in your email; you don’t have to log into your web-based account (i rarely do).

Above is an example of a VM that came in as an email.  You can read the transcribed voicemail where it says “Their Message” and see the attached audio where it says “Listen To The Audio”

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This post was written by Daniel R. Odio, broker/owner of DROdio Real Estate, Inc, based in Washington, DC and licensed in VA, DC, MD & NV.  Daniel is on VAR’s Board of Directors and wants to hear from you about what VAR can be doing to make you more productive, efficient, and successful in your job.

Va Homeowners Alliance posts for January 31, 2010

  • Prince William Population to top 400,000 in 2010
    According to Prince William county’s demographer, fourth quarter 2009 statistics indicate that the county will surpass 400,000 residents this year. The county is the third most populous region in…

    Click headline to read the full story.

  • Opinion: Housing ‘Balance’ Will Soon Be Restored
    “Being president of the Virginia Peninsula Association of Realtors, a professional trade association representing property owners and real estate professionals throughout the region, gives me a…

    Click headline to read the full story.

  • Norfolk May Lose Aircaft Carrier and Jobs
    According to the Daily Press, Norfolk is likely to lose a major aircraft carrier – and thousands of jobs as a result. A recent Defense Department report indicates that the carrier will be moved to a…

    Click headline to read the full story.

Will Warmer Weather Bring a Warmer Market?

With the New Year and the Spring/Summer Real Estate market around the corner, everyone is looking to see if this is the year of the return to a more normal market.  We can be cautiously optimistic but a few recent items in the news could spell changes in the market come April and May:

  • Extended Tax Credit – many buyers are coming out of the woodwork for the New year hoping to buy a propert yand take advantage of the expanded tax credit that expires April 30th.  How many of these buyers may decide to take a step back once they can no longer get money from Uncle Sam?
  • Short Sale reform coming April 5th - the Home Affordable Foreclosure Alternatives Program (HAFA) is a move by the government to try and make short sales more efficient and give them a better public perception.  However, as Dean Ouellette and Sarah Stelmok are currently posting, this program in many instances could be not in the best interest of the homeowner and/or lender.
  • Changes in FHA Financing – as reported on VARBuzz FHA guidelines are changing later this year.  Since for many buyers FHA is their most cost effective mortgage option, will the higher initial MIP and reduced seller concession squeeze many buyers out of the market?

We have seen many changes in th housing market so what happens when and if the “training wheels” currently in place come off?

Va Homeowners Alliance posts for January 29, 2010

  • Charlottesville Mayor Seeks to Establish Affordable Housing Fund
    According to the Daily Progress, Charlottesville Mayor David Norris has sought twice before to establish a dedicated affordable housing fund for the City. With a new Council he sees an opportunity to…

    Click headline to read the full story.

  • Hampton Citizens Will Get to Vote on City Services
    Members of the public will get a chance to vote electronically on the city services that are most important to them as council members contemplate budget reductions that could be even higher than $25…

    Click headline to read the full story.

  • Virginia to Receive $75 Million for High Speed Rail
    Virginia is set to receive $75 million in funding for high speed rail, pursuant to the American Recovery and Reinvestment Act. President Obama announced yesterday that thirty states are scheduled to…

    Click headline to read the full story.

New home sales fall in December — unexpectedly?

Reports the Washington Post:

Sales of newly built U.S. single-family homes fell unexpectedly in December, data showed on Wednesday, the latest indication that the government-led housing recovery might be losing some steam.

The Commerce Department said sales fell 7.6 percent to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined.

If I may be so bold, the $8,000 first-time-buyers tax credit was originally scheduled to end in November, right? So it doesn’t seem like a big leap to assume that buyers may not have scheduled closings for December if they could get it done sooner. Ergo, a slump in sales after November.

Still, according to the Post, "Analysts polled by Reuters had expected new home sales to increase to a 370,000 unit annual pace from November’s previously reported 355,000 units."

Perhaps Reuters should consider asking some different analysts.

By the way, I hereby predict a slump in May home sales.

Va Homeowners Alliance posts for January 26, 2010

  • 2009 Virginia Homes Sales Data Now Available
    The Full Year 2009

    Statewide, existing home sales in Virginia were slightly higher than in 2008 –  86,609 units sold, up 1.6% (the first increase since 2005).
    Sales were up month-to-month…

    Click headline to read the full story.

2009 year-end Virginia housing market report

With all the data for 2009 compiled and analyzed, we have a good picture of Virginia’s housing market in 2009. Housing markets, of course — Dan River isn’t Roanoke isn’t Arlington.

First off, if you want to grab the docs themselves, including charts and detailed analysis, here they are (all PDFs, all fairly small) :

And now some of the highlights.

The full year 2009

Statewide, existing home sales in Virginia were slightly higher than in 2008 –  86,609 units sold, up 1.6% (the first increase since 2005). And sales were up month-to-month over 2008 for the last five months of the year; in November 2009 it was 44% higher than November 2008.

At the same time, the 2009 median sales price — $240,809 — was 4.2% lower than in 2008.

New home sales were down in every month compared to 2008, but, while the median sales price of those new homes also decreased year to year, in November that decrease was the lowest (only 1.4% off 2008, as opposed to April, which was down 13.6% over 2008).

Of course, we know there isn’t a single economy in Virginia.

In the South Central region, for example, sales were down 14.5% from 2008, but prices were up 1.5%; in the Upper Shenandoah Valley, it was the opposite: sales up 5.4%, prices down 15%.

Here are the charts from the full 2009 sales summary (sales on top, prices below; click to enlarge either):

Annual sales changes

Pricing changes

(Note that the full-year report divides the state into seven regions, while the quarterly report is based on the 29 local Realtor® associations.)

The fourth quarter — sales

Despite that dip, though, statewide home sales were up more than 18 percent over Q3 2008. In fact, quarterly sales showed double-digit growth for 18 of the 29 local Realtor® associations, and only declined in five regions: Eastern Shore, Lexington/Buena Vista, Prince William, South Central, and Southern Piedmont.

Get this: In Southwest Virginia, Q4 sales were up 327.4% from 2008, and in Williamsburg they were up 121.3%.

Here’s the sales-change chart from the Q4 sales report (click to enlarge, but you can see Southwest Virginia even in the thumbnail):

Q4 sales change

Keep in mind that there was a significant drop in sales in December, as the $8,000 tax credit was expected to expire, which may have skewed the Q4 numbers.

The fourth quarter — prices

The median home price was down 8.5% statewide from Q4 2008 to Q4 2009, but it varied considerably between regions. At the ends of the bell curve we have Chesapeake Bay & Rivers with a 23.8% decrease, and Prince William with a 24.1% increase, while Lynchburg and New River Valley saw virtually no change.

Here’s the sales-change chart from the Q4 sales report (click to enlarge):

Q4 pricing change

Foreclosures

Statewide, foreclosures were up in Virginia by 33.8% in 2009 over 2008, but that’s well below the nation as a whole, which saw them jump 55.3%.

However, foreclosures were down 19.1% statewide from Q3 to Q4 2009 (they had gone up from Q2 to Q3, so that was a nice change).

Foreclosures

Press reax

Media outlets around the Commonwealth have posted stories about VAR’s home sales report, and most seem to have a friendly take on the numbers:

And remember, you can get all the details at www.VARealtor.com/homesales.

Va Homeowners Alliance posts for January 25, 2010

Va Homeowners Alliance posts for January 24, 2010