Welcome to the 3nd installment of our weekly sales report. Remember, I am using the same format for each report which details the total number of sales, the prices ranges of those sales, where those sales took place, and a few explanatory notes.
For the week of September 19th through September 25th, there were 24 residential sales in Leon County. That figure is 40% lower than last week (39 sales), but basically the same number as two weeks ago (25 sales). I think that we will continue to see weekly sales hover in the mid 20s throughout the remainder of the year (holiday weeks being an exception).
Of the 24 sales, 8 of those were over $200,000 with 3 of those 8 being over $300,000. With the expiration of the 1st time homebuyer tax credit, we should expect to see a higher percentage of sales taking place in these higher ranges (simply because there are fewer 1st timers buying less expensive properties).
As a result, it would not be surprising to see average and median prices increase. However, that is far from a signal of recovery unless it is sustained over time and coupled with increased sales volume (3200-3500 sales is probably a sustainable, healthy norm for the future, but it may take a few years to get there).
By quadrant, 10 sales were in the Northeast, 7 were in the Northwest, 7 were in the Southeast, and no property was sold in the Southwest this week. The "flight to quality" discussed in an earlier blog continues as the NE remains the dominant sector. In fact, over 50% of the homes sold in Tallahassee this year have been in that quadrant.
This week's average ($177,674) and median ($176,000) sale prices were both relatively close to the yearly marks of $182,387 and $159,500, respectively.
Thursday, September 30, 2010
Wednesday, September 29, 2010
Shadow Inventory
Just ahead of the weekly sales report tomorrow, I want to disseminate this article with respect to the national foreclosure inventory: S&P Report.
Locally, some other experts are predicting that there are 5000 distressed properties that need to work their way through the market. If you remember our yearly sales figures, then you'll recall that it would take over two years to sell that inventory alone. On top of that, there is still the matter of all the other non-distressed sales on the market (currently about 2300, and rising).
None of this new information bodes well for the Tallahassee housing market over the next 3-4 years. However, if you are in the market for a house long term (7-10 years), then buying now while rates are still low is a phenomenal, once-in-a-lifetime opportunity. Call me!
Locally, some other experts are predicting that there are 5000 distressed properties that need to work their way through the market. If you remember our yearly sales figures, then you'll recall that it would take over two years to sell that inventory alone. On top of that, there is still the matter of all the other non-distressed sales on the market (currently about 2300, and rising).
None of this new information bodes well for the Tallahassee housing market over the next 3-4 years. However, if you are in the market for a house long term (7-10 years), then buying now while rates are still low is a phenomenal, once-in-a-lifetime opportunity. Call me!
Saturday, September 25, 2010
Distressed Properties #2
What percentage of the current Tallahassee real estate market do you think is made up of short sales and foreclosures? 10%? 20%? 50%?
Presently, there are 2702 active residential listings in the MLS for sale in Tallahassee. Of those, 178 (6.6%) are foreclosures and 418 (15.5%) are prospective short sales. So, in total, just over 1 in 5 (22.1%) of all the homes for sale in Leon County are "distressed" sales.
While that number may seem high, it represents only 1 in every 140 households that is affected by a short sale or foreclosure. And that is good news for our community.
Presently, there are 2702 active residential listings in the MLS for sale in Tallahassee. Of those, 178 (6.6%) are foreclosures and 418 (15.5%) are prospective short sales. So, in total, just over 1 in 5 (22.1%) of all the homes for sale in Leon County are "distressed" sales.
While that number may seem high, it represents only 1 in every 140 households that is affected by a short sale or foreclosure. And that is good news for our community.
Friday, September 24, 2010
Distressed Properties
When we talked about "distressed properties" it is possible to apply the term two ways.
First, and most often, "distressed" refers to the condition of the property. That is, the physical condition of the structure(s). A "distressed" property is typically considered to be a dilapidated property, or at least one that requires a significant amount of rehabilitation. Often, distressed properties do not qualify for "conventional" forms of financing.
I put conventional in quotes there because I am using conventional to mean "usual and ordinary, commonplace" rather the the strict definition of a conventional loan -- which would be a non-government loan program, typically with 20% down. FHA, VA, USDA (aka RD), and conventional loans would all fall under the "conventional" heading as herein defined. Owner financing, private money, or "hard" money loans would fall outside the scope of "conventional" loans.
Second, "distressed" can be used to refer to the situation of the property owner. Therefore, it is also common to hear short sales and foreclosures referred to as "distressed" sales. A foreclosure or short sale could possibly fall under both meanings of "distressed" if the property is in poor condition. In this second meaning, short sales are called distressed because the homeowner is (usually) experiencing some financial hardship (or distress) which is necessitating the short sale.
