GET REAL....
Do I have your attention? Time to stop playing around and accept that the paradigm has shifted (and not in your favor). If you own a home that you THINK is valued over $450,000 you are going to have a hard time finding a Buyer.
Happy Valley has been wildly over-built in that price range. We had a modest amount of Speculator activity in new construction that is now crashing (read - selling for a LOSS). Massive amounts of ARM's are adjusting up and property tax bills are coming due. Pre-foreclosure activity is sky-rocketing and we are just at the beginning.
Here are two facts that the industry does not want you to know:
1) Prices in Happy Valley are FALLING (retreating to 2005 values), not increasing.
2) Time on market is closer to 180 days (and growing), not the 60 days reported.
The vast majority of Oregonians cannot afford a home over $450,000. If you live in Happy Valley could you afford your home TODAY based on current rates and what you think the house is worth? Tricky mortgages are gone and it is now time to pay the Piper.
OK...so now that we understand each other...what to do??
1) Hire an experienced LOCAL Realtor who you believe will stay in the business during this downturn. Look for real education (Bachelors and/or MBA). Don't be baffled by Industry designations like; GRI, CRS and e-PRO. Often times the underlying educational base is a GED.
* Price your house correctly
2) Forget everything you think you know about the value of your home. Take a hard look at the sales comps from the previous few months. Ask your Realtor to find out what other sales incentives had to be offered. Be prepared to list your home for MUCH less than you think. If the Realtor you are interviewing tells you that they can get your more...run...very far away. They are LYING. Your listing price must reflect market reality...or it will sit.
* Price your house correctly
3) Be prepared to offer incentives to the Realtor who represents the Buyer. These Realtors have literally hundreds of homes to chose from, and often a short period of time to show their Buyers. No realistic way to show every house on the market. Offer incentives to get them to show your home. Try a BAC of 3% or higher.
* Price your house correctly
4) Make yourself easy to do business with. Properly clean, prepare and stage your home. Take care of all the deferred maintenance. Proactively provide all pertinent info to potential Buyers.
* Price your house correctly
The big thing right now is for Realtors to scream in their listings that their Seller is "MOTIVATED!". Yet, when you look at the listing the house is priced too high, the commission offered is below industry standard and other aspects of the listing make it seem that the Seller wants it done their way. Here is my advice...do not say you are motivated...SHOW you are motivated. Price, price, price...3% BAC or more, house prepped for sale. That is how you show the market you are motivated.
Even in a down market homes sell. If you want yours to be one that does you must take some pretty basic steps.
MY OVERALL ADVICE IS TO NOT SELL FOR THE FORESEEABLE FUTURE IF YOU DO NOT HAVE TO. TOO MUCH INVENTORY CHASING TOO FEW BUYERS. IF YOU CAN WAIT OUT THE DOWNTURN, DO IT.
If you MUST sell (relocation, job loss, divorce, etc) get aggressive early. Don't trip over a dollar to pick up a dime!
Friday, September 21, 2007
What should Buyers do?
First you should know that you are in TOTAL control, but do not let it go to your head...
Before you enter the market you need two Allies: A Lender and a Realtor
Choosing a Lender:
1) Get FULLY qualified with an EXPERIENCED Lender who will explain all of your lending options. Most of the bad-apples are now out of the business, but some are hanging on. Find a Lender who understands the market, has been around a down-market and understands finance (yes, many do not know much about finance, taxes, etc.)
2) Meet with your Lender many months before you wish to buy so you can work through any credit glitches, build up proper cash reserves and ensure that your application is clean.
3) Be prepared to provide a pre-approval letter with much more detail than in the past. Sellers want to see credit scores, verify funds to close and know that your program has been approved.
4) Do NOT walk out of your Lender's office with questions. If you are not sure about something...ask!
Choosing a Realtor:
Over the next six months thousands of Realtors will be getting out of the business. I know some who went broke this Summer listing homes that did not sell. One had 10 listings and was spending over $3,000 a month in marketing (not including her time). She sold NOTHING and is now out of money and out of Real Estate.
1) Chose a Realtor who knows the area in which you wish to buy. They will normally know of transaction details of previous sales that can help you negotiate your best deal. They will also know of homes that are coming onto the market, but have not yet been listed.
2) Chose a Realtor who is committed to the business. Remember, most Realtors have had to take second jobs or are looking to. Make sure the one you chose isn't using you as one last paycheck before bailing.
3) Chose a Realtor with REAL education. Don't be fooled by the GED carrying Realtor who baffles you with Industry designations like; GRI, e-PRO or CRS. Look for a Realtor who holds a bachelors degree and/or an MBA.
