Last week I wrote about Evernote Basics - what it is and some samples for how to use it. Today I'll dig a little deeper and share how I use it personally - both how I organize my digital notes and what purposes I use it for. But before I dig into the details, I want to take a step back and talk conceptually about notes and filing.
Digital vs Paper
There really isn't much difference between digital and paper notes. Forget digital for a minute, and think about paper notes:
If you write something down, or print a web page, or have a photo, that paper item actually exists. You can hold it, feel it, read it, share it, and eventually - put it somewhere. Your ability to access the information on that piece of paper is only as good as your ability to remember where you put it. If you put a minute's effort into filing it into a well-labeled file folder hanging in a drawer in a filing cabinet, odds are you'll be able to find it when you need it. If you throw the note onto the kitchen counter, along with piles of other notes & junk mail, odds are you won't remember exactly what happened to it a few months from now.
Digital notes are very similar to paper notes. Each note is an individual piece of information that you might want to access again later. You can be very meticulous about filing them, or you can be less rigid.
Digital notes are also very different to paper notes. Each note can have an unlimited amount of information on it, including whole web pages, links to other notes, pictures, audio clips, and any other file (word document, pdf file, spreadsheet, etc.). In addition, the notes are search-able, so even if you just throw your notes into a big pile on the Evernote kitchen counter, you'll most likely still be able to find the note you're looking for. I have some notes which only contain a subject line - just a short phrase to remind me of something I need to do, and I have other notes which are several megabytes and contain several attachments - one of these notes might be an entire file folder if I had to print it all out!
Storage, Use, and Growth
My first boss was an organization maniac. He would preach that we take lots of notes, because nobody had a good enough memory. He taught us that if you have 5 pieces of paper on the same topic, that topic needed its own folder. If (or when) a topic's folder got too big (maybe 50 pieces of paper), you needed to break it out into more, smaller folders - either chronologically or by subtopic.
This process leads to a slow but steady accumulation of files, with an ever-evolving organization system based on how many notes you have about various topics. You don't go out on day 1 and pre-name hundreds of files, drawers, and cabinets with what you *think* you're going to need to file; you slowly add a file here and there as you have the need for them.
(my file cabinet, 3 years ago.)
I use this exact same system for Evernote. I started with one notebook, adding a few notes each day. That quickly became several notebooks representing various topics. Eventually I wanted to group related topics together, so I gave them a Notebook Stack. This is the Evernote equivalent of moving related file folders into the same drawer in the file cabinet. Over time my file tree has consistently grown; I currently have 1,993 notes in 72 notebooks and 9 notebook stacks. Looking at them today, I have only 1 notebook with more than 100 notes, and I have a dozen or so with less than 10 notes. Just last week I created a new notebook stack, when I felt like one stack was getting really big and it contained notebooks representing 2 different topic genres, so it was easy to break it out into 2.
I don't use tags - they tend to confuse me. Each note only needs to reside in one place - the right notebook. Tags feel sloppy and haphazard. But that's just me. Google "organizing Evernote" and you'll find more people who preach tags than those who don't. It's all about making organization work for you. I've been using Evernote for 2 years, I have almost two thousand notes, and I can find any of them in about 2 seconds from any of my computers or phones - it simply works!
My 10 Best Uses for Evernote
1. Kids' School Work. the kids bring home mountains of paperwork from school, and my wife wants to save all of it! I scan or snap a photo of each page, then put it into an Evernote notebook. now it's stored forever, without any boxes of old crap to keep in the attic!
2. Client Files. each client/project gets a notebook, and EVERYTHING goes into it. I now have all my info & notes, neatly together, wherever I am. For organization & clutter sake, and because Evernote has a limit of 250 notebooks (although they'll allow thousands of tags), once the client closes I move their notes into a combined notebook - I still have everything available, but I have fewer notebooks to sift through.
3. To Do List. I've used dozens of task managers over the years, but I keep coming back to Evernote. It's fast & easy to jot down a to-do item as I think of it, it's with me all the time on all my devices, and it's easy to add notes, screen clips, emails, etc. to my to-do notes. I have one notebook for my tasks that are due immediately - today or tomorrow, and another notebook for tasks due in the future.
4. Web Research. I have taken screen clips of tons of things over the last couple of years - maps, computer comparisons, cell phone plans, state parks and hiking information, hotel information and confirmation, online shopping receipts, etc. etc. Anything that shows up on my computer screen that I want to keep a picture of - done.
5. Special Foods. My oldest son is on a restricted diet, so I've taken pictures of some of his foods with my cell phone & shared them to Evernote. Then, when my wife asks me to stop at the store on the way home to pick up some ________ , I get the right kind! I've also taken pics of the vitamins he takes, so when my wife calls from Sprouts to ask which specific brand is his, I can tell her. (Bonus husband points for me!)
6. Bookmarks. Evernote has a browser add-in which allows you to highlight any part of a web page and keep that selection as a new note, with the web page's URL attached to it. (or, don't highlight anything and Evernote captures the whole page.) I use this to add bookmarks with one mouse click, and my bookmarks are now available to me from any browser on any computer.
7. Names. I like to jot down a quick note of people's names, especially when I meet a group of new people. It helps me remember the names better, and it gives me a quick reference guide to review on the way to an event where I'm likely to see those people again.
8. Journal. A couple days a week I do a voice recording on my way home, (using Hi-Q MP3 android app to record in mp-3 format), as a way to journal what's going on - mostly notes about the kids, but I also journal about work, triathlon training, and whatever other thoughts I have. It's become a great record of the last couple of years. I can also add text and photos to my journal notebook - sometimes I just take a picture of the kids with my cell phone & share it to my Evernote Journal Notebook - done.
9. Blogging. Combining the Web Research and Journal functions gives me a great blogging resource. I store ideas for future posts, web articles & research, and rough drafts. In fact, this post was composed entirely in Evernote. I wrote some of it from my desktop, then I added some notes from my phone during my son's soccer practice, then I used my laptop, before finishing it from my desktop.
10. Paperless. I expanded on my Kids' School Work concept and started scanning &/or photo'ing all my admin files: records and receipts for the cars, medical receipts, notes & receipts from household items, etc. Once my records are in Evernote, I'm able to shred or trash the paper document. I also take pictures of the box or the model/serial number when I buy new things (dishwasher, SLR camera, etc.), so I'll have the information I'll need in a few years for a repair or replacement part. Right now I'm 99% paperless, and I'm more organized, with more information that's easier to find, then I've ever been. 1,993 Evernote notes and counting.