In a foreclosure, the institution who owned the mortgage and foreclosed in order to take ownership of the property is an "unwilling" owner (because a bank/mortgage holder would much rather collect interest than be a property owner and it has taken back the property as a last resort). Needing to sell the asset (house) in order to return to normal business operations (lending money) puts the owner of a foreclosure in a "distressed" position.
Finally, remember that there are exceptions to most rules. It is possible for a homeowner to consummate a short sale without ever having missed or been late on a mortgage payment. In this case, the homeowner may simply be "underwater" (owing more than the property is worth) and desire to be rid of that negative equity position. In that case, a short sale would not be a precursor to foreclosure, as is often the case.
Questions?
First, and most often, "distressed" refers to the condition of the property. That is, the physical condition of the structure(s). A "distressed" property is typically considered to be a dilapidated property, or at least one that requires a significant amount of rehabilitation. Often, distressed properties do not qualify for "conventional" forms of financing.
I put conventional in quotes there because I am using conventional to mean "usual and ordinary, commonplace" rather the the strict definition of a conventional loan -- which would be a non-government loan program, typically with 20% down. FHA, VA, USDA (aka RD), and conventional loans would all fall under the "conventional" heading as herein defined. Owner financing, private money, or "hard" money loans would fall outside the scope of "conventional" loans.
Second, "distressed" can be used to refer to the situation of the property owner. Therefore, it is also common to hear short sales and foreclosures referred to as "distressed" sales. A foreclosure or short sale could possibly fall under both meanings of "distressed" if the property is in poor condition. In this second meaning, short sales are called distressed because the homeowner is (usually) experiencing some financial hardship (or distress) which is necessitating the short sale.
In a foreclosure, the institution who owned the mortgage and foreclosed in order to take ownership of the property is an "unwilling" owner (because a bank/mortgage holder would much rather collect interest than be a property owner and it has taken back the property as a last resort). Needing to sell the asset (house) in order to return to normal business operations (lending money) puts the owner of a foreclosure in a "distressed" position.
Finally, remember that there are exceptions to most rules. It is possible for a homeowner to consummate a short sale without ever having missed or been late on a mortgage payment. In this case, the homeowner may simply be "underwater" (owing more than the property is worth) and desire to be rid of that negative equity position. In that case, a short sale would not be a precursor to foreclosure, as is often the case.
Questions?
Thursday, September 23, 2010
Weekly Sales (9/12 - 9/18/10)
Here is the 2nd installment of our weekly sales report. For ease of use, I am going to use the same format for each report which will detail the total number of sales, the prices ranges of those sales, where those sales took place, and a few explanatory notes.
For the week of September 12th through September 18th, there were 39 residential sales in Leon County. Year-to-date, there have been an average of 45.5 sales per week, so 39 sales is as close to the average as we would expect to be at this time of year.
Of the 39 sales, 17 of those were over $200,000 with 10 of those 17 being over $300,000. Those figures are once again encouraging. 7 sales were under $100,000.
By quadrant, 16 sales were in the Northeast, 15 were in the Northwest, 7 were in the Southeast, and 1 was in the Southwest. The increase in the number of sales in the NW relative to other quadrants is good considering the slowdown in that area over the past several months. Hopefully, that trend will continue.
This week's average ($220,027) and median ($198,755) sale prices were both well above the yearly figures of $182,387 and $159,500, respectively.
For the week of September 12th through September 18th, there were 39 residential sales in Leon County. Year-to-date, there have been an average of 45.5 sales per week, so 39 sales is as close to the average as we would expect to be at this time of year.
Of the 39 sales, 17 of those were over $200,000 with 10 of those 17 being over $300,000. Those figures are once again encouraging. 7 sales were under $100,000.
By quadrant, 16 sales were in the Northeast, 15 were in the Northwest, 7 were in the Southeast, and 1 was in the Southwest. The increase in the number of sales in the NW relative to other quadrants is good considering the slowdown in that area over the past several months. Hopefully, that trend will continue.
This week's average ($220,027) and median ($198,755) sale prices were both well above the yearly figures of $182,387 and $159,500, respectively.
Tuesday, September 21, 2010
Moral Component of Recovery
I have a confession...
I bought my house at the peak of the market. And not just in the peak year (2006 in Tallahassee), but in the peak month of the peak year (May). So, like approximately 15 million other Americans (according to Moody's Economy.com), I am "underwater" on my house (meaning I owe more on it than the house is worth).
So what do you think that I should do?