4) Finally, chose a Realtor who is not afraid to tell you the truth. Don't hire a Yes-person. They are being compensated for their ability to navigate your transaction and look out for your interests. The good ones will tell you things that you may not want to hear, but NEED to hear...listen.
*One more no-no...do not hire a Realtor solely because you were 8th grade friends or its your second cousin twice removed. Hire a Realtor for their competence.
With your trusted Lender and Realtor on your team you are now ready to hit the market:
1) Take your time. There is plenty of inventory to chose from and very little competition.
2) Negotiate, but be fair. Sellers are about to take a beating...no need to rub it in.
3) Just before writing up your offer, take a breather and really think about it.
4) Once you have an accepted offer, be very thorough with your inspections and due diligence.
Go out there and find your best deal!
Before you enter the market you need two Allies: A Lender and a Realtor
Choosing a Lender:
1) Get FULLY qualified with an EXPERIENCED Lender who will explain all of your lending options. Most of the bad-apples are now out of the business, but some are hanging on. Find a Lender who understands the market, has been around a down-market and understands finance (yes, many do not know much about finance, taxes, etc.)
2) Meet with your Lender many months before you wish to buy so you can work through any credit glitches, build up proper cash reserves and ensure that your application is clean.
3) Be prepared to provide a pre-approval letter with much more detail than in the past. Sellers want to see credit scores, verify funds to close and know that your program has been approved.
4) Do NOT walk out of your Lender's office with questions. If you are not sure about something...ask!
Choosing a Realtor:
Over the next six months thousands of Realtors will be getting out of the business. I know some who went broke this Summer listing homes that did not sell. One had 10 listings and was spending over $3,000 a month in marketing (not including her time). She sold NOTHING and is now out of money and out of Real Estate.
1) Chose a Realtor who knows the area in which you wish to buy. They will normally know of transaction details of previous sales that can help you negotiate your best deal. They will also know of homes that are coming onto the market, but have not yet been listed.
2) Chose a Realtor who is committed to the business. Remember, most Realtors have had to take second jobs or are looking to. Make sure the one you chose isn't using you as one last paycheck before bailing.
3) Chose a Realtor with REAL education. Don't be fooled by the GED carrying Realtor who baffles you with Industry designations like; GRI, e-PRO or CRS. Look for a Realtor who holds a bachelors degree and/or an MBA.
4) Finally, chose a Realtor who is not afraid to tell you the truth. Don't hire a Yes-person. They are being compensated for their ability to navigate your transaction and look out for your interests. The good ones will tell you things that you may not want to hear, but NEED to hear...listen.
*One more no-no...do not hire a Realtor solely because you were 8th grade friends or its your second cousin twice removed. Hire a Realtor for their competence.
With your trusted Lender and Realtor on your team you are now ready to hit the market:
1) Take your time. There is plenty of inventory to chose from and very little competition.
2) Negotiate, but be fair. Sellers are about to take a beating...no need to rub it in.
3) Just before writing up your offer, take a breather and really think about it.
4) Once you have an accepted offer, be very thorough with your inspections and due diligence.
Go out there and find your best deal!
Summer Season Summary
Well...it was UGLY....
As expected there was too much inventory chasing too few Buyers, a couple of Builders facing defaults from their Lenders, the mortgage melt-down GREATLY reduced the available mortgage products and finally Jumbo Mortgage Rates spiked in early August making loans over $417,000 much more expensive than they had been previously.
So...what was the outcome? Only a fraction of those who wanted to sell this Summer did...and those that were lucky enough to get a Buyer had to reduce asking price and increase incentives. I won't boar you with the numbers, but there are STILL 249 homes at $450,000 or higher still listed for sale in Happy Valley (not including FSBO). The Summer selling season going back four full months only saw 58 homes transact above $450,000.
As I drilled down into the numbers it was apparent that actual sales prices were at or below 2005 prices...and with such a huge supply of homes still on the market, prices are continuing to decline.
I saw multiple homes in Eagle Landing and Kensington Heights sell for LESS than they originally did two years ago.
What do I see for the Fall/Winter Season? The next six months will be far WORSE than the Summer. Still way too much inventory, hundreds of ARM's resetting and the rate of defaults in our area is escalating. Buyers are becoming very demanding and no one is willing to pay anywhere close to full price. Hold on for a long ride down...
As expected there was too much inventory chasing too few Buyers, a couple of Builders facing defaults from their Lenders, the mortgage melt-down GREATLY reduced the available mortgage products and finally Jumbo Mortgage Rates spiked in early August making loans over $417,000 much more expensive than they had been previously.
