About Delaware County, IN

We're just into 2012 and already there's talk from Washington of a new program to "fix" the housing problem, with today's papers carrying a story about a modification of the Home Affordable Modification Act. While I've read conflicting reports its contents, it seems to focus on a refinancing plan to help people with good credit and current payments who are upside down on their current mortgages. Without getting into the specifics of the HAPA at this time, I couldn't help wondering how the previous plans had affected the housing market in Muncie and Delaware County, IN.

The previous federal stimulus programs were as follows.

2008-The Economic Stimulus Act of 2008- First-time homebuyers were offered a tax credit of up to $7500 as a no-interest loan to be repaid at $500/yr for 15 yrs.

2009-The American Recovery and Reinvestment Act of 2009 (ARRA)- First-time home buyers were offered a tax credit of up to $8,000 which did not have to be repaid. Non-first-time buyers were offered up to $6,500.

2010- ARRA was extended to buyers under contract by May 31 and closed by Aug. 31.

Looking at sales and prices from 2006 -2011, I saw no significant effect on our market. Here's the data.

Except for a property tax issue in Aug. of 2007, the sales and price increses reflect the normal seasonal cycle of our business. I'd be interested in hearing what effect the stimulus programs had on your markets. Maybe the 2012 plan will have positive results, but I doubt it. The only good thing is that given the current political climate, there's little chance anything will be passed.

2011was a challenge for the real estate market in Muncie and Delaware Co., IN. Terrible weather depressed business in the first quarter of the year. Second quarter results were also quite disappointing with nearly every measurement at or near all-time lows. However, there was a turn-around in the third quarter with overall sales better than the same period in the previous year for the first time in 12 months and we ended the year with 836 homes sold, down 6% from 2010.

Repos remained steady at about 29% of sales, averaging around $33,000 each. 80% of the repos were sold for cash indicating they are being bought by investors. Since most of these units are below $40,000 threshold being required by lenders, buyers are having difficulty obtaining financing unless they have large downpayments. This will further delay the absorbtion and depress the prices of this segment of the market. On the plus side, this will mean continued opportunites for investors with cash.

The overall inventory of homes for sale in Del. Co. remains low for this time of year and at 2011 sales levels there is just over 6 months supply at $75,000 and below ranging up to a 13.5 month supply of homes over $300,000. Altogether, we have just under an 8 month supply. More high-priced homes were sold in 2011 and overall sale prices moved up 1%, the first annual increase since 2008.

2012 looks to be a little brighter year. Interest rates remain at all-time lows and seem likely to continue at present levels at least throughout the first half. There is a continued lack of new construction so existing inventory should be absorbed at a greater rate and prices should hold. The property tax caps enacted by the legislature three years ago seem to be working and assessment values appear to be following sale prices as intended. We still have a "lack of confidence" mode and buyers will remain hesitant to commit until there is an increase in positive economic news, both locally and nationally. 2012 is a state and national election year with all the mixed messages that creates, so I doubt there will be any confidence-builders coming from the public sector. For 2012 in general, I expect unit sales here in our area to increase around 8% and for prices to gain modestly ending the year up 1%.

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Muncie and Delaware Co, IN is a small market and I do both residential and commercial brokerage. On the commercial side we're usually dealing with business professionals and attorneys who have broad experience in these transactions. "Due Dilligance" is done prior to entering into the process of negotiating an offer and then there is an additional period after an offer is accepted. This gives the buyer time to investigate details such as environmental issues, inspections, zoning, governmental approvals, permits and the like.

In residential transactions the buyers look at a number of properties and make an offer on the one they like best. Their "Due Diligence" usually involves personal viewing, investigation of schools, and a CMA prior to making an offer and then finalizing financing and inspections after the offer is accepted. Since most buyers are not seasoned professionals, they can overlook some details that can have a big effect on their quality of life in the new home.

Residential buyers rely on their agents, Sellers' Disclosures and their home inspector for discovering problems, but agents must be careful about making neighborhood statements because of Fair Housing and possible lack of first-hand knowledge. Disclosures can be misleading, even if unintentional, and inspections have a host of disclaimers covering areas that are impossible to check. There are legal remedies but these can be costly and lengthy. What about intangibles? You can go on line and check for sex offenders, but those searches may not be current and may have unacceptable provisions like a 200 ft. tether when the next house is only 100 ft away. Even in upscale subdivisions, what's the neighborhood like at different times of the day and night? Does a nearby neighbor have an annoying hobby or barking dogs?

I could list many more possibilities, but the point is to have home buyers learn from commercial transactions and go further with their "Due Diligence." Visit the prospective neighborhood at various times of the day. Park along the street for 20-30 minutes each time and see what goes on. Knock on the doors of nearby neighbors and talk with them about the neighborhood. What do they like? What don't they like? Most will be open and honest and you may start a valuable new friendship. Real estate is not liquid and when buyers become sellers it's a whole different ball game so a little more "Due Dilligence" can help insure a happy outcome in the purchase of a new home.

