Post-crisis real estate: What’s in store for the housing market?

by Dan Krell
© 2011

It is often said that history repeats itself. If we want a glimpse of our future, we should look to the past; if we want to see how a post-crisis housing market looks like, we should look to see how a previous housing crisis ended.

According to the Census Bureau (, the last time homeownership rates declined was 1980-1990. Recent seasonally adjusted homeownership rates have been declining slowly from the all time high of 69.2% reached in the first quarter of 2005. The current seasonally adjusted homeownership rate (for the third quarter of 2011) is 66.1%, which is similar to the homeownership rate of 66.2% reported by the 2000 Census.

Although the country is dealing with some of the same economic issues that was problematic during the early 1980’s; the current real estate market is more akin to like the post S&L crisis of the late 1980’s and early 1990’s, when the market was flooded with foreclosures and a coinciding recession impeded an already difficult housing market. Some may remember that during that time home prices decreased and, not unlike recent events, many home owners walked away from their homes (some lenders were sent the keys of recently purchased homes).

Then like today, resulting legislation changed the lending landscape in an effort to ensure such systemic abuse and failure would not happen again. The Census reported that the homeownership rate in 1990 was 64.2%, just shy of the 64.4% homeownership rate reported in 1980.

Additionally, mortgage interest rates were “normalized” post the S&L crisis, making homeownership more affordable than the previous decade. Then, like today, low mortgage rates are touted to make owning a home more attractive than renting.

Also, like that time, the real estate business was changing. Besides changing business models (buyer agency was becoming recognized across the country), large real estate brokers downsized and/or absorbed brokers wanting to get out of the business. Today’s real estate business models have changed to accommodate technology and a vast array of information; additionally, national and regional brokers may begin to see their market share change with the marketplace.

Demographics are always changing. Current demographics indicate a shrinking pool of willing home buyers and sellers. As home prices have dropped over the last several years, many baby boomers who planned to downsize cannot afford to sell their home; additionally, “move-up” home buyers have also decided to make do with their current home longer than they planned as they find that their home’s equity has diminished. Many renters are choosing to continue renting as homeownership is viewed as an anchor; they prefer to be more mobile and not tied down by homeownership until they become more established in their careers.

Before home prices can stabilize, many expect average home prices to drop another 20%. Home prices have (more or less) historically returned to an established “norm” after a housing boom. Home prices are about 26% higher than the “norm” adjusted price, which was established in 1890 as reported by Robert Shiller (Irrational Exuberance; Broadway Books 2nd edition, 2005).

As we move forward, economic and industry related barriers continue to prevent a recovery in the real estate sector. It may be several years before these issues may be managed; however once addressed, confidence in homeownership may begin to increase once again instilling pride and sense of community.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of December 12, 2011. Using this article without permission is a violation of copyright laws. Copyright © 2011 Dan Krell.

It’s time to buy a new home

new homes for sale

The time may be right for you to buy a new home this spring. Low interest rates and reduced prices, combined with builder incentives may make a new home a viable option that many home buyers have forgotten about.

Home builders that survived the culling of the market decline have sought out ways to make homes more affordable. Going with the new trend, some home builders are offering more efficient floor plans, as well as more cost efficient building processes.

Modular homes seem to be more prevalent these days as custom home builders seek to reduce costs to the buyers as well as increasing floor plan flexibility and construction quality. The reason why many home builders are turning to modular designs may be that the modules are built in a controlled environment, which increases quality while reducing weather related delays and damage. In a typical plant, manufactured and modular housing fabrication quality specialists constantly monitor fabrication to ensure the final product meets or exceeds all codes, which is unlike on-site construction where inspections can be random and inconsistent.

One attraction to buying a new home is that everything is new! Along with the new, one expects warranties. Make sure you discuss the warranties that are provided with your purchase with your builder and Realtor®. It is typical for new appliances, fixtures and flooring to have limited manufactures warranties, so make sure you receive all paperwork related to those items.

