The First Question You Should Ask Your
Listing Agent

Reposted from the KCM Blog 2/8/2011

What is the most important thing a seller should look for when  hiring a real estate agent to sell their house? We are often asked this question. Is it the size of the company they are licensed with? Is it their marketing program? Their years experience in the business? Should you choose the agent who suggests the highest listing price?

There are many things that should be taken into consideration when hiring someone and giving them the responsibility for selling your home. In our opinion, the most important question you can ask a potential listing agent is a simple one:

Do you truly believe that now is a good time to buy a home?

Why should this matter when hiring someone to SELL your home? Buyers are nervous about purchasing right now. They want to know they are making an intelligent choice. We believe, especially in today’s market, you need to hire someone who realizes that this is one of the best times in American real estate history to buy. If an agent doesn’t believe that, how will they be able to convince a potential buyer to buy your home?

When interviewing a real estate professional, ask them to explain why purchasing a home makes sense today. They should be able to explain it simply and effectively. See how many of the following facts (which should be shared with every potential purchaser) the agent knows:

The Wall Street Journal last week stated:

“With home sales starting to improve, and with prices now possibly forming a bottom, real estate could well be the asset class that represents the best low-risk buying opportunity out there today.”

Donald Trump was just quoted saying:

“I’m pretty sure this is a great time to go out and buy a house. And if you do, in 10 years you’re going to look back and say, ‘You know, I‘m glad I listened to Donald Trump’.”

John Paulson, a multibillionaire hedge fund operator and the investment genius who made a killing betting against housing a few years ago, is now bullish on residential real estate market. He recently said:

“If you don’t own a home, buy one. If you own one home, buy another one. If you own two homes, buy a third. And, lend your relatives the money to buy a home.”

A recent Gallup Poll showed that 67% of American’s think that now is a ‘good time’ to buy a home. The Gallup Organization went on to say:

“Overall, there is good reason for most Americans to think now is a good time to buy a house. Interest rates remain near historic lows. Home prices are down sharply, providing many incredible buys.”

The iconic financial paper in this country, the country’s most famous real estate investor, the most successful prognosticator of the housing market and 2/3 of all Americans say now is the time to buy a home. Shouldn’t your agent agree?

Bottom Line

Selling is nothing more than the transference of conviction. How can agents transfer that conviction if they themselves are not convinced? Find a listing agent who truly believes that someone should buy your home – TODAY! This is the single most important thing you should look for in a potential listing agent.

Like Comparing Apples to Oranges

Re-posted from the KCM Blog posted on 2/4/20100

Over the next several months, there is going to me some confusion about how well the real estate market is doing. Some headlines are going to announce several consecutive months of increased sales. Other headlines are going to talk about a near total collapse in housing. Both headlines will be based on facts supplied by the National Association of Realtors (NAR). How can that be? How can data report that two opposite things are happening at the same time?

Let us explain. NAR will release two reports each month: the Pending Sales Report and the Existing Sales Report.

The Pending Sales Report (as per NAR)

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The Existing Sales Report (as per NAR)

Existing-home sales are completed transactions that include single-family, townhomes, condominiums and co-ops.

The reason there will be confusion created by the media reports is actually simple to explain. There will be two different numbers reported by both reports each month.

• The month-over-month (M-O-M) comparison and
• The year-over-year (Y-O-Y) comparison

Normally, we would want to look at the Y-O-Y numbers in each report. However, these numbers are skewed because of the Home Buyer Tax Credit which was available to purchasers for the first four months of last year. Comparing contracts and sales with this time last year would be like comparing apples and oranges.

We strongly suggest that you look at the momentum shown in the month-over-month numbers. They accurately depict a surge in sales that we believe will continue throughout 2011. However, that does not mean price appreciation. Just as demand is increasing so is the supply of inventory. Price is determined by both supply and demand. We do not see any price appreciation until later in the year or early next year.

Bottom Line

The market is coming back. Homes are selling. We have turned the corner and 2011 will be the year the market will normalize.

Reposted from The KCM Blog posted 1/31/2011

Does It Make Sense To Buy a Home?

