Out on a Limb

I look for April to continue in the same way that March did. New inventory coming on and strong sales continuing, keeping inventory levels low. That being said some of the pent up demand has been sated and April is always a big month for new inventory to come on the market so I feel that the townhome market will stay the same but we will see some increase in the available single family properties for sale. Townhomes will stay the same, as those that are motivated by the stimulus plan are rushing to buy before the plan ends on April 30th. There is not that kind of drive in the singe family market but move ups will continue to bolster sales there compared to previous years. It will be interesting to see if May continues the same way. I expect townhome sales to slow a tad but for the most part stay status quo. I look for our foreclosure listings to increase a bit as well. Competition in the single-family sector will be fierce as those that "have to sell" start aggressive adjustments in May realizing that the spring market is all but over. This will level out some of the frenzy from March and we may even see a slight pull back. That being said our market is strong, sales will continue, good homes on good lots in good condition will sell. As our market continues to unfold I will as usual keep you informed.

Real Estate Taxes

While writing this I had a gentleman stop by my office asking about his current real estate assessment. Once again the county is playing games with land values and house values and this is causing confusion. Bottom line though is that the county needs to generate "X" number of dollars in real estate tax revenues. They have 3 numbers they can play with to do so, land vaules, improvement values and the tax rate. It is always unpopular to raise the tax rate and actual house values are easier to track because of neighborhood comps. So switching land and improvement values around further confuses the issue and the homeowner. At the end of the day though folks do not let that cause you any stress. Simply look at the total value that you are assessed and then look at your local neighborhood comps. If the comps are higher then there is no argument but if they are lower then we can argue with the county. If you need us to send you comps we are happy to do so; just let us know. While I hate paying the taxes I am tired of seeing my assessment go down!!

Out on a Limb

Not that the snow is gone I look for a surge in inventory, especially in the single-family sector. Typically March is when inventory really starts to grow and I believe that many who would have come on in February were prevented from doing so by the weather. I also feel that many savvy sellers are umping in early trying to catch those buyers that are active now trying to buy so they can get the tax stimulus incentive before it goes away in April. I think that is a smart strategy. I still look for interest rates to start creeping up, regardless of what the fed does, in response to the government getting out of the mortgage backed security business. I must admit that I am somewhat reassured that we have not already seen a larger spike in rates and believe me this is something I hope that I am wrong about. I think there is pent up demand for good housing to come on the market and I think that what comes on in March that is good will be snapped up. I look for increased relocation activity to boost that demand. I am heartened to see the short sale process drawing the attention of the bigger banks and efforts being made to somewhat streamline that process. That would be a huge plus to the marketplace and would certainly go a long way to relieving the fears of the looming foreclosures and shadow inventory. All that being said I believe that March will be a great month in the marketplace and that the influx of inventory will be gobbled up by current demand. The townhome market will continue to generate multiple offers and be fiercely competitive. The single-family market will also continue to move well although the highest brackets will not see the same level of activity as the lower and mid level price ranges. As our market continues to unfold I will as usual keep you informed.

Front Lines

Well, let's start off by saying Thank God the snow is almost gone! It sure put a chill on the market. We had come out of the gates strong in January but this stopped everything in its tracks. The month however saw improvement, just not what it could have been in my opinion. Sales of townhomes increased 54% going from 46 sales in January to 71 in February. Still below the 80 we sold last February but I think that is purely a function of there being far fewer homes on the market and this February only 51. The average Days on Market for townhomes was 28 days up slightly from 20 in January, a HUGE improvement from the80 plus days of last February. Single family homes also showed improvement although not the same high numbers as townhomes. The number of sales increased by 21% from 23 in January to 28 in February. This is 33% higher than the 21 sales last February so I think it is a good trend. I also think this is a direct result of the bounce in the townhome sector allowing folks to move up in the housing market. Lets hope that continues!! Inventory only increased slightly from 34 in January to 36 in February, still less than half of last year's available inventory in the same months. Sellers that have come on the market are for the most part optimistic in their pricing. That means they are pricing higher than even the most recent comps in hope that the market will come to them. For townhomes this is much easier to do than it is for single family homes. There is much demand in the lower price ranges that you can try higher and then reposition if you have to and you will not have lost any ground. This is harder in the mid and higher levels because there is just not the same amount activity and there is more inventory to choose from. If you miss that buyer they are not necessarily going to be there when you change your price because they are not a first time buyer or an investor, they are either relocating and have to buy quickly or they have their home sold already and have to buy quickly. I expect, or maybe just hope, to see a "bounce" in the single-family sector or at least the bottom. I base this upon incoming relocation levels and move up traffic that we have not seen in the past. As long as the surge in inventory is not more than what we typically get I think the stage is set to at least see the bottom. As our market continues to unfold, I will as usual keep you informed.

