HomewardBound

Jail Bait

2008-05-28T14:57:00.000-04:00

For years, the condo conversion craze has turned abandoned warehouses, firehouses, & schools into hip personal dwellings. And then there's this:

Daily Real Estate News May 28, 2008

Maine: Why Not Buy an Old Stone Jail?

Anyone looking for security should check out the place just listed by Dawson Commercial Realty in Bangor, Maine.

It’s a roomy, brick and stone county jail in the middle of Skowhegan. Constructed in 1897, the 14,000 square-foot building is for sale for $200,000 and comes complete with razor-wire fencing. There are no zoning or permit-use restrictions, but Philip Roy, chairman of the Somerset County Commission, says only buyers with profit in mind should apply.

"I'd like to have it go back on the tax rolls of Skowhegan, and I'd also like to see it create jobs – ultimately, that's what we're looking for," he says.

Source: The Associated Press (05/28/2008)

Further Analysis of the Quarterly Comparisons & Some Suggestions

2008-05-20T12:45:00.001-04:00

I usually laugh when I hear national news regarding "the housing market" or "the real estate market". My reasoning is simple: All real estate is local. You've probably heard this statement a lot lately, so I apologize for adding to the cliche parade. This statement, however, is not only true, but it helps provide perspective when all of the housing news is dire.

Don't get me wrong, I am not here to sugar coat anything. Many markets across the country are down in some shape or form. Inventory is high, loan commitments are harder to obtain, and therefore, there are fewer buyers capable of absorbing the large inventory of listings. Still, depending on how one measures the different housing numbers, not every market is suffering.

I've analyzed three zip codes in the Louisville area for the past couple of years. My comparisons measure sales volume (total number of single-family home sold), high sale price, low sale price, median sale price, & average sale price. I then compare those categories for each quarter against the previous year's applicable quarter (i.e. year over year). To me, this is a more accurate comparison than to compare in a straight line quarterly sale figures. Granted, no measurement timeframe is perfect, but at least this type of analysis should help to equalize weather conditions & the frequency of holidays. Both of these factors are influential with regard to home sales.

Just looking at the 1st quarter of 2007 versus the 1st quarter of 2008, a few trends appear to hold across the board: Sales volume decreased substantially (20% in the 40205 zip; 54% in the 40206 zip; 32% in the 40207 zip), median prices are up in all three zip codes (11% in 40205; 9% in 40206; 11% in 40207), & average prices are up in all three zip codes (9% in 40205; 36% in 40206; 15% in 40207). So how do we make sense of such conflicting data?

From my perspective, it's pretty simple: The best products still sell, and they still sell for a good price. The problem for home sellers is, there's not as much overflow to help diminish the inflated inventory. Simply put, the buyers that are out there & actually capable of purchasing a home have the luxury of being picky. Once they find a home to purchase, there's still plenty of good choices available for the remainder of the smaller buyer pool. Buyers are more patient. They expect to get a fair, if not, great deal, and they're willing to look long & hard to find it. Since there's fewer buyers competing for the available properies, homes that look tired, cluttered, dumpy, and/or out-dated don't sell--unless they are offered at a discount. Few home sellers want to discount their price to a level that is required to sell it, and even fewer are willing to do a few things to their home to make it stand out. Thus, inventory remains high, and sellers remained convinced that the reason their home isn't selling has to do with something other than these two factors.

My question is: WHY? Many buyer objections can be mitigated with little expense to the seller. Simple things like cleanliness, fresh paint, & minimal landscaping can mean thousands to a seller, or at worst, these changes could be the difference between a sale & a home sitting on the market for months.

It's time for sellers to be proactive in regaining leverage in the transaction. Everyone believes leverage is clearly on the side of buyers, however, sellers can put serious pressure on prospective buyers to act fast by pricing their homes accordingly & sprucing up their homes so that every buyer that walks through the door perceives that this home is too good to pass up. In this current market, leverage might be more important even than location, location, location.

1st Quarter 2007 vs. 2008

2008-05-20T12:27:00.000-04:00

1st Quarter 2007: 40205

# of Sales-------High--------Low--------Median--------Average
----54--------$795,000-----$118,000-----$219,200-------$246,355

1st Quarter 2008: 40205

# of Sales-------High--------Low--------Median--------Average
----43--------$700,000-----$118,500-----$242,500-------$267,465

--------------------------------------------------------

1st Quarter 2007: 40206

# of Sales-------High--------Low--------Median--------Average
----61---------$475,000-----$36,000-----$149,000-------$171,718

1st Quarter 2008: 40206

# of Sales-------High--------Low--------Median--------Average
----28-------$1,050,000-----$66,000-----$162,976-------$233,798

