The Liz Moore Market Watch

The Numbers Don’t Lie. Or, Do They?

At Liz Moore & Associates, we consider ourselves students of the local real estate market. We carefully watch market trends, such as inventory fluctuations and pricing, week to week and month over month. We measure the number of sales this month against the number of sales during the same month last year, to try to identify shifts before they happen, and to gauge market fluctuations. Knowledge is power for our clients, and accordingly, we work hard to stay abreast of changing market conditions.

One of the challenges we face is how to correctly interpret what the data is telling us. Statistics can be complex. Formulas differ when you gather data from multiple sources, which can be very confusing.

Are Prices Increasing or Decreasing?

Great question! Based on WMLS data via Broker Metrics, median prices of sold properties in the Greater Williamsburg area (residential homes only, in zip codes 23185, 23188 and 23168), actually rose just over 10% over the course of 2010. However, that doesn’t necessarily mean that values are going up. What is more likely is that there was more activity in the upper price ranges than in the prior year. My educated guess is that is a direct result of the expiration of the tax credits, which incented activity in the first time homebuyer category. I also believe that activity in the market is precisely because prices in many areas have fallen to around pre-boom levels, which has enticed both investors and value conscious consumers back into the local market.

According to REIN data via Broker Metrics, median prices of sold properties on the Peninsula have dropped about 8% over the course of 2010. Converse to the situation in Williamsburg, the majority of Peninsula activity is in the lower price ranges, due largely to the significant number of short sales and foreclosures in this market.

How Many Months of Inventory Are Currently On the Market?

On the Peninsula, according to Broker Metrics, there are currently 13 months of available inventory. This can be another tricky statistic, because different data providers calculate the formula differently. For my purposes in this article, months’ supply of inventory is calculated by dividing the # of properties that went under contract in February (322) into the # of properties available for sale on the last day of the month in February (4278). Accordingly, the number can take a huge swing from month to month as sales spike in the Spring and Summer months. This particular statistic is more useful when measured against the same month last year. Right now, it is running relatively stable.

How Long Will It Take to Sell My Home?

So, does that mean I should plan on it taking over a year to sell my home? Thankfully, no! Average “days on market” in February on the Peninsula was 122, which means that of the homes that sold (and that’s an important point – this calculation does not take into account properties that are still on the market, or that expired unsold), they averaged about 4 months on the market. Over the past 12 months, that number has risen approximately 14%. Another factor to consider is that MLS only uses the last listing period to calculate this statistic, so that if a listing was on the market with another brokerage prior to the current listing, that additional time will not be included in the average.

The bottom line is that statistics can be both complex and deceiving. Ideally, your agent should drill down to the neighborhood level to give you the best picture of what’s happening with the most comparable properties possible.

Curious about a particular trend or statistic in your area? Drop me a note at liz@lizmoore.com, and I would be happy to send you a specific report at no charge or obligation.

Is It a Good Time to Buy?

That’s the million dollar question! And, quite simply, the answer is…it depends.

The local real estate market on the Virginia Peninsula and Greater Williamsburg has been a roller coaster for the past 10 years, along with (although admittedly not quite as crazy as) the rest of the nation. We have moved from the strongest Sellers’ Market we had seen in decades in the early 2000’s, to a rapidly declining market correction that begun in late 2006. The mortgage liquidity crisis accelerated the correction, and flipped the local market switch to Buyers’ Market in what seemed like record time. That was followed by several attempts to “stimulate” the real estate market and corresponding economy with tax credit incentives, and then a burgeoning inventory as a result of increasing numbers of short sales and foreclosures hitting the market.

Of course, the conundrum is that you don’t know when a cycle has peaked or bottomed out until after it has happened! And, many would-be real estate investors have made expensive mistakes by waiting too long. Real estate insiders understand that equally important to location, location, location is timing, timing, timing.

So, has the market hit the proverbial bottom? I wish I had a crystal ball to predict that one! Many industry gurus believe that we are now, in fact, bumping along the bottom, and that realignment toward a more balanced market is in its initial stages. Early activity in both of our Newport News and Williamsburg offices suggests to me that consumer confidence is returning, and we are seeing heightened property showings across all of the price spectrums.

Interest rates are still historically low, and that won’t last forever. Inventory levels are still high, affording buyers many choices and a negotiating-friendly market environment. If you have the stomach for short sales, foreclosures, and pre-foreclosures, there are definitely some deals to be had.

