Month: December 2009

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Things we’ll be talking about in 2010

2009 was a year when many home owners lost their homes to foreclosure, while other home owners could not move due to their depreciated home values. Let’s also remember that 2009 was also the time when many home buyers took advantage of home buyer tax credits and reduced prices from distressed properties (which helped boost home sales statistics).

As much as it felt that 2009 was the tear down year for the real estate industry, 2010 is promising to be a re-building year; the upcoming year will lay the foundation real estate markets to come. So, you might ask, “how will things be different?” This is what we may expect to see in 2010: a change in home buyer attitude; rising interest rates; and “Cash for Caulkers.”

More home buyers will be searching for homes in 2010. However, continued changes in mortgage underwriting guidelines will most likely limit the number of qualified home buyers. Mortgage underwriting guidelines have been tightening through 2009 and will continue into 2010. The trend of shrinking the pool of qualified home buyers due to mortgage guidelines requiring increased down payments, higher credit scores, and reduced debt ratios will most likely continue as FHA’s new underwriting guidelines are anticipated in 2010. New FHA guidelines are expected to increase the minimum down payment to 5% and restrict debt ratios below 45% (for FHA mortgages).

Additionally, the current home buyer incentives are likely to sunset without any further extension; it is doubtful that home buyer credits will continue in its current form. As a result of having more “skin in the game,” it is possible that home buyers will be more conscientious during the home buying process; home buyers will take more time and be more discerning in their home search.

Mortgage interest rates are likely to increase through 2010. Having been relatively close to historic lows for nearly a decade, mortgage rates will most likely steadily climb as current Federal Reserve programs are set to end (already evidenced by a consecutive 4 week rise in the average 30-year fixed rate as indicated by Freddie Mac’s Weekly Primary Mortgage Survey). The Fed’s current purchase program of mortgage backed securities and agency debt, that was meant to assist the housing market and facilitate mortgage lending, is committed through the end of the first quarter of 2010. The Fed has already begun slowing the pace of these purchases, so as to ease the transition in the marketplace (www.federalreserve.gov/).

The most anticipated news for 2010 is the “cash for caulkers” program, also known as the “Home Star” program. Although many have speculated about the program and its guidelines, legislation has yet to be passed. President Obama, in a speech given at the Brookings Institute on December 8th, called on Congress “…to consider a new program to provide incentives for consumers who retrofit their homes to become more energy-efficient…”, and to emphasize passing of such as legislation (WhiteHouse.gov). The plan is supposed to offer tax incentives to home owners for increasing home energy efficiency through home energy audits, system replacements, and weatherization; however, the final legislation (if any) may have variants of the current proposal.

In the near future it may seem as if home owners may be talking more about retro-fitting their homes than moving, while more home buyers will complain of the mortgage process. Regardless, everyone is looking forward with optimism to 2010.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Permission to use this article is by written consent only.

by Dan Krell. Copyright © 2009

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Evelyn Harper, our favorite TV real estate agent

by Dan Krell © 2009

Television doesn’t often portray a realistic view of life, especially in a sitcom. That’s probably why reality TV has a huge following. And what’s more interesting than real estate?

A couple of well produced reality shows that presents the “realistic” drama of buying and selling homes include Bravo’s “Million Dollar Listing” and HGTV’s “Real Estate Intervention.” These two shows depict the daily ins and outs of real estate in two markets on opposite coasts of the country, as well as illustrating how hard a real estate agent works for their clients. For example, while demonstrating the slowdown in the market (Million Dollar Listing’s) Chad endlessly waits for prospects to show up to his open house.

But no matter how hard Realtors work at maintaining a positive image, leave it to a sitcom to stereotype the personification of the real estate agent. Credibly played by Holland Taylor on CBS’s “Two and a Half Men,”, the fictional character Evelyn Harper appears to be the quintessential real estate agent.