--------------------------------------------------------

1st Quarter 2007: 40207

# of Sales-------High--------Low--------Median--------Average
----100------$1,260,000-----$120,500----$206,500------$260,903

1st Quarter 2008: 40207

# of Sales-------High--------Low--------Median--------Average
----68-------$2,300,624-----$123,000----$230,000-------$298,990

--------------------------------------------------------

4th Quarter 2006 vs. 2007

2008-05-20T12:06:00.000-04:00

4th Quarter 2006: 40205

# of Sales-------High--------Low--------Median--------Average
----76---------$1,000,000---$119,900----$218,000-------$243,179

4th Quarter 2007: 40205

# of Sales-------High--------Low--------Median--------Average
----84---------$779,500-----$139,00-----$215,000--------$252,778

---------------------------------------------------------------

4th Quarter 2006: 40206

# of Sales-------High--------Low--------Median--------Average
----40--------$1,150,000-----$68,204-----$199,000-------$251,546

4th Quarter 2007: 40206

# of Sales--------High--------Low--------Median--------Average
----39---------$500,000-----$65,000-----$195,000-------$216,038

-------------------------------------------------------------

4th Quarter 2006: 40207

# of Sales-------High--------Low--------Median--------Average
----88--------$2,350,000---$120,000----$210,000--------$284,858

4th Quarter 2007: 40207

# of Sales-------High--------Low--------Median--------Average
----66---------$880,000-----$112,337----$250,000-------$323,256

-------------------------------------------------------------

3rd Quarter 2006 vs. 2007

2008-05-20T11:48:00.000-04:00

3rd Quarter 2006: 40205

# of Sales-------High--------Low--------Median--------Average
----103------$925,000-----$102,000-----$210,000--------$247,795

3rd Quarter 2007: 40205

# of Sales-------High--------Low--------Median--------Average
----85--------$823,800-----$103,000-----$250,000-------$273,777

---------------------------------------------------------

3rd Quarter 2006: 40206

# of Sales-------High---------Low-------Median--------Average
----42--------$725,000------$60,000-----$170,000--------$248,415

3rd Quarter 2007: 40206

# of Sales-------High--------Low--------Median------- Average
----69-------$1,250,000-----$25,000-----$200,000--------$272,694

----------------------------------------------------------

3rd Quarter 2006: 40207

# of Sales-------High--------Low--------Median--------Average
----116------$1,850,000----$130,000-----$230,000-------$305,868

3rd Quarter 2007: 40207

# of Sales-------High--------Low--------Median--------Average
----102------$1,137,500----$117,000-----$228,000-------$269,187

----------------------------------------------------------

2nd Quarter 2006 vs. 2007: Finally Catching Up

2008-05-20T11:22:00.000-04:00

It's been awhile since I've posted comparison numbers for the three zip codes I've been monitoring for the past couple of years. I've finally caught up, and the figures are below for the 40205, 40206, & 40207 zip codes in the Louisville area. The numbers are based on the Greater Louisville Association of REALTORS MLS. As usual, the data include only single-family homes. Condos were excluded from this analysis. Enjoy!

2nd Quarter 2006: 40205

# of Sales:-------High---------Low--------Median----------Average
----105--------$1,700,000----$102,000----$203,608---------$247,244

2nd Quarter 2007: 40205

# of Sales-------High----------Low---------Median---------Average
----115--------$1,500,000----$117,000------$226,950--------$253,850

-----------------------------------------------------------------

2nd Quarter 2006: 40206

# of Sales-------High---------Low---------Median----------Average
----63---------$1,138,000----$67,500------$168,500---------$217,149

2nd Quarter 2007: 40206

# of Sales-------High---------Low---------Median---------Average
----66---------$800,000-----$39,900-------$182,000--------$221,496

------------------------------------------------------------------

2nd Quarter 2006: 40207

# of Sales-------High---------Low---------Median---------Average
----118-------$1,427,500----$114,000------$225,000--------$299,473

2nd Quarter 2007: 40207

# of Sales-------High---------Low---------Median---------Average
----139-------$1,025,000----$118,000------$215,000--------$283,927

-------------------------------------------------------------------

Derby

2008-05-02T10:49:00.000-04:00

The Derby happens tomorrow! It's a great time to be in Louisville.

Short Sale Tax Implications--REWIND

2008-05-02T10:27:00.001-04:00

I need to set the record straight it seems, as I've run across information that disagrees with my post regarding short sales & the tax implications for the sellers of short sales. It appears that back in December of 2007, President Bush signed into law the Mortgage Forgiveness Debt Relief Act of 2007 which, for all intents & purposes, removes the former tax consequences that accompanied this type of forgiven debt. So instead of the seller of a short sale being taxed on the shortfall of what is owed on his/her home, the seller can sell his home short with no Federal tax liability. This is truly remarkable, and it's important to note that this law expires on December 31, 2009.