Additionally, most builders offer a warranty as well; the warranty is most likely guaranteed by a third party. According to a homebuyer’s booklet offered by the Maryland Attorney General’s Office Consumer Protection Division, a home builder warranty in Maryland must include at a minimum: “any defects in materials or workmanship for one year; any defects in the electrical, plumbing, heating, cooling and ventilating systems for two years (not to exceed the period of the manufacturer’s warranty); and defects to any load-bearing structural elements for five years.” The booklet recommends that you contact the third party guaranteeing the warranty, to check if the builder is in good standing.

Although a home may be new, it does not guarantee that it is perfect when delivered to you. It is common to conduct a “final walkthrough” with a builder representative to check the systems and to identify any defects that may need repair or correction. Builders will ask for a “punch list” of items that need correction.

Former president of the American Society of Home Inspectors, Frank Lesh, was on record as saying that “Even new homes have defects that only a professional can detect…” He stated that a home inspector can help ensure that a new home’s major systems (roof, foundation, electrical, plumbing) “are functioning properly and safely before moving in”… “Because many items can’t be inspected after a house has been built, homeowners should consider having a series of phased inspections conducted at key milestone markers. ASHI encourages homebuyers to consider an inspection at the following times: prior to foundation pour; prior to insulation and drywall; prior to the final walkthrough.” (

If you’re considering buying a new home, consider visiting new home resources offered by the National Association of Home Builders ( and the American Society of Home Inspectors (, as well as the homebuyer’s booklet offered by the Maryland Attorney General’s Office Consumer Protection Division (

By Dan Krell
Copyright © 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

Attitudes towards business and the housing market

Everyone seems to be fixated on resolving the housing market through direct intervention. However, it is increasingly apparent that people are forgetting the symbiotic economic system that housing belongs. Even local attitudes towards business may affect local housing markets.

First let’s consider housing data reported for October 2011 by Real Estate Business Intelligence, LLC and Metropolitan Regional Information Systems (MRIS), which indicates that sold prices for homes in Montgomery County decreased 3.2% compared to September 2011 and decreased 6.5% compared to October 2010 (the same time last year). And although sold prices for homes in Loudon and Fairfax counties decreased from October 2011 compared to the previous month, the median sold price for these two Virginia counties increased compared to October 2010 (an increase of 2.5% and 2.3% respectively).

Maybe Donald Trump knows something we don’t; the high profile real estate investor purchased a Loudon County golf course in 2009, and more recently a Charlottesville winery.

Next consider that some high profile companies have been making their preferences clear, as they choose Virginia over Maryland. Anita Kumar reported in her October 27th Washington Post blog (McDonnell, pursuing Lockheed Martin, says Maryland is less friendly to business) that Maryland has lost two defense contractors to Virginia. And recently, Virginia is trying to persuade Lockheed Martin (one of Montgomery County’s largest employers) to move there too; this courtship became widely publicized after a brouhaha erupted when the Montgomery County Council considered passing a resolution asking Congress to cut defense spending in favor of social spending. Additionally, Steve Contorno of the Washington Examiner reported just last week (McDonnell woos Bechtel Corp. away from Maryland; 11/17/2011) that the “International construction and engineering giant Bechtel Corporation” will move its global operations headquarters from Frederick to Reston.

Another consideration is the demographic change in Montgomery County, which may be one of the main reasons for big-box retailer Wal-Mart wanting to expand within the county. Reported by Carol Morello and Ted Mellnik of the Washington Post (Incomes fall in Montgomery and Fairfax counties; September 22, 2011), the once considered “posh” county now has a lower median income than Prince William County, VA, which is home to Potomac Mills Outlet Mall.

As the housing solution continues to elude many, along comes the National Association of Realtors ( publicizing a “2011 Five Point Housing Solutions Plan.” The plan is a result of a policy meeting (New Solutions for America’s Housing Crisis ) conducted by the Progressive Policy Institute ( and Economic Policies for the 21st Century (

Looking more like a “five point housing suggestion,” NAR’s plan offers these recommendations: 1) Not to weaken housing any further; 2) Support communities by reducing foreclosures; 3) Open mortgage markets to “foster new demand among responsible homebuyers”; 4) Support for a secondary mortgage market with government participation; and 5) A call for a national housing summit to “articulate a new housing policy.”

