Month: April 2009

The High End Real Estate Disconnect

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

Negotiating the Offer

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.

Signs of Spring- What’s selling in Newton

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

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

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?

Consequences of Over Pricing Your Home

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!

Clarifying Average vs Median for Newton Housing

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.

Median Sale Price $717,500

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.

Newton Housing Stats 1st Quarter ’09 vs. ’08

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

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

Homes Sold 77
Average Sale Price $875,124
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. This year so far 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 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.