5 Traits of Today's Buyer

Are you a buyer in today's market? If so, then a Builder by American Lives survey says that this is you:

• They are young. Most are under 45. Half said they had annual household incomes of $75,000 or less. Two-thirds are married.

• They are frugal. They consistently told surveyors they were eager to live a simple lifestyle.

• They worry about their financial future. About 70% said the economy is “not so good” with 27% saying it was getting worse, 27% saying it was getting better and two-thirds saying it would get better in a year. Some 55% said they were concerned that they might lose their jobs.

• They see themselves as energy efficient but not necessarily “green.” About 32% said they’d pay extra for energy-efficient features but only 16% said they’d pay extra for recycled or renewable construction materials.

• Neighborhood is important. Ninety-five percent said they thought the community was as important as the home itself. Seventy-nine percent wanted the most square footage they could afford, but 69% said they’d consider a smaller home in the right neighborhood. (Source: Inman News)

I'd love to hear your feedback. Tell me if you agree or disagree and what other things are important to you!

Weekly Sales (10/17 - 10/23/10)

My dear followers! I'm sorry that I haven't posted a new blog since Monday. I've been a bit under the weather (and the weather isn't helping!), but I am bringing you the weekly sales report right on schedule. Remember, this report (now in its 7th week) will detail the total number of sales in Leon County along with the price range and location of those sales. Here goes...

For the week of October 17th through October 23rd, there were 25 residential sales in Leon County (down 3 from last week). This is now the third consecutive week of sales in the mid-20s. Remember that I have predicted that sales per week will hover in the mid-20 range for the rest of the year.

Of the 25 sales, 4 were under $100,000. Nine of those were over $200,000 with only 1 of the 9 being over $300,000. The median sales price per square foot this week was $97.45 (about 30 cents lower than last week). I predict that this statistic will continue to fall also, probably for at least another year.

By quadrant, a whopping 17 sales (68%) were in the Northeast, 3 were in the Northwest, 3 were in the Southeast, and 2 properties sold in the Southwest. My old slogan "flight to quality" may now be an understatement. It would be safe to say that buyers are flocking to the Northeast in droves!

MY ADVICE: If you have a house to sell that isn't in the Northeast, then drop your price FAST.

This week's average price ($176,963) was up and the median price ($150,000) stayed the same.

A "Hurry Up and Sell" Corollary

This corollary might give you a coronary... seriously.

To further bolster support for the information which I have been giving you about the dire state of the housing market, please read Joe Manausa's weekly market update HERE. The graph which he provides detailing sales over the past 20 years is pasted below.

Remember, this data comes on the heels of the Clear Capital report that US home prices dropped 5.9% in just two months. I cautioned you readers about the fact that such a decline in home prices was not just a national, but also a local, phenomenon. You can see evidence of it in Joe's report also (this is a sales graph, not a price graph, but it shows weakened demand which translates into lower prices, as I have previously stated).

Stay tuned for more market data. As always, I'll release the weekly sales report on Thursday.

Hurry Up and Sell... Really!

Based on my bit.ly reporting (a wonderful URL shortening website which also tracks clicks on its links), 11 of you read my recent blog entitled "Hurry Up and Sell!". Thank you.

I'm hoping that you found it helpful. I'm also hoping that you read it for more than just the reference to "Don't be a Menace to South Central", but I guess I should take the Apostle Paul's stance that so long as you heard the message, I will be glad (Philippians 1:15-18). But most of all, I hope that you believed what you read.

Prices are taking (not just about to take, we're really in the middle of this) a dramatic free fall. Still don't believe me? Too much "Chicken Little" for you? Then read the following DSNews article detailing exactly what I have been talking about HERE.

Now you may protest, "But Jason, real estate is local! We aren't experiencing that in Tallahassee!" And that would be a good answer because real estate is local. But friend, I tell you truth, we are experiencing it in Tallahassee.

If you NEED to sell your home for reasons of job loss, job transfer, divorce, or some other significant life event, PLEASE call me now! I'm here to help (850-251-6643). Remember, too, that the flip side to this coin is that it's a GREAT time to buy!

Weekly Sales (10/10 - 10/16/10)

Like our previous five reports, this sixth sales report will detail the total number of residential sales in Leon County along with the price ranges of those sales, where those sales took place, and a few explanatory notes.

