Thursday, March 28, 2013

The Rocky Mountain Way?

For as much as I complain about the lack of positive statistics coming from realty associations, the Denver Association of Realtors has been providing an interesting angle in its tracking of local sales. Rather than simply reporting that home sales are up, down, or steady, the Association has been tracking the number of home sales against the number of homes currently on the market.

By doing so, the Association's most recent report reflects a trend over the past few months clearly showing that a higher percentage of available homes have been selling in the Denver area of late, and a growth of that trend over the past six months.

What makes this data significant is that if the Association did not provide this information, their graph showing the movement of local home sales would only show as being on the decline!

That there are comparably fewer properties on the market than months ago is understandable. With foreclosures and short sales taking up a significant percentage of reported home sales, prices continue to be too low for many long time home owners to be able to sell for a profit or a break even.

In addition, some of the properties currently on the market are still not advertised or marketed like they can or should be.

For a case in point, I went online as if searching for a 2 bedroom townhome in the $100,000 range in the Auroura 80014 zip code. Based on current local inventory, this is a comparably good value for the community it is in.

The first towhome that came up is on the market for exactly $100,000. I immediately reasoned that with this for an asking price, it has probably been on the market for a while. Sure enough, it was listed back in October, more than five months ago. How did I know? Because reducing the asking price even by a mere $50 would make it $99,950 - and give this unit the ability to be marketed as "townhome living in Aurora for under $100,000" or "five figures for two bedrooms", and so on.

Although the advertisement appearing on does have eleven photos, the problem is that the majority of them hurt the cause rather than help. The primary photo shows the corner of a building with a street sign blocking part of the view. It is even difficult to tell on first glance that the photo shows a residential unit. Obviously, not a good first impression, especially when the description claims this is a "ranch style" townhouse.

Four of the eleven photos are indistinguishable exterior photos, which give the unit the appearance of being very small when you can tell it is a residential unit. Another photo is a long shot of a bathroom, which is not especially impressive. Yet another photo shows the washer and dryer with clothes stacked on it.

The ad copy for this unit could just as well have said it has an in-unit washer and dryer. However, it certainly doesn't appear that the agent or writer of this ad put any thought into it. Consider that for "Fireplace Features" the copy says, and I quote, "In the living room".

So are you chomping at the bit to pursue this property?

I didn't think so. And a return to this search brought up four other listings within the same area, also priced at exactly $100,000.

This is pointing out how a larger percentage of listed inventory is selling, even if the number of sales is really down. The Association has brought out a positive that other realty associations and reporters do not. With a better effort to market the current inventory, the Denver market could be "higher" than a lot of other areas.

Wednesday, March 27, 2013

They Still Don't Get It

If only the National Association of Realtors would identify the solution instead of the problem. We know there is a problem. The NAR "pending home sales" showed a slight decline for Feburary 2013. As is always the case, the Association points out that the February home sales volume is higher than February 2012, as if that would somehow impact the near future.

The NAR Chief Economist, Lawrence Yun, was quoted as saying "Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50% from current levels".

Am I the only person who finds this quote alarming? Shouldn't the members be exploring why the "current" housing isn't selling?

It is so simple, really. The homes that are selling are mostly foreclosures and short sales, which are sold at prices designed to satisfy an outstanding loan, and NOT to reflect the actual value of properties.

If only the NAR and its underling associations would know to eliminate any sales via foreclosures and short sales from their monthly statistics and enter them into a separate category. When average housing prices and sales are reported by "legitimate" sales, the property values will go up to where they should be. Once that happens, some home owners will have a reason and incentive to list their homes, knowing they could get full price.

I'm reminded of the story a few years ago about the divorced ex-wife whose "busy" ex-husband asked her to "Sell the Porsche and send me the money" as part of their settlement. She then reportedly sold it to some guy off the street for $500 and sent him the check.

This may be amazing to the NAR, but anyone bringing that information to a Porsche dealer to show that the value of a (whatever year) Porsche model (whatever) had dropped to as low as $500 was not able to purchase a similar car for under $1,000. Somehow, Porsche dealers around the country managed to convince the public that their cars continued to be worth thousands and thousands of dollars more.

Yet, even though a number of houses and condos are selling for half to two-thirds of their value in order to satisfy delinquent loans, thousands of realty agents are allowing their "Porsches" (in the form of houses) to count toward their value in the market.

I'll ask my question again. Am I the only person who finds this quote alarming?

Friday, March 22, 2013

Can Boston "Green Light" Help Stop The Red?

Officials in the city of Boston have begun to accept bids from developers as of this week for 1.3 acres of vacant land in the Mission Hill area which includes eleven parcels. The minimum bid, according to the Boston Globe story about this, is $488,000. The "catch" is that city officials will require the developer with the successful bid to build "green", meeting specific environmental guidelines in the process.

One of the requirements is that at least 15% of the project is to be for "affordable housing". Nearby this site building is already underway on a set of four townhouses, three bedrooms each, which are expected to be available later in 2013. Each of those townhomes is being built with 39 solar panels, an energy producing formula that city officials also expect the successful bidder on this vacant land to follow.

Developers are given through June to place their final bids, with city officials hoping to have the successful bidder chosen and plans in place by the end of this year. Bidders are not restricted to only residential use, as these land parcels are, according to reports, zoned for possible mixed use.

Normally, talk of requiring solar panels, building "green", and producing energy is of little to no significance to me in terms of trying to solve the problems of today's real estate market. However, I'm finding a lot of positives to this approach by city officials.