The financial turmoil we have experienced over the last five years has definitely taken it’s toll. It has especially been a difficult time for real estate. Nationally, values have fallen over 25% and there may be more softening in prices to come. We realize that this has caused difficulty, and in some cases, heartbreak for many families. People unable to make their mortgage payments have been forced to sell or, even worse, have faced foreclosure.

However, the thing that has continued to amaze us is the country’s steadfast belief in the benefits of homeownership even in these most difficult of times. The vast majority of Americans still realize that the value of a family owning a home goes far beyond just the financial considerations.

There have been three major surveys done in the last 75 days delving into Americans’ current belief in the value of owning a home:

1. The National Housing Survey by Fannie Mae this past November.
2. The Housing Survey by the Gallup Organization completed last month.
3. The American’s Attitudes About Homeownership (AAAH) study completed by Harris Interactive for the National Association of Realtors.

Each showed the country still believes that buying a home makes all the sense in the world. Let’s consider some of the findings:

Is owning a home good for a family?

• In the AAAH study, 87% of homeowners and 64% of renters believed that “owning a home provides a healthy and stable environment for raising a family”.
• The Fannie Mae study showed that the main reason people gave for buying a home is that “it is a good place to raise children and provide a good education”.

Has owning a home been a positive experience?

• AAAH: The study shows that an astonishing 88% say it has been “a positive or very positive experience”. An overwhelming majority of home owners are happy with their decision to own a home. A full 93% of owners surveyed would buy again.
• Fannie Mae: The study shows that 95% see homeownership as a “positive experience” for them and their families.

Do renters aspire to own a home?

• AAAH: Most renters aspire to home ownership. The majority of renters (63%) say they are at least somewhat likely to purchase a home at some point in the future. Among them, young adults (18- to 24-years-old) have the strongest aspirations for home ownership.
• Fannie Mae: 67% of renters plan to purchase a home in the future.

Is now a good time to buy a home?

• AAAH: 78% of homeowners and 58% of  renters believe now is a good time to buy.
• Fannie Mae: 64% of those surveyed said it is a good time to buy a home.
• Gallup Poll: 67% of Americans think now is a good time to purchase a home.

Bottom Line

Survey after survey report Americans believe two things: that there is a value in owning a home and that now is the time to buy!! What are you waiting for?

Where Are Housing Prices Headed?

Reposted from the KCM Blog on 1/28/2011

The National Association of Realtors (NAR) has been reporting great news recently. Last week’s Existing Home Sales Report and yesterday’s Pending Sales Report both showed consecutive months of increases in the number of homes sold. Finally, buyers are jumping off the fence and taking advantage of one of the most opportune times to purchase a home in America’s real estate history. With an increase in demand, price appreciation can’t be far behind, can it?

Actually, the answer is NO! Prices are not determined by demand alone but in the relationship of demand to available supply. The inventory of homes for sale is still too high and about to surge higher. Along with the news of increased demand yesterday, RealtyTrac released their 2010 Year-End Metropolitan Foreclosure Market Report. The report showed that distressed properties across the country are on the rise:

… foreclosure levels remained five to 10  times higher than historic norms in most hard-hit markets, where deep  fault lines of risk remain and could potentially trigger more waves of  foreclosure activity in 2011 and beyond.

The report also explained that the foreclosure epidemic is spreading to more and more of our communities:

… foreclosures became more  widespread in 2010 as high unemployment drove activity up in 72 percent of the  nation’s metro areas — many of which were relatively insulated from the initial  foreclosure tsunami.

(Attention KCM Subscribers: The January issue of Keeping Current Matters has the ‘shadow inventory’ of homes coming to the market broken down by state. Use the chart when talking to sellers about future prices in your region. Click here to login.)

What does this mean for prices?

Here are a few quotes from this week.

Washington Post:

The closely watched S&P/Case-Shiller report shows that housing prices, compared year-over-year, have declined nationally for six consecutive months. The downward path suggests that housing prices could, by spring, hit their lowest level since April 2009, said David Blitzer, the index committee’s chairman.

New York Times:

A new slide in housing prices has begun in earnest, with averages in major cities across the country falling to their lowest point in many years.

CNN Money:

Barclay’s Bank analyst Theresa Chen doesn’t expect a reversal in housing market trends any time soon, since there is no end in sight to the foreclosure crisis.