As we come to the end of 2011 I want to look forward to 2012 and make some predictions about the real estate market in Muncie and Delaware Co, IN. 2011 was a very difficult year and when the final tallies are in, we're probably going to see unit sales down about 10% from 2010 and average sale prices about equal to 2010.The good news is that most of the problems were in the first half of the year and that 5 of the last six months have been better than their 2010 counterparts.

Looking ahead, I think 2012 will remain relatively flat with some improvements in the second half. There are more optomistic predictions beginning to appear in the media, but many of those predictions are based on improvements from very dismal prior years. If you look at the formerly "hotmarkets" like CA, NV and FL, many areas lost 50% or more of their previous values so it's not to hard to show improvements. In Muncie and Del. Co. our average sale price only dropped about 10% from 2006 levels and has been increasing over the past 6 months.

Market conditions are excellent, with low interest rates and attractive prices favoring buyers and low inventories favoring sellers. Our biggest problem remains the lack of confidence generated by all the negative financial news and especially by the lack of policy direction from Washington. Added to that is the uncertainty resulting from an presidential election year. Locally, we have a new and untried city administration and a governor election coming up. When faced with uncertainty people put off major financial decisions like home purchases.

On balance, I think our unit sales will rise in 2012 to somewhere in the 900 range, up from just over 800 this year.

Interest rates will rise slightly as the national economy improves, but will still remain below 5%.

Average sale prices will rise 8-10% as a result of low inventory and increased buyer activity.

New construction will remain slow but should improve from the very low levels of the past few years.

Best wishes to everone for a prosperous 2012.

The following article was posted by CNBC on Yahoo Finance last Fri. Those of you who read me regularly know that I usually ignore national market information because all real estate is local. This time, however, our Muncie-Delaware Co. market data seems to be reflecting many of the characteristics of the predicted recovery. Our unit sales have exceeded those for the same period in 2010 for the past 5 months. Average sale prices are also up.

Here's the article. "After half a decade of withering sales and slumping prices, there are strong and diverse signs that the single-family housing market is poised for a rebound.In some metropolitan areas, the market has bottomed, with both sales and prices on the rise and foreclosures on the decline. This contrarian - and largely overlooked - thesis flies in the face of the persistent gloom that has nagged the industry since 2007, when the subprime crisis flared.

Industry analysts and players cite a number of reasons - some traditional (employment), others unique to the post-credit bubble era (foreclosures) Â - for the long-awaited sea change. An analysis of industry and government data also support the forecast. "It has become increasingly apparent to us that the pieces for a housing rebound next year are beginning to fall into place," declared Barclays Capital analyst Stephen Kim in a recent note to investors.

Proponents admit that the nascent rebound could easily be derailed, but stress that after years of government efforts to support sales and prices as well as the volatile impact of foreclosures, the market has regained a measure of normalcy. "With the exception of really hard-hit markets, the vast majority is ready to turn around," adds Jerry Howard, president and CEO of the National Association of Home Builders, NAHB. "The Washington, D.C., area is not only ripe for recovery, they need to start building units."

The iShares Dow Jones US Home Construction Index Fund (NYSE Arca: itb), for example, is up some 38 percent, while the S&P 500 is up about 21 percent.

Nevertheless, skeptics overwhelmingly outnumber the optimists, given the false-starts of previous years, the economy's sub-par performance, a new wave of distressed properties and the capacity for the European debt crisis to spook business, consumers and investors. "I think it's premature," says Richard Smith, CEO of Realogy, the nation's largest real estate company, whose brands include Century 21, Coldwell Banker and Sotheby's International. "We see little indications here and there. Transaction volume is improving. Prices are still under pressure. This isn't going to be one of those spiked robust recoveries." Smith is echoing the conventional industry calculus: that price increases follow sales growth amid consistently strengthening demand.

There's been little conventional, however, about this housing slump, which is one reason it's had so many false bottoms. Among its many firsts - housing starts fell through 1 million annual units, foreclosures topped 2 million in three consecutive years, and home prices declined on a national basis.

The catalysts to recovery are mostly the same: for potential buyers, residential rents have now risen enough to consider buying; existing-home inventory is the lowest in five years, while that of new homes is at a 40-year low; affordability is at a record high; delinquencies have peaked; consumer confidence is on the rise ; and job growth is accelerating.

For investors, with a continuation of the gold rally in question, real estate is beginning to look like a viable inflation hedge alternative, while rising rents mean greater profits.

That thinking may help explain why the iShares Dow Jones US Home Construction Index Fund (NYSE Arca: itb), a broad barometer for the housing market, is up some 38 percent from the stock market's October bottom, while the S&P 500 is up about 21 percent.

Finally, there's the intangible fatigue with bad news, and a desire to end the negative feedback loop. "We believe there is sizable housing demand that could be released into the market," says Lawrence Yun, chief economist of the National Association of Realtors, NAR. The NAR is forecasting existing home sales will rise 5 percent in both 2012 and 2013; prices will edge up 2 percent in each of those two years, then 4 percent in 2014. The NAHB is forecasting a 5.1-percent increase in new home sales and a 10-percent increase for new home starts in 2012. "