Real Estate News

That’s a great question since home buyers and home sellers are arming themselves with this data to support their points of view on “market price”. But you know what?

…Market price is determined by a willing Buyer and Seller agreeing on what price the home is worth buying.

2-15-2016: Another article: Midland real estate agent questions Zillow’s ‘Zestimates;’ company calls them a ‘starting point’.

2-18-2015: Another article “Starting With Zillow’s Zestimate May Not Get You Very Far

Here’s a recent article about Zestimates suggesting they are provided or “entertainment” reasons, not factual data. http://www.ahwatukee.com/real_estate/article_ac42208e-f41f-11e3-bf5d-001a4bcf887a.html

Now based on the 5 of 7 random sales in or around my subdivision, the actual market sales price of properties ranged from 10-25% above Zillow – another one 8% above and another was lower by 22%.

Even the National Association of Realtors (NAR) had some input from investigative reports back in 2009 stating that 55% of the Zestimates didn’t come within 10% of the actual market price.

So although I applaud Zillow’s effort to provide Zestimates that try to give buyers and Sellers a relative market price, I have fielded several buyers not willing to pay the “market price” for a home because Zillow said it wasn’t worth it only to see someone else buy it for more and take their favorite choices away. Even though agents can show Buyers a vast number of examples that most (not all) properties sell within 5% of asking prices, Buyers then become more confused and stop searching while digesting this information.

This confusion will continue until a “perceived” independent research company (like Consumer Reports) investigates and releases a report to disclose the relative accuracy of the Zestimate for each and every subdivision in America….until that happens, we’ll just need to keep on seeing ill informed, disappointed, and confused home buyers and home sellers.

Apparently, large companies are now shifting their pensions into 401Ks managed by financial institutions like Prudential Financial, Inc.

I understand that pensions are guaranteed, but 401Ks are not? Should you be worried if your pension plan just got shifted from a “guarantee” to an investment with “no” guarantee?

Therefore, when many retirees hit the pension payouts, hopefully the investments will be secure and steady for those payouts and not huge loses that reduce their payments. But that’s all up to the investment vehicle risk and the US Federal Government’s appetite for a Pension system bailout in addition to the $102+ Billion already guaranteed by the Pension Benefit Guaranty Corporation of the Federal Government.
Note: According to Wikipedia at the time of this blog post, the PBGC has a total of $102.5 billion in obligations and $79.5 billion in assets.

So, are we creating another class of financial institutions that will become “too big to fail”? Will the CFPB write rules to have their cash reserves or certain protections required to carry those “pension costs”?

10-8-2014: According to a former director of the PBGC, the agency is in debt $27 billion and growing and eventually will need a US Government bailout. And with higher premiums to over the shortage, many companies are offloading their pension obligations to 3rd party financial firms.

10-7-2014: Motorola (as other large employers like Bristol Meyers, General Motors, and Verizon) will be shifting about 35% of its $8 Billion pension liability to an investment firm (in this case Prudential Financial) and another 13% through lump sum pension buyouts. This also removes the backing of the US Government under the Pension Benefit Guarantee Corporation and retirees will lose everything if Prudential goes under.

4-16-2014: Dodd-Frank created the Financial Stability Oversight Council who defined some major insurers (like Prudential, AIG, etc,.) as “systematically important financial institutions” (SIFI’s) which means the Federal Reserve may regulate them – oh boy!

Source: WSJ, 3-25-2014, B1 and WSJ, 3-12-2014, C2, WSJ 4-15-14, A13.

There really is none, but here’s an interesting thought you can add to your financial strategy:

Divide the subdivision/area annual rent by the home’s price and if the result (i.e., yield) is >8%, it favors buying…from 5-8% it favors longer term hold and <5%, it favors renting. But don't hold me to that ratio - it just sounds like an interesting rule of thumb. Source: WSJ, 2-22/23-2014, B9.