So...what was the outcome? Only a fraction of those who wanted to sell this Summer did...and those that were lucky enough to get a Buyer had to reduce asking price and increase incentives. I won't boar you with the numbers, but there are STILL 249 homes at $450,000 or higher still listed for sale in Happy Valley (not including FSBO). The Summer selling season going back four full months only saw 58 homes transact above $450,000.
As I drilled down into the numbers it was apparent that actual sales prices were at or below 2005 prices...and with such a huge supply of homes still on the market, prices are continuing to decline.
I saw multiple homes in Eagle Landing and Kensington Heights sell for LESS than they originally did two years ago.
What do I see for the Fall/Winter Season? The next six months will be far WORSE than the Summer. Still way too much inventory, hundreds of ARM's resetting and the rate of defaults in our area is escalating. Buyers are becoming very demanding and no one is willing to pay anywhere close to full price. Hold on for a long ride down...
Thursday, August 2, 2007
So...What's the Good News? - Buyer's Edition
It seems we can't open a paper, watch a news show or even talk to a friend without hearing the bad news in the market. Surely there must be some good news, right? Well, there is plenty...
1) Bad news story #1 "Mortgage meltdown"
Sure, many lenders are going under, lending standards are toughening up and fly-by-night Loan Originators are closing up shop...and we should all be VERY happy about that! What is left are much healthier underwriting guidelines, more ethical and experienced Loan Originators, better educated consumers and higher quality loan pools. Effectively, those loans written in 2007 and 2008 will be much healthier than the junk written in 2004-2006. We will see many fewer rate re-sets, lower defaults and a declining pool of excess housing inventory.
For properly qualified Buyers (Fully documented income and assets, good credit, modest down payment) Lenders are tripping over themselves to loan you money. There is still very high demand for quality mortgage backed securities. Getting a good loan with a good rate is still very easy.
* Actual Mortgage Market position = Flushing out the Toxic, re-filling with high quality notes.
2) Bad news story #2 "Prices are in free fall"
Yes, pricing are stabilizing to 2005 levels...which were PEAK prices. What does that mean? We are staying at or near our peak prices, not dropping like other markets (Las Vegas, Phoenix, Miami....). Sellers looking for another 10-20% gain over 2005 values will be disappointed, but Sellers looking at stabilizing prices with more traditional 2-3% annual gains will be happy to see our local market holding strong. Outside of a small majority that bought during the peak, very few homeowners (mostly speculators and investors) are seeing negative equity.
Buyers can now take a comprehensive look at a neighborhood and the available inventory and make an educated and informed decision on which house to buy. They also do not have to worry about trying to "time" the market as Sellers have become more realistic about current values.
* Actual sales prices are stabilizing and many asking prices have come down to support a more realistic value base.
3) Bad news story #3 "Inventory will take years to burn through"
This is one instance where national markets and local markets diverge. We do have some near-term inventory over-hang that will take a few quarters to burn through, but many builders have dramatically cut back production and new residents continue to move to the greater Portland area. This is a great time for Buyers to pick up a bargain, but it won't last. Just as the boom had an end, so will the period of excessive inventory.
* Increasing population growth and decreased builder activity will burn through our local excess inventory much faster than the national trend.
Summary:
If you are a Buyer waiting for the right time...it may be upon us.
- 30 year fixed rates are lower than last Summer
- Prices are off their highs, but showing signs of firming
- Plenty of inventory gives you options
- Sellers are negotiating
What should a Buyer do?
- Engage an experienced local Realtor who can help evaluate values.
- Get pre-qualified for your loan well BEFORE you are ready to make an offer.
- Pick a Loan Originator who will show you front end fees AND back-end "rebate".
- Negotiate WITH the Seller not AGAINST the Seller. Always let the other party have at least a small win while negotiating.
Your thoughts and/or comments are always appreciated.
1) Bad news story #1 "Mortgage meltdown"
Sure, many lenders are going under, lending standards are toughening up and fly-by-night Loan Originators are closing up shop...and we should all be VERY happy about that! What is left are much healthier underwriting guidelines, more ethical and experienced Loan Originators, better educated consumers and higher quality loan pools. Effectively, those loans written in 2007 and 2008 will be much healthier than the junk written in 2004-2006. We will see many fewer rate re-sets, lower defaults and a declining pool of excess housing inventory.
For properly qualified Buyers (Fully documented income and assets, good credit, modest down payment) Lenders are tripping over themselves to loan you money. There is still very high demand for quality mortgage backed securities. Getting a good loan with a good rate is still very easy.
* Actual Mortgage Market position = Flushing out the Toxic, re-filling with high quality notes.
