Out on a Limb

Our inventory for the most part has remained consistent for the last 3 months and unless the banks dump a huge batch on us we should see it shrink further in the next couple of months. As is typical in this time frame the folks that only "want to sell" but do not "need or have to sell" are dropping out of the market. Most will come back on the market in the Spring when there is a little more optimism in the market. Those that "have to sell" always dominate the market in this time frame as they do what it takes to get their home sold and that means dropping their price. This forces out the "want to sells" as they just can't or won't compete. The "need to sells" hang tough but typically can't compete unless they have some exceptional feature. That being said, inventory is dropping and consumer confidence is building. There is some urgency being created by the uncertainty of the extension of the first time buyers tax credit and by the fact that some of the higher loan limits are disappearing in the neat future. Good properties that are selling especially in the lower price ranges although I do look for that to slow somewhat between now and the beginning of the year. For buyers, your choices are getting slimmer and on those good properties or good values there is competition. This is the time though to get a good value especially in the higher ranges as those that are on the market are typically motivated to get their home sold, not in every case but in many of the cases. I look for values to remain steady for the balance of the year. in 2010 I look to see a stronger market that continues to improve. It will be a good market and if we can avoid the foreclosure influx it has the potential to be great. Not a 2003, but an improvement for sure.

Front Lines

Well, the weather has gotten cold but the market has warmed up a bit. Fair amount of activity although it remains in the lower price ranges. There is a little activity and it is slowly moving up through the price ranges. We put a nice property on the market at $550,000 (which the seller and I agreed was a stretch in looking at the comps) on a Friday and got a darn good offer on Sunday. Home inspection is done and we are all wrapped as of Thursday. We have another home that we feel is very well priced at $599,900 and there are no lookers at all. Go figure. We were recently at the NVAR Convention and it was a common theme that inventory was getting very difficult to find in the $500,000 and under category which is a bump up from the $400,000 and under of previous months. Town home inventory has dropped just a tad and the number of sales has increased from last month and both categories are significantly improved from the same month last year. however, if you look at the average number of sales per month for the same time frames it is exactly the same at 30 sales per month, so some of the buyers that bought earlier in the year are buyers that typically would have waited. How is that for looking at the glass half full?! The number of new listings coming on is substantially lower this year for single family homes as well as for town homes. Not much different this month from last month the the exception that the number of distressed properties in the $500K to $700K range tripled since last month. I do not read much into that short of how it played out this month. We still are not seeing a significant jump in new foreclosure activity and that is certainly something we are watching closely. Let's hope it stays that way. As our market continues to unfold, I will as usual keep you informed

Out on a Limb

I am looking for September to show better numbers than our August as buyers look to take advantage of the values in our marketplace. The first-time buyers market should see an increase in activity as buyers get off the fence to catch the first-time buyers credit of up to $8000 that is set to expire on December 1st. This is a wonderful program and we are hoping that it gets extended but there is no talk of that at this point. Investors also continue to drive our market and rightly so as this is one of the few times in my career that there are good choices and options available for positive cash flows. The higher end of the market place will not see that much of an increase if they see any at all for a number of reasons. First, relocation buyers are much more active in spring and to a lesser extent summer as they look to get in before school starts. They will be few and far between in the fall market. Second the move up market has been virtually non-existent this year. Even at the current foreclosure levels sellers looking to move up have a hard time competing with bank owned properties. Lastly, this is typically the time of the season that the "have to sells" drop their prices to rock bottom so that they can hopefully get sold before the last quarter of the year. Those that "want to sell" or even "need to sell" just cannot compete price wise with those that absolutely "have to sell" their home. At the end of the day I see the market in the next 30-50 days staying strong for homes priced fairly in the under $500,000 range and I look to see activity over that range stay the same at best. We will closely monitor the foreclosure activity and keep you informed as usual.

Front Lines

August saw the market shift very subtly. The number of new listings coming on the market in each category was less than the same month last year, which is good. There were fewer sales in each category compared to last year and last month, which is not good. Sales of both town homes and detached single-family homes dropped a solid 25%. Inventory virtually stayed the same with 49 town homes currently listed as compared to 51 last month and 46 single family homes compared with 48 last month. It is still great compared to last year in the same time frame when we had 213 available town homes and 129 available single family homes. One good sign is that the number of new listings coming on the market is still well below 2008 levels for the same month. Since a large majority of the new listings are distressed properties (foreclosures and short sales) I consider this a good indicator. We have seen consistent improvement in our marketplace for the last year but as I said in the beginning we have been seeing an almost imperceptible stabilizing in the last 30-60 days in both categories. This could be attributed to any number of factors including the typical summer slow down we used to see the marketplace 20+ years ago. Given how fast the summer seemed to fly by, that may very well be the case. If so we should see a little burst of activity as our fall market begins. The bigger concern is the threat of the foreclosure tsunami I mentioned in last months "Front Lines" It is a good thing that we have not seen an influx of inventory come on the market, as that would indicate that the forecast was coming true. Our market is strong and if it continues at the pace that it has for the last year then we should be able to absorb a sudden increase of inventory in the town home market very easily. If the slower pace of August continues we may have difficulty if indeed that tsunami does come. I have always maintained that it is a bit "if" as to whether or not we get that next wave. Unfortunately that may not be an "if" at all. I am a member of a group that has access to some of the highest of the higher ups in the mortgage business and we have seen some stats that are specific to our local market area. There is one specific lender that is one of the if not the largest on a national basis and certainly the largest in our marketplace. Within his company the number of existing foreclosures (those already foreclosed upon) is less than half of what it was at the peak in fall of last year. That is the good news. The bad news is that the number of home owners that have received notice that they are beginning the foreclosure or are going to a trustees sale has more than doubled from the low point and is up 70-80% over the months preceding the high point of active foreclosures. This is the largest national lender. This is their number and you have to assume that all the other ones have proportionally the same numbers. This is specific to our market. This is not Florida numbers or Nevada or California; it is Northern Virginia numbers. So that tells me that the next wave is indeed going to impact our market and there is no longer question that it is coming. The question now becomes is if our strong (relative to the rest of the country) marketplace can absorb these and keep on gradually moving forward. It is important to note that the reason for this increase in foreclosures is due to one particular type of loan that is now adjusting to higher rates and payments. These loans were typically used by those that are stretched financially anyhow and have the least ability to absorb a higher payment rate. They cannot refinance because their home no longer appraises at the value necessary to support their loan amount. So the only option is a short sale or letting the home go to foreclosure. The next few months should be interesting as usual I will keep you informed as our market continues to unfold.