Most importantly, however, is that sellers of short sales consult their CPA or tax professional to ensure that they are completely & professionally informed of any tax consequences that could result from selling their home for less than what is owed.

Here's the article:

The IRS Forgives Until December 31, 2009

Thursday, May 01, 2008 - By Thomas M. Mitchell

If being in default and the threat of foreclosure aren't troubling enough, the thought of the IRS coming around after the fact is sure to keep sellers up all night. They have all heard the stories of being tracked down by the tax man to pay taxes on “forgiven debt.” To them it’s like a bad dream turned into a nightmare, all summed up and justified by a bunch of letters and numbers. But not every code section is necessarily a 4 letter word.

Code Sec 108(a)(1)(B),(C) – better known as 1401, means everything to some homeowners in today’s market … but it only has meaning in light of HR 3648. Then again, Section 163(h)(3)(b) is really the key to the whole thing. Make sense to you?

It doesn’t to your homeowners either. Staring foreclosure in the face they want to know if there is anything they can do. Can you sell their house before the deadline? In most cases your answer would be no because they are completely “upside down” but there are cases in which a short sale could work. And when you broach that subject one of the first questions they may ask is “what is our tax liability if we agree to a short sale?”

While the correct response is that you are neither a tax lawyer nor a CPA, you need to be able to let them know that if they qualify there are some options that may resolve that issue. And it all ties back to December 20, 2007, when President Bush signed into law a new measure giving tax breaks to homeowners who have mortgage debt forgiven. With the passage of the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer does not have to pay federal income tax on debt forgiven for a loan secured by a qualified principal residence.

Why is this so important? In most instances, debt that is forgiven or cancelled by a lender must be included as (ordinary) income on the seller’s tax return and is taxable. There are a number of terms within the bill that are central to the issue, such as “Acquisition Indebtedness” – and you need to know them.

And don’t forget December 31, 2009. That’s the date when this tax break expires. It only applies to debts discharged from January 1, 2007 to December 31, 2009. And tell your sellers that “being insolvent” as a result of bankruptcy doesn’t count.

http://nationalrealtynews.com/content/templates/default.aspx?a=963&template=print-article.htm

What is a Short Sale?

2008-03-25T15:46:00.000-04:00

Short Sale as defined by the author:

A real estate short sale results when a home owner's lender approves the sale of his/her property for an amount less than the home owner owes on the property.

In most cases, the home owner is either entering into some stage of foreclosure, or realizes that he/she is nearing entrance into foreclosure. Many lenders actually require the home owner to fall behind on paying the mortgage in order to agree to sell the property short of what is owed, however, it's my opinion that those days are running out.

Given the high foreclosure rates in much of the country, these mortgage holders have many reasons to sell their holdings short instead of pursuing the more costly avenue of foreclosure.

It's also usually advantageous to home owners who fall behind on payments to pursue short sale approval from their lender. A short sale is not as damaging to a home owner's credit as a foreclosure. In a short sale scenario, the borrower is not responsible to pay back the shortfall, but would be responsible to pay taxes on the amount as a forgiven debt. Beyond that, it's difficult to get a read on where that borrower will stand regarding future home purchasing, and it typically varies from lender to lender. Certainly, a short sale does constitute some type of credit penalty, however, as of now, it's still less of a penalty than undergoing a foreclosure.

Going forward, it will be interesting to see how banks & mortgage companies handle new borrower applicants who have gone the short sale route. It's by no means a new problem, but a problem that is increasing in frequency by the day.

The other side of this coin is the purchaser(s) of a short sale. As I've said before regarding buying foreclosures: Just because it's a foreclosure does NOT mean it's a great deal. Similarly, just because a buyer chooses to purchase a short sale does NOT mean it's a good deal. And when I say "good deal", I'm only referring to the economic investment value.

Don't get me wrong, there are many advantages to purchasing foreclosures & short sales, but it's important to do one's homework regarding the value.

An advantage to purchasing a short sale is the prospect of getting a good economic deal on price. Another advantage is dealing with a lender who views the property as more of a serial number or liability than the home owner who views the property as his or her home with all of the emotional attachment that home ownership brings. In other words, it can be a rather sterile transaction. The process can be a little less like a poker game. It's more cut & dry.

The disadvantages to purchasing a short sale have mostly to do with time investment, patience, & fewer options on negotiating the terms of the deal. It can take days, weeks, or sometimes months to get to the closing table.

As banks & lenders realize a need for system implementation in the short sale arena, the time investment will likely lessen, but until then, it's smart to lower one's expectations regarding the promptness of the lender's response. In short, be patient. This is easier to do when the purchaser is certain that the deal is worth waiting for, but no matter how good a deal a buyer thinks he or she is getting, it's often difficult to play the waiting game.