Remember my filing cabinet from 3 years ago? Here's my filing cabinet today.
It's also my briefcase. The silver one on the right is my backup. Not only is it easier to find what I need when I need it from wherever I am, but the next time I move is going to be a whole lot easier! ;-)
Your Evernote-lovin’ Realtor,
I don’t know about you, but when I love a product, I tend to talk about it. (sometimes a little too much!) Evernote is one of those products. I’ve talked it up enough that more than a few people have asked me what it is & how they should use it, which gives me a good reason to write a post about it.
What is Evernote? Well, a screen clip from their website is a great place to start:
That basically says it all.
- Sceen Clippings
- Web Sites
- Thoughts, notes, ideas
- Voice notes
- Digital files - pdf, doc, xls, etc.
Everything you put into Evernote is readily available on every device you own, as well as any computer (or any other device) with an internet connection. It’s totally platform independent.
- Windows PCs & laptops
- Macs and MacBooks
- Android phones
- Android tablets
- iPhones and iPod Touch
- Blackberry phones
- Blackberry PlayBook
This means anything you note, capture, or edit on any of these devices will be automatically sync’d up with all your other devices, ready to be retrieved or edited from wherever you are & whatever device you’re using.
Find things fast.
Evernote offers 3 completely different ways to organize your notes, each of which can be used with or without any of the others:
- Categorize with notebooks
- Label with tags
- World class searching, including searching handwritten & typed text in photos and scanned files.
(image courtesy of Jeffrey Beall)
Notebooks and Notebook Stacks. Stacks are like file cabinet drawers (or stacks of file folders), and Notebooks are like file folders. Each note can only be in one notebook, like each piece of paper can only be in one file folder. You can have multiple notebooks in a stack. People who are good with filing systems - paper or digital - will probably gravitate towards this system.
Suppose you had a Notebook Stack called Vacation, which contained Notebooks for San Diego, Colorado, Florida, and New York.
Information for your trip to San Diego would go in your San Diego notebook.
You could find all your San Diego notes by selecting the San Diego notebook, OR by selecting the Vacation notebook stack. (in which case you would see your San Diego notes mixed in with your notes from Colorado, Florida, and New York.)
Tags. Tags are like labels. Each note can have an unlimited number of tags. In addition, Tags can be organized into a file-tree for those who want to organize groups of tags together – this makes it visually easier to find a tag or tag group on the screen. People who prefer a little less structure, or those who are used to using labels extensively, will most likely gravitate towards tags.
Information for your trip to San Diego would be tagged with San Diego and Vacation. (and possibly Restaurants, Theme Parks, or Hotels.)
Search by Key Words. Since Evernote's search capabilities are so good, some people just put their notes into a "big digital pile", but they can search for a particular word or phrase to find the note they want.
Information for your trip to San Diego is just put into Evernote. You could find it by searching for San Diego, or San Diego Restaurant, or Sea World, or whatever makes sense for whatever you are looking for.
How to get started using Evernote
Because it can be a bit overwhelming to think about what goes into Evernote, or making a switch from where you are today to going paperless, or anything drastic like that, I recommend you start with 1 thing, and add other uses as you get comfortable with it.
Recipes. My wife gave Evernote a try with her recipe collection. Over the years she had accumulated magazine pages, email & website printouts, and lots of individual recipe-cards. Years ago I built her a template she could use to type in a recipe & have it print out onto postcard. The postcards were then kept in a cute little box in the kitchen. This was ok when it worked, but it had several flaws:
- She would get behind & end up with a stack of printouts, then have to stay up late one night to type them all out.
- She would get a new computer, and if everything wasn't backed up perfectly, she would lose her digital copy.
- She would be at the store, or at her mom's house, and wouldn't have the ingredient list for a particular dish with her.
Using Evernote has solved all 3 problems.
Now she can type them up, clip the web page directly into Evernote, or take a picture of a magazine page with her cell phone, and the recipe is stored – permanently and easily searchable-sharable-readable.
She tags the recipes as needed - chicken, main dish, dessert, appetizer, gfcf, etc., so she can quickly search for whatever type of dish she's looking for.
She also has them wherever she goes - home computer, smart phone, mom's computer, wherever there's an internet connection.
By doing this, she’s become more familiar with Evernote as an application – how to put stuff in, how to find it later, and how it all shows up wherever she needs it to be. That makes it a lot easier to start using it for other things, too.
Other ideas include:
- web research – Evernote is awesome here. Screen clippings save exact images from your screen. Web clippings copy web pages and include the url they were copied from. And you can add as many notes about it as you need to.
- plan a vacation – maps, hotel information, restaurants and entertainment ideas, flight info, contacts in the area.
- client notes – housing likes and dislikes, neighborhood criteria, photos, notes about homes you’ve shown them, mls search results, alternative contact information, frequently reviewed emails, etc.
- receipts – take a picture of a receipt with your phone, and Evernote will read the text for searching later.
- hobbies – Evernote can become a collection of notes, projects, history, ideas.
- blogging! – Jot down an idea (typed or voicenote) wherever it comes to you. Write rough draft posts in. Clip articles and images to be used later.
- journal – an easy way to write up your daily thoughts throughout the day, from whichever device or wherever you are.
- add more ideas as you get comfortable with it!
In part 2 I'll write about how I use Evernote - how I organize it and some specific ways I use it to be more efficient.
For those of you who want to know more about it – security, sharing notes, bandwidth limitations, free vs premium, etc., there’s been more written than you have time to read! Start by reviewing the evernote website, then try one of the 61,400,000 results that returned in my Google search for Evernote.
Anyone out there already using Evernote? Please chime in on anything I might have missed..
** Update 9/28/11 - Link Here to Evernote Part 2 - How I Organize and My 10 Best Uses.
Your thankful to have an external brain Realtor,
Trulia regularly tracks the buy vs. rent equation and reports again that it’s cheaper to buy a home than to rent in metro Phoenix. See full story here: http://explore.trulia.com/datavis/rentvsbuy/Q2-2011/
Meanwhile, mortgage rates are in free-fall, according to an Inman.com interpretation of Freddie Mac’s rate survey…
Rates on fixed-rate mortgages declined for a seventh week in a row to new lows for the year ... Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.
