2012 Predictions In Review

With just a few days left in 2012, I think it’s appropriate to check on the list of 7 predictions which I had made at the beginning of the year.  Let’s see how everything turned out:

  1. President Obama will get re-elected – Got it right – I knew without a doubt that Obama would get elected when Romney’s video explaining what he thought of ‘the 47%’ was released.  It proves that Romney, and really the Republican party, is very much out of touch with the voters.  I don’t know that they have a consolidated message and even when they do, they have done a very poor job at translating that into a message that the voters respond to.  This win wasn’t so much a victory for Obama as it was a fear of Romney. 
  2. A downturn on strategic defaults and underwater mortgages – Got it right – I figured that the housing market had hit bottom.  Last year it seemed that while things weren’t on the upswing just yet, we had leveled off.  This year did see an actual upswing in most areas of the country, and part of that included less strategic defaults and less underwater mortgages.  I guess if home values rise, this naturally brings people at or above the ‘underwater’ line, which would give people less reason to walk away. I’m very happy to see this and I hope that the housing recovery market is sustained moving forward!
  3. The Eurozone crisis will not be solved but will get less attention – Got it right – Was anything really accomplished in the European crisis?  Not really.  I think they did kick the can down the road a bit, but as far as actually solving anything, I don’t think that happened to any real degree.  However, the markets and the economy really didn’t react in much of a negative fashion.  There was a couple of months in the middle part of the year where the market did have some rough weeks, and they were tied to the European problems, but that was shrugged off relatively quickly and I don’t think it played much of a factor overall.
  4. Blackberry will be history (or RIM will be out of business) – Not so much – Blackberry is still around, and I’ve heard that the next release (Blackberry 10) is thought to be very well designed, and if it is received well, could put Blackberry back on the map.  I personally don’t see much hope here.  In the consumer electronics market, more often than not when customers abandon a particular company to the degree that has taken place with RIM, it’s pretty hard to convince them to come back.  The only big exception in history that I see here is Apple, but I’ve seen Apple, and I’m sorry RIM, you are no Apple.
  5. Apple will either provide a dividend or make a big purchase – Got it right – Apple instituted a dividend for the first time in 2012.   No big purchases, but since it was an either/or type of statement, I got it right.  The stock for Apple has been on somewhat of a roller coaster ride, rising all the way to $700 per share and dropping down to the low $500’s.  I think investors are finally starting to realize that while Apple is a great company that makes wildly popular products, the amount of growth potential may be slowing.  Wall Street investors live and die by growth, so the perception that Apple may have finally hit a ceiling could make for a bumpy ride moving forward.
  6. Unemployment will fall, the economy will improve,businesses will get better, but consumer spending will lag – Got it right – The economy has definitely continued to improve, and business profits have improved, but not to the robust levels that would indicate a long term healthy economy.
  7. Oprah will lose her network – Not so much – She still has her TV network, but the fact that I had to look this up to see where this stood, well it’s still not doing so well.  I know Oprah said that she wanted to put more of her ‘presence’ into the network this year, and I’m guessing she did that, but to what degree this matters, I really do wonder.  Before she shut down her talk show, you used to hear about Oprah in some fashion all the time.  Her opinion and voice was right up there in the cultural fabric.  Now, I think her voice has lost a lot of luster, so while she still has her ‘own’ network for now, I clearly think it’s been a disaster.

Five out of seven, or just over a 70% ‘success’ rate was how it worked out for my predictions.  That’s not too bad!

How did 2012 turn out for you personally and how did things around the world play out from what you had thought would happen in 2012?

What topics do you think I should predict for 2013?

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Did Condos Get Hit Harder Than Houses In The Downturn?

In 2007, I sold my condo and we bought the house of our dreams.  We wanted something that we would be able to start a family in, and the house has served us very well in that regard.

The condo I sold was my first real place, and I left it with great sadness.  Still, I knew that while it was a good bachelor pad, it wasn’t any place to start a family.

The condo was built around 1990.  I think the ‘original’ price was in the neighborhood of $70,000 or thereabouts.  It sold in the early 1990’s for around $80-85k if memory serves.

I bought it in the spring of 1999.  It was listed for $104,900 and I put a full price offer.  There was a second offer, equal to mine, but the seller chose my offer because I was not moving out of another house, therefore I didn’t have another sale in the way of closing.

