New Home Sales Drop in September 2009

New Home Sales Drop in September 2009

According to this Nashville Business Journal article, New home sales drop unexpectedly, "New home sales took a surprising turn downward last month, according to newly released government figures." According to the article, on 10/28/2009, the US Commerce Department reported that sales of new homes declined by 3.6 percent in September 2009 to a seasonally adjusted rate of 402,000 new home sale units.

The article stated the following new home sales figures:

• The number of unsold new homes fell for the 29th straight month to 251,000.
• The supply of new homes at current sales rates remained unchanged at 7.5 months.
• The median time it takes to sell a home remained unchanged at 13 months.
• The number of completed new homes for sale fell to 109,000 units.

The article quotes Patrick Newport, a U.S. economist for IHS Global Insight, as saying "September’s decline is hard to explain."  According to the article, Newport offered the following possible explanations for the "unexpected" decline in new home sales:

• "One possibility is that inventory has fallen so low that builders do not have enough completed homes on hand, and are losing sales to the market of existing homes."
• "A second possibility is that September's reading was simply an aberration, just like the August drop in existing home sales was an aberration, and that sales will take off in October."
• His final possible explanation is that due to the deadline for the first-time homebuyer tax credit nearing on 11/30/2009, would be new home buyers do not think they will be able to close in time and so these buyers decided not to buy.

I have to say that I do not find this "unexpected" decline in new home sales to be unexpected at all. The fundamentals of the real estate and housing market are poor. Unemployment is over 10%, foreclosures and other distress sales are at record levels, banks are failing in record numbers (in terms of dollar losses). The only things keeping home prices (including new construction) at current levels (i.e. preventing home prices from falling to sustainable levels) is artificial government intervention in the form of:

• The $8,000 home buyer tax credits.
• Expanded FHA and other government backed mortgage loans (see my blog post Real Estate Recovery or More Problems (Short Sales and Foreclosures)?, which shows that "of all the home sales that have occurred in 2009, 59% of all buyers relied on low down payment government financing programs.").
• Extraordinary government purchases of mortgage loans (95%+ of all mortgage loans are purchased by the government owned agencies Fannie Mae, Freddie Mac and Ginnie Mae - see Recent Developments in Mortgage Finance).

With the $8,000 tax credit coming to an end soon (even with the proposed extension it will only last for an additional 8 months), continued unemployment, record foreclosures and a pending pull back in FHA and other government loans due to the record default rates (see my blog post FHA in Deep Trouble: Default Rates Skyrocketing) new home sales should decline.  Only the government nonsensical intervention is fooling buyers into thinking things are OK.

If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing new construction (new single home, new townhouse or new condo), do not be fooled by builder hype and marketing. If you want a great deal on new construction, you will need knowledgeable, aggressive and professional buyer representation. Please contact me, or visit my website Search the Middle Tennessee MLS - Find New Single Homes, New Townhomes and New Condos in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

On the other hand, if you are a home builder in Middle Tennessee who is in financial trouble due to being unable to pay your mortgage payments, or owe more in mortgage debt than you can sell your newly constructed homes for, or you are already in foreclosure please contact me to discuss selling your new homes via short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your new homes (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need quick sales due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get New Construction Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Buying a Foreclosure Is Harder Than It Should Be

Buying a Foreclosure Is Harder Than It Should Be

This video, How to Buy a Bank-Owned Home (see below), is both hilarious and infuriating because it is true. I really believe that banks choose the most incompetent and ignorant foreclosure and REO agents to market their bank owned foreclosures.



If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing a Fannie Mae foreclosure, a Freddie Mac foreclosure, bank foreclosure or REO, a short sale, or other distressed real estate in order to get a great home or investment property at an attractive price without dealing with the difficult REO/foreclosure listing agents and you want aggressive and professional buyer representation, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

Terrazzo to Auction Condo Units Due to Slow Sales

Terrazzo in Nashville Gulch to Auction Condo Units Due to Slow Sales

According to this Nashville Business Journal article, Terrazzo to slash prices, auction condos, Crosland, the developers the Terrazzo, a $68 million 117 unit luxury high rise condo project in the Gulch section of downtown Nashville Tennessee, will auction off up to 30 units at 1:00 PM CST on November 21st at the Renaissance Hotel. According to the article, sluggish sales are the reason that the developer opted to auction off some condo units.

The article quotes Bill Barkley, president of Crosland's Tennessee division (the developer of the Terrazzo) as saying that the auction "offers Terrazzo the opportunity to sell a significant number of condominium homes and instantly build the growing community at Terrazzo — all in a single day."  The article goes on to state the following terms and conditions of the Terrazzo auction:

• "Minimum offering bids will range between 40 percent and 50 percent of list price. Minimum bids for one-bedroom units will range between $159,000 and $225,000, two-bedroom units will start between $250,000 and $310,000, and three-bedroom units will start at $399,000. Bids will include one parking space in the mixed-use building’s underground garage."
• "Interested buyers are required to register and preview the units before bidding. According to the Terrazzo’s Web site, bidders will need to come prepared with a cashier’s check or money order for $5,000 and a blank personal check, which will be added to the $5,000 to equal 5 percent of the winning bid price."

