May Existing Home Sales fell short of expectations. Month over month home sales only increased 2.4% versus expectations of 3%. This is notably weaker than the strength of the pending home sales reports where the latest report was a rise of 6.7%. There is true irony in the shortfall. Normally, in this environment, the finger would quickly be pointed at the banks, but that is not the case. The National Association of Realtors has pointed the finger squarely at the appraisers. According to NAR, “However, the increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan,” and “Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales.” The 180 degree reversal in appraisals illustrates the essence of the bubble-bust environment in which we live. Just 3-4 years ago, it seemed as if appraisers added value to a property simply because the sun came up that morning. Fraud was rife, and as we all know, many unqualified buyers bought homes they could not afford. Today, asset values have significantly corrected, housing has been in a 4 year downturn, we are 18 months into the longest post war recession, and as buyers finally materialize, the appraisers are afraid to give the valuations that support the prices buyers are willing to pay. There are essentially $10.5 Trillion in mortgages out there and a significant portion of those were made at higher price levels. Now, when the smart and patient buyer steps in at low levels, the valuation is an issue. In any market, if someone does not pay above the last sale price, then you will never see a rally. Homes are not nearly as liquid as equities, but the self interest of free markets will prevail (sorry, free markets with government subsidies). Obviously, it is preferential to see these deals closing, regardless of the distortion in the market place. It is still a positive sign that trends are shifting in the right direction.

The high end market has been stagnant since the meltdown in the financial markets last September. While it has been raining here in Newton most of the Spring, the high-end housing market (homes priced above 1.5 million) is seeing some sun. During May and June 13 homes have gone under agreeement or sold. That is a significant increase over the 10 homes under contract from January thru April. The average list price was $2,310,269 and average sale price is $1,997,083. The list to sales ratio is about 86%. Worth noting, the average days on market was 217 days, 5 of the 13 were on the market between 221 and 808 days. Homes more recent to the market average 86 days and will probably garner closer to their asking price. On a personal note a 2.5 million dollar home in excellent condition I brought to market last Thursday has had 16 showings, and 3 second showings. We are negotiating one offer and are told we are getting another offer. Compare this to a beautiful home I listed in March for 2.8 million I had a total of 8 showings in 2 1/2 months before we decided to take the home off the market.
San Francisco entered the decline before Boston and seems to be recovering ahead of us also, although suburban Boston did not see the steep drops San Francisco did. MDA DataQuick reported on San Francisco home prices. Although they are down 34% year over year, they were up 12% month over month and are up 18% from the March cycle low. The rise in median price is a sign that the high end is starting to see some signs of life. Sales of homes $800,000 or more were 13.2% of all resales, the best reading since October’s 14.8%. Jumbo mortgages accounted for 25.5% of the Bay Areas sales, which is also the best reading since October’s 25.8%.
Home sales in Newton under 1 million dollars are brisk, with some receiving multiple offers and most receiving close to the asking price. However, pricing is still key, overpriced homes are not selling at any price points. The condo market continues to be very weak with the recent tightening of mortgage guidelines for condos. There are loans for condos, but it helps to have a knowledgeable mortgage broker.

Buyers’ agents are agents who are experienced in representing the needs and desires of the buyers. Many buyers incorrectly believe that if they don’t use a buyers’ agent they can get the seller to “discount” the property in-lieu of paying the full 5% to the listing Broker. A seller enters into a listing agreement (a legal and binding contract) with the listing Broker for an agreed upon percentage of the final sales price; usually 5%. The 5% is roughly divided 4 ways, the listing side gets 2.5% and the selling side gets the other 2.5%. The 2.5% is then split between each office and sales agent. If the listing agent sells the property directly, the firm that agent works for gets 100% and is shared with the listing agent. Most agents cannot negotiate the company commission. The contract states that the agent has a fiduciary responsibilty to represent only the seller. Included in that representation, it is the agents job to negotiate the best possible price for that home. An agent cannot represent both the buyer and a seller in a contract. The agent may not disclose personal information about the seller without the sellers consent. If for instance you wander into an open house and you decide you want to make an offer with the sellers agent, you the buyer and the seller must agree in writing that this is taking place. Be aware, the sellers agent is still representing the seller, you are not represented by anyone. Futhermore, the seller’s agent and the firm they work for stand to receive 100% of the commission. So the agent has a different finacial stake in your specific offer. No agent cannot promise you she/he can do better on the price if you buy directly from them. It is illegal. Of course the agent wants you to make an offer with out another agent, they receive the buying and selling side of the commission. It has been my expereince that buyers without buyer representaion pay more for the property.

Reliable advice and information is the key factor in making a good decision. A buyer’s agent will provide you with information, but not necessarily limited to the following.

