Notorious R.O.B.

Ted Williams: .406 batting average in 1941. Me: .600 in 2009. Sorta...

Coming off of an awesome, Hall-of-Fame type of year in which I batted .600 in predictions (or, alternatively, a year in which I only got 6 out of 10 predictions even remotely close to right, and hence am a big #FAIL), I thought I would don the Nostradamus hat once again and make foolish predictions for 2011. I know I should make 10 predictions, but… y’know, I’m sort of stuck on that number Seven.

Here are seven predictions for 2011. Many are guaranteed to be wrong, or your money back! But as a bonus, each prediction comes with a music video for your entertainment.

[Warning: don’t read this is you’re feeling happy and optimistic, and you want to stay that way. I’m personally feeling happy and optimistic, but as I put this together, I can’t help but want to reach for strong drink for the industry as a whole. I know I tend towards bearishness, and some might suggest, alarmism, so… I’d suggest you go read some other 2011 predictions posts as well. Here are a few I’ve seen myself: Lani on Agent Genius, Greg Robertson on VendorAlley, and this whole series over at Inman.com.

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A couple of weeks ago, I wrote that if you have a REO or short sale practice, you want to pay attention to some legal cases going on around the country:

Trouble is, MERS might lack legal standing to bring a foreclosure action. At least, that’s what the attorneys for the homeowners who are getting foreclosed are claiming.

Given that so many mortgages were packaged into securitization pools (RMBS), sliced and diced, with different investors taking a different piece of a few hundred thousand pooled mortgages… it really isn’t clear who actually owns the mortgage, and has the right to enforce its terms by foreclosure (or have its duly authorized agent/servicer do it).

I noted then that this seemingly esoteric legal issue is a thermonuclear landmine for the entire foreclosure and short sale industry, including real estate agents who represent buyers and lenders.

Well, Congress has been holding hearings on problems in the foreclosure industry. I haven’t seen too many media coverage of the hearings. This blogpost on Washington Post is one of the few I could find. I just spent valuable two hours of my life watching CSPAN video of the hearing on December 15, 2010, which is embedded above.

This topic is just too big, even for my lengthy posts. But if you have anything to do with foreclosures, REO’s, and short sales… I would suggest you spend some time looking at this issue.

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Men, they're coming for the mortgage interest deduction! This means war!

NAR has finally gone to the mattresses over Federal policy. Some time ago, I wrote that the mortgage interest deduction may be phased out or limited as part of Obama Administration’s new “sustainable housing” policy. At the time, I’ve heard quite a few people say, “It’ll never happen”. The thought was that the public loves the MID so much, they feel entitled to it, just like Social Security and Medicare. Plus, NAR is such a powerful political operation that no politician would ever dare touch the MID.

Well, the White House Deficit Commission unveiled its recommendation today, and guess what? The MID is most definitely on the table for outright elimination or significant limitation. From Housingwire:

Of the many proposals inside the document, the most contested one for the housing industry will be the mortgage-interest tax deduction. The commission proposes for the deduction to be limited to principal residences only and that eligible mortgages be capped at $500,000 instead of the $1 million current cap. The commission also proposed a 12% nonrefundable mortgage-interest tax credit for all taxpayers.

As expected, NAR criticized that part of the report, suggesting that eliminating or limiting the MID would cripple the housing market, drag values down another 15% or so, and so on. Investors who have been coming back into the market, at least for foreclosures and short sales, might need to redo all of their financial models based on the tax subsidy for mortgage interest not being there anymore. Buyers will need to redo their rent-vs-buy calculations. All sorts of bad things for housing, at least in the short-term, will come about.

Then earlier today, I see that NAR has put out a Call to Action to its members to call their Congresscritters to defend the MID. This is merely the opening battle, so how this issue gets resolved should signal how the rest of the Housing War of 2010-2012 will go.