It’s not the ideal time for everybody to buy a home, and mortgages are still a bit difficult to obtain. But it could be a great time for you to buy:
- Home prices just double-dipped according to Case-Shiller numbers (they're down over 50% from their Summer 2006 peak)
- Sellers are frequently willing to pay the buyer's closing costs,
- There's talk in Washington about increasing the minimum cash down payment of the FHA mortgage program from 3.5% to 5% sometime soon, so buying now could save you a couple thousand dollars over waiting
A few questions can help you decide if you should consider buying a home now, or not...
- Are you emotionally & financially ready to be a homeowner?
- Do you have stable employment?
- Do you plan to stay put in your home for 5 to 10 years into the future?
- Do you have a couple months’ worth of salary in savings?
- Have you planned your future budget to account for costs of home ownership like maintenance & property taxes?
- Do you consistently pay your bills on time or even early?
- Do you know what your credit score is? (studies show that people who know their score tend to have better credit ratings than people who don’t know their score)
- Have you talked with a lender to find out how much home you’ll qualify for? (In Arizona, buyers *must* submit a loan approval with a purchase offer)
If you answered yes to all or most of these questions, you’re probably a great candidate to buy a home. Contact your Realtor. Don’t have a Realtor yet? You’re in luck, we’re Realtors. Read what our clients say about us behind our backs, and then give us a shout by email, phone or even text or Facebook.
Ready to start browsing listings online? We provide you a direct link to the private, Realtors-and-appraisers-only Multiple Listing Service. That's the most up to the second, accurate information consumers can get their hands on. Use our map based home search, or use our Detailed home search to really dial in on your housing wants and needs.
Rentals, Investors, and the Future of the Market
First of all, I need to come right out and say it - there will be some over-simplifying in this Viewpoint. We'll be discussing very complicated concepts with lots of variables and moving parts, yet this isn't a Harvard reviewed journal - my goal has always been to make things easier to understand and talk about.
Next we'll need to define a very important term: "Normal Market".
Normal Market: Think about the 1990's. Relatively low interest rates. (yes, 10% in 1991 seems high by today's standards, but it was much lower than the 15% from a few years earlier.) Relatively stable appreciation. People could buy a home, then sell it a few years later and buy a bigger home, using the proceeds from the sale as their down payment on the purchase.
Example: My wife & I bought our first home in 1995 for $132,000, making a 10% down payment. In 1998 we sold that 3-bedroom home for $160,000, and used the proceeds ($38,000 give or take) as the down payment on our larger, 4-bedroom home. Our appreciation was a little higher than expected; we were fortunate enough to buy in a desirable neighborhood which was going through a renaissance of sorts.
It might be a generation (20-25 years) before we return to that kind of Normal. Everyone who bought a house after the year 2000 has been severely impacted by the Great Recession and the decimation of home prices. Many, if not most, who bought during the peak boom years (2004 - 2006) have lost their home. Good news is they aren't burdened by negative equity; bad news is they have to start saving for a down payment all over again, along with rebuilding their credit. Those who bought earlier in the decade are sitting in homes worth about what they paid for them, maybe even less. Good news is they've paid close to 10 years on their mortgage, and they might have even taken advantage of mortgage rates in the 4's to refinance to a 15 year loan. Those who bought late in the decade are in a similar position as the early-decade buyers, except they are starting with a brand new mortgage.
So, if it's going to be that long before the market is Normal, what are we left with?
Who are today's homeowners?
1. First-time buyers. Lots of first-timers have joined the ranks of homeownership over the last few years, especially during the tax credit craze in 2009. The vast majority of these purchases have been at the lower end of the pricing spectrum - buying either fixer-uppers which have been foreclosed by the bank or already-fixed-up homes from investors (usually).
2. Investors, however, have been the largest pool of buyers over the last several years. And investors do 2 things with their houses:
a) Fix n Flip - they make the homes pretty & sell them for a profit, often to a first-timer.
b) Fix n Hold - they make the homes pretty & rent them out, often to people who have lost their own home.
3. Longer term homeowners. Those who bought their homes before the big boom. Many of these folks are somewhat stuck in their homes, unable or unwilling to make a move until the market heals.
How will these homeowners impact us, and/or be impacted by us?
Let's talk about 1 & 3 first; they're the easiest.
Many first-time buyers are in great shape today. Imagine being in your 20s and owning a 3-bedroom home which you only paid $120,000 for, financed at 5.5%. Today you're carrying an FHA mortgage at under $1,000 per month. And that's on a fixed rate, can never increase, will be paid off in 30 years, mortgage!
Granted, the job market isn't what we'd like it to be. Nor is the housing market. So these kids can't move at the drop of a hat. But, if they stick around for a few years (5, 7, 10..?) Pretty soon they're making more money, they have equity in this home, and they can think about moving. They'll have the option of either selling this home (like my personal example above), or keeping it as a long-term rental - eventually this home could be paid for, free & clear, and generating income every month for the rest of their lives!
Longer term homeowners are in a position which isn't too much different. The job market and home market are dictating they need to stay put today, but eventually our economy recovers and they'll be in a position to make a move. However, I bet there are many people out there who originally wanted to move, but after being in their home for longer than they wanted, have seen their lives move on while their mortgage has gotten smaller - there will be plenty of people who decide to stay put and pay their home off completely.
And that brings us to the investors - the largest group of recent buyers. What will happen to them over the next few/several years? Or more importantly to us non-investors, how will they affect us over the coming decade?
Investor Mindset - Profits
An investor buys a home as a tool to help turn his money into more money. This can be done in a couple different ways:
1. Rental Income. If you buy a home for $120,000 and pay cash for it, you've invested $120,000 but you don't have any monthly mortgage payments. If you can rent that house out for $1,000 per month, you'll earn $12,000 per year, which is a 10% Return On your Investment (ROI). (yes, I'm ignoring taxes, insurance, vacancy, maintenance, etc. etc. - simplicity, remember?)
The example above works even if the home isn't bought with cash. If the investor puts $12,000 into the home (10%) and borrows the rest, he only needs to earn $100 per month, which is $1,200 per year, to earn that same 10% ROI. So as long as the rent covers his mortgage payments, this is equally profitable.
2. Profits from Sale. Let's again assume you pay cash for a $120,000 home. You rent it out for whatever the market bears - $700, $800, $900? But then, after a few years, the market comes back, home prices go up, and you sell the house for $160,000. You end up earning $40,000 in rents and then $40,000 in profits: $80,000 (a 67% ROI) in 4 years.
So, given that, investors stand to make more money when either rent rates or home prices rise.
