Housing Market Activity

There seems to be a lot of activity in the housing market right now.  As well it should.  We are seeing ridiculously low mortgage interest rates (floating just over and under 4% for 30 yr loans), housing prices are (finally) starting to creep upwards after years of decline, and the buyers that are ready to move out of rentals recognize this is a great time to purchase.

We are seeing low inventory levels, lower than what I consider 'desirable', which makes buyers do a lot of shopping.  And a lot of the inventory is in a condition that doesn't suit itself to quick decisions on writing a purchase agreement. But buyers that miss a few opportunities figure out the winning game plan.

1. Get new listings reviewed quickly, first on screen, then as a drive-by.
2. Get into the ones you want to see as fast as possible.
3. Write a fair offer.

The last one is very subjective, but understanding that any home priced at 'market' value and in decent or good condition will receive multiple offers is important, too.  In most cases, you will get a chance to come back with your 'highest and best' offer.  Highest, as in price, and best, as in terms.

If you're mainly looking at short sales, you need patience as a Number 4 on the above list.  Foreclosure homes sell quicker as a rule, but you may need to consider a rehab loan or doing a lot of work before moving in to the house, so it's not for everyone.

If you're thinking about buying a house in Brighton or selling a house in Howell, call me.  I also work other areas, and I can always refer you to a good agent in other markets if necessary.

Market Notes – August 25, 2011

I just received the August survey results from Campbell/Inside Mortgage Finance, a firm that surveys agents and brokers from across the country. This is one of many Real Estate-related surveys in which I participate. Their results are broken down both in general groups of buyers and/or sellers and by geographic region.

scottchan / FreeDigitalPhotos.net

Last week my blog entry, “July 2011 Market Data” reported that the number of local cash sales is way down compared to 2010. This most recent national survey reports that July 2011 investor purchases are at a 12 month low. This survey also says that about half of investor purchased properties in July 2011 (48%) will be rented out, compared to 28% in July 2010. Is that due to tighter loan requirements for first-time buyers (investors wanting to re-sell have a worse market), a lack of confidence in the economy by buyers, or something else? It is a big difference in numbers.

Some survey comments conclude that investors are acting decisively while first-time home buyers seem to be demonstrating fear and indecision. The rental market in my area is robust, so perhaps investors are leveraging those conditions.

The sales price to listing price ratio for our region, the Industrial Midwest (MO, IN, IL, OH, MI) shows that damaged foreclosure (REO) properties sold at a 91% ratio. That means a $100,000 listing sold for $91,000. Move-in condition foreclosure homes did marginally better at a 93% ratio, short sales sold at a 91% ratio and non-distressed homes were at 94%.

Remember that homes in better condition sell for more money, too, so while the percentage differences are small, the ultimate purchase prices are much wider. The average sales prices on these categories are: Damaged REO - $57,938, move-in condition REO - $114,015, short sales - $150,493, and non-distressed homes sold for an average of $205,604.

If you are looking for a house, a foreclosure or short sale can be a great bargain. Just know the difference in timelines (and processes) to close, and also know that you still pretty much get what you pay for. A $57,000 house will need a lot more work than a $114,000 house.

As always, if you have real estate questions, feel free to contact me.

July 2011 Market Data

The July data has just been published by our MultiList System (MLS), RealComp II, Ltd. We’re seeing a continuation of trends from earlier in the year, namely, fewer listings, slightly increased sales numbers and a shorter time on the market.

First, listings. Year To Date (YTD) for 2011, we’re 11% below 2010 levels, with 3041 this year compared to 3404 last year. Short sales listings are down a significant 28% comparing July 2011 to July 2010(252 in 2011 vs. 352 in 2010).

Sales of residential units (detached homes and condominiums) are up 7%, or 237 in 2011 vs. 221 in 2010. Pending sales are also up 23% from last year. July 2011 showed the highest average ($173,608) and median ($153,750) sales prices of the year, and both of those indicators are nominally above 2010’s performance.

The time on market (time it takes a listing to sell) is at average of 114 days for 2011 compared to 121 days for 2010. It may not seem like much, but selling your home a week faster can be important to some people. It also means that buyers need to be motivated and move on their choices quicker.

The ‘hot spots’ for sales in Livingston County continue to be Genoa Township, Hamburg Township, Brighton Township, and Green Oak Township, in that order.

Cash sales are way down so far this year, with only 95 being reported. At the end of July 2010, that figure was 415 – a 77% decrease. Land contracts are a little more popular this year, but at 25 sales with those terms, they are still a very small part of the overall financing picture. Conventional mortgages are still the most popular financing method, followed by FHA loans.

Livingston County Sales Figures – January to June - 2010 vs 2011

Single family residences (SFR) sales (detached homes) are down about 10% for the first six months of 2011 as compared to 2010. The bright spot is that both the average and median sales prices are showing nominal increases (3-4% margin), and are selling slightly faster in 2011 than in 2010.

Private sales (non short sale, non bank-owned) are up over 9% from 2010, but the overall decrease quoted above is heavily impacted by an almost 21% DECREASE in bank-owned home sales. The bank-owned sales are also selling for 6-10% less for average and median sales prices compared to 2010 and those that are selling are going about 5-6% faster than last year.

