Indiana Realtor blog by James P Wells. Discussing Real Estate topics concerning Central Indiana and the US. Focusing on Boone and Marion County.

I get asked all the time how the Real Estate market is going. My answer changes, but I find I normally get more information than I really give when I discuss this issue with people. I don’t get to determine if we are in a good market or not, the general public does. When people ask me what I think, I ask them the same thing and get a ton of information regarding current opinion.

I also use a website to post short surveys, and review other’s surveys regarding the real estate market. You must understand it’s demographic limitations, but it is still a good source of public perception. Here is a recent survey regarding Real Estate Short Sales which tells me many people don’t know what it is:

A recent article on CNN Money shows different estimates for home value growth in various regions of the US. While some market values look bleak in the future, the majority will see a slight rise in value based upon their estimates. Here is their breakdown:

• The North East- The slowdown will continue. One of first areas to be affected by the market decline, the trend is likely to continue, but some areas will see moderate growth.
• The South- Having 12 of the 20 hottest markets for 2007, the South seems to be rising again. Other than areas of FL, most of this region will see gains in property value.
• The Midwest- Having missed out on the good times during the Real Estate boom of the last several years, this market doesn’t have much to lose and therefore won’t suffer a lot in the downfall.
• The West- Ouch, the worst outlook in the nation for the next couple years. The gold has turned to lead, with Las Vegas being #99 out of 100 in projected price change.

With foreclosure filings to hit an expected 2 million this year, the real estate market is hitting new records which aren’t good ones. Nevada leads the pack with 1 in 185 households hitting foreclosure.

If you visit any of the pages in my website like my Zionsville Real Estate section, you will see county information regarding building permits for the last three years. A quick review of the permits for Hendricks, Hamilton, and Marion county over the past few years shows a decline in the market. I see this as a market adjustment to meet supply and demand. The demand for homes as been declining in our local market, but central Indiana still has growth, even though it is not as strong as it was. The area around Indianapolis is expected to have between a 3-3.5% increase in property value over the next two years, ranking it 7th in the Midwest and and 33rd nationwide.

So what does all this mean to you?

Buyers- Foreclosures are rising and lenders are tightening the belts on approvals, but sellers now have to be realistic in their pricing to sell within a reasonable time frame.

Sellers- Buyers seem to have the upper hand, so promote your property in the best possible fashion and remember that “buyer financing” is the #1 reason a sale doesn’t occur once an offer is accepted.

In closing- The Indiana market is good, but parts of the nation are in real trouble. And while the economy has a direct impact on real estate value, public perception of the housing market (which is also effected by the economy) plays a vital role in property values as well.

In an effort to keep another great depression at bay, the Federal Reserve led by chairman Ben Bernanke, cut a key interest rate down to 4.75%. The Feds have been receiving pressure to reduce rates and this cut will have several different impacts on our economy. The immediate relief will be seen in loans, and hopefully spur the souring housing market. Current ARM owners will also see some benefits, but not likely as immediate or as drastic as those who are currently trying to buy a home.

The short term implications will help spur the economy, but it will likely be 3-9 months before we see any real results from this cut. The Feds have also left the door open for further cuts, but don’t expect anything too soon.

I have received several requests in the past few weeks to contact my congressman and request support of this bill. These requests have been sent from several different sources but the most recent was from Pat Combs, President of the National Association of Realtors.

I’ll admit that I haven’t reviewed this bill with a fine tooth comb, but I have looked thru it. I do see benefits from changes made to this bill including tighter requirements on mortgage broker (required surety bonds), but my concern is more about the attitude and some of the other significant changes proposed like:

• Eliminate the 3% down payment currently required
• raise single-family FHA loan limits to 125% of area median home prices
• allows Secretary of Housing and Urban Development to make even further increases if required by market conditions

I may go on a rant here so I’ll apologize up front, but this bill is being sold that it will modernize FHA for current market conditions. I loaned money for 10 years and was deeply involved in sub-prime mortgages. The main reason I chose to leave the industry was because I saw things were getting out of control.

Indiana has been at the top of the foreclosure list for many years and I believe a big reason for that is because we have made it extremely easy for people that should not be homeowners, become homeowners. Indiana homeownership rates for 2005 put us at about 78.5% compared to 68.9% for the US. What does this have to do with foreclosure you ask? I own rental property and can honestly tell you that there are people in our society that are not able to successfully own and maintain a home. The question becomes- What percentage of the population can effectively own and maintain a home?

I guess I just don’t understand how making it even easier for a 1st time buyer to buy a home will help us in our current market slump. The slump has been created via several different factors, including low down payments (reduces the buyers vested interest in the property), High loan to value percentages (if you owe $125,000 on a $100,000 house and making the payments becomes tough, what incentive do you have to retain the property), stated income loans (people don’t have to prove what their income actually is for loan approval), and most importantly a huge swing in the supply/demand cycle.

Loan approvals are becoming tougher to obtain and homeowners stuck in bad loans may end up losing their homes if they are unable to refinance, but revising the FHA guidelines in this manner doesn’t agree with my opinion of a solution. The real estate market needs this adjustment (the current slump) to bring home prices down so they are more affordable to the average buyer. Reducing down payments and and increasing LTV percentages only makes it easier to afford in the short term, not for the next 30yrs when the buyer will need to make those mortgage payments.