I would like to say a couple of things about this auction:

• The minimum bid prices are still too high.  This will result in very light bidding.
• Overall, I do not think many units will sell at these prices. See my previous blog post, Birmingham Auction Ended Abruptly After Too Many "Low Bids", for the results of a condo auction in Birmingham Alabama. The highest bids at that auction were only about one-third of the original list prices.
• According to the City Federal Condos (the Birmingham condo project mentioned above) website, the developer is now trying to sell the condo units that fetched $80,000 at the auction for $139,000.  My guess is that this project will be bankrupt in less than 12 months.
• Even if the developers do sell some some units at 50% of the original list prices, what happens to the people who already purchased condos before the price drop?  If they have to sell due to a job loss, job relocation, illness, or other reason, they will lose over $100,000, or be forced to short sale their condos.
• Based on the above information, I think that the Terrazzo will end up being auctioned off by the lenders who financed the project.  Until the developers accept the fact that there is only a limited number of high income young people and wealthy "empty nesters" they will never price their condo units where the overwhelming majority of the market is.  It seems like the developers are still in denial.

If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing a Fannie Mae foreclosure, a Freddie Mac foreclosure, another foreclosure, REO, short sale, auction home, or other distressed real estate in order to get a great home or investment property at a low price, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

Homeowners Walking Away: Right or Wrong?

Homeowners Walking Away: Right or Wrong?

In my previous blog post, Underwater Homeowners Walking Away From Their Homes, I covered the issue of homeowners who "walk away" from their homes and mortgages (even though they can afford to pay their mortgages) due to the mortgage debt on their homes far exceeding the market value of their homes (in other words, they are "underwater"). "Walking away" is also called a "Strategic Default". That post briefly covered the fact that most homeowners view "strategic default" as being morally wrong, but despite that many homeowners would still "walk away" from their homes and mortgages if the debt to market value ratio reached a certain point. The post showed, that based on current financial research, that debt to market value ratio is somewhere around 50%. In this post I want to address the issue of whether "walking away" from a home and mortgage is Right or Wrong?

I will only state my position briefly as I would like input and comments from other people. A few years ago I would have said that "walking away" from your home and mortgage was definitely wrong. Now, I am not so sure. Real estate investors, business owners, Wall Street firms, etc. have "walked away" from debts for many, many years. If a business or investment firm cannot pay a debt, they file bankruptcy, shut down, simply do not pay, or now ask for a government bailout. Why should looking at paying debts as a business decision be OK for businesses and investment firms, but not for individuals? That is why I am no longer sure "walking away" is wrong. If buying a home is an "investment" as the National Association or REALTORS (NAR) has stated for years (they should regret that statement now) then why shouldn't a homeowner have the option to "walk away" if that so-called "investment" goes bad? After all, the mortgage lender does have contractual recourse (via the loan note and mortgage) such as reporting the lack of payment to credit reporting agencies, taking the home back via foreclosure and pursuing the delinquent homeowner for any losses not recovered by selling the foreclosed home. No where in the documents that the borrower/homeowner signed does it say that shame or moral indignation is part of that recourse. That being said, I do think that trying to sell a home via a short sale is a significantly better option for a homeowner than a "strategic default". Therefore, I would highly recommend that a homeowner try a short sale before "walking away". With that I respectfully request your comments.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including loan modifications or short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Underwater Homeowners Walking Away From Their Homes

Underwater Homeowners Walking Away From Their Homes

According to this New York Times article, Homeowners Walking Away, a study produced by the Financial Trust Index (a financial and economic research group formed by the Kellogg School of Management at Northwestern University and The University of Chicago Booth School of Business) states that more than 25% of foreclosures are actually strategic defaults where the homeowners walk away from their homes and mortgages even though they can afford to pay their mortgages. The Press Release, When Homeowners Walk Away: New Research Reveals More than 25 Percent of Mortgage Loan Defaults are Strategic, and Study, Moral and Social Constraints to Strategic Default on Mortgages, show that while most homeowners generally believe that walking away from a home is immoral, many will still do it if their negative home equity situation reaches a certain threshold. According to the Press Release "17 percent of households would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50 percent of the value of the house." Given that information and the fact that a Deutsche Bank report published this past summer (See my blog post on the subject - SCARY STUFF: About half of U.S. mortgages seen underwater by 2011) predicts that about 50% of all US mortgages will be underwater by 2011, it is highly probable that the foreclosure crisis could actually accelerate in the near future rather then settling down as several organizations have suggested. I predict that there will be record numbers of loan modifications, short sales and foreclosures over the next 3 years.

According to the Press Release "People under the age of 35 and over the age of 65 were less likely to say it was morally wrong to default compared to middle-aged respondents." I guess that younger people and older people view the strategic default decision more as a business decision than a moral one. There are in fact consequences of walking away from your home and mortgage including damaged credit, which will make it very difficult to borrow money in the future, get credit of any kind, obtain insurance (insurance companies frequently check credit as part of the insurance underwriting process) and even get a job (employers frequently check credit as part of the job application process). Another pitfall of the strategic default is that you are open to a potential deficiency judgment where the mortgage lender could pursue you for their losses not recouped by selling your foreclosed home. For these reasons, I highly recommend trying a short sale instead of a strategic default.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including loan modifications or short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.