The original purchase price of the house

The mortgage amount still owed on the house

Comparative market analysis for similar homes in the neighborhood

The original list price and any price adjustments since listing date

The number of days the house has been on the market

If the house has been listed for sale in a previous year and did not sell

Information about a house having been under contract but is now back on the market

Evaluating improvements the seller may have made to the house and whether the seller obtained proper permits. A town permit requires all subcontractors to be licensed by the state

The relationship to assessed value and market value

Accompanying you to the inspection and re-negotiating on your behalf if nesessary

Introduction to reliable mortgage lenders, home inspectors, closing attorneys

Keeps track of important dates (mortgage commitment, inspection contingency) and communicating their importance to you.

Protects your P&S money..by keeping track of these dates and communicating effectively with seller’s agent, mortgage broker and attorney.

Provide a list of pre-schools, churches, temples, restaurants, transportaion, however, we cannot make evaluations or offer an opinion regarding the schools and temples etc.

So why do buyers think they are getting such a good deal when they buy a house without the aid of a broker? They haven’t been educated. Most believe the seller’s agent is also representing them. A seller’s agent must be honest and disclose what she knows about the house, but their fiduciary responsibility is to the seller. Would you go to court without representation? Would you have surgery without discussing what was going to happen with your Doctor? Buying a home is a huge financial and emotional undertaking, you shouldn’t go it alone..

Where have all the homebuyers gone? Buyers are asking where have all the realistic home sellers gone. Sellers need to look in the mirror and ask what they would pay for their own home. The kitchen you renovated in the 80’s looks the same way the 50’s kitchen looked to you when you bought the house 30 years ago. That modern 70’s bath with groovy tiling is now just an eyesore. While wall-to-wall carpeting was all the rage, it-is-no-longer, ditto for the wallpaper. Moreover, that knotty pine lower level you entertained your friends in back in the day is now just a musty basement. The truth is, someone is buying the bones of your home, and they want to create their own memories. You don’t like the cabinets, the tile, the siding or the paint colors on your next home either. Buyers don’t care about your daughter’s wedding in the backyard and how beautiful it was. Honestly, when was the last time you spent money on the garden other than weekly maintenence. We cannot be in both a seller’s market and a buyer’s market at the same time. It is highly unlikely that you will sell your home for a premium and buy your next house at a discount. If your home is not selling, it has nothing to do with your Realtor’s marketing plan. It’s the price; price melts away objections.

Every house has a fair market value; the price point at which a buyer is willing to pay and a seller is willing to sell. Both parties need to be realistic, but in a buyers market the sellers need to be more flexible. As a seller, is it more beneficial for you to sell your home now or ride out this cycle and wait for the next boom? Does it make sense to list a home with a fair market value of $1.5 million for $1.650 and wait until next year or beyond to get the higher price? Do you think the market will be 10% higher next year? The catch is- the market needs go up 20% because your house is listed 10% above fair market value. Just ask the sellers who finally sold their homes after a year on the market what their early offers were, the price they found insulting; I can assure you it was substantially higher than what it ultimately sold at. I am not suggesting you accept a low-ball offer, but ask yourself, is it the buyer or me who is unrealistic? Remember, sellers who understand fair market value set the price for future sales. You don’t want your home making the competition look good.

Most sellers are emotionally stuck on an arbitrary number and have trouble accepting a lower price. Oftentimes this number was something a friend said at a cocktail party. The conversation usually sounds like this, “did you see the house across the street sold for 1.5 million? Well your house is so much nicer you could get 2 million”. Of course, this person has no real estate qualifications, but now the sellers feel like they are losing money, you can’t lose money you never had.

The question only you can answer is, do you stand to gain more from waiting? Will you be substantially better off if you sell in 1 -2 years, as compared to selling at today’s market value? Most often the answer is no.

I posted these numbers April 1st using MLS market sold statistics. Do these numbers make- sense-yes and no, all parameters must be taken into account, not just price.
First, MLS statistics have Newton’s median price up about 2%, not down, the median price was $717,500 in 2008 versus $735,000 in 2009. MLS uses only homes listed publicly for sale by a member of Multiple Listing Service. I got a lot of flack for posting average numbers in my last blog post which showed 2009 down 7% from the same period last year. $875,124 in 2008 versus $807,163 in 2009.
Since April 3rd we have seen inventory rise to 245 single family homes,
184 condos for a total of 428. 105 above 1 million, and 31 above 2 million. 54 homes have gone under agreement in the past month, however, 99 new listings have come on the market, so twice as many new listing are coming on than going off. This is not rocket science; we are clearly in a depreciating market. Sellers who understand this concept and act first to lower prices or list with a realistic price will reap the rewards, because buyers out there.

