The Liz Moore Market Watch

How Much Have Prices Fallen in Hampton Roads?

That’s a great question.  I would argue that this particular statistic is far more complex than the Daily Press would have you believe.  MLS data for February home sales in Williamsburg, for instance, suggests that prices in the Williamsburg-James City County real estate market have fallen 10.5%, from a median of $285,000 in February of 2009 to $255,000 last month (February, 2010).  That’s a pretty steep decline for 12 months.

However, there are some additional factors that influence that number that are critical to consider.  The $8,000 tax credit stimulus has incented many first time buyers into the local market.  That means that there is an unusually high number of transactions in the “under $300,000” price range, which is an anomaly for Williamsburg real estate.  So, if there is more activity in the lower price quadrant, then logically, the median sales price is going to decline.  That doesn’t necessarily mean that a $450,000 home has lost $45,000 in value since last year.

At Liz Moore & Associates, our agents are students of the local real estate market.  They carefully monitor pricing, inventory, and absorption trends at the micro-level…neighborhood by neighborhood, which is where it counts.  Only by getting an up-to-date market analysis of what your home is worth, relative to active inventory in your sub-market, is going to tell you if your value has truly decreased.  Want a complimentary update?  Drop me a note at liz@lizmoore.com, and I’ll hook you up with an agent who specializes in your neighborhood!

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Positioning

I’m often asked by Sellers and prospective Sellers, “what can I do that will have the biggest impact when I put my home on the market?”  Great question.  In this market, every listing is competing with dozens and dozens of comparable properties, and differentiating your property from the rest is literally the difference between a SOLD sign and languishing on the market unsold for months.

Quite simply, you must become the best value in your category.  Look through a buyer’s eyes, and consider the competition.  They are going to select the house that offers the most value for the price.  And, it will either be a “deal” (priced substantially below the market), or if it’s priced at the market, then it will be in move-in condition with superior features to others in the same price band.  Otherwise, it will fall into the “everything else” category that eventually expires or is withdrawn from the market.  The last thing you want is to fall into the “everything else” category!

So, begin with price.  You should position your listing lower than other comparable homes that are currently available.  That is really the ONLY factor you should consider when pricing your home; not what you have in it, what you paid for it, or what you need to get out of it.  Unfortunately, none of those things mean anything to buyers.

Next, work on condition.  “Move in” ready means different things to different people, but at a minimum, your home should have fresh paint in neutral colors.  Carpets should be clean or replaced.  Kitchens and baths should sparkle.  De-clutter and de-personalize as much as possible, so that the new buyer can imagine themselves living in your home.  You’re moving anyway, so go ahead and thin out closets, pack up unnecessary things on kitchen counters, take down knick knacks, and store extra or large pieces of furniture that may make your home feel smaller than it is.

We work with several professional stagers who are truly artists at putting a home’s best foot forward.  An investment of several hundred dollars is well worth it, and can pay off in thousands of dollars of return to help a home sell faster and for top dollar.  I look at many houses every week, and I continue to be amazed at what 6 or 7 hours of staging can accomplish.

First impressions are also important – flower beds should be freshly mulched and free of weeds.  A touch of color, especially in the winter, goes a long way.  Fresh paint (and sometimes a brass kickplate) on the front door says “welcome” and porches should be clean and tidy.  During showings, open all drapes and blinds, and leave lamps on – even during the day.  Pets should be invisible (including food bowls and litter boxes), in case prospective buyers aren’t fans or are allergic.

Our agents are happy to give you some pointers (or refer you to their favorite stager) if you’re thinking about putting your home on the market this Sprint.  Just give me a call or send me an e-mail, and I’ll hook you up!

What is an EEM?

And how in the world does it help me?  E.E.M. is an Energy Efficient Mortgage, one of the new products that work in conjunction with an FHA or VA mortgage.

It allows you to finance into your mortgage additional costs for storm windows and doors, heating and cooling systems, solar heating, insulation, and some other energy efficient plans.

FHA buyers can get up to 5% of the sales price (even if it exceeds local FHA loan limits), and VA buyers can get up to $6,000 additional funds added to their base loan amount.

Interested?  I would be happy to hook you up with a great local lender who specializes in this program!