According to a recent Pew Research study, 36% of Americans would say that it is alright for me to "strategically default" on my loan, that is to say, to purposefully stop making my mortgage payments even though I am able to afford them, and walk away from my house.
If that trend is troubling to you, it should be. A continued rise in strategic defaults would mean a whole new wave of foreclosures entering the market over the next 2-3 years. More foreclosures would put increased downward pressure on home prices and keep us stuck in the negative feedback cycle in which we presently find ourselves.
If we are to have any hope of a real estate recovery in the near term, then Americans must make the decision to honor their promise to repay the money that they borrowed for their home (or vacation property, or car, or boat, or whatever). This is absolutely essential. If honesty and integrity disappear from our society and economy, then there is no hope for the future of our nation.
"Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed. Let no debt remain outstanding except to love each other" (Romans 13:7-8).
I bought my house at the peak of the market. And not just in the peak year (2006 in Tallahassee), but in the peak month of the peak year (May). So, like approximately 15 million other Americans (according to Moody's Economy.com), I am "underwater" on my house (meaning I owe more on it than the house is worth).
So what do you think that I should do?
According to a recent Pew Research study, 36% of Americans would say that it is alright for me to "strategically default" on my loan, that is to say, to purposefully stop making my mortgage payments even though I am able to afford them, and walk away from my house.
If that trend is troubling to you, it should be. A continued rise in strategic defaults would mean a whole new wave of foreclosures entering the market over the next 2-3 years. More foreclosures would put increased downward pressure on home prices and keep us stuck in the negative feedback cycle in which we presently find ourselves.
If we are to have any hope of a real estate recovery in the near term, then Americans must make the decision to honor their promise to repay the money that they borrowed for their home (or vacation property, or car, or boat, or whatever). This is absolutely essential. If honesty and integrity disappear from our society and economy, then there is no hope for the future of our nation.
"Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed. Let no debt remain outstanding except to love each other" (Romans 13:7-8).
Thursday, September 16, 2010
Weekly Sales (9/5 - 9/11/10)
This is our first weekly sales report. As I mentioned in an earlier blog, these reports (with notes) will always reference data for the week prior because sales are typically reported in the MLS one to two days after they actually occur.
For the week of September 5th through September 11th, there were 25 residential sales in Leon County. Year-to-date, there have been an average of 46.2 sales per week, so 25 sales represents a significant slowdown (some of which we would expect given the seasonal nature of real estate sales).
Of the 25 sales, 10 of those were over $200,000 with 5 of those 10 being over $300,000. Those figures are encouraging for homes in the upper price ranges.
By quadrant, 11 sales were in the Northeast, 4 were in the Northwest, 8 were in the Southeast, and 2 were in the Southwest. I believe that we will continue to see the highest percentage of sales occurring in the Northeast as buyers continue a "flight to quality" (the Northeast has, generally, the best schools and nicest neighborhoods). Not surprisingly, 5 of the 8 sales in the Southeast have been in Southwood.
While this week's average sale price ($213,700) is well above the yearly average ($182,070), the median sale price ($159,990) is right in line with this year's figure ($159,000).
Check back in next week as we continue to monitor our weekly progress.
For the week of September 5th through September 11th, there were 25 residential sales in Leon County. Year-to-date, there have been an average of 46.2 sales per week, so 25 sales represents a significant slowdown (some of which we would expect given the seasonal nature of real estate sales).
Of the 25 sales, 10 of those were over $200,000 with 5 of those 10 being over $300,000. Those figures are encouraging for homes in the upper price ranges.
By quadrant, 11 sales were in the Northeast, 4 were in the Northwest, 8 were in the Southeast, and 2 were in the Southwest. I believe that we will continue to see the highest percentage of sales occurring in the Northeast as buyers continue a "flight to quality" (the Northeast has, generally, the best schools and nicest neighborhoods). Not surprisingly, 5 of the 8 sales in the Southeast have been in Southwood.
While this week's average sale price ($213,700) is well above the yearly average ($182,070), the median sale price ($159,990) is right in line with this year's figure ($159,000).
Check back in next week as we continue to monitor our weekly progress.
Tuesday, September 14, 2010
Suggestions for Market Improvement
This post is the last in a series of three detailing the current state of the real estate market in Leon County. Please refer to the posts from 9/11 and 9/13 for background information.
I mentioned yesterday that I would give some suggestions on how to improve the state of the market. You will recall that I advocated an approach which targets both supply and demand. While I am thinking of Tallahassee in particular, these suggestions will work for any market struggling with oversupply.