The other disadvantage to embarking on a short sale adventure is negotiating the terms. Typically, buyers & sellers compromise somewhere to make a deal work. In the case of a short sale, the lender who must approve the sale perceives that they are giving up a lot in the form of sale price, so they want to dictate the other terms of the deal. Most of these sales are "as is", so the buyer can perform inspections on the property, but the seller/lender will forego any resonsibility to make repairs, corrections, or replacements to the property. This isn't always the case, but for the most part it is.

The lender/seller will also likely stipulate a fairly aggressive deadline to close the sale. This is ironic in a sense because it is often the lender that drags its feet in responding or approving the offer, only to then demand a quick close.

My advice is be prepared to wait, but while you're waiting, work closely with your agent in coordinating all of the details that result in a smooth closing. That way, when the lender says it's time to close, you're ready to proceed quickly.

For more information or a list of short sale opportunities, please e-mail me at cthomas@mulloyproperties.com

*Disclaimer: The information included in this post is based on the experience of the author in representing sellers & buyers in short sale transactions, and should not be relied upon for tax or credit purposes. Specifically, the processes and results of executing a short sale can vary dramatically depending on the situation.

Short Sales in the News

2008-03-25T15:41:00.000-04:00

More Banks Consider Short Sales

After about a year of dealing slowly and reluctantly with short sale offers, many banks are reconsidering, looking for solutions that will allow them to recoup debt in foreclosure situations.

Observers say that if the trend continues, it will reduce or eliminate the need for taxpayer bailouts.

The National Short Sale Center, which helps short buyers negotiate with banks, says three-quarters of its short offers are approved now, up from maybe half six months ago.

"Before, people on the phone at banks didn't even have the authority to negotiate. Now they're calling us with numbers," says Pam B. Canada of nonprofit NeighborWorks in Sacramento, Calif.

To be sure, many agents and counselors think banks still have their heads in the sand. "They're out to get the last dime, even when people don't have a dime," says real estate practitioner Heidi Mueller in San Francisco as she heads to an auction sale on the courthouse steps.

Source: Forbes, Bernard Condon (04/07/08)

Mortgage Fraud on the West Coast

2008-03-25T15:28:00.000-04:00

Feds Charge 19 With Mortgage Fraud

Federal prosecutors announced 19 indictments Monday in a mortgage scheme that stole nearly $13 million in home equity and victimized more than 100 home owners.

Under the scam, home owners facing foreclosure were promised lower home payments and cash up-front if they agreed to add another name to their home’s title. The victims were led to believe they were paying rent to the investors to give them time to get their affairs in order, according to officials.

Prosecutors say the scam was headed by Charles Head of La Habra, Calif. Prosecutors say additional indictments are likely as they continue investigating.

In all, prosecutors say Head defrauded 115 financially strapped home owners in 22 states of at least $12.6 million. The fraud began in and continued through 2006.

Victims ranged from first-time home buyers to the elderly and cost 90 percent of the victims their homes, said Assistant U.S. Attorney Ellen Endrizzi.

Source: The Associated Press, Aaron C. Davis (03/24/08)

This is nothing new. These types of scams are likely in full force all over the country.

The premise is actually not all bad, as these types of arrangements are sometimes fair & actually helpful to the homeowner. It's never a good idea, however, to allow an unknown party to basically add themselves as part owners to a property without the third party having any responsibility to pay the mortgage. From what I can tell from this brief account, that's what happened.

It's an arrangement where an unscrupulous third party shows up to save the day without ever intending to make any payments on behalf of the troubled homeowners who do have payment responsibilities to their lender.

Museum Plaza Groundbreaking

2007-10-22T15:40:00.000-04:00

Groundbreaking ceremonies for the much anticipated Museum Plaza skyscraper are set to occur this Thursday, October 25, 2007. More details here.

It's exciting to me to see what's happening in downtown Louisville. The naysayers were many with regard to this project at its inception, but it certainly appears the promise of such a huge undertaking will come to fruition.

Metro Housing Corp. Stats

2007-10-17T17:51:00.000-04:00

Here are some interesting statistics just released by Metro Housing Corporation regarding the Louisville Metropolitan Statistical Area. It's an interesting read that basically reaffirms what we pretty much already know: Foreclosures are increasing, as are rents. There's good info about income vs. rental cost. Check it out.

A Peak at the Million Dollar Home Market in Jefferson County

2007-10-17T13:16:00.000-04:00

In some areas of the country, $1,000,000 won't get you much as far as housing is concerned(Manhattan for example), while in other areas, Million Dollar homes are relatively scarce. The Louisville Market has its fair share, but they are not at all prevalent. I thought it might be interesting to see how this tiny segment of the Louisville Market has evolved since 2000.