It appears to me that sellers who WANT to sell and have not been under pressure to sell may have tired of waiting for the market to improve. I know that I have had conversations with consumers that have another home, and while they can continue to make payments on both, are deciding to make the move to their next destination. Sometimes it’s for retirement, other times to be closer to family. Those of us that work with banks to sell foreclosed upon properties have definitely recognized that the supply has decreased.

Condo sales seem to be increasing in both average and median sales prices, and they are generally selling faster than last year’s pace, too. There is a 10% increase in bank-owned condo sales, but the short sales are down by over 26%. I’m not sure if that’s a sign of frustration with the short sale process (and it can be VERY frustrating), or if there are more ‘strategic defaults’ in that group of property owners.

The Real Estate market continues to change. If you’re considering either a purchase or a sale, make sure you work with a full-time Real Estate professional that is watching trends and market dynamics.

Strategic Defaulters - FICO Has Your Number

OK, so they don't have your actual (FICO Score) number, but they do have a profile of who is most likely to use strategic default as an exit strategy. You manage your credit better than the average consumer, have lower revolving balances and generally, you don't exceed your credit card balances.

Strategic default is generally accepted to mean default by a consumer that still has the ability to make payments. Often these folks are value-keyed, figuring that if they walk away from a home that isn't worth what they owe, perhaps they can also pick up another home at a cheaper price before the default impacts their credit.

If you are not facing an economic hardship, you will not be eligible for a short sale, which is the route many distressed homeowners first explore.  Since those considering a strategic default are not in a 'distressed' condition (other than overthinking the value of their homes against current market prices), strategic default often seems like a good idea to them. 

This 'profiling' could help servicers to reach those considering strategic default before they make that final decision. The analytics developed by FICO Labs indicate that the riskiest 20 percent of borrowers actually comprised 67 percent of consumers who later executed a strategic default. To me, that's an amazing number.

In this report from DSNews.com, Dr. Andrew Jennings, chief analytics officer at the Minneapolis-based FICO and head of FICO Labs said, "Strategic defaults are bad for lenders and investors, they're bad for the homeowners who elect to default and they're bad for neighborhoods and cities. Preventing them is in the interests of everyone involved."

You can read the entire article at DSNews.com by using this link.

Quicker Lender Response To Short Sales Near?

Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey) have introduced a bill that would give lenders a 45 day deadline in which to render a decision on a short sale offer, according to an article published today by DS News. The National Association of Realtors (NAR) is supporting this effort.


Nationally, short sales account for 13% of recent home sales. The Prompt Decision for Qualification for Short Sale Act of 2011 still has not been referred to a committee. Hopefully that will happen promptly (pun intended) since short sales are often the brightest ray of hope to homeowners that are facing foreclosure.

DS News is a source of breaking news and up-to-date information for the default servicing professional.

You can read the entire article here.

Winning at 'Highest and Best'

In my market areas, there's a shortage of supply in the under $150,000 price range. That means that most first time buyers are getting into multiple bid situations.  As both a listing and a selling agent, here's what I've seen.

First, sometimes the list price is artifically low. Maybe it's a short sale and that's the only way the seller could generate enough showings. Maybe it's a bank owned with a listing agent from 30 miles away and they're not familiar enough with the local market to price it a little higher. Or maybe the bank just wants to get it sold fast.

What I'm driving at is that the list price is not always the 'fair' market value. Usually we see that on the other end of the spectrum - where it's too high.  I've also seen $89,000 properties sell for $102,000 and $107,000 homes sell for $121,000 - and pretty recently. And that means they did appraise, folks.

I always counsel my buyers that we need to be ready to move fast. Strong pre-approval is number one.

Also, be ready to scurry to get a bank specified pre-approval. Wells Fargo and Bank of America do this all the time, as do many other foreclosure (REO) vendors. Your buyer can still use their lender of choice, but they better have their info ready for a quick bank pre-approval from another lender.

If you can get your offer accepted quickly you can eliminate the multiple offer scenario. But that's happening less and less.  Many banks don't allow ANY offers for the for the first seven days of a listing. Then it's open only to owner occupants for the next week, then it opens to investors.

I also suggest that you forget about the list price.  Do what you're supposed to do - a CMA on the property. Sure, you take into consideration its condition and its defects, but you need to establish a real value 'as is'.  In some cases your buyer may elect to surpass even that amount. Maybe it's convenient to family or commuting needs. Perhaps it's the school district they really want their child to attend. Perhaps it's an REO property in (gasp!) move-in condition.

Paying a little over fair market value isn't that big of a deal when you're looking at amortizing a loan over 30 years and IF this is the property they want the most. We all get into this lowest price mindset and lose sight of the bigger picture.

Make the terms as painless as possible. Be prepared to eliminate seller concessions towards closing costs if necessary to make your 'highest & best' more attractive. I've seen banks take a lower priced but more streamlined terms offer after they call for highest & best.  That's not the norm, of course, but it does happen.

I do quite well for my buyers on price and terms. But if they constantly lose house after house to superior bids, not so much. We've all worked with buyers that exhibit 'selective memory'. We still have to start from the very first meeting to establish how they will be successful in buying a new home with the least amount of stress, and to fully explain market dynamics.  That's why they chose us instead of another agent.