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Buyers Appear to Be Responding to Lower Metro Home Prices

by Jeremy Larkin

I'll keep this short: Existing-home sales rose from the first quarter in 13 states, apparently from buyers responding to discounted home prices, according to the latest quarterly survey by the National Association of Realtors®. Nearly 25% of metropolitan areas showed rising home prices in the 2nd quarter from a year ago, with greatly mixed conditions continuing around the country.

In the West, the median existing single-family home price was $290,600 in the second quarter, which is 17.4 percent below a year ago. After Yakima, the strongest metro price increase in the West was in the Salt Lake City area, at $234,200, up 0.5 percent from a year ago; all other metro areas reported for the West were down from the second quarter of 2007.

What does this mean for Washington County? Perhaps nothing as "all real estate is local", but perhaps something based on the general activity level that exists currently in our local market. In the marketing of our Larkin Group Listings, we use a varitey of tools to track everything from the total number of buyer calls and visits, to the media source they originated from. (I often feel a bit like "Big Brother...")

From this data I can that the Buyers are OUT THERE. They are calling, surfing the web, following prices, trying to figure out "what to do."  Whereas 1 year ago there was just a sense in the "trenches" of the business that the Buyers were hiding out.

I'd love your opinion.....has anyone else out there gotten the sense that prices have finally reached a level that actually makes sense for today's fence-sitting buyers?

I work on a regular basis with a large volume of “expired listings.” As a matter of fact, these clients account for 25% of the Larkin Group’s total sales volume. These are Sellers who spent 3, 6, perhaps even 12 months on the market and their listing term finally “expired” without the home selling.

 

We’ve had tremendous success helping these individuals the next go-around in getting their home sold, which means that I also spend a fair amount of time communicating with potential clients from this group.

 

There are many characteristics that the expired listing sellers share, the main two being that #1 – they still own their home, and #2 – they are NOT HAPPY about still owning their home. They make lots of frustrated accusations about ‘why’ the home didn’t sell….the agent, the market, the brokerage, the weather, the neighbors, even their ex-spouse.

 

However, can I share with you the absolute #1 thing I hear from that group, bar-none? “We are just going to wait for the market to come back...and besides nothing is selling anyway!”

 

Why do they think the market will magically bounce back say, next year? Two reasons:1. Because it would financially benefit them if there were a quick recovery and… 2. because the market has never done this in Washington County before, therefore most people are in denial about the reality of the situation.

 

Homes ARE Selling

First of all, things ARE selling and the world hasn’t come to an end.  225 listings sold last month alone. Add to the fact that there are actually TWO sides to every transaction, (buyer and seller), and you are looking at 450 individuals who bought or sold on a monthly basis!  

 

But I digress…..Many Sellers are frustrated with the disparity between what they thought their home was going to be worth and what is actually is. They are concerned about a “paper” loss, if that makes sense. They want to ‘wait it out’, yet they may be waiting a LONG time. Am I saying that it is a bad time to buy? Well not necessarily at all. I’m just pointing out that statistically, Sellers may be looking for a pot of gold in terms of a short turn-around to real estate values.  Allow me to statistically prove my point.

 

If you look back over the past 10-20 years, US home appreciation has never been above around 6% on a year over year average.

                  US Home Appreciation over past 10 years

Along comes the recent housing boom and we start seeing 30%, 50% or even higher appreciation! As a matter of fact, it was 73% in Washington County over the past 5 years to be exact. The problem is that at the same time, wages were NOT increasing at those rates, and many buyers were getting into loans they could not eventually afford.

 

Fast forward to 2007/2008. Those same buyers now have their loans “resetting” to much higher interest rates, the respective profession they work in is suffering due to the housing market so their personal income is down, and the their home is now worse significantly less than what they paid for it.

 

Add that to the fact that many of the very buyers they need can’t purchase their home because they are waiting to sell their own homes, or can’t qualify for a loan in the current mortgage climate. It’s a vicious cycle, quite frankly, and one that most civilians (a.k.a “Sellers”) haven’t fully considered. Hence their (misguided) optimism.

 

And why should they have considered it? They are, of course, civilians, not real estate professionals. It’s not their job to consider it. It’s mine, and that of other real estate people who take themselves seriously.