“We expect softness to persist,” she said, “as home prices continue to face headwinds from the large pipeline of foreclosures entering the market.”

Housing Wire:

“… we believe that home prices will continue to weaken on a month-over-month basis until spring, and a year-over-year basis through the end of 2011,” the Radar Logic said.

Bottom Line

Prices will continue to soften in the first half of 2011 in most regions of the country. This information should be taken into consideration if you plan on selling your house in the next twelve months.

Re-Posted From the KCM Blog 1/27/2011

WHAT THE CRYSTAL BALL SAYS ABOUT RATES

Predicting what will happen with interest rates is risky for a person’s credibility.  Last year at this time, I (and the KCM Crew) believed rates would climb after June and for very logical reasons: the end of the Fed’s purchase of mortgage-backed-securities (MBS) and the end of the Tax Credit. What we didn’t anticipate was the collapse of the Greek economy. 

That being said, I firmly believe that my opinion on the topic has some value. So, here’s my opinion (which assumes the governments of Ireland, Spain and Portugal stay solvent and no other major geo-political event occurs- like a war or terrorist activity).

The Fed and the federal government have publically stated their desire to get the American Economy back on track.  Their goals:

• Creating Jobs. They want to put Americans to work.
• Improving Production in the corporate and manufacturing sectors (which will create jobs and profits)
• Ratcheting Up Inflation in order to get prices moving upwards (really as a prevention of deflation)

Accomplishing these goals will likely improve the fortune of businesses (by creating higher sales, profits and stock prices).  In turn, the expectation is that these businesses will expand (spending money and creating jobs).  The money spent and jobs created will beget more spending in the private sector which will, in turn, create more sales, profits and jobs for the businesses.  Logical? Yes. Simple to accomplish? No.

Rewind 18 months: the Fed decided to buy massive quantities of mortgage-backed-securities to keep rates low (which encourages businesses to borrow and invest….and to refinance their existing debt to help their bottom lines).  Unfortunately, there was little confidence in the plan and many businesses instead of expanding, actually tightened their belts. You see, CONFIDENCE is a crucial component to any recovery.  There wasn’t enough confidence (look at the November elections as proof).

But in the last few months, Americans seem to have to begun to feel that things can and will improve.  QE2 has encouraged borrowing and expanding.  Jobs are starting to come back slowly. The infusion of $600 billion into the economy from the Fed via their new MBS purchase program is both inflationary and helpful in devaluing the dollar abroad (which allows foreign money to buy more American goods and services for less).  That helps improve sales, profits and jobs for businesses here.  The wheel is beginning to grind its way in the right direction.  At least, there is some confidence in that plan.

How is all this likely to affect mortgage interest rates?

• Inflation is always…bad for rates
• More jobs is inflationary…bad for rates
• A strong stock market…bad for rates
• A devalued dollar helps companies selling abroad and their stock value…bad for rates
• Consumer Confidence typically good for stock prices…bad for rates

Conventional wisdom is that, while rates have climbed from the low 4s to about 5% already, 2011 looks to be a volatile year with rates bouncing from 4.75% to 5.5% throughout the year. That’s a significant range and it behooves home buyers to pay attention and strongly consider locking in their rates when they are 5.125% or lower. 

Additionally, home sellers need to recognize that a .75% hike in rates makes a home about 8% more expensive to afford monthly. As we know, buyers don’t buy on price but instead buy on monthly carrying costs. Sellers are going to have to lower their prices by 8% to achieve the same cost for their buyer.

That’s my prediction in an unpredictable world….Let the debates begin.

The Real American Idol – HOMEOWNERSHIP!

Re-posted from The KCM Crew on January 25, 2011

Simon Cowell would have to be considered congenial compared to the critics of real estate in the last few years. But like the popular TV show, where the ultimate winner is not chosen by a  select few but instead by the vote of the nation, homeownership again has proven to be the choice of the people. There have been numerous survey’s and polls done in the past 90 days that confirm this.

 American Attitudes About Homeownership is a new survey conducted by Harris Interactive for the National Association of Realtors. The findings of this survey combined with the findings of Fannie Mae’s November  National Housing Survey and last week’s Gallup Poll paint a clear picture that the majority of Americans still value homeownership and believe in its benefits. In the latest survey, America’s belief in owning a home came through loud and clear.