2) Bad news story #2 "Prices are in free fall"
Yes, pricing are stabilizing to 2005 levels...which were PEAK prices. What does that mean? We are staying at or near our peak prices, not dropping like other markets (Las Vegas, Phoenix, Miami....). Sellers looking for another 10-20% gain over 2005 values will be disappointed, but Sellers looking at stabilizing prices with more traditional 2-3% annual gains will be happy to see our local market holding strong. Outside of a small majority that bought during the peak, very few homeowners (mostly speculators and investors) are seeing negative equity.
Buyers can now take a comprehensive look at a neighborhood and the available inventory and make an educated and informed decision on which house to buy. They also do not have to worry about trying to "time" the market as Sellers have become more realistic about current values.
* Actual sales prices are stabilizing and many asking prices have come down to support a more realistic value base.
3) Bad news story #3 "Inventory will take years to burn through"
This is one instance where national markets and local markets diverge. We do have some near-term inventory over-hang that will take a few quarters to burn through, but many builders have dramatically cut back production and new residents continue to move to the greater Portland area. This is a great time for Buyers to pick up a bargain, but it won't last. Just as the boom had an end, so will the period of excessive inventory.
* Increasing population growth and decreased builder activity will burn through our local excess inventory much faster than the national trend.
Summary:
If you are a Buyer waiting for the right time...it may be upon us.
- 30 year fixed rates are lower than last Summer
- Prices are off their highs, but showing signs of firming
- Plenty of inventory gives you options
- Sellers are negotiating
What should a Buyer do?
- Engage an experienced local Realtor who can help evaluate values.
- Get pre-qualified for your loan well BEFORE you are ready to make an offer.
- Pick a Loan Originator who will show you front end fees AND back-end "rebate".
- Negotiate WITH the Seller not AGAINST the Seller. Always let the other party have at least a small win while negotiating.
Your thoughts and/or comments are always appreciated.
Monday, July 23, 2007
What is REAL in Real Estate
The past few months I have had to explain over and over and over again some of the misconceptions in our market, true valuation models of properties and the basics of buying and selling. In this blog I want to cover a few of the most common.
Misconception 1: Happy Valley Real Estate is still appreciating at 10.3% per year!!!!
RMLS puts out these numbers, and in my opinion, artificially inflates consumer sentiment. Many people use the median price point to determine "appreciation", including RMLS. Median price point is nothing more than a statistical line depicting the midpoint of value between which homes have sold over a set period of time. You can have a declining median price point and rising values, or rising median price point and declining values. As the two are not necessarily connected. The median has NOTHING to do with appreciation. Appreciation (or depreciation) is the actual change in value of an asset over time. Looking deeper into Happy Valley transactions I am seeing a RETREAT in values to 2005 values. In fact, I found MULTIPLE properties that have sold, or are sale pending in the last 30 days below their previous sale prices in 2005 ands 2006. Additionally, Craig's List is full of desperate Sellers trying to get out from under homes purchased in the last three years, many have already pre-negotiated short-sales with their lenders.
Truth 1: Happy Valley home prices are at best flat, most likely retreating.
Misconception 2: My home was appraised at $650,000, so it must be worth $650,000!!!!
Any asset is worth what another party is willing to pay for it. I don't care if the Pope himself says your house is worth $650,000, if you cannot find a willing party to pay that much, then it is not worth that much. "Value" and "market price" are not always the same thing. We may be able to do a cost approach to determine the value at $650,000 (lot, building, landscaping, upgrades). But, if the current market is not willing and/or able to pay that price, then its market price becomes lower than its appraised value.
Truth 2: Appraised value and market price are no longer the same thing.
Misconception 3: My neighbor just sold for $650,000, so my comparable home will net me $650,000.
Currently sales prices are inflated in multiple ways that are often difficult for the average person to discern. That $650,000 sales price may have been inflated by; Seller contribution to closing costs/pre-paids (often as high as 6%), pre-closing repairs / upgrades totalling tens of thousands of dollars and the inclusion of personal assets such appliances, play structures and even vehicles/RVs/boats. That $650,000 price may have included $40,000 in Seller give aways - net price actually $610,000. From this net sales price Realtor fees, Escrow costs and settlement charges must then be deducted.
Truth 3: Sales price grossly overstates Seller net proceeds.
Misconception 4: The market slowdown is just a bump in the road and we will be back to "normal" soon.
I always answer this one with a question: With your income and credit could you afford to buy your house at what you THINK it is worth? Almost 100% of the time the answer is NO! Then, I ask, who can? The pyramid is starting to crumble, and the removal of the base will reset values backward a few years.