Ok, Evelyn is portrayed as selfish, opportunistic, unloving, and sometimes pushing the ethical envelope. But personality traits aside; she is always wheeling and dealing, always thinking, and appears to be a very hard working real estate agent. For example, in the 2007 episode “Media Room Slash Dungeon,” Evelyn attends a charity event with her son Charlie. When asked by Charlie:“…If you don’t like any of these people, why do you come to these things?” Evelyn quips: “ Do you read the paper? Do you know what the Los Angeles real estate market is like now?…No one is selling unless they have to…that’s why I have to be working these rooms to learn who is getting divorced, who’s dying, who can’t make bail, who’s crappy sitcom got cancelled…”

If the fictional Evelyn were a real person she might not be your best friend, but you could possibly say that she does know real estate, about networking and the art of making the deal. But the real reason that Evelyn Harper is our favorite TV real estate agent is that she allows us to laugh at ourselves by seeing the humor in typecasting a real estate agent; although exaggerated personality traits (and personality disorders) are not pleasant in real life- it makes great TV comedy!

This article is about fictional TV characters and not to be confused with any real person or real estate agent with similar or same names. This article is not intended to provide nor should it be relied upon for legal and financial advice.

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The Gambit of Eminent Domain

Many contend that the use of eminent domain is increasingly abusive, as highlighted by the case of Kelo v. New London. If you recall, Kelo v. New London involved the taking a private land to be used by developers to revitalize a Connecticut waterfront into upscale homes, a commercial district, and a large (private) research campus. The case was fought through the court system all the way up to the Supreme Court of the United States (SCOTUS). In 2005, the SCOTUS ruled 5-4 in favor of the municipality, New London, CT, with the majority accepting an expanded interpretation of “public use.”

Eminent Domain is a common law process that allows the government (local or federal) to take real property without the owner’s permission. The right of eminent domain is given to governments by the United States Constitution, as specified in the Fifth Amendment. Typically, land that is taken is used for public roads (battles over the ICC are still fresh in our memories), public schools, public utilities, and other public uses. Generally, if the land owner refuses the initial offer for their property, the government initiates condemnation proceedings to take control of the land.

Since the case of Kelo v. New London, similar cases have emerged up across the country. Two high profile cases in New York are being fought and again raising the question about eminent domain abuse.

A case ruling in favor of the State involves the development of a Brooklyn neighborhood into “Atlantic Yards” (Atlantic Yards is to include commercial and residential development, including the Barclays Center- where the New Jersey Nets will call home). Property owners who fought the condemnation of their property for the development of Atlantic Yards were thrown a major obstacle in their fight when they learned that the New York Court of Appeals upheld the condemnation. Additional appeals are probable.

The other case concerns the expansion of Columbia University in New York City. The university’s expansion rests upon the ability to purchase property and land in specific neighborhoods that they feel is appropriate for their needs. When several property owners refused to sell to the university, the State stepped in to condemn the property to force them to sell. Recently, a New York State appellate court ruled against the State (of New York) which possibly characterizes the abuse of eminent domain by abetting Columbia University in acquiring land that was ruled to have no public purpose.

A recent local case of eminent domain has some raising their eye brows as well. Earlier this year, Governor O’Malley asserted the use of eminent domain to save the Preakness Stakes by attempting to force Magna Entertainment to sell Pimlico, Laurel and Bowie race tracks to the State. Questions whether this use of eminent domain is in the spirit of the Constitution may be moot as the race tracks may be sold to other local interested parties.

Eminent domain continues to be a complex and deeply debated issue. If eminent domain’s expanded definition is to allow commercial development for the public good, then consider a recent Wall Street Journal report (November 11, 2009; “Pfizer and Kelo’s Ghost Town”): The local and state government spent $78 Million to raze the Kelo neighborhood, only to find out that developers pulled out. The land is now vacant and without any tax benefit.

This article is not intended to provide nor should it be relied upon for legal and financial advice.  Permission to use this article is by written consent only.

by Dan Krell ©2009

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