For the week of October 10th through October 16th, there were 28 residential sales in Leon County. This is the first time in our report history that there have been back-to-back weeks of similar sales numbers. This week's figure is consistent with my prediction that sales would hover in the mid-20s each week for the remainder of the year.

Of the 28 sales, 6 sales were under $100,000. Nine of those were over $200,000 with 3 of those 9 being over $300,000. The median sales price per square foot this week was $97.77 (about a dollar per square foot lower than last week). Expect this statistic to continue to fall for the rest of the year.

By quadrant, 15 sales were in the Northeast, 4 were in the Northwest, 4 were in the Southeast, and 5 properties sold in the Southwest. This week marks the first time in our report that the SW outperformed the NW and SE. Expect to see more properties selling in the Southwest part of town as investors scoop up properties at bargain basement prices.

This week's average ($167,460) and median ($150,000) sale prices varied more this week than they usually do, though the spread narrowed from last's week figures. Expect to see the average and median sales prices continue to plummet over the next 3-4 months.

Hurry Up and Sell!

If you spent part or all of your adolescence growing up in the '90s, then you'll probably remember a scene from the movie "Don't be a Menace to South Central while Drinking your Juice in the Hood" where a pair of Chinese grocery store owners repeatedly tell two African-American brothers (I mean siblings) to "hurry up and buy!" (if you missed this cultural icon - I'm being facetious, although the movie was pretty hilarious - click HERE).

While that mantra may have permeated our recent real estate boom from 2002-2006, the slogan of today's market has radically changed. If you are thinking about selling your home, then you should "hurry up and sell!"

Since the market peak in the Spring of 2006, median property values have fallen by 15% in Leon County as a whole (-1% in 2007, flat in 2008, -9% in 2009, and -5% YTD so far). Some neighborhoods have fared better, some worse (much worse).

This year's numbers were buoyed significantly by the 1st time homebuyer tax credit, and the market decline is now accelerating. Property values are going to continue to fall so long as foreclosures and short sales continue to be a significant factor in the market (foreclosures and short sales once accounted for only 2% of sales in Leon County... that figure now stands at 25% and growing) and unemployment remains high.

And the median sales price doesn't tell the whole story. Remember, that statistic is subject to changes in market demographics (and there have certainly been changes in market demographics). The best way to track appreciation or depreciation is to look at repeat sales of individual properties. In these cases, the depreciation story is significant and scary. I'll use two of my current listings as cases in point --

1. 1117 Wisteria Drive: SOLD in January of 2006 for $550,000. Now under contract for $295,000 (and in need of significant repair that was overlooked in the 2006 sale).

2. 1827 Ivan Drive: SOLD in July of 2005 for $175,000. Now listed (after about $11,000 in improvements including a new 15 SEER HVAC system) for $148,000 with very little interest.

Waiting until next year to sell will not help. We have at least two years of foreclosures to work through, and we probably won't see appreciation for quite a while after that (Joe Manausa thinks we've got 7-10 years of falling and then stagnant prices).

So if you or someone you know is thinking about selling, call me ASAP: 850-251-6643.

Homeownership is Affordable.... Today!

Housing affordability is a combination of prices and interest rates. There are several scenarios that can play out as those two metrics change. They are:

1. Prices rise, interest rates rise = affordability falls (homes less affordable)

2. Prices rise, interest rates fall = affordability outcome uncertain

3. Prices fall, interest rates rise = affordability outcome uncertain

4. Prices fall, interest rates fall = affordability increases (homes more affordable)

I have bolded #4 because it is the situation in which we find ourselves. And really, it is a historically unprecedented situation. 

During the last real estate bust in the late '80s, prices fell sharply but interest rates were near historic highs (18%+). During our most recent real estate boom, even though interest rates were relatively low historically (6-8%), prices rose dramatically and made homeownership impossible for many people. 

However, prices and interest rates are now at a level where homeownership is a wonderful investment - both long term (because prices will go back up) and short term (because owning is now cheaper than renting). NAR chief economist Lawrence Yun said recently that homeownership is more affordable than it has been in a generation.