What happens next?
We talk about recovery and getting back to normal, mostly while looking at the inventory of homes hitting the market for sale. I've written many times about the distressed and vacant listings being a leading indicator for the recovery.
But I haven't heard anybody address the concept of these thousands of investor-owned homes as a sort of hidden inventory. The recovery works well if these homes are permanently "off the market". But what happens if, as prices rise, investors begin putting homes up for sale? One or two at a time won't have any effect on prices. Thousands at a time would affect the market the same way thousands of bank-owned homes are doing today. And if there's an avalanche of new listings competing with each other.. It'll cause the triple dip!
So these investor-owners, the very ones who are saving our collective bacon today by clearing thousands of listings from the market each month, could become a serious headwind against the recovery if they decide to liquidate their holdings as prices rise.
Next let's look at interest rates.
Interest rates are low, and have been for a decade and a half. But that doesn't mean they can't rise again. In fact, the longer our economic problems play out, the greater the likelihood that the bond market will push interest rates higher - long before the Federal Reserve decides to take action. (And if that happens, look out. Ask Greece what it feels like to lose the market's trust.)
What would happen if interest rates go back to 10%?
That $120,000 home I mentioned earlier, the one a first-time buyer could buy for less than $1,000 per month.. At 10% interest, that same home now carries a monthly payment of about $1,300. That's a BIG difference. $300 per month (30%) more for the exact same house at the exact same price.
So our first-time homebuyer has to make a choice:
a) Buy the house and spend 30% more each month on housing payments.
b) Buy a less expensive house to keep the $1,000 monthly housing budget in tact. (about $85,000 in this example)
c) Forget buying and continue to rent.
Let's assume some first-time buyers choose each of the three choices - some stretch their budget, some buy a smaller home, and others decide not to buy.
We all know about supply and demand's effects on prices. This scenario would have a negative impact on demand. 1/3 of all these buyers decide to rent, which reduces the demand for homes to buy (but increases the demand for rent...) Another third of the buyers are going to move their demand to a lower price range - this should put downward pressure on prices at the $120,000 range, yet potentially put upward pressure on prices at the $85,000 range. And, since 2/3 of the buyers are not looking at $120,000 homes, the lack of demand should put further downward pressure on prices.
Now, while housing prices are probably falling, rental rates could very well rise. Rents are usually in balance not as much with housing prices, but with the cost of owning a home. If the cost of owning a home increases by 30%, it's very likely that investor-owners will be able to ask a higher amount for rent. When it cost $1,000 per month to buy a 3-bedroom home, the rent might have been $900. But when it costs $1,300 per month to buy, there's a lot of room for rents to increase. Add in the extra demand from those who can no longer afford to buy, and there's quite a bit of upward pressure on rents.
Prices are about as low as we can imagine. Yet rising prices could trigger investors to sell. And if enough investors sell, they could add enough inventory to causes prices to fall. So, rising prices could cause falling prices.
Interest rates are at historical lows, coming off record lows just a few months ago. It's hard to imagine interest rates going anywhere but up. Yet, rising interest rates could have a negative impact on prices and a negative impact (to the consumer) on rental rates.
In the end..
I can talk about home prices and what-ifs all day long, but when the dust settles and the smoke clears, it's still all about jobs. As long as the unemployment rate falls, and people can find jobs &/or feel more secure about the job they have, the rest will take care of itself.
It's hard to budget when you don't have any income. And it's hard to get excited about moving when you're afraid you're going to lose your job.
Sometimes we forget about a key variable outside of our current discussion. Yes, there are a lot of investor-owned homes which could hit the market as inventory. But there are also a lot of people who have been taken out of the labor market, who could enter again and hit the market as buyers.
What will happen? I don't know. We're in uncharted times. But I have a much better understanding today of how my grandfather must have felt in the late 1930's.
Your looking forward to the Roaring 20's Realtor,
Pleasant Valley – Neighborhood Spotlight
Sometimes a single neighborhood can act as a microcosm for the city as a whole. Yes, this is contrary to my normal disclaimer about market conditions varying greatly from city to city and neighborhood to neighborhood. But hear me out..
Pleasant Valley is a medium sized subdivision in the northwest valley. I’d call it upper-middle class; the kind of homes which feel like luxury to those who aren’t used to such things, but which the truly affluent would turn their nose up at. Spacious homes (2,800 – 4,500 sqft), large lots, and the surrounding by mountain views help keep the neighborhood a desirable place to live.
The subdivision was built out in the early to mid 2000’s, far enough away from the hustle & bustle to feel tranquil, yet only a few minutes away from amenities and infrastructure.
OK – this is starting to sound like an advertisement – why am I bringing all this up? Because these facts show what the neighborhood has been through:
- Some homeowners bought before the price run-ups in 2004-2006.
- Most homeowners bought during the boom years.
- Prices went through the roof and have since been decimated.
- Many people lost their home.
- Through all this the neighborhood has remained a desirable location. (much the way Phoenix is still a destination city for people in other parts of the country.)
Let’s take a look at Pleasant Valley in detail, through the ups and downs, and see if we can extrapolate any information for the greater Phoenix area at large.
Number of Sales per Quarter (Red) and
Average Sales Price per Quarter (Blue)
The red line (# of sales) shows us an obvious seasonality – sales peak in Q2 and Q3, then dip in Q4 and Q1. This is true of Maricopa County as a whole, although it’s more pronounced in Pleasant Valley.
But unlike Maricopa County, this also shows us an upward trend through the boom and bust years. (I placed a marker on the chart to represent April, 2011 * 3, since the Q2 number is falsely shown as one month.) 2009 was a big sales year for the county, but it was not 50% bigger than 2005.
The blue line mirrors Maricopa County much more closely – a price run-up of about 150% from 2003 into 2006, then a slow decline through 2007, then a sharp drop-off in 2008. Prices today are slightly less than they were in 2003.
Here are the actual numbers (for my number crunchers out there.)
Now let’s take a look at distressed activity. MLS didn’t always require sellers to identify short sales and lender-owned property, so I’m using occupancy for the chart below.
Owner Occupied Sales (red) and Vacant Sales (blue)
Again the trend is similar to, but not exactly like, Maricopa County as a whole. More owner occupied sales early in the decade. More vacant sales in 2008 and 2009. Fairly even in 2010 and 2011.