Let’s look at what I posted on April 1st.

Newton Housing Stats 1st Quarter ‘09 vs. ‘08
Posted by szerlip under Uncategorized | Tags: Greater Boston Real Estate, Newton/Brookline Real Estate, REAL ESTATE |

The 1st quarter year over year results are in for Newton Single Family Homes

‘09
Homes Sold 45
Average Sale Price $811,100
Median Sale Price $735,000
Days on Market 90
Highest Price $3,000,000
Lowest Price $314,000

‘08
Homes Sold 77
Average Sale Price $875,124
Median Sale Price $717,500
Day on Market 113
Highest Price $1,850,000
Lowest Price $375,000

Prices are down about 7% from 1st quarter of ‘08. Volume is down a whopping 40%, but days on the market is also down, from 113 days in ‘08 to 90 days in ‘09. The market is struggling the most at the high end. So far this year there have been nine sales above $1,000,000 compared with 21 at this time last year. Only two house have sold above 1.5 million 1st qurter this year, last year 12 homes sold above 1.5. At this point Newton has 26 homes priced above 2 million dollars, (a record) expect to see homes withdrawn or price reductions to get the high end moving again.

No one’s gonna steal my house! Please read the WSJ story from April 24th.

http://online.wsj.com/article/SB124057365983752607.html”>this link to a fascinating Wall Street Journal article about the disconnect between buyers and sellers of high-end houses. As the article points out, it’s a lot like the old joke about the guy with the million dollar dog: “Well, I haven’t sold him yet.”

The latest data from the National Association of Realtors, which rattled nerves on Wall Street this week, showed national home sales are still weak. But they also showed how home sellers nationwide have split into two camps.

Call them “the haves” and the “don’t haves.” As in: Those who have to sell, and those who don’t have to.

The haves are the distressed sales. These include those in foreclosure, and those in pre-foreclosure “short sales.” Such sales are now booming – at bargain prices.

On the other hand, those who don’t have to sell are often hanging on to 2006 prices. And they are hanging on to their homes.

Prices aren’t dropping. And homes aren’t selling.

This could be ominous. It suggests – though it does not prove – that another shoe could be about to drop in real estate, as those who don’t have to sell realize they need to compete more aggressively with those who do. [emphasis added]

The latest housing numbers tell a story.

In other words, the number of distressed sales has nearly tripled in a year.

That’s the good news. That’s a market clearing, at last. Distressed sales are taking place at prices at least 20% below the rest, the association says.

On the other hand, look at those who aren’t in foreclosure or a short sale. They’re selling their homes while still solvent. This used to be called the normal housing market.

Prices haven’t come down much. In some premium neighborhoods they have may even be rising.

But the volume of those “normal” sales is down sharply. They make up just 47% of 360,000 second-hand home sales. That’s 169,000 transactions.

How little is that?

Even a year ago, when the housing market was already in the tank, these non-distressed sales accounted for 82% of 375,000 second-hand home sales nationwide. Or 308,000 transactions.

It’s like the old joke about the man with the million dollar dog (”Well, I haven’t sold him yet!”).

When a real estate market collapses, volume dies first. Prices fall later. So news that volumes are drying up for non-distressed sales has to be an ominous sign. [emphasis added]
Those who live in premium neighborhoods often fancy that they are immune from the slump. “Oh, good quality will hold up,” they say. It’s true good quality may hold up for awhile. But that doesn’t mean anyone’s immune.

And over long terms, different real estate markets have to maintain some reasonably persistent connections. Otherwise many people would move to the cheaper neighborhoods.

The trade now — in theory, at least — may be to sell the place in an upscale neighborhood like Pacific Heights in San Francisco, if you can, and buy a foreclosure deal out in the ‘burbs.

To put the Newton market in perspective we have 97 houses priced above 1 million dollars! Out of those 97, there are 31 priced above 2 million dollars. Sellers at every level of the market can decide to be proactive or reactive. Either you determine the “reset” of prices or your neighbor will. I would much rather be representing the seller who understands this concept rather than the seller who is chasing the market. There is no average pricing in real estate.

My heart is beating a little faster. A properrty has been on the market for 66 days when an offer comes in. The buyer is respresented by a Realtor I respect. I go over the offer again and again, it is within 5% of the asking price, flexible closing date, no mortgage contingency. I present the offer to the seller; they are expressionless, not happy or relieved. They reject the offer there is no counter.

To say I am dumbfounded is an understatement. What went wrong, what am I missing? This should have been a sale. The sellers had purchased in 2005, had outgrown the house after the wife had triplets, were moving back to California, but renovated above fair market value for this house. There was some discussion about this at the lisitng presentation, but no red flags. The sellers realized that a buyer may not value their renovations as much as they did. I gave a lsiting range, they wanted a higher price, so we went over the comps, considered market conditions and disicussed consequences of overpricing. They went with the absolute highest price I thought possible and told them so. The property was in a great location and it was in excellent condition. The sellers found a property they wanted to purchase.