My research is based on the Greater Louisville Multiple Listing Service's records. I culled the sales of Million Dollar Homes from each year since 2000, and compared the data. Included are sales of new & existing homes & condominiums that sold for $1 Million Dollars or more. Excluded are raw acreage/land sales or any parcels or properties that could be developed for commercial use (including larger condominium conversions). Only properties located within Jefferson County were included.

Here are the results:

Year--# of Sales---Low--------High--------Average----Median
2000-----12-----$1,000,000---$2,275,000--$1,360,352--$1,190,000
2001-----13-----$1,060,000---$2,250,000--$1,333,846--$1,250,000
2002-----16-----$1,008,212---$2,098,000--$1,319,388--$1,168,750
2003-----13-----$1,000,000---$1,525,000--$1,234,904--$1,225,000
2004-----19-----$1,000,100---$2,250,000--$1,368,598--$1,200,000
2005-----39-----$1,000,000---$2,650,000--$1,442,262--$1,300,000
2006-----31-----$1,000,000---$2,880,500--$1,393,704--$1,195,000
2007*----38-----$1,000,000---$2,250,000--$1,308,770--$1,233,210

*=through 10/17/07. Additionally, there are 4 PENDING sales that would qualify upon closing.

Currently, there are 83 properties listed for sale that meet the criteria. At the current pace, that's over two years worth.

Since I'm not much of a proponent of looking at an entire metro area as one market, I broke down the areas in which these Million Dollar sales occurred. Here is a geographical description of each area represented in the Louisville Area:

Area 00: The Central Downtown Business District, loosely defined as north of Broadway, east of 9th St., south of the Ohio River, & west of Baxter Ave.

Area 01: Old Louisville/West Louisville/Shively, loosely defined as south of Broadway, east of 44th St., north of I-264, & west of S. Brook St.

Area 02: Butchertown/Highlands/Germantown, loosely defined as north of I-264, east of I-65, southwest of Lexington Rd.

Area 03: Brownsboro Rd./Crescent Hill/St. Matthews, loosely defined as east of Story Ave., south of the Ohio River, west of Rudy Ln. at I-264, north of I-64 at Cannons Ln.

Area 07: Fern Creek/Hikes Point/Jeffersontown

Area 08: Douglas Hills/Hurstbourne/Middletown Anchorage

Area 09: Anchorage/Lyndon/Prospect/River Rd.

Year-----Area------# of sales
2000----- --00------------0
2000--------01------------0
2000--------02------------2
2000--------03------------3
2000--------07------------1
2000--------08------------0
2000--------09------------6

Year-----Area------# of Sales
2001-------00-------------0
2001-------01-------------0
2001-------02-------------0
2001-------03-------------4
2001-------07-------------0
2001-------08-------------5
2001-------09-------------4

Year-----Area------# of Sales
2002-------00-------------0
2002-------01-------------0
2002-------02-------------0
2002-------03-------------4
2002-------07-------------0
2002-------08-------------5
2002-------09-------------7

Year-----Area------# of Sales
2003-------00------------0
2003-------01------------0
2003-------02------------2
2003-------03------------2
2003-------07------------1
2003--------08-----------6
2003--------09-----------3

Year-----Area------# of Sales
2004------00-------------1
2004------01-------------0
2004------02-------------2
2004------03-------------2
2004------07-------------0
2004------08-------------6
2004------09-------------8

Year-----Area------# of Sales
2005-------00------------0
2005-------01------------0
2005-------02------------2
2005-------03------------12
2005-------07------------0
2005-------08------------8
2005-------09------------17

Year-----Area------# of Sales
2006-------00------------5
2006-------01------------0
2006-------02------------2
2006-------03------------9
2006-------07------------0
2006-------08------------4
2006-------09------------11

Year-----Area------# of Sales
2007-------00------------0
2007-------01-------------1
2007-------02------------7
2007-------03------------6
2007-------07------------0
2007-------08------------5
2007-------09------------20

Current Active Listings FOR SALE
Area 00: 4
Area 01: 1
Area 02: 3
Area 03: 18
Area 07: 3
Area 08: 21
Area 09: 33

So What Does It All Mean?

I'd say the data suggests that purchasing a home for over $1 Million Dollars is a bit of a risk in the Louisville Market. Don't get me wrong, it's encouraging that the total number of sales of these type properties is increasing. The values on the other hand are fairly flat, so be sure to have the home in tip top condition when needing to sell. Buyers in this range demand a lot and at times are hard to come by. Despite the challenges, this segment of the market is doing better than others in the area. More on that later...

What is that?