What’s the bottom line?

It’s a great time to be a buyer, it’s a great time to invest, and it’s a great time to move “up.” It’s a good time to be a seller, as long as you bought your home more than 5 years ago. It can be a challenging time to be a seller if you bought during the market boom, and those facing that situation should carefully evaluate all of their options.

Regardless of your circumstances, you need a good REALTOR now more than ever! If you’re not sure whether or not a move makes sense right now, but would just like a real estate “check up,” please give me a call or send me an e-mail.

How Should You Choose a REALTOR?

Buying and selling real estate are several of the largest, most important financial transactions most people will make in a lifetime. And yet, many times consumers choose the real estate agent who guides and advises them “by accident”…they hook up with an agent that answered an ad or sign call, or the first agent they meet at an open house. I’m not suggesting that is necessarily a problem, but I would offer some advice as you consider hiring a REALTOR:

Home Sellers:

Your agent should have a specific marketing plan for your property, tailored to reach a specific target profile buyer. In most cases, there will be several demographics involved, and your agent should be able to effectively outline a strategy to reach them all.

Marketing should include print media, online efforts, and a plan to reach out to other agents.

The ability to “tell your home’s story” is key, through expert photography and compelling copy. Details matter. You should ask to see samples, and the agent should be able to elaborate on a game plan that spans the length of the listing. Quite simply, your agent’s marketing plan should “wow” you!

Your agent should be excited about your property, and should be able to easily articulate its benefits and value to prospective buyers. Equally important is their ability to identify potential objections, and have a plan to overcome them.

Lastly, and perhaps most important of all, is your agent’s willingness to be both honest and direct with you. While that may sound obvious, what I mean is that must be able to deliver difficult messages, and tell you the truth and the bottom line (either about your home’s market value, or that outdated wallpaper even though it’s your favorite), even when it’s not what you want to hear. An agent who is afraid to tell you that the price you want is too much will allow you to make expensive mistakes when positioning your property, and those relationships often end with an expired or cancelled listing as well as a disappointed seller.

Home Buyers

Your agent should be familiar with the area and price range you are interested in. Understanding the trends and market dynamics are both essential to formulating a winning negotiating strategy. Your agent is your advocate, and their expertise to structure an offer that suits your situation is key. They should be an expert negotiator. You should ask about median price numbers and % of sold price to list price statistics, as well as inventory trends.

Buyer agents should be able to help you objectively evaluate your choices, look beyond cosmetics, and advise on the best value. They should be well connected, and refer you to the best local mortgage, title, insurance, and home inspection resources. They should be expert problem solvers.

How do you find a REALTOR with these traits? Ask your friends and family about their real estate experiences – personal referrals and recommendations are invaluable. Or, feel free to call or e-mail me and I will be more than happy to recommend an agent who fits your needs.

2010 – The Year in Review

There are many different views on where we are in the proverbial real estate cycle…have we hit the bottom, or is there more bad news to come?  As students of the local market, it’s important that we put things into a bigger picture perspective.  Click here to view the Schiller report and read its conclusions about the trends for 2010.  Most interesting, I thought, was the relationship between appreciation during the boom years, and the subsequent post-2007 decline.  Our area has definitely fared well, relative to many parts of the country.

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Got One Dollar? You May Be Able to Buy a House!

Liz Moore & Associates is excited to launch the VA $1 Move-In Program. Participating Liz Moore sellers have partnered with 5 of our preferred lenders and Lytle Title to pay all of the buyers closing costs and prepaid items, including a survey and owners’ title insurance. What does that mean for VA eligible buyers? That you can put one dollar down as an earnest money deposit, and move in after closing with no more money out of pocket!

For example, you can buy a $300,000 home with 0 down will have a monthly house payment of $1530 (principal and interest only), for a 30 year loan with a fixed interest rate of 4.375% (APR 4.567%).  Hurry – rates may change! In this example, the seller will pay $6,700 of costs on your behalf, enabling you to move in for a dollar.

How do you learn more about the program, see if you qualify, and check out which listings are participating in the campaign? Just visit www.OneDollarVAMoveIn.com or call a Liz Moore office at 757.873.2707 (Peninsula) or 757.645.4106 (Williamsburg) for details!

Technorati Tags: no money down,va financing,seller paid closing costs

Should I Rent or Should I Buy?

