October 29, 2010

Hello All:

Here’s the latest update on the market.

In addition to this letter there are 4 enclosures in this packet.

If your property is currently in the MLS then the first is the list of the number of times someone opened the detailed report for your property after it was returned in a search of the MLS. The figures are for the last 30 days and ranged from a low of 103 to a high of 417 with an average of 238 for homes and from 15 to 111 with an average of 53 for lots and land. The most searched for portion of the home market appears to be the $200,000 range. This is not surprising as 1/3 of the homes sold now are distressed-either short sales or foreclosures-and a large percentage of buyers are either first time buyers or investors looking for rentals and this price range is a good one for both.

As to lots and land, we are receiving more inquiries than we were in the summer which is totally contrary to the normal cycle of bare land. Maybe this means people are becoming more confident.

Investment property is slow mostly because the cap rates demanded by investors have risen a lot in the past few years but owners who purchased when the rates were lower are reluctant to lower their asking prices which of course leads to a standoff.

Then there are three housing articles enclosed. A positive one from RIS Media, a real estate reporting outfit, points out that sales of existing homes were at an annual rate of about 4.5 million in September which compares with a long time average of about 5 million but still down

from the 7 to 8 million per year rate during the boom. The second article is from the latest issue of the Economist Magazine and is basically neutral. Experts can’t seem to decide whether United States housing prices are overvalued or undervalued. And the 3rd article from Tuesday’s Wall Street Journal is more somber predicting that the market will not bottom until late in 2011 or into 2012 and may rebound some late in 2012. That’s two years away and is just a prediction.

What all this means is that there is no consensus and you will have to draw your own conclusions and do what is right for you. 

Most of you will have seen your tax bills by now. The only increases in the Assessor’s true cash values I have seen so far are in the very close to U of O properties where I have seen a few percent increase. Everything else has been a decrease from as little as 5% to as much as 50% in the true cash value with about a 25% decrease being quite common. And remember that these values were determined by sales in 2009 and set as of midnight on 12/31/2009 so they are already 10 months out of date. As prices have not strengthened so far this year I expect that when the bills come out a year from now in October of 2011 where the values will be based on sales in 2010 that there will be a further erosion in the Assessor’s true cash value.

Our feeling is that if you truly want to sell and get on with your life in a new home then what needs to be done is to properly prepare the home for the market so that it outshines the competition and then price it to where it is the best value compared to the competing homes. This will probably hurt both from the time and money spent to prepare the home and from the listing price which will undoubtedly be lower than what

your hopes are but it is the key to selling. Remember that what you appear to “lose” here can most likely be at least partially, if not wholly, made up on the replacement home. On the other hand sometimes staying put can be the best strategy.

Unfortunately one of the things we are seeing more of is owners who are upside down on their home meaning they owe more than what the home will sell for. If you know of anyone in this situation please ask them to contact us and we will do our best to help them with the tools available. These include such options as the loan modification programs or pre-negotiating a short sale with the owner’s lender. The last thing the owner wants to do is go through a foreclosure. Credit is ruined and they are not eligible for a federally guaranteed loan for seven years. And as the vast majority of new home loans are federally guaranteed now this is a big hit. In spite of the horror stories circulating about dealing with lenders on short sales it is getting better and more doable. Much depends on the specific lender and whether there is only one loan or multiple ones. We can guide them through the process and send them to the appropriate professionals for guidance on such topics as tax ramifications, possible deficiency judgments and other considerations.

And as always we are here to answer any questions and address any concerns you may have.