Next I wonder how many of those owner occupied sales could still be distressed. I said before MLS didn’t require a short sale notification until a couple years ago, so let’s look at the recent data:
Hmmm. OK – so even though the owner occupied and vacant sales numbers were about even over the last couple of years, the owner occupied sales are heavily weighted with short sales. In 2010, there were 24 distressed sales compared with 10 non-distressed. And in Q1 2011 the numbers were 7 to 1 – wow!
Current Market Analysis
Looking at the historical numbers above, it’s pretty easy to think this is a neighborhood in trouble – a real buyer’s market. Prices are way down from their peaks, and bank/distressed activity dominates the market. Well, not so fast…
These are the homes which have sold since 1/1/2011.
- 12 sales in the last 120 days, an average of 3 sales per month.
- Avg CDOM (Cumulative Days On Market) hovers around 2 months.
- Avg Sold Price is very close to Avg List price – no big discounting going on recently.
- 1 Active listing. Read that again – 1 house is for sale. (and quite frankly it’s listed at a price so far above the market that it’s not really a listing – leaving 0 homes available to buy at today’s prices.)
- 7 Pending Sales – these are homes which have negotiated through the contract and are heading towards closing.
- 8 Active With Contingencies – these are homes which have offers on them but which are still negotiating &/or looking for backup offers.
If you count the Pending and AWC as “homes which have been for sale but which are no longer available”, and add them to the homes which have sold, here’s what you get:
- 28 homes have been available for sale this year.
- 27 homes have been bought.
- 1 home remains available – the one asking $200,000 above market price.
So now I ask – is it really a buyers’ market?
Kind of, but not really. If you wanted to buy a home in Pleasant Valley today, I can’t take you over there, show you all the available inventory, and ask you to take your pick of the litter – and then advise you to make a low-ball offer to some desperate seller. Not possible. (and not advisable).
But it’s not a sellers’ market either. Even though there are more buyers than sellers right now, sellers aren’t afforded the luxury of padding their price. The market is ruthlessly efficient right now; buyers will bid against each other for properties priced fairly, but will demand discounts from homes which are overpriced.
This is true for most of Phoenix right now.
Buyers can get great homes at great prices, but only when you compare those prices in a big-picture, historical context. Getting into Pleasant Valley at prices less than what the builder originally sold them for – that’s awesome! But don’t think you can walk into any listing and offer 70% of their asking price – not gonna happen.
Sellers can unload a home in a matter of days, if it’s in good condition and priced aggressively. In fact, they might even start a bidding war among multiple buyers. But don’t think it’s a sellers’ market and you can ask 5% more than the last home sold for – that’s not gonna happen either.
We’re in a strange market right now. It’s been this way for quite awhile, and it’ll be this way for longer than we’d like. Buyers get frustrated because they have to compete so hard to buy the home they really want. Sellers get frustrated because there are so many buyers, but none of them will pay what the seller really wants to receive.
Buyers – plan on spending a little more than you expected.
Sellers – plan on receiving a little less than you expected.
Once we get realistic expectations in place, the market isn’t so bad – there are plenty of homes selling. No need to be frustrated, right?
Your trying to keep frustration at bay Realtor,
The Wealth-Income Pyramid, from zerohedge.com:
“The key to understanding “recession” and “recovery”: The Wealth PyramidThe top 20% are prospering and spending money; the bottom 80% are not, but thanks to vast wealth disparity, the top slice of households can keep consumer spending aloft. This provides an illusion of “recovery” that masks the insecurity and decline of the bottom 80%”
“This goes a long way to explaining how "consumer spending" can be "recovering" even as the incomes of the bottom 80% stagnate or fall. The top 5% of Americans by income are responsible for 37% of all consumer spending-- about the same as the entire bottom 80% by income (39.5%).”
Of the 1%, By the 1%, For the 1%, from Vanity Fair:
“Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.”
“It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall.”
My Viewpoint (the short version):
I grew up a staunch believer in big capitalism and small government – you work hard, you create value, you get rewarded. I’ve moderated over the years, becoming much more liberal, especially socially. But articles like these bring what we’re seeing and hearing from people we talk with out into the open.
The have-nots ARE working hard, sometimes working 2 or 3 jobs, but they aren’t getting rewarded. The current system/environment, especially with its high unemployment, feels like a throwback to the times of the industrial revolution – “if you won’t do this hard work for this low pay, there are 100 people in line behind you who will.” Meanwhile the CEOs and land-owners are getting rich.
Yes, it’s fair, and it’s the capitalism our county was founded on. But our country was also founded on fairness and equality – no unfair taxes just to line the King’s pockets, all men were created equal, and all that jazz. The current wealth gap is starting to breach these fundamental values.
I don’t know what the answer is – I’m certainly not a politician – but something’s gotta give at some point…
Your working to get by Realtor,
It's easy to make projections; it's a bit more difficult to make accurate projections. And far more projections are made than accurate projections. So why do we listen so intently to the experts' opinions, giving ourselves an emotional roller coaster, when they're probably no more likely to be right than you or me?
Let's take a look at Federal Reserve chairman Alan Greenspan's projections from 10 years ago this spring. (testimony given on March 2, 2001):
Both the Bush Administration and the Congressional Budget Office project growing on-budget surpluses under current policy over the next decade.
The most recent projections from OMB and CBO indicate that, if current policies remain in place, the total unified surplus will reach about $800 billion in fiscal year 2010, including an on-budget surplus of almost $500 billion. Moreover, the admittedly quite uncertain long-term budget exercises released by the CBO last October maintain an implicit on-budget surplus under baseline assumptions well past 2030 despite the budgetary pressures from the aging of the baby-boom generation, especially on the major health programs.
These most recent projections, granted their tentativeness, nonetheless make clear that the highly desirable goal of paying off the federal debt is in reach and, indeed, would occur well before the end of the decade under baseline assumptions.
Yeah. Not quite dead-on accurate...
He did go on to warn about the potential for fiscal bloat:
With today's euphoria surrounding the surpluses, it is not difficult to imagine the hard-earned fiscal restraint developed in recent years rapidly dissipating. We need to resist those policies that could readily resurrect the deficits of the past and the fiscal imbalances that followed in their wake.
Seems like congress listened to & believed the first part of Greenspan's projections, but the second part never got through.
More importantly, if the top expert in the field - the one with more access to more information and resources than anyone else - can be so incredibly wrong in such a short time horizon, why do we bother to get wrapped up in so many projections?
Thanks to the Calculated Risk blog for digging this one up.