2007-07-09T12:52:00.000-04:00

I take pride in the pictures I take of properties I represent. Pictures of a property are crucial in attracting today's home buyer. In fact, I've spoken with quite a few buyers who won't even consider looking at a home unless the on-line listing features interior photographs of the property. So when I was alerted to this website created by a Wisconsin REALTOR & featuring some of the worst real estate pictures he's been able to compile, I had to post it here. Having viewed hundreds of terrible real estate photos myself, I empathize with his viewpoint. Enjoy!

Tips on Real Estate Investing: Foreclosures

2007-06-29T16:18:00.000-04:00

There's news everywhere regarding the national foreclosure rate. From today's REALTOR Magazine On-line, here are some solid tips, the best of which is simply that just because a property is a foreclosure doesn't mean it's a good deal, should you decide to invest in a foreclosure:

7 Tips for Foreclosure Property Investing

With foreclosures rising nationwide, prices falling, and inventories swelling to historic levels, investors with a discerning eye and knowledge of the foreclosure process can build a profitable portfolio of distressed properties, says James Saccacio, CEO of RealtyTrac, which tracks foreclosure data.

Saccacio offers this basic advice to foreclosure investors:

Know your market. The most important tool in your real estate investing toolbox is knowledge of the area where you plan to invest.

Develop an appropriate investment strategy. Find an investment strategy that will work in your market, and then do what it takes to implement that strategy.

Make the foreclosure process work for you. Decide what foreclosure buying technique works best with your investment strategy and your strengths as a person.

Scrutinize each deal. Many real estate investors wrongly assume that if a home is in foreclosure it's a good deal.

Rely on a trustworthy team. You'll be in over your head if you try to do all the work involved in foreclosure investing on your own.

Network with banks and lenders. In a slow real estate market, banks and other lenders are saddled with larger inventories of foreclosed properties and will be more motivated to sell those properties at bargain prices.

Act quickly, but don't be in a hurry. A slow real estate market gives you the upper hand as a buyer, but you'll still need to act quickly to get the best deals.

— REALTOR® Magazine Online

Thoughts on Real Estate Licensing

2007-06-28T12:38:00.000-04:00

Many industries struggle to maintain a certain level of professional respect, however, some lines of work such as real estate sales & insurance sales, seem to have never quite gotten past the point of being a punchline. Nowadays, marketing is everything. Look at lawyers, dentists, & other medical specialists, professions where even the thought of advertising used to be offensive. There are commercials everywhere, and not only is it becoming accepted, it's becoming absolutely necessary to the vitality of many of these practitioners. Granted, there are still those who do quite well for themselves and are completely referral-based (my dentist comes to mind), but these examples have built practices the hard way through years of grinding it out, one client at a time. I'm not trying to draw a direct parallel between law or medicine & selling real estate, but some of the challenges to answering the perception question are similar.

Consider the following article written by former National Association of Realtors Chief Economist, Dr. John Tuccillo. The perception of the profession of selling real estate will not graduate beyond an "anybody can do it" sort of hobby until changes are made regarding entry into the occupation. During the "boom years", this mentality was only bolstered as huge ranks of people jumped into the art of selling real estate with both feet. It was easy to make a quick buck. As 2007, however, is half over, many agents are struggling to make a living as the market downturn is affecting marginal producers. Perhaps the downturn will weed out many agents, which at least in theory, could be a good thing. Or, perhaps it will be a catalyst to a greater change in how people become real estate agents.

Many agents, including myself, have been screaming for higher standards for gaining a real estate license since way before 2007. It is absurd to think that someone who has as much influence on what, in many cases, is the largest financial transaction many people will ever make can gain the ability to do this through attending 90 hours of academic classroom material, passing a test, & paying some fees. Large brokerages have been fueled by attracting huge numbers of agents knowing that even the least capable agent might fall into a deal or two in one year, but is this really good for the industry? The above referenced article appears to answer that question directly. Let's hope its merits produce better agents & a better, more legitimate industry as a whole.

Catching Up: 1st Quarter Comparison '06 & '07

2007-05-30T10:12:00.000-04:00

40205: SOLD 1/1/06-3/31/06

Total # of Sales: 66
High: $543,000
Low: $110,000
Median: $190,000
Average: $203,552

40205: SOLD 1/1/07-3/31/07

Total # of Sales: 53
High: $795,000
Low: $118,000
Median: $226,000
Average: $248,097

------------------------------------------------------------------------------------------------

40206: SOLD 1/1/06-3/31/06

Total # of Sales: 28
High: $510,000
Low: $68,800
Median: $174,750
Average: $183,932

40206: SOLD 1/1/07-3/31/07

Total # of Sales: 57
High: $475,000
Low: $ 36,000
Median: $145,000
Average: $172,841