First, the excess in total itemized deductions you have can be used to reduce your taxable income but it’s not a major factor to determine to buy a home. Actually, the major reason to buy a home is when someone’s marital status changes.

In my opinion and experience, it may be of no benefit.

Sometimes there are homeowners who have mortgage interest, but they don’t have enough itemized deductions to push them over the standard amount in the tax tables and therefore can’t deduct excess interest payments.

The benefit isn’t equally distributed but is more equally distributed to the wealthier homeowners by allowing them to borrow more money to buy bigger houses…Those earning >$100,000 annual income are several times more likely to exercise the deduction. For those with incomes >$200,000/yr get about a $1,800 benefit and those around $65,000/yr get about a $200 kick. (Note: I guess they have better lobbyists like Realtors and the Banking Industry.)

Even though 75% of all benefits from the mortgage interest deduction goes to the with incomes exceeding $65,000/year, those above $160,000/year get 75% of that benefit.

Investigative analysis by the R Street Institute revealed that the mortgage interest deduction contributed to increase the size of homes in wealthier areas. In fact, in just the Washington DC area, the study concluded that homes were approximately 1,400′ larger than what homes would have been without the deduction. Some believe that the deduction doesn’t have any meaningful cause of home ownership.

But I think most agree that home ownership is an integral part of most Americans’ equity and wealth and is therefore an important part of their financial strategy in addition to a place to live.

Interesting note: Estimates for lost Federal Tax Revenues from the deduction ranged from $70 – $175 Billion.

Sources: WSJ, 3-24-2014, Page A2 and WSJ, 3-17-2014, R4.

I don’t think all the blame of the past 7-20 years is entirely on the backs of banks and financial institutions as the US Justice Department feeds on a frenzy to go punish the pit bull that the US Government created and released upon us.

Over the decades, the United State Government, with help from the Federal Reserve, kept interest rates low, offered tax incentives (including mortgage interest deductions, caps on taxes paid on the profit of selling a home; waivers of taxes on 2nd homes, etc), created Fannie Mae, Freddie Mac, and Ginnie Mae; and create the atmosphere to buy homes as investments and not just to live in and/or raise a family.

In 1980, fewer than $10 Billion in loans held by Fannie Mae and Freddie Mac reflecting less than 10% of total mortgage loan and now almost $4.7 Trillion are held by these GSE’s. Since 2008, Fannie-Freddie-Ginnie-FHA-VA (all government mortgage insurers or issuers) had a hand in >95% of new mortgages

From 1980 to today, almost the same percentage (65%) of US households own a home – a virtual flat rate of net increase over 30+ years of federal government involvement.

All that involvement in mortgages an what did we get? (I hear crickets!)

Biggest housing bubble burst in US history; improper economic priorities by tipping scales toward Buyer’s favor to loss sense of control and responsibility to create a mass surge toward “investment” property and not just a place to live (i.e., giving tax advantages, limited recourse by lenders to seek damages); and people with marginal credit ratings were encouraged to apply and got mortgages.

Fannie Mae: Guarantees and purchases loans from mortgage lenders to provide liquidity (i.e., mo $ to lender to loan out).

Freddie Mac: Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets by buying or insuring losses of mortgages from lenders.

Federal Housing Administration (FHA): “FHA”, provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals

Ginnie Mae: Ginnie Mae does is guarantee investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans — mainly loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Other guarantors or issuers of loans eligible as collateral for Ginnie Mae MBS include the Department of Agriculture’s Rural Development (RD) and the Department of Housing and Urban Development’s Office of Public and Indian Housing (PIH).

Sources: Besides individual websites – Wall Street Journal, 3-6-2014, A17.

Update 2-6-2015: Major mortgage bond investors and the state of Confusion (i.e., California) are taking legal action over Ocwen’s management mismanagement of mortgage servicing. They alleged improper loan modification practices, wrongfully recouped advances, and a failure to account for cash flows. Other non lender servicers are taking flak as well.