Truth 4: This is not a bump, but a fundamental shift to a more conservative and responsible housing market.
Summary:
There were multiple changes in the real estate market that fundamentally changed value models during the early 2000's. This last year has seen the brakes applied to many of them.
1) Cheap easy credit. Not only were rates LOW, but lending standards were very lax. Rates are up steeply from 04/05 lows and Creditors are dramatically tightening standards, reducing the number of people who qualify. This means there are FEWER qualified Buyers who can afford LESS than before.
2) Speculation. Speculators helped bid up homes, particularly new construction. Those Speculators are no longer Buyers, but now desperate Sellers!
3) Market Exhaustion. So many new Buyers got into the market, and existing Buyers moved up, that we have naturally arrived at a point of respite where people are likely to sit tight for a period of time. A mid-income family who lives in a $400,000 home with a $300,000 mortgage at 5% fixed with a payment of $1,611 would not want to get rid of that mortgage to buy a $500,00 home with a $400,000 mortgage at $6.75% fixed with a payment of $2,595
4) Builder desperation. Yes, Builders horribly misjudged the demand in Happy Valley and overbuilt in the $500,000+ range. One is holding a fire-sale for their remaining 70 properties. Huge price reductions and Seller concessions are being offered as the norm.
5) Consumer sentiment. When all the news was "rosy" Buyers felt that the had to jump quickly before a house was snatched by another Buyer or the price went up another 10%. Now that the news has turned "apocalyptic" Buyers are viewing dozens of homes and negotiating every concession they can.
What can you do in this tough market?
1) Engage an experienced professional who can best market and show your home and negotiate on your behalf during a transaction.
2) Price your house correctly.
3) Make your house easy to see, and remove barriers to an offer.
4) Present yourself as a "qualified Seller", not a desperate Seller.
5) Be patient.
As always your comments on this blog are appreciated.
Misconception 1: Happy Valley Real Estate is still appreciating at 10.3% per year!!!!
RMLS puts out these numbers, and in my opinion, artificially inflates consumer sentiment. Many people use the median price point to determine "appreciation", including RMLS. Median price point is nothing more than a statistical line depicting the midpoint of value between which homes have sold over a set period of time. You can have a declining median price point and rising values, or rising median price point and declining values. As the two are not necessarily connected. The median has NOTHING to do with appreciation. Appreciation (or depreciation) is the actual change in value of an asset over time. Looking deeper into Happy Valley transactions I am seeing a RETREAT in values to 2005 values. In fact, I found MULTIPLE properties that have sold, or are sale pending in the last 30 days below their previous sale prices in 2005 ands 2006. Additionally, Craig's List is full of desperate Sellers trying to get out from under homes purchased in the last three years, many have already pre-negotiated short-sales with their lenders.
Truth 1: Happy Valley home prices are at best flat, most likely retreating.
Misconception 2: My home was appraised at $650,000, so it must be worth $650,000!!!!
Any asset is worth what another party is willing to pay for it. I don't care if the Pope himself says your house is worth $650,000, if you cannot find a willing party to pay that much, then it is not worth that much. "Value" and "market price" are not always the same thing. We may be able to do a cost approach to determine the value at $650,000 (lot, building, landscaping, upgrades). But, if the current market is not willing and/or able to pay that price, then its market price becomes lower than its appraised value.
Truth 2: Appraised value and market price are no longer the same thing.
Misconception 3: My neighbor just sold for $650,000, so my comparable home will net me $650,000.
Currently sales prices are inflated in multiple ways that are often difficult for the average person to discern. That $650,000 sales price may have been inflated by; Seller contribution to closing costs/pre-paids (often as high as 6%), pre-closing repairs / upgrades totalling tens of thousands of dollars and the inclusion of personal assets such appliances, play structures and even vehicles/RVs/boats. That $650,000 price may have included $40,000 in Seller give aways - net price actually $610,000. From this net sales price Realtor fees, Escrow costs and settlement charges must then be deducted.
Truth 3: Sales price grossly overstates Seller net proceeds.
Misconception 4: The market slowdown is just a bump in the road and we will be back to "normal" soon.
I always answer this one with a question: With your income and credit could you afford to buy your house at what you THINK it is worth? Almost 100% of the time the answer is NO! Then, I ask, who can? The pyramid is starting to crumble, and the removal of the base will reset values backward a few years.
Truth 4: This is not a bump, but a fundamental shift to a more conservative and responsible housing market.
Summary:
There were multiple changes in the real estate market that fundamentally changed value models during the early 2000's. This last year has seen the brakes applied to many of them.