Out on a Limb

I expect to see inventory levels creep up in February and the level of activity continue at its present pace. . I hope to see some improvement in the townhome sector compared to January as buyers should take advantage of the stimulus before it is gone and investors continue to pluck off good values that are becoming scarcer by the day. Usually sellers that come on the market in the spring are very optimistic about the market and tend to price higher or pus the market a bit. Appraisals will continue to be a factor so you can only push so far but we will have to see if the market will bear this out. We have been successful in this strategy on homes that "hit on all cylinders" meaning great condition on a great lot. So far we have gotten these appraisals through so knock on wood that this continues. The higher the price range though the tougher that is. We all still need to keep in mind the changes in the financial sector looming on the horizon. The Fed pulling out from buying mortgage-backed securities has to have an impact, and big changes have been proposed for FHA financing which will have an impact if they go through as I think they will. I believe our market is strong enough to work through these challenges but if you do not or simply want to hedge your bets and you are thinking of selling then you need to get on the market quickly. For buyers, you definitely need to act quickly as rate changes can quickly erode your purchasing power. Likewise changes in the qualifying guidelines such as requiring a larger down payment and/or stricter underwriting regulations can take you out of the market completely. As our market continues to unfold I will as usual keep you informed.

Front Lines

2010 started out pretty much as expected. We saw a 10% increase in single family inventory for a total of 34 single family homes on the market and a 31% increase in townhomes coming on the market raising the available inventory to 51; still well below the 2009 January totals of 161 townhomes and 70 single family homes. We saw a 15% increase in the number of sales in the single family sector going from 20 in January '09 to 23 in January 10 but the townhome sales dropped dramatically from 81 last January to only 46 this January. Now keep in mind that we had 161 units on the market last year so part of that is a function of there being so many "good" properties to choose from. "Days On Market" for townhome sales in '08 was 74 and that dropped to 39 in '09 and for January of '10 it was only 20 so that is a positive trend. If there is something good (priced fairly, good condition and good location) it is gone quickly. Similar numbers in the single family sector were 88 DOM in '08, 68 in '09 and 56 this January. (January's number excludes one sale that was 532 DOM home that I felt unfairly skewed that stats.) In other words, January was a good month for real estate and our market is coming out of the gates with a pretty fair amount of activity.

Out on a Limb

We enter the next decade with a lot of uncertainty in the real estate market. A big concern is that there are big changes coming in the mortgage industry, which will affect a buyer's ability to qualify. FHA guidelines are changing to reflect their concern over running out of reserves. They have proposed increasing the down payment, which is one of the big attractions to FHA. They have also proposed making the qualification guidelines with regards to the FICO score more stringent. This will affect many potential borrowers, especially in today's economic climate. Also they are making condominium complexes qualify for FHA financing and those rules are very tough, limiting the number of investors in a subdivision and limiting the number of FHA loans in a subdivisions. The scary part of that is that a subdivision that does not qualify for FHA approval is at a real disadvantage and is competing for a narrower buyer pool. It also means that FHA has determined that they have a larger default rate in condominium subdivisions and they are looking to limit their exposure. These changes are something we will keep a close eye on and we will keep you informed. Another upcoming change is that has real potential for disaster is the government getting out of buying mortgage backed securities. This requires a lengthy
explanation but the shorter version is that when the mortgage industry collapsed , no one would buy our mortgages on the secondary market because they had been burned and they felt
the risk was too high. The banks initially originate the loans and some keep them in their own portfolio but the vast majority are packaged together according to underwriting guidelines and sold on the secondary market through Fannie Mae and Freddie Mac. With no one to buy them, the money dried up until the government stepped in and said that they would buy them. Well, come March they will no longer be buying them. They say they are out of money or it may just be that they feel the market has improved enough and the time is right for the banks to step back in and start selling them on their own. At a minimum I would expect to see rates bump up in an effort to attract outside inventors to buy. Worst case is that no on e buys them and once again loan money becomes scarce. This is serious threat to the health of our market. and according to powers that be, could result in shrinkage of possible 10%! That is a big one to watch and we will keep an eye on it. Lastly, the foreclosure mess. Yes, we are a fishing boat in the fog and somewhere out there is a cruise ship bearing down full steam ahead. It may hit us, it may not, but it is there, and it is coming. (Sorry about the bad analogy but it took me a while to even come up with this one). We have seen foreclosure activity drop off (in our area not nationally) and what does come on gets absorbed. The powers that be say another wave is coming and I have seen LOCAL numbers that confirm that BUT the question now is if our local market is strong enough to absorb what comes. If so, the impact will be minimal but, if not, then we will see inventory climb which will slow down our recovery. Those are currently the big three potential impacts on our market place. I say currently because tomorrow could bring some fresh challenges; I do not think so but then who knows. That being said I am totally optimistic about the new year. I think our numbers will continue to improve and I think consumer confidence will continue to grow. I look for our market to start early and it is a smart move for our clients to get out in front especially given the uncertainties mentioned above. The lower price ranges will continue to lead in activity but it will continue to filter up through the rest of the marketplace. It is an exciting time full of challenges and opportunities and as it continues to unfold I will as usual keep you informed.