More and more banks are tying to shed the effort to service mortgages. So mortgages are being serviced by non mortgage companies like Ocwen Financial, Nationstar Mortgage Holding, and others.

Hoever, these non-bank mortgage servicers are somehow exempt from capital requirements by CFPB rules – oh really? Yes – according to the Financial Stability Oversight Council.

Some of the problem these non-bank servicers are accused of is improper or slow application of mortgage payments to customer accounts or charging unauthorized fees.

Source: WSJ, 3-10-2014,C1.

And the decision isn’t good for those who want to convert them into riding/walking/nature trails.

In an 8-1 decision, the Supreme Court upheld a 1940’s Supreme Court decision that the U.S. Congress granted only an “easement” onto public and private property for the specific use as a railroad and no other use/claim can be made by the US Government.

Besides the absurdity of anyone fighting US Congress and US Supreme Court actions in the past is the fact that the WSJ article mentioned that the US Justice Department is reviewing the decision – why? The matter is decided unless they wish to ignore the Supreme Court and Congress – but why stop now!

WSJ, 3-11-2014, A11

In 2013, about 30% of new construction was apartment buildings (highest in several years) in hopes to catch young people out of college or just leaving home to step into an apartment and not a home. It’s also estimated many older homeowners will be downsizing and may just rent something.

Some reasons young people are not buying homes so soon – low wage gains, student debt, tight mortgage credit, and unemployment.

Source: WSJ, 3-10-2014, A1

If you have a cat and wish to offer it some outdoor playtime, but are afraid another animal can reach it or inflict any harm, then why not build a — catio.

A catio (patio for cats) is a “fully” enclosed, covered outdoor playground area for your cat(s).

In those times where your partner misbehaves, you can also put them out with the cats to play and blow off some steam!

Catios can run into the thousands of $ since they might be built just like a sun-room would…

You should make sure it’s secure and no access in or out unless from inside the house; views of the outside; ventilation; maybe a fan in summer or heater in winter; plenty of play toys; scratching or climbing posts; litter-box; and water…and maybe a chair or seat for you too?

Are we now in a “Race to the Top of the Pile of Common Core Crap” in education?

For a long time we’ve been relying on the great and powerful Federal Government ($ wink-wink-$) to use the carrot and stick approach to financing education goals through Federal monies…

We just stopped reeling from Ted Kennedy and George Bush’s brainchild of “No Child Left Behind” which didn’t work, even though it was a noble effort to tie $ to school performance …

But how do we measure student progress in learning the skills and abilities to be better citizens and workers? Who measures them and to what criteria do you tie Federal $?

Do we have specific regurgitation tests? One with written essays?

Do we tie “all” funding to test scores and get a bunch of test taker products?

A little history:

2002: Bush signed Ted Kennedy’s bill “No Child Left Behind” that required math & reading tests of 3rd grade and upward….usually to tie the Federal $ to need or remove funding.

2009: Obama started “Race to the Top” tying teacher performance to Federal $.

2013: Many Atlanta teachers/administrators were found to have cheated on scores to get ‘mo money.

2014: 2 Chicago teachers say “NO” to giving tests…

2014: Now there’ the new crap called “Common Core” – same crap but the name has changed to protect the idiots?

2014: Georgia Senate Bill 167 allegedly proposes we reject Federal Common Core requirements and leave it up to the State of Georgia to determine what educational learning standards Georgia should strive toward. Question: Do you believe education (i.e., childhood cerebral indoctrination) is a state or federal issue?

So, will we wait for the next US President to start something new, or is it time to “take this country back” and start over?

In other words, if you’re a liberal, you “grovel for the federal $”, but if you’re more conservative, you “see more strings attached to your pockets”. Are you a sucker or visionary?

See Wall Street Journal, March 1-2, 2014, Page A3
See Marietta Daily Journal, 3-6-3024, A1.