1) Cheap easy credit. Not only were rates LOW, but lending standards were very lax. Rates are up steeply from 04/05 lows and Creditors are dramatically tightening standards, reducing the number of people who qualify. This means there are FEWER qualified Buyers who can afford LESS than before.
2) Speculation. Speculators helped bid up homes, particularly new construction. Those Speculators are no longer Buyers, but now desperate Sellers!
3) Market Exhaustion. So many new Buyers got into the market, and existing Buyers moved up, that we have naturally arrived at a point of respite where people are likely to sit tight for a period of time. A mid-income family who lives in a $400,000 home with a $300,000 mortgage at 5% fixed with a payment of $1,611 would not want to get rid of that mortgage to buy a $500,00 home with a $400,000 mortgage at $6.75% fixed with a payment of $2,595
4) Builder desperation. Yes, Builders horribly misjudged the demand in Happy Valley and overbuilt in the $500,000+ range. One is holding a fire-sale for their remaining 70 properties. Huge price reductions and Seller concessions are being offered as the norm.
5) Consumer sentiment. When all the news was "rosy" Buyers felt that the had to jump quickly before a house was snatched by another Buyer or the price went up another 10%. Now that the news has turned "apocalyptic" Buyers are viewing dozens of homes and negotiating every concession they can.
What can you do in this tough market?
1) Engage an experienced professional who can best market and show your home and negotiate on your behalf during a transaction.
2) Price your house correctly.
3) Make your house easy to see, and remove barriers to an offer.
4) Present yourself as a "qualified Seller", not a desperate Seller.
5) Be patient.
As always your comments on this blog are appreciated.
Tuesday, May 22, 2007
Tis' the Season...to Sell your house!
With memorial day weekend just a few days away we are officially entering the peak selling season for Portland Area Real Estate that will run through Labor Day weekend. If you had hoped to sell your home in 2007, this is the time to be on the market!
What is the market telling us so far?
a) It is a Buyer's market with prices coming in well below asking. March 2007 to April 2007 showed the first month-over price declines since 2001!
b) Inventory is WAY up. We are looking at the highest inventory levels in years.
c) Qualified Buyers are few and far between. Many investors have bailed, or become Sellers this year. With lending standards getting tighter, would be borrowers can afford less or no longer qualify. California's slowdown is meaning fewer transplants. So many people became home owners the last few years that the Buyer pool has just naturally declined.
I am a Seller, what should I do?
a) Be realistic. Expect a sales price closer 2005 comparative levels, not a premium over 2006.
b) Use competent, professional and local representation. Find a Realtor who has sold in your neighborhood recently and frequently.
c) Make yourself "easy to do business with" by removing obstacles to the transaction before they arise.
I am a Buyer, what should I do?
a) Engage a Realtor who KNOWS the area in which you want to buy. They often have information and insight to previous transactions that are not part of the public record.
b) Get yourself fully qualified with a Lender. Lending standards have changed, and continue to change. Be sure you know what you truly qualify for.
c) Be a tough negotiator, but be fair. Estranging a Seller with an initial offer that is insulting will not get you the best deal.
My outlook for the 2007 selling season in Happy Valley:
Many Sellers will be very disappointed this year with the offer prices, or total lack of offers. There will be many homes that do not sell at all. Builders carrying unsold homes at huge costs will initially be the most aggressive and further drive down values. Sellers who MUST sell because of financial issues, relocation or life status changes will also be very aggressive and help to bring the broader market down. Buyers will end up steering the ship. Those that do buy this year will have the pick of the lot and plenty of time to fully explore all of the inventory and their options. Buyers will be setting the terms for the transactions this year.
What is the market telling us so far?
a) It is a Buyer's market with prices coming in well below asking. March 2007 to April 2007 showed the first month-over price declines since 2001!
b) Inventory is WAY up. We are looking at the highest inventory levels in years.
c) Qualified Buyers are few and far between. Many investors have bailed, or become Sellers this year. With lending standards getting tighter, would be borrowers can afford less or no longer qualify. California's slowdown is meaning fewer transplants. So many people became home owners the last few years that the Buyer pool has just naturally declined.
I am a Seller, what should I do?
a) Be realistic. Expect a sales price closer 2005 comparative levels, not a premium over 2006.
b) Use competent, professional and local representation. Find a Realtor who has sold in your neighborhood recently and frequently.
c) Make yourself "easy to do business with" by removing obstacles to the transaction before they arise.