Everything went without a hitch and I took ownership in March.  Within the first year, I replaced all of the carpeting and re-painted virtually every room.

In 2003, I re-financed from a 30-year 6.875% mortgage to a 15-year 5.25% mortgage.  These rates look high compared to today, but both at the time were pretty good rates.

Based on similar units sold, the condo appreciated pretty well, though nowhere near the crazy levels that were seen elsewhere.  I figure at its peak value around 2005 or 2006, it probably could have fetched $140,000.  It was an end unit, pretty well maintained, and the neighbors were, for the most part, quiet and courteous.

The market had already started to slip, at least in the Detroit area.  Sales had pretty much come to a standstill, so when I met with the real estate agent to help me sell the unit (the same agent who had represented me as a buyer back in 1999), he set the expectation that it could be awhile.  This was in the winter of 2007.  He suggested I paint again and do a few other things, which I did.

We listed the condo for $135,000.  Within a few days, another unit went for sale in my building around $132,000, so even though it had only been a few days, we lowered the price to match.

People looked but things were slow.  It could go a few days between viewings.

After about a month and a half, the realtor indicated that there seemed to be a pretty promising looker.  Sure enough, it was on a Saturday that he told me that we’d received an offer.

At the time, I felt the offer was far below and was actually a little insulted.  Still, after talking it over with my realtor, he advised that I accept it.  The offer was for around $122,000.  I asked him to counter with $124,900, which he did, and it was accepted.  I would also have to pay around $5,000 at closing, so it was really around $120,000.

This still represented quite a bit of equity, but after seeing the values fall around $20k from it’s peak, I was disappointed.  You have to realize that I had no idea of what was really about to come.  I felt we ‘made it up’ on the purchase of our house, as we got the house at $50k less than what the owners had paid for it in 2003 (which I thought was the ‘bottom’, though it went down another $50k or more after we bought it…but back to the condo).

The day of the scheduled closing came and we were told there was a delay. This was a nightmare for us because we were doing both closings on the same day, selling my condo and buying our house.  We were nervous about losing the house, but we had no choice to delay the week or so that the buyer’s lender (Countrywide, if that tells you anything) needed.

The new closing date came and another wrinkle came up.  Turns out that there were some limitations on what we could ‘give back’ to the buyer at closing as part of the transaction.  I want to say it was limited to around $1,000.  My realtor had been in contact with the buyer and asked that we cut her a check during the closing for the difference.

I knew that if I said no, she could just cancel the sale.  But, I also knew that we had leverage, so I offered to split the difference.

She accepted, so we ended up a couple of thousand ahead of where we had planned.  Not too bad.

At closing, I was a little horrified to find out that she would be financing the entire transaction, with a primary and second mortgage taken at the same time, both by Countrywide.  We all know how that turned out, but at the time, if you banked on the values going back up, this didn’t seem so bad.

As it so happens, it was within a couple of weeks of closing that Countrywide problems really began to emerge, and they stopped those type of loans.  So, we beat it under the buzzer.

After seeing the values continue to drop, I was curious as to what would happen with the condo.  I noted in 2008 that the condo was on the market, though it was for rent.  By that time, the buyer was definitely underwater.  I found out from an old neighbor that I kept in contact with, that she ended up moving out of state with an ex-boyfriend.

Tax records for that city are kept online and are available for public viewing.  The summer and winter taxes were paid a couple of times, and then they weren’t.

By this time, values had dropped even more, and I figured that she was giving up the condo.

Over the summer, we had dinner nearby and I wanted to drive by.  The place was definitely in foreclosure as the notices that are common were posted in the windows.  Looking in, the place looked pretty good.  The neighbor that I had mentioned earlier happened to see us, and said that, yes, she had given it up, but that the bank had just put it back on the market.

So I searched and found the listing, and I was floored when I saw what the asking price was:

$49,900.

In 2011, that was 30% lower than it had originally sold for twenty one years prior.  And while it was dated (appliances were all original, linoleum and fixtures were all original), it wasn’t destroyed like other foreclosures, all the wiring and plumbing were intact.  From the listing, you could tell that even the washer and dryer that I had to leave as part of the sale were still there.

It ended up selling pretty quick.  For more than the asking price.

How much more?

$100

That’s right, the property tax records showed that it sold for $50,000.

I simply couldn’t believe it.