------------------------------------------------------------------------------------------------

40207: SOLD 1/1/06-3/31/06

Total # of Sales: 73
High: $675,000
Low: $129,000
Median: $198,000
Average: $220,741

40207: SOLD 1/1/07-3/31/07

Total # of Sales: 99
High: $1,260,000
Low: $120,500
Median: $ 206,500
Average: $260,356

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Catching Up: 4th Quarter '06 & '05 Comparison

2007-05-29T17:07:00.000-04:00

40205: SOLD 10/1/05-12/31/05

Total # of Sales: 76
High: $775,000
Low: $84,900
Median: $183,000
Average: $204,160

40205: SOLD 10/1/06-12/31/06

Total # of Sales: 75
High: $1,000,000
Low: $119,900
Median: $218,000
Average: $236,577

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40206: SOLD 10/1/05-12/31/05

Total # of Sales: 57
High: $1,470,000
Low: $29,000
Median: 182,000
Average: $236,695

40206: SOLD 10/1/06-12/31/06

Total # of Sales: 39
High: $1,150,000
Low: $68,204
Median: $185,500
Average: $253,126

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40207: SOLD 10/1/05-12/31/05

Total # of Sales: 101
High: $1,950,000
Low: $132,000
Median: $228,000
Average: $307,640

40207: SOLD 10/1/06-12/31/06

Total # of Sales: 84
High: $2,350,000
Low: $120,000
Median: $209,000
Average: $281,013

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Well, the 40205 zip remained incredibly strong in the year over year comparison. Total of sales were basically unchanged, but median & average prices were up dramatically. Prices in 40206 were up, but sales were down noticeably. The 40207 zip was dismal, posting lower total sales & prices.

Time to Trim the Fat?

2006-11-30T15:46:00.000-05:00

The Courier-Journal reports Louisville Metro Councilman,Dan Johnson, is going to propose an ordinance that prohibits Louisville area restaurants from using trans fatty acids in their menu offerings. Interesting...

Adjustable Rate Mortgages Continue to Get Pummeled

2006-11-30T15:16:00.000-05:00

Looking at the news, much has been made about the so called housing bubble & the effect that exotic mortgages are having on the general housing market. Recently, the CEO of Countrywide, one of the largest mortgage lenders in the United States, offered his estimate of the level of understanding that he feels his customers have of Adjustable Rate Mortgages (ARMs) & other non-traditional mortgage products that have risen in popularity over the past few years. He feels that these products aren't as much of a mystery as some advocacy groups believe they are. What is also interesting is that there is fear that these types of loans are disproportionately hurting less affluent borrowers.

As a former mortgage loan officer, I admit that exotic mortgages were just beginning to gain in popularity when I made my exit from the profession, so I'm not as familiar as some, however, having shopped for an ARM myself, I think it is a bit curious to suggest that the pitfalls of exotic mortgages only affect the not-so-wealthy borrower.

My wife & I initially financed the purchase of our home back in 2004 with a 90/10 loan. This loan features a 90% First Mortgage locked for 5 years & a 10% Second Mortgage that adjusts after the first year. This mortgage product was attractive to us because it prevented us from paying Private Mortgage Insurance (PMI). We eventually needed to refinance the 2nd to pay off a few things, so that's when I began inquiring about an interest only loan. It's extremely important to point out that our total debt on the home was quite modest (less than $130,000). We looked into combining both mortgages on an interest only loan with about $7,000 additionally to pay off a debt or two. Come to find out, this type of scenario did nothing for our bottomline. It didn't reduce our monthly payment, and obviously, it didn't reduce our principal loan amount. Not that I needed him to tell me, but the mortgage professional I spoke with said that the deal didn't make sense.

I bring this up because it illustrates how an interest only ARM doesn't really benefit someone borrowing a nominal amount of money, i.e. a less affluent borrower. If we had purchased a more expensive home, then the monthly payment would have looked more attractive, but my wife & I would still have had to explore all the pros & cons regarding this product before making a decision. Obviously, in our case, the exotic mortgage didn't make sense because our total debt service was relatively cheap & stable enough that it didn't warrant much change, but even if the monthly payment had been cheaper, it wouldn't have saved us much each month. Similarly, less affluent buyers are not likely to be able to afford a home where an exotic would make sense either, so I'm not quite sure how ARMs can be said to disproportionately affect less wealthy borrowers in a negative fashion. It seems to me that borrowers who are finding themselves with huge payment increases were not all poor, but instead, they did not take into consideration all of the hurdles that might emerge later.