Your happy when he occasionally gets a projection right Realtor,
I thought this was interesting..
Economist Mish Shedlock published an email correspondence with a reader, where they discuss the concept of property taxes being similar to a mortgage you can never pay off.
Imagine the perpetual loan, a loan that no matter what you do, you can never pay off. To help conceptualize the idea, think of it as a perpetual interest-only loan in which you are forbidden to completely pay off principal.
As preposterous as that deal may sound, it is highly likely you are in one.
If you own a house, you are in exactly that deal, except it conveniently not called interest. Instead it's called a property tax.
It’s a thought provoking discussion, but I’m not sure they’re looking at all angles..
Property Taxes are just another option our government(s) have of raising the funds they need. If they don’t have property taxes, the funds will come from somewhere else, such as increases in sales or income taxes. In addition, they aren’t necessarily a penalty against homeowners, because renters live in a home which is still “owned”, even if by somebody else.
What would happen if the local government decides to raise property taxes aggressively?
The first round or two of property tax increases won't make a big difference. (and that's assuming they can even get passed when put to a vote.) Eventually though, higher taxes will make owning a home noticeably more expensive. This will cause 1 of 2 things to happen:
1) Property owners (landlords) pass this increase on in the form of higher rents. If this happens, nothing changes in the rent vs buy discussion, and the city/state gets their extra revenue.
2) Renters refuse to pay the higher costs - either by moving to less expensive housing or by finding a landlord who isn't trying to pass on the extra cost. (renters have more flexibility to move on shorter time horizons.) If this happens, the gap between renting and buying will grow, and home prices will fall. Falling home prices reduces the property tax valuation, so the city/state ends up without any increased revenue - a scenario with the same deficits but less ammunition to fight them (and a host of angry homeowners.)
In normal times, outcome #1 is feasible. Today, I'm leaning towards #2.
Your would prefer lower taxes Realtor,
Via Freakonomics Radio, with guest Edward Glaeser, who recently published a book called “Triumph of the City: How Our Greatest Innovation Makes Us Richer, Smarter, Greener, Healthier, and Happier.”
The author makes a couple interesting points:
1. Cities are green. Contrary to the first impression most people have of equating cities with smog and suburbs with green grass & blue skies, cities are actually better for Mother Earth than the suburbs. More walking, more public transportation, smaller living spaces to heat & cool… He makes some good points.
2. But what I found most interesting was this paragraph condemning the public education system:
“Certainly for anyone who’s a parent, like myself, the suburban school districts offer huge enticement to leave cities. And this is really a question of how we’ve decided to structure our schools. So I want you to just imagine, if, for example, instead of having a New York restaurant scene that was dominated by private entrepreneurs, who competed wildly with each other, trying to come up with new, new things and, you know, the bad restaurants collapsed, the good restaurants go on to cooking show fame, and you have these powerful forces of competition and innovation working. Imagine instead if there was a food superintendent, who operated a system of canteens, where the menus were decided at the local level, and every New Yorker had to eat in these canteens. Well, the food will be awful, and that’s kind of what we’ve decided to do with schooling. That instead of harnessing the urban ability to provide innovation, competition, new entry, we’ve put together a system where we turned all that system off. And we’ve allowed a huge advantage for a local, public monopoly. It’s very, very difficult to fix this.”
I think charter schools are a step in the right direction. I would love to see an expansion of a system where there are more private or quasi-private (charter) options to choose from, where tax dollars followed the child to whichever school he/she attends. Good schools thrive & grow; bad schools wither and die.
The current system sounds efficient in theory: Superintendent drives overall mission; administration is centralized for the district; schools are left to teach. But theory rarely works in practice, and this is no exception.
Your would love to one day run a private school Realtor,
I’ve never been wildly pro or anti nuclear energy, mostly because I’ve never spent the time to really understand it. But with the Palo Verde plant (the largest energy producer in the country!) in our own backyard, it’s something I’ve always wondered about.
Today I saw a graph depicting the relative safety of various kinds of energy, and I have to say WOW!
Death Rate per Watts of Energy Produced
Click through to Seth Godin’s post on the topic, where he gives credit to additional sources and information.
I’m not here to start political arguments, but to me this is just mind-boggling.
Your loving energy efficiency, and efficiency of all kinds for that matter, Realtor,
Lately I’ve come to realize that I’m reliant on free software, mostly cloud-based, which in most cases I didn’t even know existed a year ago! These 7 applications are not just cool – they’ve made my life easier:
The first thing I open when I turn on my computer (any of my computers), and the app I use most frequently on my phone.
Evernote is advertised as being your second brain, and that’s not far off from the truth! It’s a place where you can store notes to yourself regarding any topic. Add in some web pages, screen clips, pdf files, photos, or any other file-type. Then make them extremely sortable, searchable, taggable, and easily shareable. And make them all readily available from any computer – completely in sync. It’s a WOW product, and yes – it’s free!
The syncing is amazing – I have the exact same notes available from my laptop, my desktop, my phone, my wife’s laptop, and any other computer with internet access.
I started slowly, using it as a place to store blogging ideas and other thoughts from around the web. But I realized how good it was and I quickly started adding other uses. Some of my uses include:
- Client notes & conversation logs
- Kids’ school projects – no more file cabinets filled with “stuff”!
- Family medical records – another file drawer emptied.
- Writing ideas & research
- Action items
- Vacation research, planning, and notes
- Quicknotes for people’s names I can’t forget
- Dozens of others – I have approx. 900 notes scattered across 5 notebook “stacks”, 50 notebooks, and 5 tags.
Full disclosure – I used the free version for a few months before upgrading the the premium version ($45/yr), which offers more storage space, larger individual note size, and unlimited file-types can be uploaded.
I used Quicken to organize my bank accounts since the mid-90s – first by manually entering every single receipt, then over the last couple of years downloading our account activity directly from Wells Fargo into Quicken.
This year, on January 1st, I made the switch to Mint.com for tracking and reviewing my checking account, and I’m amazed by how good the program works. (and it’s free!)
My banking activity is automatically populated into Mint – no more logging into wells.com to download my activity. Each expense is placed into the appropriate category (you can use Mint’s default categories or you can create your own, which I did.) I had to teach the program which category to use the first time an expense showed up, but after that it automatically puts the expense into the right category. And the one click charting/reporting is easy to read yet powerful.
In summary, it’s free, it works well, it’s a faster way to keep track of something I was already doing, and it’s available from any computer (including my phone.) Yep, that’s a winner.