I am a Buyer, what should I do?
a) Engage a Realtor who KNOWS the area in which you want to buy. They often have information and insight to previous transactions that are not part of the public record.
b) Get yourself fully qualified with a Lender. Lending standards have changed, and continue to change. Be sure you know what you truly qualify for.
c) Be a tough negotiator, but be fair. Estranging a Seller with an initial offer that is insulting will not get you the best deal.
My outlook for the 2007 selling season in Happy Valley:
Many Sellers will be very disappointed this year with the offer prices, or total lack of offers. There will be many homes that do not sell at all. Builders carrying unsold homes at huge costs will initially be the most aggressive and further drive down values. Sellers who MUST sell because of financial issues, relocation or life status changes will also be very aggressive and help to bring the broader market down. Buyers will end up steering the ship. Those that do buy this year will have the pick of the lot and plenty of time to fully explore all of the inventory and their options. Buyers will be setting the terms for the transactions this year.
Monday, March 26, 2007
Selling Strategies in an over-supplied market
How do I set my house apart from the pack?
1) Price your home correctly. Forget the 20% year-over-year price gains. They were based on apples to oranges comparisons anyway and further driven by loose money and lending standards.
a) Look at actual closed sales comparables. Call the parties to those transactions and find out if there were any Seller concessions that further reduced the actual net price to the Seller.
b) Just because your neighbor listed their home at $XXX,000 does not mean you should too. Many homes are currently listed much higher than current market values.
c) Consult sites like Zillow.com, but do not accept it as gospel. Call MULTIPLE Realtors who specialize in your area and ask them for a market analysis. Take what they say with grain of salt, as most will tell you what you want to hear to get the listing...
d) Don't base the asking price on what you want to make. Sellers do not set final price and terms...Buyer's do....and Buyers could care less what you need to net.
d) After you've done your research and consulted local professionals pick an asking price that is truly reflective of recent closed sales and then modified for your homes pluses and minuses.
2) Prepare your home for viewings.
a) Take care of the deferred maintenance.
b) Get rid of pet damage and odor. You may not even realize that your home has pet odor. Have a non-pet owner come over and ask them for an honest answer.
c) Get rid of the clutter. You are moving anyway...get an early start!
d) Stage the house for Buyers, with more modest tastes and color tones. If you are not a design guru, spend the $150 for a consult.
3) Demonstrate to Buyers that you are a "Qualified Seller". During the boom times, Sellers only wanted "Qualified Buyers" to submit offers...now the game has changed and Buyers want to know that you are serious.
a) Hire quality local representation, not your cousin "Lola" who just got her license last week. Hiring a Broker who lives in and knows your community, as well as being known and respected by other local Brokers is the single most important decision in choosing a listing Broker.
b) Make it easy to see your home. Try to put as few limitations on showing times as possible.
c) Have your disclosures complete and available to Buyers to preview when they come view your home.
d) Be quick to respond to inquiries and offers.
While it is going to be a challenging year for Sellers, many homes will change hands this year. Do you want to be one of them? Follow some of the basic guidelines, set realistic expectations and you should be OK!
1) Price your home correctly. Forget the 20% year-over-year price gains. They were based on apples to oranges comparisons anyway and further driven by loose money and lending standards.
a) Look at actual closed sales comparables. Call the parties to those transactions and find out if there were any Seller concessions that further reduced the actual net price to the Seller.
b) Just because your neighbor listed their home at $XXX,000 does not mean you should too. Many homes are currently listed much higher than current market values.
c) Consult sites like Zillow.com, but do not accept it as gospel. Call MULTIPLE Realtors who specialize in your area and ask them for a market analysis. Take what they say with grain of salt, as most will tell you what you want to hear to get the listing...
d) Don't base the asking price on what you want to make. Sellers do not set final price and terms...Buyer's do....and Buyers could care less what you need to net.
d) After you've done your research and consulted local professionals pick an asking price that is truly reflective of recent closed sales and then modified for your homes pluses and minuses.
2) Prepare your home for viewings.
a) Take care of the deferred maintenance.
b) Get rid of pet damage and odor. You may not even realize that your home has pet odor. Have a non-pet owner come over and ask them for an honest answer.
c) Get rid of the clutter. You are moving anyway...get an early start!
d) Stage the house for Buyers, with more modest tastes and color tones. If you are not a design guru, spend the $150 for a consult.
3) Demonstrate to Buyers that you are a "Qualified Seller". During the boom times, Sellers only wanted "Qualified Buyers" to submit offers...now the game has changed and Buyers want to know that you are serious.
a) Hire quality local representation, not your cousin "Lola" who just got her license last week. Hiring a Broker who lives in and knows your community, as well as being known and respected by other local Brokers is the single most important decision in choosing a listing Broker.
b) Make it easy to see your home. Try to put as few limitations on showing times as possible.
c) Have your disclosures complete and available to Buyers to preview when they come view your home.
d) Be quick to respond to inquiries and offers.