This is an excellent concept, whether the "building green" direction is used or not. Here are city officials looking at ways to improve a neighborhood with modern development, while providing an angle for certain companies to bid for the opportunity.

Those developers which can or have done "building green" now have the opportunity to be "chosen" by Boston city officials to handle a development. That looks good on their resume, so to speak, moving forward.

More importantly, it looks good for the city of Boston. It's city officials getting involved enough to arrange guidelines, review proposals, and contribute directly toward positive development, whether only residential or combined.

Here's hoping that other municipalities will become aware of this opportunity, and how it plays out this summer. Whether they adopt the "building green" angle or not to move forward with important local development, this is a positive concept.

Frankly, it is one that the banks which have foreclosed upon and are sitting on tons of properties should also be looking at. Consumers should speak up about this. The sooner distressed properties come off the market at the lowball prices they are often listed at, the sooner the real estate market can return to "real" sellers breaking even or hopefully making a profit from being able to sell their home.

That's the "green" we should all be concerned with!

Tuesday, March 5, 2013

One Two Three Foreclosures

If those who insist in going by the real estate statistics would instead use foreclosures and short sales as an indicator, they would see that the market is not "back" as many would like for us to believe. 

A big part of the problem is that the "real estate sales" statistics still fail to distinguish between distressed properties and what I call 'voluntary' listings. According to the latest CoreLogic report, the number of completed (and that does not even take into account those still in process) foreclosures since September 2008 is now at more than 4.2 MILLION.

As of January 2013, there were still 1.2 million U.S. homes in some stage of foreclosure, although that number is down by nearly 300,000 from early last year. The states with the lowest foreclosure inventory most recently included Wyoming, Alaska, North Dakota, Nebraska and Colorado.

My point is that it is no coincidence that the states with the lowest foreclosure inventory are nowhere to be found among the states with the biggest increases in home sales. By comparison, several markets in Florida (including Sarasota, as mentioned here a couple weeks back) are supposedly among the "most improved home sales" markets in the country.

However, as of January 2013 (still the most recent statistics available as of early March), Florida was reported to have had more than 95,000 homes in the foreclosure process.

What makes this problem even worse than misleading consumers with statistics that do not distinguish foreclosures and short sales, is that foreclosed homes more often sell as prices well under the true market value.

Thus, not only are these foreclosures damaging the truth about the real estate market, but they continue to bring down property values and kill a major incentive for "voluntary" listings.

Worse yet, not all of these foreclosure homes include short sales, even though those (short sales) create the same mess of lowering property values for those who have faithfully paid their mortgage and distorting the sales facts.

I'll say this again. More than 4.2 MILLION homes have gone through the foreclosure sale process since September 2008. As of the most recent report, there were more than 1.2 MILLION homes undergoing the foreclosure process, meaning that the majority remain to be sold at a reduced rate. And be counted as "regular" sales to make people think the market is better?

Let's compare to one other fact. Between 2000 and 2006, the average number of completed foreclosures per month in the U.S. was around 21,000. 

If you take away the 4.2 million foreclosed homes sold in the past 4 1/2 years and removed the lower sales prices they fetched, you'd have a TRUE gauge of the current real estate market.

I'm on this topic for a reason. Last week I received an e-mail from a realty agent that I respect and have used in the past telling me that "Now is the time.....". Within five minutes, I was on to find not one but TWO homes on the same block and within the same development I live in that are for sale right now. Both prices are not only more than $30,000 more than I currently owe on my mortgage, but more than $150,000 LESS than the homes were sold for as recently as 2006.

As a marketing expert, I noted this to use as another example of how realty agents need to think and research before they send something like that out to "everyone". But as a home owner, I noted that these short sales (and foreclosures) not being 'separate' matters continue to damage my options.

Friday, March 1, 2013

It's Not The Statistics, It's The Homes

Statistics do not buy or sell homes. While that sounds so simple, there continues to be too many realty agents who don't appear to take this into account.

Meanwhile, the majority of home sellers, even in the supposed "buyers markets" are still having to wait a long time for a sale, if they are fortunate enough to find their buyer.

The RealtyTrac statistics for 2012 (and that's for the year, not for a one-month period) concluded that roughly 43% of home sales were either foreclosures or short sales. Those were, for the most part, sold for less than the actual value of the home. What is unfortunate is that the sales statistics continue to fail to take this into consideration. Home owners who have paid their mortgages faithfully continue to suffer because nearly half of homes sold last year were underpriced and their chances to sell for a profit are significantly diminished through no fault of their own.

Yet, in reading a report today about supposed "hot markets", the sales process for the increased number of homes sold is still a long time as I see it.

Let's use Seattle as an example. Even with foreclosures and short sales, this region showed a 16% increase in the median sales price for last year, while the listed inventory reportedly declined by 44%. Some experts consider Seattle among the best "seller markets"., in its market analysis, reports that homes in this area spent "an average of just 56 days on the market". 

What this information fails to show is that an average 16% increase does not mean that home prices are back to the level that current home owners paid for them years ago. It is quite common to have had the foreclosures and short sales in most areas drop prices by more than 30% at bottom. In more common terms, many homeowners there still would not profit if they sold at these prices.

Perhaps the reduction of listed inventory is because the "faithful" home owner, whose property is still valued for much less than it was a few years ago, still has no financial incentive to sell. The decline in available properties is likely because many of the foreclosures and short sale properties have been gobbled up by investors waiting to flip them and profit.

In order to save the market, the time has come for the foreclosures and short sales to be completely separated from "non-distressed" home sales. But I'm afraid we'd see a much different picture of the current marketplace.