Welcome To My Loo

For the last five years my wife and I have gone without a formal toilet paper dispenser in our bathroom.  Part of our problem has been that we are very picky about style.  In the meantime, my wife has done a good job buying decorative baskets and such to make the toilet paper look cute sitting on a shelf.  But our world is about to change.  Recently, I found a great item for sale on Ebay.

This vintage-style reproduction of a toilet paper dispenser dates back to ones used at the turn of the century.  The original dispenser in our home went right where you see this one.  Life just got a lot better for all of us.

If you are in need of a vintage style toilet paper dispenser and don't mind a reproduction, go to The Charleston Hardware Co. website and check out thier inventory.  They have some nice wire soap baskets for claw foot tubs as well.  I asked them to antique the brass finish and they did it for just an extra $5.  Not a bad deal at all.  Now pardon me as I am off to use my new fancy dispenser....

Project Victorian Tour: 321 27th Street

For those of you who love restoration projects and old homes, please consider this property:

Part 1



Part 2

Ogden Valley: The Tale of Two Visions

The Weber County Commission met recently to vote on issues related to Ogden Valley and its growth and development. There was quite a showing by local residents who rebuffed many of the proposals on the table and were able to alter the results of the intitial proposals.  Here are the issues discussed:

• Zoning - Providing an amendment to allow commercial storage buidlings on lots where that use is currently not allowed.  Result:  After critisism from the public, the commission tabled the decision for later consideration.
• Commercial Amenities - Provide an amendment to allow for larger commercial signs and those that are interior lit.  Result:  After critisism from the public, the commission passed the larger sign ordinance but declined to do so for the interior lit portion of the proposal.
• Master Plan - the commission provided an update to its 20 year master plan.  Debate arose about a proposed road that passes through sensitive historic farmland.  Result: The commission changed the name of the map to the Ogden Valley Elements Map.

The fight to make Ogden a quality resort location is the same fight going on in Downtown Ogden in the effort to rejuvenate and restore it.  The specific issues at hand in each area are very different from one another, yet the spirit of the causes are the same: Crafting Quality of Life.

In each community you have two visions of the future.  In Ogden Valley, there is a natural trend toward easy development to meet immediate demand.  The problem with this approach is that easy development makes for poor quality, which in turn affects everybody with the externalities of poor asthetics, and therefore reduced demand and property values.  Zoning and building plans should be carefully considered because once something goes up, it takes a generation or two to correct if it's bad.  Just take a look at all the residual atrocities frleft om zoning mistakes in Ogden in the 1960's.  If Ogden Valley wants to preserve its future as a resort destination, it would be best for it, and the County Commission, to adopt policies in line with that vision.  If Ogden Valley wants to be just another mountain town, then easy unthoughtful development will meet its needs cheaply.  Fortunately, the choice is in the publics hands.

Merry Christmas!

Seasons greetings to everyone from the Peterson home!  

May our spirits be lifted as we reflect on this holiday of remembrance. 

Price and Appreciation Update

Its been a while since we updated our price index and appreciation charts.  Here is the latest data as of Q3 2009 from FHFA.

This first chart is a little scary.  Especially for Salt Lake and Utah Counties.  We have broken the barriers for depreciation year over year at least for as far as our chart goes back in history to 1986.  If you look at the Ogden curve, it seems to be flattening out while the other two counties are still accelerating in their depreciation.

The next chart shows was what is happening to the price points in index form.  The flattening out is evident in the Ogden curve while Salt Lake and Utah County look like a ride from Lagoon.

My take on things, judging from the current market, is that prices have stabilized where they are going to be for a little while...at least in the Ogden market.  Look for the appreciation curve to return to Zero over the next few quarters and stay there for a few years.

However, there could be another shift downward if unemployment takes a significant hike upwards.  Lets hope that is not the case.

REO Market: Dysfunction Junction

I have lots of interesting stories from the REO market this week.  Besides buyers being totally irrational, we have the added melee of banks running around with their heads cut off.  Lets review some examples:

1.  2676 Jackson Ave.

List price $44,900.  This home was a real doozey.  The picture looks nice right?  Well what you don't see is that all that rock has been put on the house by a five year old.  They also put the rock on the front porch...not around it but on the walking surface.  A major ankle-rolling hazard.  Inside you have two layers of tile that need removal, floors that are sagging from failed posts in the cellar, no kitchen, no furnace, and foundation issues.  Plus all the windows need replacement because they were scabbed into place. No casings...ect ect ect.  This home should have sold for around $32,000 with all the work required.  Just shy of a teardown.  What did this atrocity sell for?  $45,000!

2. 865 Binford St.

This is an example of asset manager buffoonery at the banks.  This property started out at a listing price of $48,105 back in September.  The price reduced to $43,105 in November.  My clients placed a full price offer on the property Friday of last week.  When I called to confirm the receipt of the offer, they told me the asset manager "accidentally" signed a contract with an online auction company to market the property the day we submitted our offer.  So, they said, we would have to wait  seven days to see how the auction turned out.  Wierdly, on Wednesday, the list price was reduced to $38,105.  Then on Friday they placed it under contract!  What!?  I petitioned the listing agent for answers to this wacky situation and why our offer, which was $5,000 higher than his new list price, was overlooked.  I still have not heard back from the agent. 

3. 2174 Jefferson Ave.