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My friend Matt Dollinger recently commented on a post by the longtime real estate expert Steve Harney. Both were commenting on the doom & gloom article from Time Magazine on how homeownership is overrated. Steve Harney rightfully takes Time to task:

Again, they are simply arguing a miniscule point of an extensive research paper that proves the benefits of homeownership. Where is their research, their study, their expert testimony disproving this study’s results? They gave none because there is none. (Emphasis in original.)

Matt, in commenting on what Steve Harney wrote, and on the gloomy headlines from newspapers and magazines, suggests that real estate agents need to start focusing on how to answer questions from confused consumers:

We all understand that this is a difficult time for those in real estate… both consumers and agents alike.  However, your job above all else, is to become the Trusted Advisor of those closest to you and choosing you to represent them.  That means that you are responsible for being able to decipher fact from fiction and opinion from proof.  There are many conflicting headlines out there today published by everyone from trusted sources like Wall Street Journal, CNN and many others.  Your job is to sift through this material and create KNOWLEDGE from the DATA presented.  Only by creating this knowledge and providing it objectively to your clients can you truly assist in their decision to buy, sell or invest in real estate.

I agree wholeheartedly with both Steve and Matt insofar as their trashing of Time’s “reporting” and their recommendations to real estate professionals.  I do, however, think that the implications they draw are not necessarily what we’re going to face.

I believe that every real estate professional today, like it or not, has to become an amateur political analyst because it is well-nigh impossible even to understand what to make of conflicting headlines without understanding the political implications.

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[Note: This is a longer version of the original, which was posted on AOL Housingwatch a few days ago.  I'm crossposting it because Notorious ROB has no space constraints and my readers are used to 2,000 word posts, heh. ]

In Part 1 of this series, where I laid out why I believe the 30-year fixed rate mortgage (among other features of contemporary homeownership) was on its way out, to be replaced by a far greater emphasis on rentals.  So let’s take a brief look at what the future of rentals might look like, since many of you reading this now will be renting for a lot longer than you had ever imagined.

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It’s a chilly, rainy day here in New Jersey under iron grey skies.  If where you are is sunny, and you’re feeling happy and optimistic, and you want to stay that way, let me strongly suggest that you not finish reading this post.  This is where I engage in paranoid fearmongering speculation.

You have been warned.

Actual post continues after the jump.

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In part 1, I laid out some hints of what the Obama Administration has in mind for a new federal housing policy that would “reset the rules of the market” and engage in a “fundamental rethink” not just of the mechanics of housing finance, but of the objectives of housing policy themselves.  The Treasury now has all of the comments that it requested from the public and we can expect to see a proposal from the Administration sometime this fall or early next year.

In this post, I’d like to engage in the purest conjectures about what such a policy might look like.  I know that assumptions are dangerous, and any conjecture at this early stage is more likely to be wrong than right, but… hey, this is fun.  (If you’re a real estate and politics geek like me anyhow.)  So here we go.

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1906 San Francisco earthquake

There was, apparently, an earthquake in Washington DC not too long ago.  Thankfully, no one was hurt, and no serious property damage occurred as the 3.6 magnitude tremor rolled through.  Mere days later, however, I learned that another tremor — this one not registered on any geological survey — centered around Washington DC occurred.  From the Washington Post:

Responding to the collapse in home prices and the huge number of foreclosures, the Obama administration is pursuing an overhaul of government policy that could diverge from the emphasis on homeownership embraced by former administrations.

“In previous eras, we haven’t seen people question whether homeownership was the right decision. It was just assumed that’s where you want to go,” said Raphael Bostic, a senior official in the Department of Housing and Urban Development. “You’re not going to hear us say that.”

While this particular tremor hasn’t developed yet into anything earth-shattering just yet, and there are absolutely no details available just yet, for anyone even remotely connected to the real estate industry, these statements amount to a tectonic shift of realignment.

What rough beast, its hour come around at last, slouches towards DC to be born?

Conjectures follow.

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