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From Prestidigitator to Prognosticating

2011 is underway and it’s hard to tell which road will be taken. I am hoping that it is the road less traveled—the one to the settlement table. It’s time to get this housing market kick started and ready for a robust spring. Call your senators and congressman and ask them to put pressure on lenders to free up some of that TARP money. Families are in the wait. Move-up buyers have a huge inventory to choose their next house and the money is at its lowest rate in years. Open the vaults and get it to the buyers.

Let’s talk numbers. TREND, (our multiple listing system) keeps statistics on everything real estate.

The stock market is positioned to break the 12,000 mark—evidence that the economy is moving in the right direction. Jobs are still elusive in our area—and the region—but economists predict they will increase in the second quarter of 2011 and continue through the year. (These are the same economists who predicted seven out of the past four recessions.)

When I speak with John Tuccillo, former chief economist of the National Association of Realtors, he usually ends his speech with, “Your guess is as good as mine.” Our 2010 was the worst year in real estate since the fall of the Roman Empire. There were more foreclosures than reality TV shows. The bad news is in 2011 both numbers will grow. Short sales are becoming the norm.

Previously in my career, you never asked the seller if he had enough money to go to settlement. Now the question is asked within the first five minutes of the appointment. Banks are not equipped to handle the volume of short sales and foreclosures, thus backing everything up for weeks and often months. The government must free up the gridlock that’s so prevalent in the mortgage process. Unqualified underwriters are making decisions based on their mood, not financial fact. Until this is corrected, the housing market will stay adrift. In one instance, a soldier’s family was foreclosed on while he was fighting overseas. It was a mistake—their mortgage was up to date. Sadly, it was one of the three major lenders in America that made the error.

The first quarter of 2011 will mirror the last quarter of 2010, which is not good news. But then the view becomes brighter for the New Year. Spring will bring lots of sun and a brighter outlook for real estate. It should look a bit like spring of 2009—not the greatest year, but about 3 percent better than last.

Any movement is welcome. Through the rest of the year, we will see an improvement on the numbers, ending the year ahead of 2010 by numbers that teeter at 3 percent to 5 percent. This is all conditioned on the government not putting a jinx (incentive) in place and the banks getting a handle on the foreclosures.

In 2010, the governments were picking our pockets faster than the Amazing Kreskin. They pick our pockets and add to the debt. Our administration gets my vote as the leading prestidigitator of the decade. The economy was soooo bad in 2010, Houdini would face his greatest escape challenge. That was last year. This is this year. We need to go to our happy places and think positively.

My hope is that, locally, the government’s hands will stay out of our pockets. Our property taxes have nearly doubled in the past 24 months. What is on the horizon we will find out when the newest deficit comes to light? The defense from our elected officials is to look to neighboring states and feel lucky that we are not paying what they are in real estate taxes. That spin doesn’t work, because while looking at the neighboring states, I look at their state income tax rate, which is much lower and, in some, instances nonexistent, so that dog won’t hunt.

The reality is that you need to take the whole picture into consideration when explaining taxes. The simple formula would be: money earned, money paid out to various taxing organizations, taxable goods, licenses, and a host of other hidden costs followed by money kept. The rate is extraordinarily high. Government spending is not kept in check, which results in a shortfall. When the government has a shortfall, it looks to whatever means will not have a negative effect on their chances for reelection. The solution is tax everyone equally, spend judiciously, look to future needs and, above all, be honest.

I have been reading economic reports for the past several months, listening to economists, the Fed, the president and a host of elected officials. Frankly, the numbers don’t add up.

The job numbers seem large on the surface, but where are those jobs? Many of the jobs lost will never come back.

The economy is growing and consumer spending is up. Really? Our retail division has more properties for rent than ever before. Commercial vacancies are high, and few are building new properties—residential or commercial. Hopefully 2011 will show a reversal and start the trend upward.

Nostradamus would not be impressed by these prognosticators. As a matter of fact, if you are looking to find out what will really happen, you need only to travel to Punxsutawney, Pennsylvania, for an event that has been happening since 1887. Punxsutawney Phil, the only groundhog prognosticator since (longevity due to an annual sip of groundhog punch at the summer picnic) appears on February 2 from his home, Gobbler’s Knob, and predicts the remainder of the winter. If, as legend states, he sees his shadow, there will be six more weeks of winter. Now this is a prediction you can hang your hat, gloves, boots and coats on.

On the other hand, if the current administration comes out of their “homes” (the White House or the Capitol) to make a prediction, be assured that we will have six more months of recession. Let’s hope they stay huddled inside and find solutions rather than face the cameras and microphones to pontificate.

Yes, 2011 will most assuredly be an interesting year. If we go on the way we have for the past several years, there is little hope for recovery. A double dip recession—even a depression—is inevitable.

But if we buckle down, curb spending and, above all, get people back to work, there is hope for a gradual recovery, starting in the second quarter. The two biggest challenges are job creation and housing starts. When people are employed, they purchase homes, move up to larger homes and stimulate all of the ancillary businesses connected to housing.

I don’t see myself as a prestidigitator or prognosticator, but I hope if I see my shadow next week, I will he heading in the Right Direction.

P.S.—This weekend, I will be in Rehoboth Beach as the MC of the Polar Bear Plunge benefiting Special Olympics Delaware. Over 3,000 people will brave the cold and jump in the Atlantic Ocean on Sunday, (myself included). This is our 20th year and we hope to pass the $600,000 mark. Rehoboth will be packed as over 10,000 spectators will be crowding the boardwalk. The event starts Saturday with a 5K run and a Polar Bear Cake Off featuring six contestants from TLC’s “Cake Boss.” Come down and jump in, view the jumpers or just give me a pledge. It’s a great way to start off Super Bowl Sunday.

 

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