Out On A Limb

By Spencer Marker
All my beliefs are based on the numbers that I share with you every month and I see them continuing to improve. It does not feel like the market is getting better every day but the truth is in the numbers. I believe that we will see the same trends continue as investors and first time buyers get into the market. This will keep the lower end of the market hopping. The higher end will continue to plod along but eventually we will see more and more move up buyers as the inventory gets gobbled up on the lower end. During the 4th quarter I do not see pricing changing significantly in the lower end and I expect to see some drops in the higher end of the market. There is surplus inventory in the higher end and those that have to sell will lead the market down in price. There is enough demand in the lower price ranges that will will probably not see that occur. All that being said there are some things that could set us back a bit. The first is the tsunami of foreclosures that the powers that be say is coming in the fourth quarter. I was one that underestimated the extent that the foreclosure mess was going to affect our market so I have to give credence to those that say this is coming because they were right last time. BUT, I do see our demand in our LOCAL market exceeding any other market in the country and I think these homes are getting sold now as short sales prior to them going to foreclosure. So, in the spirit of going "out on a limb" I am optimistic that we are through the worst of it and our market is strong enough to absorb what foreclosures we do get and not have them flood our market again. A lot of what is driving the 1st time buyers is the tax incentive of $8000 to buy your first home. That is slated to go away at the end of the year. It is an effective tool that is working so I would hope that it would be extended but you never know. Rising interest rates, more restrictive lending programs, inflation, even rising home values all could have an effect on our marketplace but I do not see that happening. Our local economy is strong and getting stronger, our unemployment is one of the lowest in the nation and we are one of the best areas for job creation. I am confident that the worst days are behind us and we are moving forward. As our market continues to unfold I will as usual keep you informed.

Front Lines

Ok, it is official, we have just finished the July stats and we have now seen 12 straight months of improving market conditions. It may not seem that way but it's true. The town home market is on fire and our inventory is turning over every 2 weeks. We currently have 51 town homes on the market and we sold 103 in the month of July. Great numbers! We are seeing fewer homes coming on the market, which in this market means we are getting fewer foreclosures listed than last year in the corresponding months. The percentage of available properties that are "distressed" sales has dropped to around the 30% mark, which while is not great is better than the 70% mark we had seen. Certainly a vast improvement. We are seeing multiple offers on all the best values and this means that in many cases the prices have escalated up over the list price so as those homes close it should start to affect our pricing in a positive way. The single family sector is not doing a swell as the town home market but it is doing better than the previous years and continues to improve. There are currently 48 homes available and we sold 33 in the month of July. In other words we are turning that inventory over every 6 weeks or so. The under 500K price range is where all the action is and the over 700K market is the slowest of the categories. There has been increased activity in the higher ranges primarily driven by relocation but with the town home market moving so quickly there are finally some move up buyers back in the market. Appraisals continue to be the biggest hurdle as they (and the lenders)fail to recognize that our market has "bounced". By bounced I mean we have hit bottom and bounced back up to more realistic numbers for our area. New appraisal guidelines, while well intended and frankly a good idea, are just not being implemented properly. Until this is worked out it will continue to be a challenge and effect pricing. After all is said and done, though, our market is doing okay; homes that are priced competitively, in good condition and on a nice lot are selling quickly. Homes that are not, don't. If you are on a bad lot then you cannot ask what a home on a good lot is getting. If you have deferred maintenance (poor condition) then you cannot sell for what a a home in good condition is getting. If you do not have the same features as other homes in your price range then you must complete in a lower price range. At the end of the day price cures all ills. Banks know this, which is why foreclosures sell for less than the rest of the market and as long as there is nothing pushing the buyer to buy and there are plenty of homes to choose from buyers are only cherry-picking. Buyers are still controlling the market although that is changing in the lower price ranges. I will, as usual, keep you informed as our market continues to unfold.