September 2008


I received an email last night from one of my buyers.  It was 3 sentences long and titled “Market Conditions”.  Given the events of 9/29/08, my buyer was concerned as to what this meant now and what the future holds for real estate, here is my answer:

You have asked the million dollar, or should I say the 700 billion dollar question!

I believe it is safe to say the market is currently stalled and waiting to see what the end result will be.  Buyers are currently experiencing difficulty in securing financing if they are putting less than 20 % down as there are less companies willing or able to insure those loans.  I personally closed 2 transactions last week which involved local banks, so houses are still selling, and these lenders (though more cautious than before) were never risky players in the mortgage game.

Houses are selling!  The obvious values are still selling quickly…a 1500 square foot contemporary ranch closed in Griswold yesterday for $270,000 after only 11 days on market; a lovely colonial in Canterbury also closed yesterday for $395,000 with less than 30 days of marketing under its belt.  Both were in the 95% range of list to sell price.  (these are just 2 examples…there are many more)

As to the future, ugh, if I only knew!  But I will predict…some form of a “bail out” will be passed (today likely scared the living daylights out of everyone) and a new president is right behind, which usually ushers in more consumer confidence.  No matter what, everything I read indicates that we are likely in for a bumpy ride for the next 10 to 12 months.

For you, the buyer with no house to sell and funds to invest, this is likely a perfect market!  Only once before in nearly 24 years of doing this business have I seen such a market for buyers of real estate.

Invest in Real Estate!  It is clearly a safer long term bet.

The response to my email was:  Thank you for your response, I guess I will get off the ledge now.

Yes, please do!  This is a time for cooler heads….

Kind of how things feel…

Enough said…at this point!

Seriously!

3 years ago it was nearly impossible to find a property under $200,000 in Southeastern Connecticut–today the story is a little different:

Per local towns, priced $100,000 to 200,000 active listings:  (this does not include condominiums)

Norwich, 93; Lisbon, 5; Canterbury, 5; Voluntown, 7; Griswold, 24; Ledyard, 27; Montville, 22

It is not, however, a lack of opportunity that is stalling the first time buyers.  I would argue it has more to do with the economic news which I think we can all agree has been at best, bleak.  Consumer confidence is incredibly lacking.  But, for the first time buyer, I simply can not recall a time when the incentives and opportunities have ever been better, allow me to count the ways:

1.  Tax incentive up to $7500.00!  Yep, there are nuances to this but really it does have a very broad reach.

2.  The fixed rate is currently in the low 6 range (there are many who are arguing that it is time to raise the rates to fight ensuing inflation–but I suspect they are keeping them low to try and entice you into the market)

3.  Downpayments are still doable…CHFA 3%; FHA 5%, VA 0%  (yes, 100% financing is incredibly rare right now, but there are still reasonable options)

4.  Mortgage money is indeed still being lent!  In fact, lenders have never been more diligent about securing business and offering tenacious service.

5.  Sellers, REALTORS, lenders, the economy are all vying for the first time buyers business!  This is an envious position to be in…just ask the sellers of a few years back.  Sure, it is about making money but the bigger picture is for the economy to start to improve the buyers need to take advantage of this market just for them.

So, still sitting on the fence thinking prices will go even lower?  Excellent point and one it becomes harder and harder to debate.  How much lower do you think it will go?  5%, 10%, 15%?  In a buyers market, you are indeed free to make that offer now!

The economy needs you, please come out to play..

That would be me..you are very smart! 

I read the economy news, especially housing stuff (been watching Freddie and Fannie pretty closely), and I find myself wondering, if any of it makes sense to most folks?  So I shall attempt to (over) simplify:

NAR says it is a 11.1 month market and the Northeast has seen a 12.6 drop in activity year over year.  You can read all about it www.realtor.org , research department.  (just so you know I do not make this stuff up..)

What does that mean?  We have a lot of inventory because people are not buying.

Why are foreclosures bad?  While aside from the lose of someone’s home, they affect market value for mortgage paying citizens.  Uninhabited properties held in bank inventory must sell, usually at more modest prices.  Foreclosures cost everyone!

What is SubPrime lending and why did it melt down?  Loosy goosy lending parameters that let folks buy property they really could not afford, at higher rates, which made it that much harder to afford.  It melted down because the risk was passed down on investors then these mortgages stopped being paid, investors were losing money and locked up the breaks for obvious reasons.  No more loosy goosy lending.