Much like a doctor’s patient seeking pain relief caused by a systemic problem, housing relief through direct intervention may only be temporary. Although some have found the solution to a faltering housing market and other economic ailments tied to jobs, others continue to be confounded by the issue.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

by Dan Krell. Copyright © 2011

What do visitability, foreclosure, and agency have in common?

Since the 428th session of the Maryland General Assembly ended Aprill 11th, have you read the “90 Day Report: A Review of the 2011Legislative Session” ( Many bills that affect real estate transactions as well as homeowners and those involved in the industry have been passed (and of course, many were defeated or not passed). Among the many new laws passed during the 428th legislative session, here are a few highlights.

The international movement which advocates for construction practices for the mobility impaired has taken hold in Maryland. HB437 requires home builders to offer “minimum” visitability features in new homes. The new law applies for new developments of 11 homes or more that receive preliminary approval on or after October 1st, 2011.

“’Minimum visitability features’ are defined as (1) a ground level entrance meeting specified height, width, and accessibility characteristics; and (2) a circulation route from the ground level entrance to an unattached garage, parking space, or public right-of-way that is free of specified impediments or vertical changes in levels greater than 1.5 inches. The builder must provide (1) a point of sale document describing the minimum visitability features; and (2) a drawing or photograph showing these features as well as the lots and new home types that are conducive to the construction of these features.”

If you plan to purchase a foreclosure in the near future, take note: HB842/SB516 indicates that you cannot begin to collect rent from a remaining tenant until you provide notice. As of July 1st a purchaser of a foreclosed property cannot collect rent unless they have: “1) conducted a reasonable inquiry into the property’s occupancy status and whether any individual in possession is a bona fide tenant; and 2) served on each bona fide tenant, by first-class mail with a certificate of mailing, a notice containing the contact information of the purchaser or the purchaser’s agent responsible for managing and maintaining the property and stating that the tenant must direct rent payments to this person.” You can claim rent up to 15 days immediately prior to satisfying the notice requirements.

If your real estate agent is part of a real estate team, there is a chance that a real estate agent of the same team will represent the other party of the transaction, provided that the appropriate disclosures are provided and all parties agree. Currently, only the team’s broker can assign two team members to represent a buyer and seller of the same transaction. Beginning October 1st, HB1049 will also allow a designee of the team’s broker to appoint team members to the same transaction, provided that the broker designee is not a member of that team.

To add teeth to the Commissioner of Financial Regulation’s enforcement of Maryland’s Protection of Homeowners in Foreclosure Act and the Maryland Mortgage Fraud Protection Act, HB509 (an emergency bill that went into effect earlier this year) clarifies the authority of the Commissioner of Financial Regulation, as well as clarifying a homeowner’s ability to seek damages. The Commissioner is authorized by this legislation “ to enforce these Acts by exercising any of the commissioner’s general enforcement powers, seeking an injunction, or requiring a violator to take affirmative action to correct a violation, including the restitution of money or property to any person aggrieved by the violation.” Additionally, a homeowner can seek damages as a result of a violation of the MPHIFA and MMFPA, regardless of the status of administrative actions or criminal prosecution of the offender.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

Notable Homes – Bethesda, MD

What do Edward R Murrow, Close Encounters of the Third Kind, and a Bethesda Mansion have in common? …Howard K. Smith

Howard K. Smith, for those of you who don’t know, was one of the original “Murrow Boys,” as well as being a famous journalist, commentator, and later- a movie actor. As one of the original Murrow Boys, Mr. Smith was one of the journalists who were closely associated with Edward R. Murrow at CBS during the years prior to and during World War II. As an associate of Murrow, Smith covered Pre-war Europe and Pearl Harbor. He later moved to commentator and anchor, most notably when he made a move to ABC. Besides having cameos on various TV shows, Smith also had roles in several films, most notably The Candidate, Close Encounters of the Third Kind, and The Best Little Whorehouse in Texas (

The Smith’s lived on this remarkable estate from 1958 until his death in 2002. The estate has fantastic spaces inside and out and is situated on over four acres of plush greenery overlooking the Potomac River.

Information is believed to be accurate, but should not be relied upon without verification. This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.