I knew condo owners took a bigger hit.  But, not only was the eventual decline more than what our house went down ($75k for the condo vs. $50k for our house), the percentage differeace was huge (62% for the condo, where it was less than a third of that for the house).

As much as I hated seeing our house decline in value, it will take a lot longer for the condo to recover value than it will for the house, at least in term of percentage.

Not only that, but you have to figure at those deflated prices, that you might have had people buying condos that might not otherwise be able to afford them, and that they might not take as good of care of them given the low prices.  This could further keep the prices down.

That was shocking to me.

What have the trends been in terms of houses vs. condos where you live?

 

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Can You Predict A Drop In Your House Price?

The following is a guest post by Money Supermarket.

There is no doubt that the current real estate market in America is going through tough times and the consequences of the global economic recession have hit this country hard.Homeowners in particular are being hit hard as, with a rise in repossessions, strategic defaults and negative equity, some locations are experiencing property depreciation. This means that house prices are falling, often due to reasons beyond the reach of most homeowners in the area.

There are a variety of circumstances in which this unfortunate event can occur and it is wise to be aware of them so you can take any necessary action. And, if you are in the position of bidding on a new property, you should also use a mortgage repayment calculator to make sure that you can afford the repayments and do not default.

These include a high number of foreclosures in the area, the building of prisons or refuge centers in the location and the property being sold to unscrupulous landlords who exploit it solely for commercial gain without consideration for the area.

The drop in house prices as a result of these actions can be considerable. A recent Ohio news report detailed how the arrival of a scrap metal recycling firm was alleged to have depreciated house prices in the area by 25%.

Depreciation of any value is something that homeowners should try to avoid at any cost but, as in the example above, a drop of a quarter of the house value would have had a considerable effect on these residents.

If you are wondering how this would affect you, put your current numbers in to a mortgage repayment calculator and imagine how different the picture looks if your house is worth much less than when first valued.

For some homeowners, this would plunge them straight into negative equity. For any householder, it could be an upsetting and distressing experience, as people often become very attached to their homes.

It is understandable given the time and money we put into making our homes a safe and special place for us to live. The building of a prison or the opening of a homeless refuge in the area can have consequences.

Of course, these buildings are needed somewhere but unfortunately for local residents, it can be to their detriment. Ensure you read the local press or check on your state’s planning website to keep aware of any planning applications.

Even the building of supermarkets and shopping malls can have a detrimental effect on houses in the immediate area. The increased traffic and the powerful lighting used on these stores have made many homeowners feel like they are living in Disneyland!

As well as keeping abreast of planning news, keep an eye out for any other changes in your neighborhood that indicate things may alter for the worst. A number of foreclosed houses, for instance, would suggest the area might suffer in the future.

Foreclosed houses can attract squatters of both the human and animal varieties! In Florida, for example, it is not unusual for empty houses to become infested with snakes and other animals.

Often, landlords will buy these houses at knockdown prices and let them out for a quick buck. Unfortunately, the residents may not always be the best neighbors and this too can affect the property values of an area.

Look out for all these signs of the area depreciating and whether this will negatively affect your house price. These predictions may mean you can sell if necessary before the worst times come; fingers crossed they never will, but better to be safe than sorry.

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For The First Time In Five And A Half Years….

I don’t post our net worth updates much anymore, mainly because I don’t post actual amounts and I didn’t feel posting percentage updates was really interesting to my readers.

However, I just finished our net worth updates for the month and I noticed something….

For the first time in five and a half years (since October of 2005), the value reported on our main property came in higher than it did from the a year ago.

From October 2005 to mid-2007, I reported the condo I lived in at stable value for awhile, then on a slow decline as the market started to soften.

In mid-2007 we moved into our home, but even though we didn’t have a history to compare it to, the reported value steadily declined so I know that the move doesn’t matter.

From 2007 to 2010 the value fell regularly.

Finally, it’s looked like it stabilized, and I April 2011 versus April 2010 was the first month that it actually came in a little higher.  I’m not jumping for joy, because it was only a couple hundred dollars difference, but it’s a start, anyways.

For the record, I use a combination of factors including Zillow estimates, property tax records, the bank ‘high level’ appraisal and nearby sales to calculate the value. This has been refined over the years (in 2005, it was pretty much market comparisons), but it’s still startling to see just how long this decline in real estate has been going on for.

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