3. Google Suite
I was the biggest Microsoft honk out there, so the switch to Google was not simple, nor was it quick. I’ve been slowly migrating since 2008, but now I’m all-in. I still have an Access database with all the MLS sales since 2000 in it, and I still have an Excel spreadsheet which pulls data from that database and then uses several pivot tables and pivot charts to sift through it all. But other than that all the documents I work on regularly have been converted or replaced.
- Gmail – easy to use, plays nice with others, easily taggable and searchable, and has the best spam filter I’ve ever seen. I use Outlook as a way to backup my email locally, just in case. But my gmail pulls all my other email addresses into one place.
- Calendar – I’m able to see my calendar, along with my wife’s and my business partner’s, all in one place (and on my phone), with changes or new appointments showing up in real time.
- Documents – word docs or spreadsheets, with almost all the functionality of MS Office. But they’re easily accessed from any computer, and they’re shareable with others, to the point where multiple people can be editing the same spreadsheet at the same time. And they’re easy to use from my phone!
- Reader – my rss reader, where I can easily scan through the dozens of blogs I read.
- Bookmarks – I bookmark my favorite websites using Google Bookmarks, so I have them available regardless of what computer I’m using.
- Picasa – my favorite photo-editing software. I still can’t believe this is free.
- Picasa Web Albums – my favorite way to share photos.
- Tasks, Blogger, Analytics, Fusion Tables, Alerts… and more!
- IGoogle – then I use IGoogle as my homepage, so I can see all of these items at a glance.
It’s free, replaces things I was already using (or in some cases adding functionality I didn’t have before), and available from any computer including my phone. Another winner.
It’s hard to get too excited about a backup service, but last month when Mozy raised their prices from $60/yr to $168/yr, I had to make a change!
Enter Syncback. It’s free, and it works flawlessly. I now backup my approx 150 gb of data to 2 different external drives, and Syncback manages everything. Best of all, it uses a regular ‘ol file-tree system, so I can easily navigate my external drives to see &/or restore any file I need. (not like some backup services which encrypt & zip the backup sets, so you’re left to hope everything is ok…)
This might be a reach, because Android is an operating system and not a software application, but I can’t leave it off the list.
I bought an HTC Incredible phone a couple of months ago, and I am absolutely blown away by it – to the point I wish my computer could be just like my phone! Over the last decade I’ve owned a Handspring Visor-phone, multiple Treos running both palm and windows os (the 600p, my first one, was my favorite), a Motorola Q, an older-generation Blackberry, a Blackberry Pearl, and a Blackberry Storm2. And this Incredible is like something else entirely – it’s like comparing an NFL team with the local high school football talent – different league entirely.
When you’re ready for a new phone, you need to look at the HTC Evo 4G (Sprint) or HTC Thunderbolt 4G (Verizon) – both are bigger & better versions of my Incredible. You won’t be disappointed.
I spend quite a bit of time in my car, and the radio gets awfully boring after awhile.
I added a free podcast player to my phone and subscribed to a few podcasts covering a few different topics – sports, history, comedy, fitness, general knowledge.
Now I listen to these podcasts more often than I listen to the radio. My podcast player automatically searches the podcasts I’ve subscribed to for new episodes at night while I’m sleeping, then it downloads any new episodes and cues them up for me to listen to the next day.
It gives me more control over what I’m listening to, with the added bonus of being able to pause, rewind, and take it with me outside of the car.
Full disclosure – I used the free version of BeyondPod for a couple of weeks, then I splurged $7 to buy the full-featured version.
The RedBox app for iPhone and Android is pretty slick. You can search for a particular title, and the app will tell you which RedBox locations have that title available. You can then select a location and rent the movie right then & there, from your phone. Then, on the way home, you simply stop by the box and pick up your movie.
You can also tell the app which location(s) are your favorites. Then you can ask the app to display which movies are available at your favorite locations. Or, you can have it use your phone’s GPS to display which movies are available at locations near you, wherever you happen to be!
What are your favorites?
Hopefully this list helps you discover a better way to do something you’re already doing. What am I missing? What apps do you use to make your life better / easier?
Your trying to work smarter Realtor,
Taylor, Bean & Whitaker’s former Treasurer will enter a plea agreement for federal criminal charges tomorrow (Feb 24, 2011). The mortgage firm imploded in Fall 2009 and investigators are still sifting through the ashes. So far, they’ve discovered a trail of fraud amounting to as much as $2 billion.
TBW’s Treasurer, Desiree Brown, is widely believed to be cooperating with prosecutors in their attempts to prosecute the mortgage firm’s former Chairperson, Lee Farkas, with 16 counts of conspiracy, securities fraud and bank fraud.
While Brown and Farkas negotiate over how much prison time each is likely to do, former Countrywide financial CEO Angelo Mozilo will not face criminal charges at all, having
paid off the right people paid a hefty civil fraud settlement of $67.5 million.
According to the WSJ:
People familiar with the federal criminal probe say that the general collapse in the mortgage market made it more difficult to pinpoint the actions of any particular executive as something that could be prosecuted.
I wonder, can the authorities successfully “pinpoint the actions of any particular executive” only when the executives are women, or only when the executives don’t have $67.5 million under the couch cushions? Or did federal investigators just forget to read this book that spells out who caused the mortgage crisis?
image credit, StockExchange user shuttermon
This is one of the funniest things I’ve seen in the Arizona Regional MLS in a long while. It’s in the Realtor-to-Realtor “private remarks” data field.
Promise of response within 12 hours with a full price non-contingent offer.
Okayfine… How random. Am I supposed to think that’s a good thing? Cranky me, I feel like testing them with a full price offer at 2 o’clock in the morning just to see if they can really reply that quickly.
The listing is a condo in a North Phoenix resort community that shall remain nameless. <cough PointeTapatio cough> I might be just a little touchy about this because I live in the Pointe, but what really grabbed my attention in the first place was the price – $75,000 for a one-thousand square foot condo. Nothing wrong with that, it’s a decent price compared to the rest of the North Phoenix area.
My problem with this price: the owners bought it on February 3, 2011 for $55,125. They relisted it yesterday, the 17th of February 2011 for $75,000. Know what the new owners did in the intervening 14 days? They painted.
Man, that had to have been some expensive paint!
