Real Estate Information Archive

"But Jeremy, I offered above full list price and STILL got beat out! What gives?

If I had $5 for every Buyer who has been shocked (and dismayed) about having to "compete" for homes in this so-called "Buyer's" market, I'd have a nice little vacation fund built up.

Today we talk about

• the "Tale of 2 Markets", those listings that are "in" the market, and those that are "out" of the market;
• why Buyers are getting into bidding wars in St. George, Utah as well as other Western markets,
• and also why Sellers have to get in the "critical 20%" if they are going to sell.

Below this video is a copy of the chart I discuss in the video. Enjoy!

I guess they may not MEAN to ruin our lives.....they just want to sell papers, TV time, increase Internet viewing. But they are ruining our lives anyway.

If you don't belive me, consider the following "incident" experienced by one of my Seller clients this week:

• They listed their home with us a few months back and after a relatively short time on market, we placed the property "under contract" with a ready, willing and able buyer to close yesterday, October 9th.
• They day before closing, October 8th, all parties were ready to go with a fully approved loan, documents waiting at the title company. My clients had moved 90% out with the exception of their beds to a rental home.
• Mid morning the Buyer's agent recieved the following letter from their buyer: 

My husband and I have been watching the news very closely and it seems just too risky to buy a home. We know that the appaisal came in above the purchase price but we heard that houses went down 16% yesterday making this purchase worth way less than the price before we even buy it. For this reason I do not want to go through with buying the home."

Wow.

THE OUTCOME: Since (like most normal people) the Seller couldn't afford to pay both rent and a mortgage payment, they are now moving BACK in to their home without the proceeds they really needed to pay off some debt, etc. The Buyer missed out on a great buy on that home (truly), neither agent got paid, nor did the mortgage lender, nor did the title company, and the profit that everyone DIDN'T make DIDN'T go back into the economy.

Oh and by the way, houses didn't fall 16% in 1 day, nor have they ever done so in 1 single day, but the Buyer thought they heard that and the rest is history. That's a funny statement though.

As if the Country isn't already facing a huge economic crisis, the Media compounds the issues 40x over by printing headlines such as:

• "Is your Wall Street Money Safe?" (CNBC.com) - How do you think that headline affects the markets? Do you think many people ran to their broker and said "CASH OUT!!"?..I'll bet so.
• And my personal favorite: "Credit Markets Frozen!" (just about every news outlet in the world....) - How many totally able people may decide to not even try to make a home or other purchase by hearing that? "What's the use?" they probably say...

That's strange about the credit situation..my credit card still works, my home equity line is still completely open to me and people continue to buy and sell homes, cars and everything else under the sun right now.

Let's take this 1 step further. Been to Wal-Mart lately? How about In-N-Out Burger? What did you find? TONS of people spending money, that's what. People washing their cars, shopping at Kohls, fueling up, going to movies, going to DISNEYLAND!! (I LOVE Disneyland). I was in Costco today and the place was ABSOLUTELY PACKED.

The world of commerce has not stopped turning as near as I can tell.

Look, I DO NOT have a crystal ball, but many of us may be wishing we had lots of cash to buy up real estate, stocks, diesel trucks, whatever during this period. There are GREAT buys in the market on alot of items.

The world has not ended. On the contrary, it is actually revolving quite normally in so many regards. But we DO face some tough challenges in the short term. You may just have to unplug the news and stop reading the paper to survive this moment in time.....I know I have.

Look, I'm not going to sugarcoat this: Sales were down in September, the Economy is a mess and the Media isn't helping in any way shape or form. This is what Washington County Real Estate Sales have looked like for the past 3 months:

That last column is what we call the "absorption rate." 28 months of inventory was not good. 34 months of inventory is LESS good.

The flip side?

• Credit actually IS available and we continue to see people buy and sell homes.
• There are so many good stories out there, but nobody is telling them.

We just sold a home for 3 sisters from Idaho. They had held this condo in their family for many years and made a nifty profit. They were REALLY happy and it was closed and recorded just 38 days after it hit the market.

We assisted another young couple get into their first home last month and they are tickled pink. It was a bank-owned property, priced extremely well, and it got them out of a small apartment.

Then there is another family living in my immediate neighborhood whose' house is under contract to close sometime next week. They have owned it for 3-4 years, will take a nice little profit, use it to pay off some debt, then rent a larger home for a while preparing to buy again down the road.

I understand it is tough right now...BOY do I understand it. However, there really are good things happening for some people, housing values are getting back in line for the "everyman" and tremendous opportunities are surfacing for investors.

When all else fails I count my blessings every day to have a wonderful wife, 4 hilarious little kids and for every chance I get to enjoy the simple pleasure of pedaling and suffering on my mountain bike or road bike.

If you have any good, OR bad stories to tell about this market is affecting you, send them on over.