You’ve just been relocated to Hampton Roads, and you need a place to live…should you find a place to rent, or should you look for a home to buy? You should never underestimate the simple emotional considerations of home ownership; however, there are number of investment factors that you should also evaluate before making a commitment:

1. What are the circumstances surrounding your housing decision? For instance, how long will you be in the area? What are your goals?

1. Begin with the qualification process. How much mortgage can you afford? How large a monthly payment are you comfortable with? As a general guideline, lenders like to see your house payment not exceed 28% of your adjusted gross income, and your entire monthly debt not exceed 41%. There are many exceptions to this rule, and many extenuating factors that may result in higher %’s, but it’s a good place to start.

Next, look at what that amount will buy, both in the housing and the rental market. The first step in the evaluation is comparing apples to apples. What is available? What is the inventory supply of choices, both in the housing market and in the rental market?

1. Assuming that you select a fixed rate mortgage, your house payment will remain the same over the term of your loan, versus a rent payment that will adjust annually to meet inflation. During the first years of the comparison, your out of pocket expense is likely to favor renting; quite simply that cost (rent vs. your house payment including taxes) from a cash flow standpoint will probably be less to rent. This is where it is important that you dig a little deeper, to consider the big picture of that comparison.

Let’s compare a $300,000 purchase with a comparable rental. Assuming a 20% down payment, and a 6.5% 30 year fixed mortgage, your house payment would be $1,580, plus another 20% roughly for taxes and insurance, for a total payment of around $1,900. Let’s assume a comparable rental will be $1,400 per month. On the surface, that seems to be a $500 savings per month, or a $6,000 annual benefit to renting.

1. The first adjustment you’ll need to make is to factor in the tax benefits of home ownership. On a $250,000 loan at 6.5% interest for 30 years, for instance, your interest deduction in the first year would be $16,167. So, if you are in a 25% tax bracket, that deduction will save you $4,041 in taxes, or $337 per month. That means that your “effective” mortgage payment after the tax benefit is $1,563.

1. Because of inflation, your rent will escalate annually based on the terms you’ve negotiated in your lease. Commonly, escalation clauses fall somewhere between 3 and 4% per year. So, the $1,400 rent payment this year will become $1,622 in 5 years based on a 3% escalation…whereas your mortgage payment remains fixed at $1,900.

Over time, more and more of your mortgage payment will be applied to reducing the principal balance of your loan, which is in and of itself a forced savings program.

Most importantly, and generally considered the most important advantage of home ownership, is the inherent value of appreciation. It’s pretty safe to use a factor of 4-6% appreciation over time. So, as an example, a $300,000 purchase increases in value to $382,884 in just 5 years (based on a conservative appreciation factor of 5%), because as a homeowner, you enjoy the appreciation based on your sales price, not just your investment.

Let’s assume that you chose to rent, and so you invested the $50,000 that you saved because you didn’t make a down payment in the stock market. Using the same 5% rate of return, your investment grew from $50,000 to $63,800 over those same 5 years, netting you almost $14,000, compared to the $83,000 in equity you built during the same period as a homeowner (and that does not factor in principal reduction).

The other important consideration here is that in order to even net $14,000, you have to invest the money you didn’t use as a down payment. Most renters are not that disciplined, which is another argument for why homeownership is a great “forced” savings plan.

1. There is one potential downside to the rent vs. buy analysis, and that is market timing. If you’re not in a position to hold your investment long enough to enjoy the benefits of appreciation and equity growth, or worse, if you are forced to liquidate at a down cycle in the market, the equation may not be as favorable.

In order to avoid that, one recommendation is to considering holding on to a property as a rental investment, rather than selling at a low point in the market. Although you may face the consequence of negative cash flow in order to do that, the promise of equity gain over the longer cycle may outweigh the short term discomfort.

Let’s recap. When you consider the price of inflation and the tax benefits of mortgage interest deductions, for the most part, the cash flow comparison of renting vs. buying is a close call ~ the out of pocket cost is close to the same.

When you add the investment value over time of (1) principal reduction, and (2) appreciation on the leveraged sales price vs. the amount of your investment, the answer is pretty clear. There is a reason that for many years, the American Dream of home ownership is also the most effective way for most individuals to build wealth over time.

Technorati Tags: rent v. buy

Average Price per Square Foot

There are many metrics that can be helpful in a real estate purchase –whether you are the buyer or the seller.  One of those metrics is calculating the price per square foot.

In the greater Williamsburg market, that number is hovering around $143 for sold properties, which is up slightly over the same time last year.  That’s a good sign for the market, as the supply and demand begins to stabilize.