This brings me to my next point: It is absolutely crucial to do your homework when making crucial buying decisions. Find answers from someone you trust to be straight with you so that you can avoid dangers like predatory lending or merely keeping up with the Joneses. As I stated, the mortgage professional I spoke to said the deal didn't make sense. Furthermore, he didn't try to get me to see it another way in hopes of putting more money in his pocket. Instead, he referred me to someone else in his office to handle refinancing my second mortgage.

The bottomline is there are very few one-size-fits-all products available whether you're buying a belt or a mortgage. Exotic mortgages are a solution to some, but a nightmare to others. It would be over-simplifying the issue to say that all ARMs are bad, but given the huge magnitude of borrowing money, it only makes sense to balance the information available concerning the loan with what you know about your foreseeable future. The results might not be guaranteed, but at least your decision will be an educated one.

Happy Thanksgiving...

2006-11-22T17:21:00.000-05:00

Thanksgiving is my favorite holiday. It's been the one holiday over the years that much of my extended family has circled on the calendar as the one where we all get together. I don't know what is more surprising: That we've chosen Thanksgiving as our annual reunion or that I actually look forward to seeing my extended family. Either way, I love this holiday. There's never been a better nap than the one that yearly follows Thanksgiving dinner. Another great thing is it's always on Thursday, so there's no complaining about getting snubbed on how many days off you get. It also brings home the point that I should be thankful more often. It's easy to look at it as one day of thanks, but I hope it challenges me to a higher level of gratefulness.

I also think the Presidential tradition of "pardoning" a turkey is hilarious. Yeah, it's hokie, but I get a kick out of it every time.

Cheers to you & yours...

3rd Quarter Numbers

2006-10-19T16:33:00.000-04:00

It's hard to believe that the third quarter of 2006 has come & gone, but it is true. I've crunched the statistics in the 40205, 40206, & 40207 zip codes here in Louisville, and what I've discovered is a bit surprising. Again, these are existing homes, and the numbers exclude condominiums.

3rd Quarter Sales, 2005

40205:

Total: 87
Low: $86,500
High: $1,000,000
Median: $195,000
Average: $234,761
Avg DOM: 48

40206:

Total: 63
Low: $64,500
High: $510,000
Median: $173,500
Average: $208,590
Avg DOM: 48

40207:

Total: 135
Low: $119,000
High: $1,550,000
Median: $215,900
Average: $311,010
Avg DOM: 49

3rd Quarter Sales, 2006

40205:

Total: 95 (+8)
Low: $102,000 (+15,500)
High: $925,000 (-75,000)
Median: $210,000 (+15,000)
Average: $243,605 (+8,844)
Avg DOM: 52 (+4)

40206:

Total: 40 (-23)
Low: $60,000 (-4,500)
High: $725,000 (+215,000)
Median: $170,000 (-3,500)
Average: $242,399 (+33,809)
Avg DOM: 56 (+8)

40207:

Total: 114 (-21)
Low: $130,000 (+11,000)
High: $1,850,000 (+300,000)
Median: $$228,000 (+12,100)
Average: $308,074 (-2,936)
Avg DOM: 58 (+9)

2nd Quarter Numbers: Highlands, Crescent Hill/Brownsboror Rd./St. Matthews

2006-08-17T16:03:00.000-04:00

The numbers are in (and have been for some time, but I've just now posted them) on the three zip codes I follow most closely here in Louisville, KY. Just as in the first quarter, I compared closed sale numbers from 2006 with those of 2005 in measuring the following categories: Total number of sales, high sale, low sale, median sale price, average sale price, & average days on market. I also gathered pending sale numbers measuring the same categories as well as active listings as of June 30, 2006. These statistics are below.

The total number of sales in all three zip codes were up slightly over a year ago, with the 40206 zip code experiencing the biggest gain. Otherwise, total sale numbers are relatively unchanged, which is encouraging news & confirms that these markets are stable.

Average closed sale prices were down minimally compared to a year ago in 40206 & 40207, and up slightly in 40205.

The median sale prices were down slightly in 40205 & 40206, and up a smidge in 40207.

The outook in my view is certainly favoring buyers as inventory is up in most of the Louisville area. Prices will remain strong for homes that sell, but I see a lower total sale number in the third quarter and fewer interested buyers currently in the market. This is ironic because the environment is very good for buyers with levelling interest rates in the mid-6% range & so much to choose from. Granted, many potential buyers are possibly taking a wait & see approach since they too will have to sell in order to buy, but anyone not needing to sell might consider a move.

Active Listings as of 6/30/06

2006-08-17T15:58:00.000-04:00

40205

Total: 115
Low: $124,900
High: $1,025,000
Median: $249,900
Avg: $267,348

40206

Total: 73
Low: $85,000
High: $1,750,000
Median: $239,002
Avg: $358,747

40207

Total: 168
Low: $125,000
High: $2,350,000
Median: $239,650
Avg: $361,037