Jay Agoado’s Homefront

The Chart below shows the January 2011 pending sales activity for the city of
Mercer Island  The ratio is figured by dividing the number of listings into
the number of pending sales.  For example, week #3 had five active listings
and two pending sales. 2/5= 40%.

As you will notice, Mercer Island is still in a “Buyers Market” but the activity
levels weren’t too bad considering the time of year.  The $500,000-$600,000
and $700,000-$800,000 price ranges seemed to be the most popular segment for the
island.

What an amazing tool to help stimulate the economy and spur real estate activity!

 http://www.facebook.com/ext/share.php?sid=207172895110&h=XOTN1&u=r0N4z&ref=mf

What is Happening on Mercer Island???

I follow statistics every friday morning and I am just stunned as to the lack of activity taking place on the island.  I guess it’s true that those markets which were affected last will recover later than others.  What an amazing time to be a buyer on the island in that homes which have excessive market times are taking drastic price reductions.  Unfortunately, we’re not seeing a lot of great homes to purchase.  It’s fairly simple to find a 40-year old not updated home but how about an updated home, on a great street, at a realistic price?   

Check out my weekly trackings to better understand what I am talking about.  Definitely a buyer’s market..

http://www.jayagoado.net/blog/QuarterlyRatios(Area510).pdf

I’ve had many individuals ask me about the specifics of the recently passed $8,000 First-Time Homebuyer Credit.  It can be somewhat difficult to explain in layman’s terms so I have included the following link to the National Association of Realtors website, which clearly explains every aspect of the credit.  Bottom line, what an amazing time to be a first-time homebuyer!  Low home prices, historical low interest rates, and up to an $8,000 credit which does NOT need to be paid back to the Government.  WOW!!!

http://www.jayagoado.net/blog/First-Time-Homebuyer-Tax-Credit[1].pdf

I found the below commentary quite interesting since many homebuyers are sitting on the fence.  Are they sitting on the fence waiting for the “bottom” in interest rates and/or home prices?  Unfortunately, one never knows when the “bottom” is until it has already occurred.  Just like how we found out a few months ago that we’ve been in a recession for over one year!  Most of these events are not accurately noted until after the fact.  Just thought I would forward since rates AND home prices are ridiculously low right now.  It’s actually a “perfect storm” for buyers and who knows how long it will last.   

Commentary: William O’Donnell, U.S. bond strategist at UBS securities hit the proverbial nail-on-the-head when he said, “Investors are reluctant to crank rates much lower — knowing that behind Door #1 looms the huge beast of new Treasury supply.” In a nutshell, he has described perfectly the current status of the mortgage market.

Though it has yet been formally announced, most credit market participants (including mortgage investors) are anticipating the Treasury Department will begin their massive round of borrowing by issuing $86 billion in short-term securities next week. Treasury is expected to follow those fireworks up by announcing plans to issue a record-setting $80 billion in notes and bonds the following week. The “so-what-factor” here is significant.

Uncle Sam can either print money, tax, or create a combination of both revenue generators to pay his obligations. Because he has this unique power Uncle Sam is considered to offer a “riskless” rate of return to global investors. His ability to generate essentially unlimited amounts of capital for debt service also means Uncle Sam has little concern regarding the rate of interest investors’ demand. Whatever the required yield - he can pay it.

Much of the capital used to fund the mortgages you create come from investors who have the option to either invest in Treasury obligations or agency-eligible mortgage-backed securities. To successfully attract the capital away from Uncle Sam and into the mortgage market we have to offer investors a higher rate-of-return on their money. From this perspective it almost goes without saying that the endless bill being racked up by Uncle Sam’s all-out-effort to restart the country’s economic engines will almost certainly continue to mute any sustained effort by mortgage interest rates to move lower. Thank goodness the Fed still has a pocket full of cash earmarked specifically to support the mortgage market. Without their big checkbook - mortgage interest rates would likely be sharply higher than where they stand today.