My suggestions (most of which have already been offered in some form or another) are as follows:
1. Create another round of tax credits which are scaled back over time as the market improves (e.g. $4000 until the end of 2010, then $3000 from 1/11 to 6/11, then $2000 from 7/11 to 12/11, and so forth).
2. Create tax deductions which are scaled over time to provide a long lasting effect for purchasers while minimizing the up front cost to the federal government.
3. Open up tax credits and/or deductions to investors. This has a multiplicative effect because most investors are able to purchase more than one property, whereas a homeowner is by definition limited to one property (the one he occupies as his primary residence).
4. Provide funds to purchase and demolish the least expensive and most dilapidated homes in the market. This has an immediate impact on supply because it removes the property from the housing stock permanently, and therefore truly reduces inventory (whereas an investor might purchase and remodel the property and then place it back into the marketplace for rent or sale, thus having no effect on reducing the inventory).
5. Provide subsidies to builders to remodel dilapidated homes instead of building new ones. This has the effect of reducing inventory because builders are moved from the new construction market to the renovation market where they are rehabilitating the existing housing stock (good in its own right) instead of adding to it (which, in effect, reduces inventory, or at least prevents the inventory from growing).
There are other ideas for improving our local and national real estate markets, so if you'd like to discourse more on the topic, please comment on this post or email me at jasonpicht@gmail.com.
I mentioned yesterday that I would give some suggestions on how to improve the state of the market. You will recall that I advocated an approach which targets both supply and demand. While I am thinking of Tallahassee in particular, these suggestions will work for any market struggling with oversupply.
My suggestions (most of which have already been offered in some form or another) are as follows:
1. Create another round of tax credits which are scaled back over time as the market improves (e.g. $4000 until the end of 2010, then $3000 from 1/11 to 6/11, then $2000 from 7/11 to 12/11, and so forth).
2. Create tax deductions which are scaled over time to provide a long lasting effect for purchasers while minimizing the up front cost to the federal government.
3. Open up tax credits and/or deductions to investors. This has a multiplicative effect because most investors are able to purchase more than one property, whereas a homeowner is by definition limited to one property (the one he occupies as his primary residence).
4. Provide funds to purchase and demolish the least expensive and most dilapidated homes in the market. This has an immediate impact on supply because it removes the property from the housing stock permanently, and therefore truly reduces inventory (whereas an investor might purchase and remodel the property and then place it back into the marketplace for rent or sale, thus having no effect on reducing the inventory).
5. Provide subsidies to builders to remodel dilapidated homes instead of building new ones. This has the effect of reducing inventory because builders are moved from the new construction market to the renovation market where they are rehabilitating the existing housing stock (good in its own right) instead of adding to it (which, in effect, reduces inventory, or at least prevents the inventory from growing).
There are other ideas for improving our local and national real estate markets, so if you'd like to discourse more on the topic, please comment on this post or email me at jasonpicht@gmail.com.
Monday, September 13, 2010
Analysis of Historical Sales Data
This blog is a continuation of my post from Saturday, September 11th. Please refer to that post for the historical sales numbers over the last decade.
At the end of Saturday's post, I mentioned that we appear to be selling a historically normal number of residential units based on sales figures from the 1990s. However, the counterpoint to the encouraging bit of news is that the Leon County population has increased 18% since the mid-1990s when we were also selling around 2400 residential units per year.
Therefore, if the sales rate did not grow, but merely kept pace with the population growth, we would expect to see closer to 2800 units sold per year. The fact that we are below the population adjusted sales figure makes sense when the current supply and demand situation is taken into account. At present, Leon County has 12.5 months of inventory which is more than double the supply in a balanced market (6 months).
NOTE: Months inventory is the number of months that it would take to sell all of the homes on the market at the current sales pace, assuming no new homes were listed for sale. For example, if 1000 homes were on the market for sale, and the sales pace was 100 sales per month, then there would be 10 months of inventory (1000/100 = 10).
With 15 new homes coming on the market for sale each day, and only 7 homes being sold each day, the market is going in the wrong direction. As in any other market, excess supply puts downward pressure on prices. If we want to see price stabilization in our local housing market, then we need to balance supply and demand. We can do that in one of two ways, either 1) Increase demand or 2) Decrease supply. It is the opinion of this author that we must have a plan that targets both supply and demand in order to be effective in balancing the market.
Check back in tomorrow for some ideas on how to fix the problem.
At the end of Saturday's post, I mentioned that we appear to be selling a historically normal number of residential units based on sales figures from the 1990s. However, the counterpoint to the encouraging bit of news is that the Leon County population has increased 18% since the mid-1990s when we were also selling around 2400 residential units per year.