And in their 2nd quarter report, Republic Mortgage Insurance Company said:

"Home prices are low relative to equivalent rents in Tallahassee.  Currently, monthly mortgage payments (principal + interest) based on the average priced property are 30.2% less than comparable rents in this area.  Historically average monthly payments (principal + interest) are 19.3% more than comparable rents in Tallahassee."

So if you are interested in buying a new home (or building wealth in real estate by acquiring rental property), give me a call! 850-251-6643.

A Voice of Common Sense

If you have been following my other blog (and you should, it is meant to be a resource for you!) at www.tallahasseeforeclosures.blogspot.com, then you will be up-to-date on the recent news regarding several large banks halting their foreclosure proceedings.

In short, GMAC and JPMorgan Chase were the first to issue foreclosure moratoriums, joined shortly thereafter by Bank of America, and then Litton Loan Servicing and PNC Financial followed suit last week.

The revelations about bank employees not properly executing foreclosure documents has caused an outcry amongst the public and politicians alike. Several politicians (Nancy Pelosi, et al) and consumer advocate groups have called for a nationwide moratorium on all foreclosures. However, to do so would cause tremendous upheaval in the real estate market and disrupt a very tenuous recovery (some places, like Tallahassee, have fared better than others, but still have more REO inventory to work through and won't see recovery until we do, so delaying foreclosures is just delaying recovery).

Edward J. DeMarco (acting director of FHFA) says, “Delays in foreclosures add cost and other burdens for communities, investors, and taxpayers. For Enterprise [Fannie Mae and Freddie Mac] loans, delay means that taxpayers must continue to support the Enterprises’ financing of mortgages without the benefit of payment and neighborhoods are left with more vacant properties.”

To read more of Mr. Demarco's comments, click HERE.

The bottom line is that people are being foreclosed upon because they have not paid their mortgages. While we want to encourage banks and all corporate citizens and be responsible and law-abiding, we need to allow them to recoup their investments, liquidate their REO inventory, and get the housing market back to where foreclosures are an exception, not the rule.

Weekly Sales (10/3 - 10/9/10)

Wow! Here we are entering our second month of posting weekly sales stats. Welcome to the 5th installment of the weekly sales report. Each sales report 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 October 3rd through October 9th, there were 25 residential sales in Leon County. That figure falls by over half from last week's astonishing 53 sales to almost match the sales figures from two weeks ago (24).

I mentioned last week that the surge in sales to 53 in a week was hard to explain, and it is not surprising to see the figure fall back into the 20s. So far we have had 25, 39, 24, 53, and 25 sales for the last five weekly totals. There looks to be something of a trend being established. As we've talked about before, I expect to see weekly sales hover in the mid-20s per week for most of the rest of the year.

Of the 25 sales, 10 of those were over $200,000 with 4 of those 10 being over $300,000. Four properties sold for less than $100,000. The median sales price per square foot this week was $98.61. This is a stat which I may start mentioning more often.

By quadrant, 15 sales were in the Northeast, 5 were in the Northwest, 4 were in the Southeast, and just one property was sold in the Southwest. For repeat readers, you will notice the sales in the Northeast quadrant continuing to dominate local activity.

This week's average ($189,105) and median ($128,000) sale prices were drastically different for the first time since we've tracked these figures. That difference shows an overweight on inexpensive homes as lower income buyers are able to afford homes for the first time in almost a decade.

Top 10 Reasons to Own a Home

Since I couldn't have said it better myself, please read the following Wall Street Journal article about why it is a good idea to own a home HERE.

My only caveats would be that:

1. Owning is a long term proposition. If you don't plan on staying in your home for at least 5 years (better 7-10), then you shouldn't buy unless the property has good income producing potential (e.g. a house in a neighborhood that could rent well, or a duplex or triplex).

2. North Florida has not suffered from overbuilding as much as Central and South Florida have. The Tallahassee area of the Panhandle, thankfully, has been largely insulated from the downturn because of our stable job market and a general conservatism about growth and expansion.

Real Estate Booms and Busts

All of us remember the recent real estate boom that lasted from 2002-2006, even though it has been largely overshadowed by our recent bust.

But do you remember the real estate bust of the late 1980s? If so, good for you. And do you remember the booms of the 1820s, 1880s, 1920s, and 1950s? What about the bust of 1926?