Here are a few of the findings:

Homeowners and renters agree that owning a home is a positive choice. A majority of homeowners and a sizable percentage of renters agree or strongly agree that owning a home provides a healthy and stable environment for raising a family (87 percent among homeowners and 64 percent among renters), that it helps them meet long-term financial goals (77 percent among homeowners and 55 percent among renters) and it helps them realize the American Dream (70 percent among homeowners and 48 percent among renters).

Most homeowners (95 percent) and renters (72 percent) believe that over a period of several years, it makes more sense to own a home than to rent.

More than 8 in 10 homeowners (82 percent) and half of renters (50 percent) would prefer to buy a home if they had to move in the next six months. Furthermore, 78 percent of homeowners consider now a good time to buy as do 58 percent of renters.

Homeownership is viewed as a positive experience while less so for renting. Eighty-eight percent of current homeowners report that owning a home has been a positive or very positive experience. About half of renters (51 percent) consider their experience as positive or very positive.

Many renters aspire to homeownership. More than 6 in 10 renters are at least somewhat likely to purchase a home in the future and 24 percent indicate that they are extremely likely. Among young adult renters, 74 percent say they are likely to buy at some point in the future. About one-third (35 percent) of renters plan to purchase a home in the next 3 to 5 years (43 percent among young adult renters).

More about the non-financial benefits of homeownership

We have argued for some time that the benefits of homeownership are more than just financial. This survey addressed this point and reported:

A larger share of homeowners than renters describe their communities as safe and stable. Homeowners also report that they are more satisfied with their community and family life. While many factors contribute to a positive community environment, a large percentage of homeowners and renters believe a high rate of homeownership is one factor. Homeowners generally feel more connected to their communities, participate in community and civic activities more frequently and are more likely to know their neighbors well.

Bottom Line

Owning a home has both financial and social benefits for your family. Today, you can buy a home at a discounted price and at an historically low interest rate. Why wait?

Distressed Inventory to Step Out of the Shadows

by The KCM Crew on January 24, 2011

We are beginning 2011 with much more positive news about real estate than we have had in several years. The pending sales numbers (houses going into contract) have been climbing for several months. Last month’s Existing Homes Sales Report from the National Association of Realtors showed an increase of over 12%. Demand definitely seems to be increasing. Does that mean prices will begin to appreciate? Probably not. Though buyers have finally come out of hiding and started to purchase homes again, an increased inventory of distressed properties is also emerging from the shadows. These houses will impact prices.

Prices are determined not by demand alone but instead by the relationship of demand to the supply of inventory available. We are talking about the ‘shadow inventory’ of homes that will come to market at discounted prices when they are sold as short sales or foreclosures. This inventory has swelled to several million units.

When will this begin and what impact will it have on prices?

Over the last year, banks have been slowly releasing this inventory to the market being careful not to release too great a number in fear of driving down house values even further. Over 25% of all sales in 2010 involved a distressed property. The numbers increased as the year went on with 33% of all sales in November being in this category. In December, that number jumped to 36%! It now seems that banks are preparing to increase the flow of such properties to the market.

Last month, CNBC reported on economist Nouriel Roubini’s predictions on this issue:

“There has been an effective moratorium on foreclosure,” said Roubini.

And the beginning of the end of that moratorium means more housing supply is about to become available on the market.

“The shadow inventory of not-yet-foreclosed homes—due to the moratorium—will surge in the next year,” Roubini says.

Bank of America said:

…it resumed foreclosure sales in most states that have a non-judicial process, but the bank won’t restart sales in judicial states until sometime in the first quarter.

And Housing Wire reported last week that Fannie Mae “directed its mortgage servicers to delay scheduled foreclosure sales 45 days” for borrowers trying to get assistance through certain government programs.  

What impact will this have on prices? Wells Fargo projected that house prices will drop 8% by mid-year. Fannie Mae and Bank of America have also predicted price depreciation for the first half of 2011.

Should I wait to purchase?