What needs to happen for the market to improve?  I say consumer confidence needs to improve.  Yeah, I know it is all blamed on housing, subprime markets and rising interest rates…but I contend that steadily rising fuel costs were the starting point for our deflated perspective on our economy.  When gas went over 3 bucks per gallon, is when the wind went out of the sails.   The survey says that a new president will improve consumer confidence (as reported in Realtor Magazine).

And the good news is…we are a short 6 weeks from that!  Now, if only Wall Street could calm down..invest in real estate, it is a safer long term bet.

Ugh, I have written this post now 5 times, I am deeply disappointed in my own town.  Why?  The town of Lisbon, my town, is gearing up for its 4th referendum vote on an education budget.  After twice sending the same non-sensical budget to voters, it now has been slashed in a mean spirited fashion–the “we’ll show you” cuts have been made. 

It is likely that many probably have extended stays planned in town, but there are those who do not, some 34 properties are currently on the market..and our town’s public perception is in a free fall.  I could go on a tangent about my views on this issue (I did in the 4 previous writings…I have many and would love to talk personally with anyone who would like to hear), however the truth is businesses are suffering, property values are depreciating, we have a national election where the real estate industry is at the forefront of concern.  In a downsizing economy, where folks are taking pay cuts to keep their jobs and not even receiving the typical cost of living increases, asking your citizens to add another 8% to the budget may have been ill conceived.

My town should take responsible and considerate steps to ensure that what makes us grand is not further devalued…when you mess with schools and taxes…it is no wonder a town sits on the edge of its seat, feeling very feisty.

It is not about young versus old–please do not be sold that old bag of tricks.  We all pay, we all want a good reputation and accountability.  Our property values depend on it.

It is simply this, the people who run our boards work for the citizens of the town and no-one else.  Their focus should be legitimately on the good of the children and wallets of their tax paying citizens, nothing else.  Our money runs Lisbon, they serve at our request.  Why do they not mind the voters?

So, until a budget is produced that is citizen-centric…I vote NO, and No means NO!

September 23 is the next vote.

So it seems, I am alone amongst my peers on this issue…I worry about the 200 billion price tag..

On a Sunday the federal government decided it was time to step in and shore up these lending giants.  For the short term, most everyone agrees this is a needed and smart move.  Only time will tell if it is truly wise or a bandaid fix.

Who will benefit?

It is reported that consumers will benefit with a lower interest rate and more available cash for lending.  More liberal lending than the current credit crisis is allowing.  Hmm, isn’t that kind of thinking sort of what got us in this boat in the first place?

Who will lose?

Taxpayers!  Someone has to foot the bill, and the estimated number I saw is huge.  Small and community banks are also at risk…too much capital invested in Freddie and Fannie, with dividends no longer being paid.

Theory

To right the economy, the housing market must be stabilized.  The 9 % NATIONAL (not Connecticut) foreclosure rate is stalling the economy.  The home value free fall is impacting the homeowners net worth, the credit crisis is causing consumers not to spend and further eroding consumer confidence.

Opinion

Yes, foreclosures in vast numbers, in your neighborhood are bad for everyone.  Yet, I wonder are we fixing anything or simply trying to lessen the impact of a tough economy and trying to ease this recession (yeah, I said it!).  Now or later, someone is going to pay and my fellow citizens I guarantee it will be you and I!

So, I hope we all get a better rate now…I recommend you get it fixed!

It was the week of the mom!  And as I am one, I dig those folks.

But this week I simply must acknowledge my favorite mom of the week and her name is Stacy.   She is my lovely client who just sold her old house and slipped into her new condo.  No more mowing the lawn or shovelling for Stacy.

Stacy and I have been together since the end of April, through many showings, open houses and finally an offer, sale and purchase…it was a bumpy ride but through it all my girl kept her head and perspective.  Her goal was an easier place to live for her and her daughter, she accomplished her goal. 

She did it on her own.  She achieved it with class and efficiency–which given some of circumstances was not an easy task (3 weeks of delay, juggling moving, work schedules and the demands of motherhood).  And, of course, the unexpected…things not what they should be.

From home inspection repairs to moving dilemmas, Stacy kept her eye on the prize….even when we got to closing and there was not a smidge of paper to be found…we sat it out and a closing did indeed happen (though I suspect she may never eat Taco Bell again :-)!  Stacy knew what she wanted and went for it, got it and stayed the course.

I admire this mom and not just because she was my client, it goes to what she does everyday, she is a hardworking lady!  And very, very smart because she invested in her future.

Hats off Stacy…hope you love your new place and your world can get back to “normal” chaos!