 

Segway back to the comments about historical home appreciation. Can anyone really believe that we will EVER see that kind of appreciation again? And if so, is it really going to happen immediately following a real estate crash? No, it’s not.

 

So as Sellers consider their options and look forward to a future market recovery, they should consider the following:

  1. Home values will have to stop falling before they can rise.
  2. When they do stop falling they most likely will remain static for a period of time….could be months, could be years!
  3. Then they will start creeping back up at a conservative pace, say 3-6% annually.

That all summarized, you can clearly see that hoping for your home to be worth more, or even as much as today in the next 12 months is wishful thinking at best.

 

Prognosis:

At the end of the day Sellers may do as they see fit. They are adults and can make their own decisions. For those who don’t need to sell, please leave your home off the market! You're just clogging up the pipes so-to-speak. But my advice to those who want to “wait” for a shorter-term, miraculous turn-around to a currently frigid real estate climate would be this: pack your long-johns, it’s gonna be a cold winter.

"Amazing Deal!! Buy an Oak tree for $209,900 and we'll throw in the home behind for FREE!"

And yes, this DID come from the Washington County MLS by the way. I shall leave the agent nameless because I think he actually is a decent guy, but seriously! Am I the only one who notices the picture of the kitchen in a million-dollar home using Grandma's vintage polaroid camera with all of the shades drawn and the lights off?

It's amazing that even in a true Buyer's market, where Sellers really need and deserve the best marketing possible, Agents continue to reach new lows with their marketing standards. This is an off-shoot of another incredibly entertaining topic, "Worst Realtor Head-Shots", which can be saved for another day.

If you want some REALLY good laughs though, I can't compete with our Friend Norm Fisher in frigid Saskatoon, Canada who has taken the time to create the following website, "Unbelievable Bad Real Estate Photos of All Time." Go ahead and enjoy that one for a moment.

Another Great "Worst MLS Photos" site: http://therealestatebakery.com/category/worst-mls-photos/.  These make the 2 I've inserted here look great.

National Association of Realtors research shows that 85% of home buyers now begin their home search online, and that 24% end up buying a home that they specifically found online. Yet agents seem content to apparently take in excessive amounts of alchohol prior to memorializing a beautiful home like the one below as it tips over and crashes down the hillside into the St. George Historic District Below.

 This stuff is just another example of exactly why Real Estate Agents get such a bad rap for doing poor or no work.

Million Dollar Views!.................$35 camera.  

 

Anyone else who has seen some classics out there in your home searching? I will continue to update this post as long as we keep finding them.....which we always will. We can really have some fun by posting all of the bad MLS/ Real Estate Photos you send to us. Shoot them over to me at larkin@exitredrockrealty.com. (They will be pictured below)

 

 

4/21 - Phenomenal 2 Bed / 2 Bath Condo.....CAUTION: Extreme Radiation Present!

 

 

 

 

 

 

 

5/13 - I actually had a buyer client of mine email me today and ask "what kind of damage is that, fire damage?" No, it's not. It's a piece of crap photo of an otherwise beautiful home. Whoops.

 

 "No Officer, I have absolutely NOT been drinking.......hey who do you know who needs to buy or sell real estate?.............."

 

 

 

You know I wasn't going to write an offer on this home, but now that I see this picture......"

 

 

 

 

 

 

 

 

This home is ACTUALLY listed at $1.7 million.....too bad the photographer snapped this shot right as he/she was knocked to the floor by the mobs of people wanting to buy $1.7 homes right now...(the 35 mm Camera was not damaged however)

 

 

This is peculiar........and a great marketing piece!

But wait, there's more! I'm going to throw in the toothpaste if you write a full-price offer TODAY!

Can Increased FHA Loan Limits Help Washington County Sellers?

by Jeremy Larkin

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?

Historic Fed Rate drop cuts both ways for Borrowers...What about you?

by Jeremy Larkin

FIrst of all, I'm NOT a mortgage specialist, so what you get here is my best summary based on personal research. (meaning you might want to stop reading now if you really appreciate authoritative mortgage commentary!) On the heels of its surprise rate cut of .75 basis points last week, the Federal Reserve cut key interest rates again, the fifth straight cut since September 2007.  In short, economic data suggests the US is on the brink of recession, and the Fed is acting accordingly.

Who benefits from this cut?
I am LOVING this cut as a HELOC borrower! If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.