Therefore, if the sales rate did not grow, but merely kept pace with the population growth, we would expect to see closer to 2800 units sold per year. The fact that we are below the population adjusted sales figure makes sense when the current supply and demand situation is taken into account. At present, Leon County has 12.5 months of inventory which is more than double the supply in a balanced market (6 months).
NOTE: Months inventory is the number of months that it would take to sell all of the homes on the market at the current sales pace, assuming no new homes were listed for sale. For example, if 1000 homes were on the market for sale, and the sales pace was 100 sales per month, then there would be 10 months of inventory (1000/100 = 10).
With 15 new homes coming on the market for sale each day, and only 7 homes being sold each day, the market is going in the wrong direction. As in any other market, excess supply puts downward pressure on prices. If we want to see price stabilization in our local housing market, then we need to balance supply and demand. We can do that in one of two ways, either 1) Increase demand or 2) Decrease supply. It is the opinion of this author that we must have a plan that targets both supply and demand in order to be effective in balancing the market.
Check back in tomorrow for some ideas on how to fix the problem.
Saturday, September 11, 2010
Historical Overview of Sales
I will begin posting weekly sales data next week. Since sales are usually reported in the MLS a day or two after they occur, the weekly transaction report that I post will always refer to the week prior (and be labeled accordingly).
Before we begin looking at weekly numbers, let's get some perspective on where we are historically. Over the last 10 years, sales of residential properties (houses, townhomes, condos, and mobile homes) have been as follows:
2000 - 3298 (63.4/wk)
2001 - 3720 (71.5/wk)
2002 - 3805 (73.2/wk)
2003 - 4383 (84.3/wk)
2004 - 4834 (92.9/wk)
2005 - 5580 (107.3/wk)
2006 - 5196 (99.9/wk)
2007 - 4298 (82.7/wk)
2008 - 2579 (49.6/wk)
2009 - 2456 (47.2/wk)
2010 - 1662 (YTD, or 2401 annualized, 46.2/wk)
Even though the last three year's numbers seem remarkably low, my research through the Florida Association of Realtors and conversations with older agents in town confirm that we are at a historically normal number of sales. That is to say, we are selling about the same number of homes today that we have sold under previously normal market conditions (i.e. balanced supply and demand). However, our current supply and demand picture is not balanced. What does that mean for Tallahassee housing?
Check back on Monday for an analysis of our local supply and demand, and recommendations for fixing the problem.
Before we begin looking at weekly numbers, let's get some perspective on where we are historically. Over the last 10 years, sales of residential properties (houses, townhomes, condos, and mobile homes) have been as follows:
2000 - 3298 (63.4/wk)
2001 - 3720 (71.5/wk)
2002 - 3805 (73.2/wk)
2003 - 4383 (84.3/wk)
2004 - 4834 (92.9/wk)
2005 - 5580 (107.3/wk)
2006 - 5196 (99.9/wk)
2007 - 4298 (82.7/wk)
2008 - 2579 (49.6/wk)
2009 - 2456 (47.2/wk)
2010 - 1662 (YTD, or 2401 annualized, 46.2/wk)
Even though the last three year's numbers seem remarkably low, my research through the Florida Association of Realtors and conversations with older agents in town confirm that we are at a historically normal number of sales. That is to say, we are selling about the same number of homes today that we have sold under previously normal market conditions (i.e. balanced supply and demand). However, our current supply and demand picture is not balanced. What does that mean for Tallahassee housing?
Check back on Monday for an analysis of our local supply and demand, and recommendations for fixing the problem.
Wednesday, September 8, 2010
Hello
Hello Blog World:
In the coming weeks, you'll find the following information about the Tallahassee area and local real estate market updated regularly:
1. Weekly market update -- interpretation of economic data
2. Weekly transaction report -- # of homes sold each week
3. Restaurant of the week -- chronicling some Tallahassee faves
4. Business of the week -- bio on quality locally owned businesses
5. Local hot spots -- venues worth visiting
6. Where in the world is...? -- 1st person to guess the photo location wins a prize
7. Breaking news -- reports that affect the real estate landscape
If you have any other information which you would like to know about, please let me know!
In the coming weeks, you'll find the following information about the Tallahassee area and local real estate market updated regularly:
1. Weekly market update -- interpretation of economic data
2. Weekly transaction report -- # of homes sold each week
3. Restaurant of the week -- chronicling some Tallahassee faves
4. Business of the week -- bio on quality locally owned businesses
5. Local hot spots -- venues worth visiting
6. Where in the world is...? -- 1st person to guess the photo location wins a prize
7. Breaking news -- reports that affect the real estate landscape
If you have any other information which you would like to know about, please let me know!
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