The Real Estate Broker's Corner

It has been a while since I commented on the local conditions. There is a lot of talk about the national market. Lets see if that pain is getting down here to "God's Country". We'll compare sales from 1/1 -8/28, year over year.

                                        2006                    2007

LAND - sales                         16                      12

Avg list price                        294k                   238k                   

Avg sale price                       286k                   215k

Days on market                     167                     227

I deleted one 2007 sale in Westport which was an outlier. These numbers speak for themselves. Land pricing has eroded and it takes longer to sell. Furthermore, since 6/1/2007, there has been 1 lot sale reported. Ouch!

Anectdotally, I still see some stubbornness in pricing. But with buyers having so many choices, the stubborn seller is setting himself up for a big fall. The last thing you want to do is chase a market down, always being a little behind a declining demand curve.

What about single family homes? 

                                      2006                    2007

Single Fam. sales                 66                       63

Avg list price                     439k                     465k                   

Avg sale price                    415k                     444k

Days on market                   138                     182

I was a bit surprised by the results here. Things are on the market longer, and perception is that the pricing is weak, but at least the bulk statistics don't show that yet.

Of course, there are non MLS sales that could change these numbers a bit, but what we are seeing is the natural cycle of the market. The demand for land has dropped off as builders have slowed, and many on the fence, fearing they waited too long to sell, have entered the market. These late entrants  often are unrealistic in pricing, to the high end. The true indication of demand, the sales, is largely unchanged, on pace for about 75-80 sales annually. At this writing, there are 136 single family homes for sale, or almost 17 months inventory. That is a huge indicator of weakness in the housing market, which usually operates around 8-9.5 months of inventory. 

What does this all mean for sellers? Get realistic about your price. If you got a dilapidated 900 sf ranch on a busy street, don't waste your time (or mine)thinking that your going to get 350k for it, because you will be alone with that vision for quite some time.

If you are a buyer, be selective. This is the time to make a quality buy. Get a buyers' agent, figure out what you can afford, and shoot for the best quality home available. View the home as a cost of living, not as an investment.

1. This past Tuesday the "Fed" made no change to interest rates, and a friend commented that it was hurting mortgage rates. I said no, mortgage rates aren't really tied to Fed Funds rates, and it was more relevant to credit card borrowers and other credit facilities, but not mortgages. In any event, it was status quo.

Last night the London Interbank Borrowing Rate, or LIBOR, went up. It went up big. It went up from 5.35% to 5.86%. And that does have ramifications for mortgages. Many commercial and residential mortgages, especially adjustable rate mortgages, are linked to LIBOR. Almost all credit cards with floating rates are linked to LIBOR. And Libor just went up nearly 10%.

                __________________________________________

2. American Home mortgage was responsible for 2% of the mortgages in the United States. They had 20 Billion dollars on balance sheet in April. American Home Mortgage employed 7000 people.

American Home was NOT, I say again, NOT a subprime Lender. American Home Mortgage file Bankruptcy this week. They simply had no market to sell their Mortgage Backed Securities. The ripples from sub prime are expanding into the bigger pond.

          ____________________________________________________

 3. A big developer here is now advertising that he will build a house on your lot. That is very telling. In the boom, developers would sell you a lot and then insist that they build the house for you, a builders' package. Now, developers don't want to buy the land. Too risky. He no longer wants to be a developor, he wants to be "hired help".

       ______________________________________________________

So, we have 1) huge increases in direct borrowing costs, and we have 2) a national mortgage thrift meltdown, and we have 3) seasoned developers preferring not to go on building spec houses or developing raw land. Does this bode well for housing. 

Much of the economy around the world is strong. It is unlikely that we are headed for a great depression. But we are absolutely in the house of pain as far as real estate goes. And no one can say with certainty how long this is going to go on.