Trying to determine the right offer price can be tricky in this market, and evaluating recent comparable solds by comparing their price per square foot to the asking price can give you a benchmark.

It’s not a perfect predictor of value, however, because certain improvements can make a significant difference.  For instance, if the house you’re considering is brick, or has extensive detailed trim work and moldings, and the properties that you’re comparing are not brick and don’t have the same quality of trim work, then you should expect to pay a higher price per square foot.

This is where a good agent can be very helpful – they have experience and can spot variances that will be instructive in your comparisons.

 

Technorati Tags: price per square foot,market trends and statistics

How’s the Market?

It’s hard to believe that 2010 is coming up on the half year mark.  From a real estate broker’s view point, it certainly feels far better than 2009, 2008, or 2007!  We’ve been “bumping along the bottom” for a long time now, and it has felt good this Spring to see some signs of recovery in the market.  April was crazy busy, and May was decent.  It’s not unusual for us to have a quieter month following a record breaking month – in large part because the agents are often worn out and need to rest a bit.

Don’t get me wrong – it’s not fair to say that the pendulum has swung!  On the contrary, we seem to take a few steps forward, and then fall back a step.  But, one thing is for certain…I see signs of consumer confidence in the real estate market returning.  Honestly, I think folks have been hunkered down for so long, that many of them are simply saying “enough is enough” and it’s time to poke their heads back out and put their toes in the water.

Our phones are ringing, conference rooms are full – buyers are looking, and sellers, for the most part, are far more optimistic than they were just a few years ago.  Interest rates are great, and for buyers with decent credit and a little bit of cash, loans are still easy to get.  There are lots of choices.  Sellers are willing to negotiate.  It’s definitely a good time to buy.

Technorati Tags: real estate market,interest rates,has the market hit the bottom?

Are You a Savvy Senior?

Liz Moore & Associates is thrilled to announce the launch of its second “virtual office,” www.TheSavvySeniorOnline.com.

What is a “virtual office?” It’s an online real estate brokerage effort, dedicated solely to serving a specific niche in the market. Research and experience has taught us that consumers today want REALTORS who are specialists in their field of endeavor. And so, Liz Moore & Associates is giving consumers what they want…the best of the best!

TheSavvySeniorOnline.com is a content rich website, offering resources galore to the 55+ community, all the way from Williamsburg to Hampton and Newport News, VA. We’ve featured lots of info and photos of our favorite 55+ communities, as well as our favorite local retirement communities. We’ve also invited many local senior specialists to share their tips and expertise on topics such as downsizing, reverse mortgages, living trusts, the difference between continuous care facilities, and much, much more. You can even Ask a Guru!

You can also search for properties that have first floor master bedrooms (or are all on one floor!) in Newport News, Hampton, Yorktown, Poquoson, Gloucester, Smithfield, Williamsburg, and James City County.

Who are the Gurus at TheSavvySeniorOnline.com? They are local agents who have proven track records in successfully helping our senior clients make careful decisions about this critical real estate step. They can help ease the burdens of this transition by recommending a variety of experts and resources in moving, downsizing, etc. These Gurus are savvy in finance, patient, and understanding of the unique challenges that the senior market faces. Many hold a special designation in the senior market, and generously share their personal tips and network of affiliates.

So, if you are wondering if now is the time to take the next step in your retirement journey, then we have the perfect place for you to begin!

Technorati Tags: senior specialists in real estate,55+ communities,downsizing,retirement communities in williamsburg and yorktown

How to Analyze a Good Real Estate Investment

Our Savvy Investor Team is sponsoring the next meet-up for experienced and new investors alike, on Thursday, May 20th at 6 pm in our Oyster Point offices.  The topic is “How to Analyze a Good Real Estate Investment” and Liz Moore Investor Guru Teresa Cline will lead the presentation, which includes a tax professional and local lender who specializes in investor financing.

This learning opportunity is free to the public, and without obligation.  This series is designed to acquaint potential investors with current local market conditions, financing opportunities, legal tips and tax strategies, as well as to introduce key resource providers who can help your investment journey be more profitable.  The group meets the 3rd Thursday of each month at 6 pm.

Just visit www.TheSavvyRealEstateInvestor.com, or click here for more details and to register for the class!

Technorati Tags: savvy investor,analyzing real estate investments,newport news,real estate tax strategies,investing in real estate