I just finished reading a great RSS feed ( http://seattletimes.nwsource.com/html/realestate/2008161424_agents07.html?syndication=rss ) on how the number of Realtors nationwide has decreased.  Is it a surprise?  Absolutely not!  I have seen so many new agents the past few years that it’s been quite frustrating.  Most of these agents got into this business to make a quick buck and didn’t understand or know how to write contracts.  What I have seen over the past 15 years is that the agents who succeed are the ones who treat their business like a business, constantly stay in touch with their past clients, current clients, and sphere of influence, and who are continually bettering themselves through education.  With these agents now leaving the business, it will be just like the dot-com crash where the last man/woman standing will be poised to grow even further.  Woohoo!!!

I just read an interesting article ( http://www.realtor.org/library/library/fg703 )and subsequent postings on selling stigmatized properties, and specifically a property where a murder has taken place. This brings back memories of when I listed and sold a home in Bellevue approximately 10 years ago where father, mother, and sister were killed in their home and the other sister was killed in the neighborhood park.  It was a brutal scene and I was unfortunate to view the day it was released as a crime scene.  The estate and I discussed whether to disclose the situation to potential buyers since the State of Washington does not require disclosure for this issue.  We opted to be upfront with people in hopes of not losing the deal at the 12th hour.

The eventual buyer was an investor who was going to use the property as a rental home, so he wasn’t concerned at all about the stigma.  He was also smart enough to realize that the stigma would pass and this would be a good deal.  Boy was he right!  He tells me to this day that it has been his best real estate investment!  He was able to acquire the home for approximately 10% below market value, acquire tenants at will due to location, and the neighbors were all happy that someone was finally occupying the home.  A win-win for all!   

The year started off in its typical slow fashion but started to pick up toward the end of the month.  I noticed some homes, that were taken off the market for the holiday season, relist and sell at the beginning of the year.  What we are seeing is a great buying opportunity but many buyers are sitting on the fence, unsure if prices are going to drop.  Certain price ranges are still selling relatively well and other price ranges are requiring price reductions.  But, our market certainly is a lot better than most.

January Activity

‘07 total active listings:  74

‘08 total active listings:  119

‘07 median listing price:  $1,797,000

‘08 median listing price:  $1,499,000

‘07 days on market for listings:  130

‘08 days on market for listings:  106

‘07 closed sales:  19

‘08 closed sales:  16

‘07 median sale price:  $1,089,000

‘08 median sale price:  $912,500

‘07 days on market for sold properties:  94

‘08 days on market for sold properties:  86

What a year 2007 turned out to be.  We started the year off very strong and, by the end of Summer, we were wondering what had happened?  The earlier multiple offers turned into longer marketing times and lots of money being spent on “staging” of homes.  Don’t get me wrong.  Homes were still selling but it seemed as though the homes that were selling were the ones that were perceived as a value.  This was most prevalent in homes over $1M.  You could have a beautiful home in a desirable section of the island yet it would sit on the market until Buyers perceived a value (price reduction).  The homes under $1M needed to be priced correctly and/or in very good condition to sell in a reasonable amount of time.  See below for statistics:

Closed Sales in 2006:  297        Closed Sales in 2007:  329

Median Sale Price 2006:  $949,000            Median Sale Price 2007:  $1,080,000           Percentage Increase:  13.8%

Average Market Time 2006:  75 days           Average Market Time 2007:  63 days

Buyers, there is no better time than now to purchase a home!  Interest rates have fallen and are at or near where they were before the subprime crisis.  With inventory up, you have a great opportunity to negotiate on a home versus what you’ve gone through the past five years.  During that time, you were paying at or above the listing price, possibly having to purchase a home without an inspection and/or financing contingency, and basically giving in to the Seller.  Even if the interest rates are slightly above where you want, you should be able to make up for it in a lower negotiated sales price and/or in Seller concessions.  Our company, John L. Scott, put out some great statistics that you should view.  ( http://www.johnlscott.com/includeX/pdfs/whynowisasmarttimetobuy.pdf )  Why wait???