Head’s up, fix and flippers… nobody’s paint job is worth $20,000. That’s a big “duh” and most of you will figure it out on your own. What you’re likely to miss because you see visions of $20,000 overnight profits dancing in your head is this: no buyer in their right mind is going to give you $75,000 for this condo when 14 days ago you paid $55,125. Plus there’s another bank-owned REO condo for sale 1 building over, in the same general condition for $53,000. Finally, your price point puts you squarely in cash purchaser land, and anybody who’s got $75k sitting around in cash had to be pretty dollar-savvy or they wouldn’t have accumulated that much. They’re smart, so they’re not going to be stupid enough to give you $20,000 extra just because you asked for it and promised to answer their offer within 12 hours.
I’m a hard-core Arizona Wildcat fan. But as a parent of a non-verbal son with autism, I’m also very aware of how people and organizations treat others, particularly those whose first appearance doesn’t tell their whole story.
Enter Villanova basketball.
Yesterday ESPN ran a story on the Villanova basketball program – turns out both the men’s and the women’s team-managers have special needs (cerebral palsy), and one of them is non-verbal. But this isn’t just a goodwill ploy, or a chance to make a student with special needs feel, well, special. This is a case where, looking past first appearances, they were able to find talented and dedicated students to help their basketball teams, who just happen to have disabilities.
(See the 5-minute video from ESPN.com below)
Update - I can't get the video to embed, so here's the link to see it on ESPN's site:
As of yesterday I’m a big Villanova fan – my second favorite team. But we should have known they were good – after all, they’re the Wildcats!
Your appreciates those who don’t judge based on things people can’t control Realtor,
The Calculated Risk Blog published a post using a number of charts to show & tell the economy’s story of 2010.
Keeping in mind these are from a national view, and that Arizona’s numbers will be different, I still thought a few of them were worth sharing, especially since they tell a story of being through the worst of things…
Existing Homes – Months of Supply
Take a look at the blue line in this chart. Inventory (nationally) has been above 7 months (the balanced market number) since mid-2006, but it looks like the number might have peaked.
Mortgage Delinquencies and Foreclosures
We’re still in record territory, but it looks like we might have peaked. We’ll have to stay tuned to this one over the next couple of quarters.
Percent Job Losses
I’ve shared this graph before, but I still can’t get over how much worse this recession is than anything we’ve experienced since World War II. That being said, it looks like we’re heading in the right direction.
Obviously things aren’t going to get back to “normal” overnight, but I like seeing the big picture heading in the right direction. I’ll work on some similar charts specific to Arizona to see how things compare locally.
Your hoping the glass is half full Realtor,
I don’t know about you, but for me the word technology brings up images of computers, cell phones, and other electronic gadgetry. But real technology is more useful than that. Real technology expands our civilization (cars & roads), powers our lives (energy), and wins wars (name your weapon here).
Does this count as a truly useful technology?
The company claims stadiums can go from eight beer pourers for every two cashiers, to one beer pourer for every eight cashiers.
It might not change the world, but it should at least cut down on the lines at the Arizona Cardinals games, which makes the world a little better!
(Hat tip to the 40tech blog)
Your suddenly thirsty Realtor,
Bank of America just posted a big loss.
Bank of America, among many other things the #2 residential mortgage lender and #1 servicer, reported a second straight quarterly loss, driven by write-downs in the value of its mortgage business.
The bank lost $1.57 billion, or 16 cents a share, compared with a loss of $5.2 billion, or 60 cents a share, a year earlier. Last year's results included a one-time TARP charge of $4 billion. Without the mortgage business write-down, the bank earned $756 million, or 4 cents per share.**
See also my broker Jay Thompson, a.k.a. The Phoenix Real Estate Guy, wrote a blog post the other day, grouching about Chase’s earnings for the 4th Quarter. Chase earned a whopping $52 million per day in profit in the 4th quarter of 2010.
Meanwhile, I’ve been thinking about Bank of America’s new billboard advertising campaign. Have you seen these? The basic message is “we’re everywhere” with billboards like these:
Where you live. Where you work. Where you play.
So many ATMs it’s like they’re following me. (with a pretty, smiling woman in the picture)
More ATMs than anyone else in the history of the world.
OK, I made that last one up. But the point is, they’ve spent a busload of money to remind us how big they are.
2008: BofA spent $319 million in U.S. advertising (source, BankInvestmentConsultant.com)
June 2009: B of A spent $125 million on U.S. advertising to date. (source, BrandWeekc.om)
January 2010: B of A plans to spend between $15 million and $20 million on a new marketing campaign aimed at the IRA rollover market. (source, BankInvestmentConsultant.com)
What happened to “too big to fail”? Did we all forget that saying already? It’s only been about a year and a half since we realized that some U.S. banks were so ginormous that if they failed the world would explode.
And now, Bank of America’s entire billboard ad campaign is centered on the idea of “we’re so huge, you can’t escape us.” Doesn’t that make them too big to fail, by definition?
**As an aside, I love how we all let corporations get away with spinning their earnings reports. BofA gets to say “without that loss of 3/4 of a billion dollars, we had positive earnings.” I’d like to be able to say to my creditors, “well, without that pesky mortgage of mine that’s underwater by $100,000, I’m fine. Really. Give me some more credit, I think I need to take a vacation this month.”
When pigs fly.
There’s a ton of reasons; almost none of them make sense. But for about 2-3 years I’ve been adding this opinion to my list of reasons banks are slow to OK short sales.
Mind you, this is my opinion. I have nothing to back up this idea other than a rudimentary understanding of Accounting 101:
- accounts receivable = assets
- accounts payable = liabilities
I believe that one of the many reasons banks are so slow to approve short sales is that while they stall, they can book the mortgage payments as an accounts receivable item, whether the homeowner is actually making the payments or not. The second the bank OKs a short sale, they have to book a giant loss. Again, only my opinion, but it passes the common sense test with everybody I’ve mentioned it to.
Now, a story at Forbes magazine backs me up, sort of. (hat tip to Mish’s Global Economic Analysis blog for the story link)
Robert Lenzner at Forbes writes US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages
[Due to loose accounting rules, banks are] allowed to accrue interest on non-performing mortgages” until the actual foreclosure takes place, which on average takes about 16 months.
All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a result, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off the books of the banks.
This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, among hundreds of other smaller institutions, can report interest due them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed.
Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans, suggests Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs.
Astounding! The extent to which our entire financial system is built on castles in the air is staggering. Banks make money because they say they do. Our dollar bills have value because we all agree they do.
I’m gonna go sit down now. My head hurts.