Not necessarily. Remember, sellers should sell now before prices do begin to fall. However, as a purchaser, you should look at cost. With interest rates on the rise, waiting may result in a higher monthly mortgage payment even with a lower sales price.

As a good example, Mr. Roubini, who was mentioned above, just sold his home and upgraded to a more expensive residence. Get counsel from a mortgage professional before you consider delaying a purchase.

Bottom Line

If you are looking to sell, you probably want to do it before this ‘surge’ of discounted competition comes to market.

From the KCM Blog posted on 1/21/2011:

It seems that the housing market is finally showing signs of a recovery. We are not suggesting that it will come roaring back and we will see 2006 numbers again. However, the National Association of Realtors released their December Existing Home Sales Report yesterday. The report showed a 12.3% increase in closed transactions over the month before. Earlier in the week the Census Bureau  reported that:

Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 635,000. This is 16.7 percent above the revised November rate of 544,000.

Should we believe that real estate is starting to make a comeback? To some degree, we think yes. Both of the above reports are promising.

However, not all the news in the reports was positive. Existing home sales were slightly down from the same month last year. Housing completions were down 22.2% from last year’s numbers. Yet, we must also factor in that the numbers from the end of last year were artificially inflated by the Homebuyer Tax Credit. Any correlation between these numbers is not an apple-to-apple comparison.

These reports, coupled with anecdotal information we are receiving from the agents we coach all across the country, seem to suggest that we may have bottomed out in regard to the number of transactions being completed. That can only be a positive for the industry.

Bottom Line

Even though there is a huge amount of visible and shadow inventory which will continue to put downward pressure on prices, it seems that buyers are beginning to realize that there are tremendous opportunities in the market.

I thought this post was excellent!  If you are thinking of selling a home in the near future please take the time to read this and watch the 3 minute interview with Mr. Steve Harney. Remember, real estate is like the weather--local.  Here in Charlottesville our 2010 year-end market report showed the market leveling off and stabilizing in several of our local market areas.  We will have to watch to see if the shadow inventory impacts our area's market this year as is predicted to happen in the national market.  Please let me know if you have any questions regarding this information or if you would like to discuss our local market conditions further. 

Reposted from the Keeping Current Matters Blog 1/20/2011 

"You Need an EXPERT, Not Just an Agent"

click here to see Steve's interview

A major national television network called us a few weeks ago to do a live interview. To Steve Harney, our lead author, it was an honor to visit their Manhattan studios and meet Gerri Willis, the anchor of her own show – The Willis Report.  She and all the people on her staff were both extremely professional and very nice. We believe the interview went well (click picture to view).

We later realized there was an underlying story behind the interview which was just as important as the segment itself. Why would a major news network want to interview a member of The KCM Crew? It seems that even main stream media understands the confusion today’s market is creating. They want to help consumers navigate through that confusion. Steve’s interview concentrated on what a seller needed to know. The next day, Gerri interviewed two other experts who discussed what was important to the buyer. She wanted to provide ‘expert’ advice.

That’s the key – EXPERT advice.

The following day, we attended a major real estate convention, the Inman News Conference, in New York City. The common theme throughout the conference was that real estate professionals need to truly understand what is happening in today’s market and why it is happening. They need to know this in order to help buyers and sellers make good, informed decisions. They need to be an expert.

In a session at the conference, the people from Tech Savvy Agent explained how important it was to have great industry information in the form of graphs and visuals on your smart phones, ipads and other mobile devices. Making the difficult easier to understand is what experts do!!

We also had the good fortune to have lunch with two of the most successful real estate practitioners in the country, Jay Kinder and Michael Reese. Each sold hundreds of homes in 2010. The same word kept popping up in the conversation – expert.

It seems that everyone is realizing the same thing – expert advice is the most valuable asset today’s real estate agent can offer.

Bottom Line

Whether you are buying or selling, make sure you are dealing with a real estate expert not just someone who happens to have a real estate license.

On Fridays we test your knowledge of how well you know the Charlottesville area.  Think you know your way around Cville pretty well?  Okay, where am I in the picture below?

Are you asking where in Charlottesville that perfect home is for you?  Click HERE and we'll get started!  Remember, it's not a "bad" market for everyone...it can be a phenomenal market for the right Buyer!!