Our best to you all,

Adrienne,  Jane,  Jim  and   Ed

QUESTION OF THE DAY-WHAT IS “VALUE” IN TODAY’S HOME SELLING MARKET?????
Below are my thoughts on a “Broker’s Opinion of Value” letter which was just completed for clients who are not planning on placing their home on the market but do need a realistic estimate of current value for personal reasons.
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The point being that no matter how I slice and dice it there are very few comparable sales-just 2- for that particular property even within a fairly large radius. Hence depending on condition, quality of finish work and how dated it is I can come up with anywhere from around $240,000 if I base the price on what is for sale-not sold, but what is available if someone wants a comparable home currently on the market- down to maybe even as low as $175,000 based on what has actually sold.
Here are the problems that home sellers and buyers are facing today.
It’s a dilemma for appraisers right now. They may omit the distress sales-foreclosures, short sales etc- in their opinions of value. In other words they can ignore those types of properties and use just “arms length” transactions in their appraisals. Obviously this leads to a higher value than if the distress sales were included. Unfortunately the pendulum has swung so far to the conservative side that many are including the distress sales as comparable sales which of course drags down values across the board. The consequence is that even though a home may be considered to be fairly priced at the agreed upon sales price it might not appraise high enough for loan purposes and the sale will fall through.
The other harm to non distress sellers comes from a prospective buyer looking at neighborhood sales and seeing the sales prices for distress homes which are way under what would be considered a reasonable market value. If the buyer uses these sales as a basis for making offers then that buyer would be expecting to purchase the non distress homes for similar prices. But what the buyer does not know is what the condition was of the distress homes. The distress sales can make a wrecked distressed home appear to be comparable to a market ready well cared for home. But it can miss the damage done to this distressed home-wiring torn out, walls kicked in, cement down the toilet, cabinets ripped out etc. What appears to be a bargain can become a loss to the buyer after the work necessary to bring the home to real market salable condition is completed. And once the work is completed the home will probably have to be priced comparably to the well cared for home if the distressed property buyer is to recoup his or her investment. Taking this into account the question becomes one of what the real value of the home was or is. Is it the distressed price paid by the buyer or is it the value once the necessary repairs are completed? So when looking at the prices at which homes were sold or to price homes about to go on the market it is not enough just to look at recent sales prices. One must also research the history of each of the sales.
The other problem can be timing. It is possible that a neighborhood will have a period of several distress sales and then there will be none available. So the appraisals show the neighborhood as being a very price depressed area. Yet all the currently available homes are priced based on a normal market. This leads a prospective buyer to believe that he or she can purchase a home with a real value of $200,000 for only, let’s say $140,000. And that buyer is surprised when the owner says “go away, and don’t come back”.
So value today, in all price ranges, is highly subjective and is a moving target. And this is why that unless you are highly knowledgeable in the real estate market it is advisable to have someone to turn to for counseling and advice. We provide that on a friendly, confidential and no obligation basis.

Here’s an update on the Eugene-Springfield home market.

Last year to date 79% of the listed homes sold. This year the figure is 55%. Should that be discouraging? The answer is no for several reasons. First is that the number of homes for sale is down by 24% which means that buyers have fewer choices which gives any single home a better chance of garnering an offer. Secondly, in certain price ranges, such as the mid $200,000s, the inventory is balanced at about a 6 month supply. This 6 month figure is what is traditionally viewed as a balanced inventory making the market neither a buyer’s nor a seller’s market. Thirdly, the buyers that are out now are the serious buyers. Summertime, while bringing out the serious buyers,  is also the time that many “lookers” appear. Many are looking for landscape or home decorating ideas in the homes they visit. Others are just thinking about a new home and are just shopping for the perfect deal. But as fall and winter arrive most of these non serious buyers disappear and leave just the serious buyers.

So is the fall and winter a good time to place your home on the market? I think so. In looking at a market analysis I just completed for a micro neighborhood in Eugene there are only 3 homes on the market yet 27 have sold in the past year. That’s less than a month and a half’s supply. So if your home was on the market now it would have a good chance of selling.

Your thought for the day is that bad news sells-good news does not. The New York Post sold a lot more papers on April 15th, 1912 with headline of “Titanic sinks with heavy loss of life” than they would have had the headline been “Titanic completes uneventful maiden voyage” .  So take the gloomy news lightly as there is always something bad to report from somewhere in the world even though 99+% of the potential news is positive.