Friday, June 26, 2009

Take advantage of market micro trends

I handle REO (foreclosure) listings for several banks, including Bank of America and local banks, and the number of new listings incoming have dropped off dramatically recently. In conversation with others who handle these properties, and with local banks, this dip was often echoed. It’s likely that a foreclosure moratorium in place over the winter has delayed some properties coming onto the market.

A little background research revealed that the number of bank owned listings as a percentage of all new listings did indeed peak last winter, and has since dropped dramatically. While this has occurred, demand for good values in real estate have not abated- I’ve got a list of ready buyers, actively seeking good values (OK, some are waiting for a great value). Driven by value, bank owned properties have cleared from the market at a rapid pace.

Here’s a chart of the ratio of bank owned to total new listings since last August

I don’t expect the rate of new foreclosure listings to remain on a downward trend- there is a fair amount of consensus that we’ll see a new round of foreclosures coming on the market this fall, and some indications that these are trending toward mid-range homes , and some higher end homes, as opposed to the past tendency toward the very low end of the market.

What this information reveals for buyers is that when they’ve identified a good value, quick action and a solid offer are in order. Prices have adjusted, and affordability is high.

What it means for sellers is that you likely have a roughly 60 day window of opportunity to sell with far less competition from distressed sale pricing on bank owned listings. This is your opportunity to price your home right, have it clean, staged and “turn key” ready and to make it as appealing as possible to purchasers.

Reinforcing this opportunity are low mortgage rates and, most importantly, the $8000 home buyer tax credit, which is scheduled to expire in November, and is driving buyers into the market.

Wednesday, June 10, 2009

Cars vs. Cribs: How the Tax Credits stack up

The passing of the $4500 "Cash for Clunkers" tax credit out of the House got me thinking. First, let's not fool ourselves into thinking that this is serious efficiency legislation- yes, it puts an incentive on deciding upon a fuel efficient vehicle, and that's certainly more palatable than forcing higher efficiencies and limiting consumer choice. But this is about getting auto sales moving more than anything. And as an old car guy (I grew up around my father's Chrysler dealership) I cringe when I hear that the "clunkers" traded in would be "recycled"- it's a certainty that some very serviceable vehicles are going to be taken out of circulation. That means they won't be available for resale to those who can't afford a new car.

Let's compare this incentive to the $8000 first time buyer tax credit, shall we?

Average new-car transaction price has dropped to $27,941, according to The Wall Street Journal. This means that the credit given is 16% of the average price- a pretty healthy incentive, and no restriction on who can buy, other than you have to move up in efficiency.

Compare this with the 2008 US Median Sale Price of $198,100 (per this NAR report) and the $8000 First Time Buyer Tax Credit, and we're looking at an incentive of 4%. Still very nice, thank you, but think what a bump in the tax credit, to say $15,000 could do. Especially if it were paired with revisions making the credit applicable to all buyers of primary residences!

Danielle Hale, a research economist with the National Association of REALTORS(R) put together this analysis that shows each home sale at the median generating $63,101 in economic impact. That's an enormous number, and one that drives activity in all sectors of the economy.

My opinion: The current home buyer tax credit is a good thing, but it would be a much more significant force in helping clear inventory and stabilize values with the changes noted above.