So you ask, "how low do you think prices will go?"......"have we hit bottom?" You may even ask, "is the world coming to an end?" Ok, well I haven't been asked that, but I've been asked something similar during the woes of the current market.

Now CNBC Analyst Dennis Kneale raises what may be the most critical question of all: Is the current housing crisis really a "crisis?", or just a problem blown out of proportion? Take 2 minutes 28 seconds and see if his answer to the question matches yours by clicking the link below:

So the Summary looks something like this:

-1/3 are owned 'free & clear'

-1/2 of the remaning 80 million were bought before the year 2000

-The median home price is up 53% since then

-Overall, 95% of all mortgage holders still pay on time.

-That leaves us with maybe 4 million homes in trouble.

-Moreover, only 2% of the households in America are actually in foreclosure!

Hmmm......is this really a crisis, or the proper adjustment necessary to get home buyers back in the game?  You make the call!

I just came across a very interesing Wall Street Journal opinion column titled as much: "The Housing Crisis Is Over," stating that April 2008 may have been the "bottom" of housing crash that started in late 2005. A pretty wild healine indeed, yet if you take the time to read it I think you will see that this guy's opinion is largely based on fundamentals, not just the wishful thinking of another housing crash victim.

Let's just say that he is right.....prices should start coming back, right? Not so, says the writer: "For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor."

His logic is based on the following key points:

• The current housing bust is nearly three years old (no longer a new thing)
• New home sales are down a staggering 63% from peak levels of 1.4 million & ousing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.
• Residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever.
• The very same thing that caused the bust will bring it back to life: Affordability. 

"Mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in."

I see some major logic in this guy's argument, and he certainly supports my personal theories that even if sales do increase, values will take a LONG time to recover. (See http://www.gostgeorge.com/blog_post.asp?post=14411)

By posting this I don't for a second imply that I agree with this opinion, but it makes for great conversation. What do you think? Somebody give me their take on this thing!

CLICK HERE FOR THE ENTIRE ARTICLE

I've been away a few days and apologize for not getting this info up quicker.  This is fantastic news for residents of any county in the Nation, and specifically for Washington County buyers.  For a complete list of limits for all Utah counties, click here: https://entp.hud.gov/idapp/html/hicostlook.cfm

The FHA was established in 1934 to help borrowers, particularly those with low incomes, purchase homes by guaranteeing banks that those loans would be repaid should the borrower default. But the agency's loan limits have generally lagged behind those of Freddie Mac and Fannie Mae and as home prices climbed dramatically and lenders with looser underwriting standards proliferated the agency became less and less of a player in the mortgage market.

As a matter of fact, FHA insured loans have been mentioned as a possible escape hatch for borrowers who may be unable to make payments on their current adjustable rate mortgages when their interest rates reset over the next year, but that plan has its' challenges.

FHA financing is NOT the same as subprime financing.  It provides financing to borrowers with some credit issues and lower down payments, but it requires documentation of income and strives to prevent “payment shock” where a buyer jumps from a low rental payment to a high mortgage payment

This is good stuff, and in addition to the benefit of current mortgage rates (which I commented on HERE), this will allow many more buyers to realize the dream of home ownership in 2008. 

As a specialist in working with expired listings, I have been asked multiple times in recent weeks, "can this increase help sellers in Washington County?" The jury is still out. The real challenge lies in the fact that according to Lawrence Yun, chief Economist for NAR, as many of 80% of today's Buyers are also SELLERS trying to sell their current home before being able to buy. Ouch.

I better start out with the following disclaimer: I KNOW you are all thinking, "but Jeremy, of course you want us to buy now....you're a dirty Realtor!".....

And yes, you'd THINK that was the case, but I'd like to hope that I'm above car salesman-like sales tactics, and if you are thinking about buying Washington County Real Estate for investment or to live in long term, you'd better pay attention to this post, and in more detail, the Time Magazine Article titled "Ignore the Headlines...."

On one hand I can't see this market not declining further, yet John D. Rockefeller made the following logic famous when he said: "The way to make money is to buy when blood is running in the streets."  And running it is!

Allow me to share the following excerpt from the article:

Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today's rate of 5.5%. Monthly principal and interest come to $994.31. Let's say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you'd have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you'd rather not be.

To make matters worse, you'll have just spent 1 more year in a place you don't like! 

Here it is - read it and give me your thoughts!

http://www.time.com/time/magazine/article/0,9171,1713483,00.html 

You may remember that phenomenon as a child....the ball begins rolling down the hill, driveway, whatever....away from you. You make repeated attempts to "lunge" with your foot and catch it, but to no avail. Finally, you realize that the only way to catch that thing is to get in FRONT OF IT.

