Friday, March 23, 2012

Keeping The Statistics Straight

Another bothersome day in the struggle to gauge the real estate market. This morning's real estate "headlines" contained 2 separate stories. One about "home sales up" and another about "mortgage applications down". And both covering some of the same time period.

There are a couple of problems here. Home sales being "up" is only if compared to one year ago. Mortgage applications being "down" means that fewer people are applying for financing. That is not a reflection of how many (or how few) were turned down for a mortgage. The statistic is based on the number of applications and not the results. Hence, some will be turned down and the number of closings will be even lower.

This constant comparison of real estate sales statistics compared with one year ago or five years ago is not doing anyone any good. Well, except for those few who get paid to research these comparisons, since it keeps them employed. I have yet to learn of anyone who has attempted to purchase a home or a property based on what the market was like a year ago.

Now it appears that mortgage rates are headed back up, even though these are still rates much lower than they were a couple of years ago. Some people will panic over this, as if it spells doom. However, it reflects times of years ago when mortgage rates were at least 2% higher, yet more proerties were selling.

Meanwhile, I have been hearing the "It's becoming a sellers' market" crap coming from more and more realty agents within the past month. This is hard to swallow. If homeowners start to believe that, we'll have a flood of people looking to list their homes at much higher prices than they should be. And some agents who will go along with them in order to get the listing. If it doesn't sell, they (listing agent) don't lose out. Practically every home owner would sell if they got an outrageous enough offer.

What that does is harm the truly motivated sellers out there, already competing against the foreclosures and distressed properties dominating the market.

And what that does is keep things as stagnant as they have been for the past two years.

So help me, I had an agent in the Phoenix area tell me that the current inventory of available homes there "has dropped to 15,000" and how it signals a "sellers market" their. I have no idea how this could be, considering that if I were looking to buy in that area, there would likely be hundreds of homes to choose from in the price range I'd be looking at. Before the rest of the neighborhood decides to list their homes too. Frankly, there would need to be at least one less zero in that amount for me to even think of that being a "sellers market". I wonder how many different states one would have to research before finding 15,000 serious and qualified buyers for a home.

After all, if there were that many potential buyers in Phoenix, there wouldn't be time, or the need, for all of the meaningless statistics about home sales. Unfortunately, this isn't anybody's market at the moment.

Tuesday, March 6, 2012

Your New House Has Arrived?

There is both a funny and a serious side to the concept, now supposedly available for the western states, of buying a prefab house already furnished and having it delivered.

My first reaction to this was to have fun with it:

Visions of convincing a bank or credit card company that it is a legitimate purchase, but how it cannot be shipped to the address on the account since it is a "new" house. Chances are the delivery people are not including hauling away the current house on the property as part of the deal. Wondering how the delivery people will find the address to bring the house, since there is no house currently on the property.

Then there are matters such as having electrical and plumbing facilities in place so that the new house can be fully functional upon installation. And in the right place at that. This doesn't even include any local ordinances and comparing the size of these prefab homes with those in the neighborhood.

Try getting conventional financing when there is no home in place to be appraised, and the price is the price, including furnishings and appliances.

However, if this is serious, there is opportunity here for consumers and for realty agents. An enterprising consumer could probably get a great deal on residential land in a lot of areas where little to nothing new is being built. Heck, a large lot might be able to hold two of these things and enable an entrepreneur to possibly live in one and rent or lease out the other. There are not many opportunities in most areas for 2 furnished and "ready to go" homes to do such a venture for less than $200,000 (although this does not include the cost of the land).

Even at one prefab house for less than $90,000 (not including the land), it seems a reasonable deal since it includes furniture and utilities, as well as the setup.

I'm wondering if a realty agent could come out with a commission on the sale of the land, and then not have to go through the hassle of issues with the prefab home, since that is a direct purchase. It would make for a much "easier" commission for agents who see this opportunity.

More importantly, it would get more people into more homes. That's what it should be all about.

Some developer or investor could do well with a 'discount' purchase of residential land, and then by filling it up with prefab housing. In and near larger cities, they could do a 10-year "lease to buy" of $1,000 per month, and likely save the "tenant/buyer" quite a bit of rent money. After the 10 years, the developer/owner pockets $120,000 (for the $86,000 home), and can then charge a "move-in" fee of thousands more. This after the depreciation of the homes and paying off on the land their group of prefab houses sits on. All without design, building, and installation costs and hassles.

Sure, the furniture company involved in these wants to find more ways to sell its items in volume. But my hope is that realty agents, investors, and unconventional lending sources will take a serious look at these opportunities. This is "easier" than dealing with foreclosures and REO's, and would help to spur the real estate market.

That part is not prefabricated.