What does this mean for long-term rates?
Long-term mortgage rates could actually increase after yesterday's cut, based on historical performance and recent trends. Wierd to some, I know, but it's just the way it is.

How does the economic stimulus package fit into the picture?
The economic stimulus package from Congress and the White House could be a double-edged sword for borrowers. Combined with recent Fed actions, the package could create inflation and bring about higher long-term interest rates.

On the positive side, conforming loan limits are likely to be raised from the current $417,000 to upwards of $625,000. This means great potential savings for purchase and refinance candidates who live in high-cost areas across the country.

The reality is that as always, "timing the market" is next to impossible, and if you want to know a little secret - some of the most savvy investors I know are on the lookout for purchases to hold long-term RIGHT NOW. As far as economic stimulus goes, I'm not seeing immediate improvements in the local market, so the jury is still out.

I have a secret weapon that is producing miracles...

by Jeremy Larkin

Happy Thanksgiving! Why do we wait all year to feel or show some gratitude? t's silly isn't it? We wait for the media to "tell us" to be grateful to do so.  Let's all do better!

My business  coaches & mentors have really beaten this gratitude thing into me this year and the results have been amazing.

I'm now going to share with you my "secret tool" that was introduced to me last year called the "10/10 Visualization" or "10/10 Exercise." It has produced miracles for me - seriously. It goes like this:

1. Every morning (or night for those with days/nights mixed up) sit down with a piece of paper, a journal, or your computer. Think of and write down the 10 things you are most grateful for. Really think about it, emotionalize it. I promise you when you really think about it, you'll find that life is really pretty good.

2. Now, while in complete gratitude mode, think of and write down the 10 things you would most like to attract.  BE HONEST HERE! You want $1 million net worth by the end of 08? Write it down! Want a loving and passionate relationship with your spouse and kid? Write it down! Trying to kick a bad habit? Write it down!

As I've been INTENTIONALLY grateful on a daily basis, using the 10/10 visualization, I have literally seen miracles popping up around us.....professionaly, personally, for my family, etc.  I DARE YOU to try this every day for a month, or at least every week or work-day for 1 month.

You probably have it better than you think. Try this and call or email me with the results!

 

Is it time to invest in Real Estate? $50.5 Trillion says yes.

by Jeremy Larkin

 

My Dad handed me a newspaper article yesterday that he had picked up from the Denver Post while travelling across the country. He warned me that it would be upsetting. "Geesh, why would $50.5 trillion in debt be upsetting, Dad?"

$400,000 - the amount the average US household owes toward that debt.  Isn't that amazing? If you think I'm just making it up, go here http://www.denverpost.com/perspective/ci_7344870 to read the interview with David Walker who is currently on his "Fiscal Wakeup Tour" across the country, trying to "wake people up."

If you don't want to read the whole article, let me sum it up for you: Forget about your Social Security, Medicare, etc - it's all drying up in the not too distant future. Which means that we'd all better find a way to build up our own nest egg, right?

I know the whole world is concerned about real estate right now. Yet let me point out that in Washington County we have RECORD inventory, motivated sellers, and phenomenal interest rates. It could be the perfect storm for buying up investment properties, which have always been great long term investments.

Timing the market is impossible, by the way. Kind of like when you hear Jim Kramer talk about the next greatest stock pick on TV, it's too late.

Just food for thought. Pick up a good little rental, let the Tenant pay your mortgage, and hang on for the long-term cash out? It beats planning on your share of $50.5 trillion in debt doesn't it?

WHAT ARE YOUR THOUGHTS?

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Photo of Jeremy Larkin - The Larkin Group Real Estate
Jeremy Larkin - The Larkin Group
Keller Williams Realty
50 E 100 S, Suite 300
St. George UT 84770
435.767.9886
Fax: 435-359-5085

St. George Real Estate - Your premier destination for St. George,Utah Real Estate Listings, Home Values, MLS Search, REO/Foreclosure Info &  St. George Real Estate Statistics.  Serving St. George, Santa Clara, Ivins, Washington, Hurricane, LaVerkin, Toquerville & more! Specializing in REO/foreclosure properties, frustrated Sellers, First-Time home buyers, and Investors. Looking for the most LOCAL St. George, Utah real estate information available? Your search is over!