So goes the process of pricing property in today's real estate market. I am just seeing the same ugly scenario over and over again right now in the St. George / Utah's Dixie area, and it goes like this. "Help my home won't sell" is the cry of most Sellers in our area these days. Let's look at a scenario that is all too typical with this group:

You decide to list your Washington County property as you will soon be taking a job transfer to another town, (or whatever reason happens to be yours.) You sit down with your Agent who doesn't get started on the right foot by telling you that the home you thought was worth $325,000, is REALLY worth $295,000 max. Can you believe the nerve of that agent? Just trying to steal your hard-earned equity, right?

So you relent and determine that $295,000 is just too low, and besides, your house is WAY nice than those other homes your agent showed you in the comparable. You can get at least another $15k, right? You list at $310,000 against your agent's judgment.  And since your home is better, it probably won't matter that the competing homes are priced from $285 - $300k.

A month into the listing showing activity slows and your agent encourages you to just DO THE RIGHT THING and get that price amended to a competitive level, say $294,900. Sadly, a few competing home sell bringing the new "market" value to around $285k. Still reeling from the news that your home isn't worth $330k, you choose a conservative $300k even price so you don't loose any more money on the sale of your home, money that YOU EARNED, right?

Long story short, 4-5 months pass and the market continues to run away from you down the hill.  In the meantime you, or your spouse, have made the job transfer and the other 1/2 and the kids have been living without you for 3 months already! You finally relent, determine to get IN FRONT OF THE BALL, and price your home at an aggressive $269k where it closes escrow at $259,000 to a really nice family. 

That was most likely a $30k loss, and a TON of time, pain and suffering in the process. Whoops.

The summary points here are very simple, and extremely obvious. We have a TON of buyers just sitting on the fence right now, and 4x that many Sellers getting upset at the "cheeky" buyers and agents who want to "steal" their equity.  

If you don't need to sell, stay put. If you do need to however, then you've got to get in front of the ball to grab it before it runs far, far away. What these buyers need is something that EXCITES them, and that "something" is almost always a well-priced, well-prepared property.

One of the techniques that is working really well for us right now is the process of setting up a series of continual, small price reductions at the time of listing. Say $2500 per week for a $250,000 listing, and maybe 2x that for a higher-end property. It works brilliantly for many reasons.

#1 - This process puts you in constant, proactive 'motion" to stay in front of the market, rather than waiting for the neighbors to out price you months down the road. #2 - Your home is continually hitting the Washington County Board of Realtors "hot sheet", the daily list of new listings, or price reductions. This same list ends up in hundreds of inboxes of actual Buyers who have logged in to the MLS through public portals and signed up for daily email updates of the hottest listings.

Don't chase that proverbial market "ball." Get in front of it.....now.

BOY!....has this market taken a turn from the "good old days....."  I say that a bit tongue and cheek since those days were actually just 2 1/2 years ago.  "That long ago?" you ask....yes, it's been that long.

The real estate world is certainly not ending. It is more accurately "adjusting" for better long-term health. Yet I find that I am facing an increasing challenge with helping our Sellers see the truth on the pricing of their properties. I know how easy it can be for an agent to tell a Seller what they want to hear, but can you tell me how that actually helps them?

 OF COURSE you can trust me.......

CASE STUDY - Joe (name changed to protect the overly optimistic seller) Joe IS a real person whom I just spoke with today. He recently finished a spec home in the Hurricane Valley worth I'd guess $250k. He is trying to sell it on his own because there is just no equity there. So I can tell him 1 of 2 things.

WHAT HE MIGHT WANT TO HEAR: "Joe, we might be able to get you that $270k you want so let's put it on the market and give it a go." I tell him this because I don't want to hurt his feelings.

THE RESULT: I spend enormous amounts of time and energy trying to market the home for 6 mos,after which it doesn't sell. He spends $1200/month in interest only payments and utilities (which he doesn't really have to give anyway). 4 months into the listing he is faced with converting the construction loan to long-term with costs him a few grand, PLUS the payment now goes to $2400/month. In the meantime the home loses another 5% in value.

TOTAL LOSS TO JOE: $12,500 value drop plus $12-$15k in actual hard costs for a total of let's say $25k, not to mention that the home STILL isn't sold and now he will have to market the home at the correct price for another 3-4 mos, spend another $5k in interest, and who knows what else in utilities, etc.

BETTER ROUTE: "Joe, I can tell the truth, or I can tell you what you want to hear but I can't tell you both. "(Tell me the truth  Jeremy so I can make an informed decision). "Ok, your home is worth $250k and for all of the above reasons probably needs to be priced at  $245k to attract buyers.

Ahhhh.......that's better.

In this scenario Joe now has the opportunity to rent it, deed it back to the bank, "short sale" it, OR just lower the price, list it with an aggressive agent, take it "in the shorts" and get done with it, saving in the process his marriage, his sanity, his credit, and 6 months of pain. (not to mentioned $20k or more in real losses).

If you were my client, which would you choose?