Ok, this was also a case of buyer's gone crazy.  The bank listed this 6,200 SQFT giant fourplex very competitively at $149,900.  It was definitely a cash cow if you could finance the repairs which I estimated at around $30,000-$40,000.  I had six of my clients inquire about the property and I represented two of them in submitting offers.  So what happens?  Well, the listing agent recieves six offers from various parties and one took the cake.  The listing agent never disclosed the amount of the winning offer but my understanding from anonymous sources is that there is concern that the offer accepted by the bank "may not appraise".  What kind of buyers are out there bidding on an INVESTMENT that won't appraise for what they are wanting to pay for it?  For heaven's sake have they gone mad? 

The REO market and wholesale market in general has entered an irrational exuberance phase that I can't get my head around entirely.  With tighter FHA guidelines around the corner, higher interest rates knocking at our door, and an expiring Home Buyer Tax credit just months away, I think the folks buying wholesale properties at a premium are in for a rude awakening.  Retail prices will not go up when these events occur and paying too much for a home on the wholesale side simply doesn't make sense.  Perhaps buyers (and their agents) haven't priced these events in yet.  If so, WHOOPS!   

REO Market Hot! Hot! Hot!

The REO market in Utah is heating up.  I have placed several offers in the last few days with multiple clients.  I keep hearing the same thing from the listing agents: "You are in a multiple offer situation.  Give us your highest and best offer."

Since the REO game is mostly for cash players, where is this cash coming from?  Frankly, I have no idea.  What I do know is that the number of players in the market is increasing and shifting the dynamic on how to bid on these properties.  Que today's chart please....

 
To get a feel for what buyers can expect to purchase a wholesale (sub $70K) property for, I took all the sales for the last year and figured out the difference between the list price and the closing price.  I wanted to see if there was a trend in the numbers.  I slapped a 7-sale moving average in and presto!  Its not perfect science but it helps us get our head around whats happening out there.  This chart is in chronological order according to sale date.

My gut told me in July that there was something wierd going on in the market.  I placed two offers on bank owned propety then and felt like I was fighting for table scraps with the other dogs. As we can see in this chart, July was a highly competitive month.  Then in August there is a big lull with buyers getting some significant discounts.  Since then there has been a steady run up to November which was also highly contested. 

I have been bidding on properties with my clients but we have been very particular about the area in which we are bidding.  We are also sensitive to property condition.  This chart includes all areas of Weber County so some of the heavier discounts have been for properties in rough neighborhoods.  Also represented here are properties that were "too rough" to bid on but were bought by somebody anyway.  I keep telling my clients "the joke is on that guy" for paying too much for a lemon. 


Another thing to consider is that some of these properties are being purchased by owner occupants.  No investor can compete with an owner occupant.  They will be outbid everytime.

Perhaps January will bring another lull and another window of opportunity.  In the meantime, we need to sharpen our senses and prepare to compete.

MBA: Refi Boom Ending

The Mortgage Bankers Association came out with their numbers for 2009 along with a forecast of future loan production for 2010 and 2011.  Here is their forecast distilled in a chart:

The MBA tracks refinances and purchase loans.  It does not track real estate transaction associated with cash purchase or other alternative financing.  What this chart is telling us is that purchase loans will build on the volume of 2009 but refinances will be in decline.  What is not included in this chart but in the MBA report is that interest rates are projected to climb steadily to 6.2% by the end of 2011.  Interestingly, the MBA appears to only be allowing for a .3% distortion created by the Fed purchase of Fannie and Freddie debt.  Other studies have shown the distortion may be as much as a full percentage point.  If the rate goes higher than 6.2% then refinance figures will be lower than projected here.  Let's watch and see.   

Ice Land: Sledding Through A Frozen Multi-Unit Market

Earlier in the year I posted The Changing Face of Investment Financing.  The point was to illustrate some seismic shifts in the way multi-unit transactions were being conducted.  The year is almost over and I thought I would revisit that subject with updated charts.  Here is our first illustration:

As we can see, sales of multi units have fallen off a cliff in the last two years.  With 51 sales completed year-to-date (5 of which were mine...smile), we have seen a 78% drop in sales volume since 2006.  The decline seems to be lessening year over year so next year hopefully should be equal or slightly better in sales.  The catch is I don't think the market is going to feel any better next year.  What I think is going to happen is that sellers will simply become more realistic about their options.  Let's explain with the next chart:

 
As you can see in this chart, normal mortgage financing - the preferred means of selling a propety - has taken a nosedive.  Meanwhile, cash, seller financing, and FHA have increased dramatically.  Today there are 134 multi-unit buildings for sale in Weber County.  This year we sold 51.  Doing some quick math shows we have 2.6 years of inventory right now. Yikes!  This very slow absorption rate in the market means that sellers will likely become more motivated as time marches forward...especially the ones that aren't good at management.  Since there is no "saftey-net" of conventional selling out there to rescue troubled investors, I believe several things will happen:

1.  More owners will become troubled as the economy starts to take its toll on employement and therefore rents and debt servicing.
2.  Many owners, especially the over leveraged ones, will simply abandon their properties to The Dead Zone and the cash buyers that loiter there.
3.  Those that are not over leveraged will seek alternative arrangements to rid themselves of the burden of managing rental property (i.e seller financing)

So in 2010 look for conventional financing to take another dip lower and cash and seller financing numbers to increase.  Also, look for FHA numbers to flatten as FHA tightens guidelines in the next several months.

2010 should be a great year for alternative finance.

Indoor Recreation Gets Boost In Ogden

In a report from the Standard Examiner this week, the Ogden City Council approved indoor recreation as a use in manufacturing zones.  The change opens up an additional 20% of Ogden city land for use of indoor recreation businesses.  No big development is currently proposed to take advantage of this change; but, it does create fertile ground when the time is right for those businesses that need it.