In recent history, booms and busts have followed roughly 20 year cycles. Our current bust has been no different. The good news is that people still need places to live, so real estate is an enduring commodity. There will always be demand (whether for renting or owning). However, at the moment, the supply far outweighs the demand and that will continue to put downward pressure on prices. But real estate will recover. It always has. It may take more time now than it used to, but it will recover.

To read more about real estate booms and busts, check out page 8 of the September issue of the Tallahassee Board of Realtors' magazine HERE.

Weekly Sales (9/26 - 10/2/10)

Welcome to the 4th installment of our weekly sales report. Remember, the sales report 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 26th through October 2nd, there were a remarkable 53 residential sales in Leon County. That figure is more than double the sales from last week (24), and roughly 33% higher than two weeks ago (39).

This dramatic increase is hard to explain. It is a figure we would expect to see during the Summer months. Weekly sales obviously fluctuate quite a bit, but this week's figure is higher than our average weekly sales figure (~ 46), an unusual occurrence during the Fall and Winter months.

Of the 53 sales, 16 of those were over $200,000 with 7 of those 16 being over $300,000. 13 properties sold for less than $100,000 with 5 of those sales closing at or below $50,000.

It is interesting to note that this market is bucking the bell curve trend, that is, we are seeing a more even distribution amongst price ranges than we ordinarily would. Typically, there would be a high concentration of sales between $100-200,000 with very few sales above or below that. Now, there is more even spread of purchases of the high highs and low lows.

By quadrant, 25 sales were in the Northeast, 11 were in the Northwest, 12 were in the Southeast, and 5 properties were sold in the Southwest. As we have seen in the past, Southwood continues to dominate sales in the Southeast (7 this week). The Northeast is still seeing the highest percentage of sales which is great news for anyone with a property to sell there.

This week's average ($170,972) and median ($162,000) sale prices were both relatively close to the yearly marks of $181,857 and $159,900, respectively.

Two Great New Listings!

2920 Abbotsford Way (32312)

3334 sq ft
4 bedrooms
2.5 baths
2 car garage
0.65 acres
Oak hardwood floors
Remodeled kitchen/baths
New roof with contract!
$365,000

5093 Velda Dairy Rd (32309)

2659 sq ft
4 or 5 bedrooms
3 full baths
2 car carport
1.00 acres
HUGE kitchen
Ample living spaces
In-law suite (1 bdr/1 bth)
$225,000

Wakulla Bank Closed

Due to its extremely high percentage (14%+) of non-performing assets, Wakulla Bank was closed on October 1st, 2010, by the Florida Office of Financial Regulation. The FDIC was named receiver.

Centennial Bank (Conway, AR) is assuming Wakulla Bank. Former Wakulla Bank locations will reopen as Centennial Bank locations. You can learn more about Centennial Bank at www.my100bank.com.

To see the FDIC press release, go HERE.

If you are a Wakulla Bank customer, you may want to read A Borrower's Guide to an FDIC Insured Bank Failure.

Halting Foreclosures... A good thing?

In the past week, three major US banks (JPMorgan Chase, GMAC, and now BoA) have announced that they will stop their foreclosure activity in order to examine their procedures.

Recent testimony by bank officials has brought to light what some are calling "robo-signers" - the practice of signing legal documents without abiding by specific laws that govern them, like having personal knowledge that the information is accurate or having the documents notarized.

One BoA official testified in a Massachusetts bankruptcy case that she signed between 7-8,000 foreclosure documents per month and "typically" did not read them. Assuming 23 working days to a month, that averages out to signing 326 documents per day, or roughly 40 per hour.

That becomes a full time job in and of itself, apart from carrying out the other duties that are required of a corporate Vice President (the position which most often signs these documents). One can readily see how having personal knowledge that such a large volume of information is correct becomes impossible.

To make matters worse, two large Florida law firms have recently been accused of falsifying foreclosure documents. And the most recent issue of the Florida Bar News found that over 20% of foreclosure cases in Manatee and Sarasota counties had some type of procedural or paperwork problem. We can only assume that other counties are similar.

So, what do you think, is halting foreclosures a good thing? I'd love to hear your thoughts... tune in next week for mine.