While it is going to be a challenging year for Sellers, many homes will change hands this year. Do you want to be one of them? Follow some of the basic guidelines, set realistic expectations and you should be OK!
Monday, March 5, 2007
Happy Valley Real Estate Update
2007 is shaping up to be the year of reality for Happy Valley. After enjoying a long run of strong growth and appreciation, we are settling into a period of market adjustments and value stagnation.
Median value: While RMLS shows year-over-year a 19.8% value gain, we need to look into this number and the definition of median to determine what is really happening. In HV our median has been rising predominately because of the bigger and more elaborate homes being built and sold by Developers, NOT by re-sale of existing homes. When a large segment of homes sold are new, the median can be carried upward without truly reflecting the re-sale appreciation of existing homes. A better measure would be the re-sale price appreciation for an area.
Market Reality: Your home may not have appreciated as fast as you think it has...
Toxic Mortgages: I have been asking clients recently if they could afford to buy their current home at today's valuation. I have been hearing a lot of no's. Many of the financial tricks people used to get into their home to begin with are backfiring. Banks have dramatically tightened their lending requirements, leaving many homeowners who MUST refinance with no product option. These people are electing to sell their homes. We are seeing a rush to market by investors and toxic mortgage holders who are trying to get out from under their homes before they lose them to foreclosure. In the past three years fully 1/3 of all new loans in the greater HV area had an interest only payment option and are adjustable.
Market reality: Many homeowners are going to try to sell this year, flooding the market with inventory.
New Development: The amount of new construction in HV has been incredible the past three years, and continues today. Problem being, Buyer's who can afford the McMansions have dwindled, leaving builders with a large glut of unsold homes. At this point supply is outpacing demand.
Market reality: Builders are offering huge incentives and cutting prices to move inventory. This makes your used home less attractive and less valuable to potential Buyers.
The Good News: While I expect this year to be challenging as we burn through some excess inventory, the toxic mortgage hang-over and general market malaise. HV is still a very attractive market to many looking to buy in the greater Portland area.
Market Reality: If you price your home correctly (Based on recent SALES comps, not listing prices), market your home appropriately and demonstrate to the Buying market that you are reasonable and a "Qualified Seller" you should be OK. As a Seller you need to be clear that it is now a Buyer's Market. When pricing your home understand that it is not your Realtor, an appraiser or even you that sets the value of your home...its the Buyer!
I encourage your responses.
Median value: While RMLS shows year-over-year a 19.8% value gain, we need to look into this number and the definition of median to determine what is really happening. In HV our median has been rising predominately because of the bigger and more elaborate homes being built and sold by Developers, NOT by re-sale of existing homes. When a large segment of homes sold are new, the median can be carried upward without truly reflecting the re-sale appreciation of existing homes. A better measure would be the re-sale price appreciation for an area.
Market Reality: Your home may not have appreciated as fast as you think it has...
Toxic Mortgages: I have been asking clients recently if they could afford to buy their current home at today's valuation. I have been hearing a lot of no's. Many of the financial tricks people used to get into their home to begin with are backfiring. Banks have dramatically tightened their lending requirements, leaving many homeowners who MUST refinance with no product option. These people are electing to sell their homes. We are seeing a rush to market by investors and toxic mortgage holders who are trying to get out from under their homes before they lose them to foreclosure. In the past three years fully 1/3 of all new loans in the greater HV area had an interest only payment option and are adjustable.
Market reality: Many homeowners are going to try to sell this year, flooding the market with inventory.
New Development: The amount of new construction in HV has been incredible the past three years, and continues today. Problem being, Buyer's who can afford the McMansions have dwindled, leaving builders with a large glut of unsold homes. At this point supply is outpacing demand.
Market reality: Builders are offering huge incentives and cutting prices to move inventory. This makes your used home less attractive and less valuable to potential Buyers.
The Good News: While I expect this year to be challenging as we burn through some excess inventory, the toxic mortgage hang-over and general market malaise. HV is still a very attractive market to many looking to buy in the greater Portland area.
Market Reality: If you price your home correctly (Based on recent SALES comps, not listing prices), market your home appropriately and demonstrate to the Buying market that you are reasonable and a "Qualified Seller" you should be OK. As a Seller you need to be clear that it is now a Buyer's Market. When pricing your home understand that it is not your Realtor, an appraiser or even you that sets the value of your home...its the Buyer!
I encourage your responses.
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