There was excellent activity in the first few weeks, after that showings were sporadic. A few second showings, but no offers. We had the “talk” about price reductions sooner rather than later, but suddenly they were firm on their price. The sellers decided that houses just weren’t selling at all so why lower. I provided enough graphs and charts to make any accountant happy, along with 3 competing properties that 3 different buyers chose over their house. Houses are selling.

We never really know what goes on in someone’s mind. Brokers have to review the goals and objectives with sellers during the course of a listing. Life is fluid, motivation changes. Markets reflect new lisings coming on and going off the market. I give my sellers verbal feedback after every showing and a written review weekly or semi weekly. What happened?…they found another house, were negotiating on that house. Those negotiations I was not privvy to, but from what they told me they didn’t feel represented.

When I presented the offer to them, the sellers evaluated the offer based on their current goals and objectives. This offer was being clouded by what was happening in California. I went home around 10:00 pm unsure, ranting to myself. In the meantime I had to tell another broker that my client would not be countering her clients offer (at this moment), she was not happy and her clients wouldn’t be either. Since we had until 2 pm the next day I asked her not to mention this to her client yet.

I woke up resolved to make this happen. I went over to see the sellers around noon and determined that they really did want to sell. I spoke with the agent in California and tried to keep that deal moving forward and convinced my sellers to counter this offer. The buyers countered the counter and the sellers countered the counter counter but in the end it all worked out well.

A successful real estate negotiation begins before there is an offer. If all the pieces are in place, including motivation, competitively priced properties, a market sensitive seller, you know the outcome. Just make sure your seller has a place to move.

It would appear spring fever is hitting the Newton real estate market. During the course of the last 4 weeks, 143 properties have gone under agreement here in Newton.
The average list price of a single family was $870,000, and was on the market for an average of 65 days. Condos average list was $472,782 and 78 days on the market. Multi families had an average list price of $689,567 and were on the market for 48.17 days.

the Breakdown:
93 single family homes
44 condos
6 multi families

SINGLE Families

A further breakdown:
1 home 2.5+
0 home 2.0 -2.5
7 homes 1.5- 2 million
20 homes 1million to 1.5 million
9 homes 900’s
6 homes 800’s
11 homes 700’s
17 homes 600’s
8 homes 500’s
9 homes 400’s
5 homes 300’s

CONDOS
2 condos above 1 million
1 condo 900’s
2 condos 700’s
3 condos 600’s
3 condos 500’s
15 condos 400’s
13 condos 300’s
5 condos 200’s

MULTI FAMILIES
2 multi family 700’s
3 multi family 600’s
1 multi family 500’s

As you can see from the data I am reprorting all price levels seem to be moving especially properties priced under 1 million dollars. The stagnating high end is also showing signs of life. Could we be near the bottom?

Wiggle room, we’ve all heard it. “If I price the house at that price there won’t be any wiggle room”. We live in an age of the educated consumer and nowhere is it more apparent than real estate. Today’s buyers have looked at 150 houses on line, visited 100 open houses, and have made appointments at another 20. They know value and that is what they are looking for. Price a home correctly and it will sell for more money than if you price it with wiggle room. An incorrectly priced property is advertising for another home. Your property makes the competition look better, you are in fact helping to sell your competition.
Fewer Realtors will show your property, fewer buyers will come to your open house, but you may succeed in receiving a low ball offer.
If a buyer does in fact buy your property at an inflated price, the mortgage may be in jeopardy because the bank may not appraise the property at that price. One of two things will happen, the buyer will walk or you will accept the appraisal price. Either way, critical time was lost waiting for finance approvals that do not go through.
Reducing the price after buyers have perceived your house as “overpriced” does not generate nearly as much interest as it would if it were priced correctly from the start.
The first 10 days a home is on the market brings in the most ready willing and able buyers. So please, leave out the wiggle room, price to coincide with the window of maximum exposure and buyer interest. Price to get buyers excited!

Ok the e-mails are flying about why I used the average sale price and not the median. I have been accused of hyping the numbers. The truth is the median numbers are higher not lower for 2009 when compared to 2008.

‘08
Median Sale Price $717,500

‘09
Median Sale Price $736,000

The median number shows a 2.5% increase in price over same period 2008. While the numbers do not lie I can’t think of one real estate agent or seller who thinks the market is up. Houses new to the market priced at 2009 levels and not 2007 levels are selling. The Case Shiller Index uses average price rather than median price. I’m just interperting the data.