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Are Values Inflated?

Historically, homes have appreciated at a rate of about 5 to 6% per year. During the period of 2000 to 2006, however, values escalated almost 90%...or over 3 times the normal appreciation rate! That equates to 15% annual appreciation during the boom.

In hindsight, that kind of inflation simply isn’t sustainable, and prices will need to return to a more normal range in order for the market to completely balance.

For sellers who purchased prior to 2004, the best way to “gut check” the true value of your property is to apply a 5-6% appreciation rate to the property since you’ve owned it.

For those who purchased during the peak (mid 2004-late 2006), it is quite likely that your property is actually worth less today than the price you paid. The good news is that over time, as values balance, your equity will be preserved. If you are moving up, you can offset the loss in value in your current home with the opportunity in the current buyers’ market to get a good value on your move up home. In other words, if you take a 10% loss on your home at $200,000, you’ve lost $20,000. But, if you are able to buy a $300,000 replacement home for 10% under value, then you’ve gained $30,000 – overall a $10,000 win.

The key in this market is to be realistic, and understand the underlying economic principles of the market. Having a knowledgeable agent on your side is essential, and I would be more than happy to recommend someone to advise you…just send me an e-mail at liz@lizmoore.com. 

Technorati Tags: home sale appreciation,home values in Hampton Roads,prices

Changes in the Appraisal World

As part of our ongoing training program, we have a weekly Roundtable meeting in each of our branch offices.  Last week, we invited 2 local appraisers to address our agents, and share the latest news from the appraisal world.

As you might imagine, the appraisal process is under great scrutiny as a result of the national credit crisis.  The result is that appraisers are being asked to provide deeper levels of substantiation for value than they have in the past.  In addition to using only "sold" (closed) comparables, now they also must provide actively listed and under contract comps.  Underwriters are hoping that this will help identify whether values in a particular neighborhood are increasing or declining.

If an appraiser marks a subject property in a "declining" neighborhood, then the mortgage company may require a greater down payment in order to lower their liability that the borrower may default and their asset is worth less than when it closed.

Beginning January 1st, mortgage companies will be required to select their appraisers from panels on a rotational basis, rather than assigning a preferred appraiser as they have done in the past.  The upside of this new process is that it helps assure objectivity.  The downside is that it will be increasingly likely that appraiser pools include out-of-area appraisers, which can be a challenge when they're assigned to a property where they are unfamiliar with the market.

Will these changes help to insure accurate values in the mortgage industry going forward?  Time will tell.

Median Versus Average Sales Price

Does it really matter which calculation is used?  In real estate, much is made of the difference between average and median sales prices when discussing market trends.  There can be a HUGE difference, and the result of using the wrong calculation can mean a significantly incorrect analysis.

Here is an example to illustrate the point.  Assume 5 properties in the same neighborhood, all built the same year and with similar features.  4 of the 5 homes have 3 bedrooms, 2 baths, a 2 car garage, and a similar sized lot.  All 4 homes sold in the past 90 days for $300,000. The 5th home, however, has been remodeled, and has an additional bedroom, bathroom, sun porch, and an in ground swimming pool. It's also on the lake. It sold last month for $800,000.

If a prospective seller in this same neighborhood looks at the "average sales price" of these 5 homes, he'll reach a value of $400,000...simply by adding the sold prices of all 5, and dividing the total by 5.  That would obviously be a huge mistake, as the "average" price was greatly influenced by an extreme.  And, the average price would not be supported by an appraisal, which will focus solely on comparable properties, excluding the larger home from the equation altogether.

So, how do you calculate a more accurate value?  By determining the median, rather than the average, sales price.  You can determine the midpoint by listing each price in order from highest to lowest, or vice versa.  The median is the point at which 1/2 of the sales prices are higher, and 1/2 of the sales prices are lower.  In our example, the midpoint, or median sales price, would be $300,000.

Median values, when trying to estimate the appropriate selling price for real estate, tend to be far more accurate than average sales prices, because they aren't adversely influenced by extremes.

The bottom line is that you really need a professional to assist with pricing, as a mistake in this market can be costly.  In addition to considering median sales price and the likely appraised value, smart sellers position their properties in accordance with current inventory.