September Sales show signs of recovery

September proved to show a long anticipated increase in real estate activity in Northwest Michigan. Buyer activity has been trending upward after a lackluster summer season, and we're driving into the fall with a lot of offers being written and properties being put under contract.

The number of residential sales for September we up 31% over 2008- actually they were the best they've been in the past 4 years. This has been driven by the downward adjustment in sale prices. Buyers flocked to those listings where the prices had dropped in concert with the regional market trend. Median price as compared to the prior year was down about 11%, which is on par with year to date figures as well.

Overall, we've seen home prices decline just under 21% since their peak in 2005/2006.

Home Sales Rebound in Northwest Michigan, September 2009

Value leaders have been in the low and middle ranges- you'll see in the chart below a sharp increase in the number of sales under $40,000 (WHAT! A house in NW Michigan for under $40,000? Yep.) That trend is reflected up into the midrange, with gains up through the $180,000 range.

Home Market Price Analysis for Northwest Michigan, September 2009

Where we've fallen off is at the higher end, made up primarily of waterfront/vacation homes. Many of these sellers are either insulated from the economic pressures of our current economy, or have just not come to terms with the effect that the overall market has had on their values. While waterfront properties have suffered much less exposure to price erosion, the lack of transactions indicate that the buyer population is waiting for adjustment to take action. There are some exclusive enclaves (such asCrystal Downs on Lake Michigan) where little if any depreciation is occurring, but what we've seen on other lakes is that only those properties that have made adjustment are selling.

We continue to have some very good values, but the best deals get picked off very quickly, and as inventory continues to tighten, we'll see increased competition for these listings. Multiple offers are already common, and by all indication this trend will continue.

New price in West LA

That's Lake Ann for those of you who don't know Northwest Michigan lingo.

Who: Motivated sellers who just improved their price to $118,000

What: World’s neatest 3 BR bi-level, with fully finished basement and detached garage.

Where: 6226 Reynolds Road (just South of 610/Almira Road), close to state land and lake access.

When: New price NOW- bring your buyers TODAY.

Why: Because you’re tired of seeing worn out, beat up bank owned homes.

How: Click here to check out the listing, then call me office to schedule a showing, or if you’d prefer email/text/tweet/facebook/smoke signals/mental telepathy- I’ll try to make it easy on you!

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.

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.

Spring has Sprung!

It's been a darn good week here in Benzie County.  The sun finally found its way back to our little corner of the world and warmed things up some.  Most of the golf courses are now open (I even got out to play once!) and most of the snow is gone.  I've also heard that the steelhead fishing is great- Betty from Vacation Trailer Park on the Betsie River tipped me off this when I saw her at the Benzie Chamber Expo on Tuesday, and I noticed a similar report when I discovered a link to Honor Motel's Blog on Twitter.  I also saw that the folks from Honor Motel did a nice job of pointing out the good values in Benzie County lakefront real estate.

Since the fishing is good, it's nice to have a couple of listings on the river, and I've noticed a spike in inquiries on both the Homestead Resort on the River which I have listed for sale, and on my listing for a secluded retreat on the Betsie River which just got a healthy price reduction.

Speaking of price reductions, I was really pleased to have secured price adjustments on five of my listings this week.  While it seems that real estate activity has ratcheted up another notch, most of the activity is still being driven by value/price.  More on those values in an UnReal Deals post soon.

Thanks to lots of hard work, I've stayed pretty busy all year, but it's at another level now, and I'm hearing that others are seeing the same trend.  One agent I spoke with put deals together for 8 customers in the past two weeks, and I have two properties that received multiple offers this week.  In other words, we had two buyers battling for one property.  It's all good news, and combined with a downward trend in the number of new listings being placed on the market, we're working toward a healthier inventory level.  Great mortgage rates and the $8000 first time buyer tax credit are helping out some too.  It's a shame that the tax credit is limited to folks who haven't owned a home in the past three years though.

Tomorrow I'm off to Cadillac to give a presentation for the Paul Bunyan Board of REALTORS about the use of Social Networking by REALTORS, then back to the office for a 3:30 closing before heading back south to Kentwood, hauling the props for my oldest son's Odyssey of the Mind Competition.

If anyone hears any reports on Steelhead, smelt, or morel mushrooms, please post a comment.  General information is find, no specifics necessary.  I don't expect anyone to give up their favorite spot!

Is that Irony? It's at least funny.

Over the weekend I received notice of a new comment on a post I made a while back, titled "Twitter and Pickup Lines".  This post was inspired by someone who started pitching me on a home based business before we'd even exchanged pleasantries.  Basically, it says... don't blindly pitch- that's not what SM is about.

So here's the comment:

jeromine said...

Hi nice Blog.Mona Vie Juice products featuring an exclusive acai berry juice blend Home Based Business opportunity.

I hope this was an automated comment.  If not, the person certainly did not read the post.

Thanks for the laugh, jeromine!

Fannie's new rule matters more to the market than it does to brokers

I noticed the new ruling by Fannie regarding "negotiating" commissions, and have to say I'm hopeful that it is a sign of positive direction.

The long and short of it is Fannie has instructed their servicers that they may not negotiate a commission below 6% in conjunction with a short sale (existing commission agreements below that level are acceptable.)  I know many agents have been burned in working short sales, when after weeks or months of hard work, their commission gets axed for the sake of the deal.

 

This ruling demonstrates that Fannie recognizes the importance of getting short sales closed, both to their customers and the overall health of the market.  It also recognizes the importance of Real Estate professionals in bringing these deals to fruition.

 

The link below provides more information about these new instructions.  

http://www.mirealtors.com/content/030309.htm#pp

I'm hopeful that in taking a leadership position on this topic, Fannie will encourage other mortgage holders to follow suit.  

It's a small step, and certainly pales in comparison with the issue of the time it takes to respond to short sale requests and get the sale done.  The market should drive a correction there, as one would hope that banks will, sooner or later, realize that by dropping the ball on short sales they are losing massive amounts of money.

In the process of foreclosure, home values most frequently drop dramatically.  With no homeowner in place, it just becomes a house, with no history, no sign of life, and no pride of ownership.  Foreclosures have one thing and one thing only to compete on- price.  The increased significance of foreclosure sales drag the balance of the local market downward with them, and while increased affordability is great, the trend becomes cyclical.  Surrounding homeowners now have increased difficulty getting their homes to appraise for re-financing, or have to fight for a short sale themselves when it comes time to sell.

What's the issue with banks approving short sales?  One can only assume it is either systemic lack of resources, corporate structures that don't allow for dispersed decision making, or just sheer ignorance, coupled with arrogance.