If you go back and check my blog on January 21st, you will see my prediction for sales to hit 1,400 by summer. Well, as of today the posted sales for June hit 1,400 exactly with a median price of $218,456. It looks like the inventory should be down a little bit more too. I will have final numbers by July 10th, and will post a link to the official numbers when the report is available.
www.DavidWelch.com, www.RealEstateOptimist.com
Wow! I was out showing homes this past week, and all but one that I saw was either a short sale or a bank owned property. I was looking in the $150,000 to $200,000 price range, in the south Orange county and Osceola county areas. I waslooking for pool homes too, which limited the search quite a bit. This seems to be the "sweet spot" for distressed properties. If you are looking for properties in this price range in our area, you should understand the difference between short sales and foreclosed properties.
First, the short sale or pre-foreclosure. If the owner is still responsible for the property, and it is going into foreclosure, you are probably dealing with a short sale. This means the owner and their real estate agent are trying to get the lender to accept less than the principle amount of the loan on the house. (ex the loan on the house is $225,000, but it is listed for $179,000). This sounds like a great deal for the buyer, but it requires the lenders approval which could take months. Let me rephrase that - it will take months, and there is no guarantee the lender will approve the lower price. Our experience in Orlando is that the banks will take at least three months to give you an answer on an offer. If the property has already had offers there may be a pre-negotiated price. This may shorten the time get a response, but not necessarily.
The foreclosure is a totally different animal. A foreclosure or bank owned or REO, sometimes listed as corporate owned property is now in the possession of the bank or mortgage company. They usually want it sold as quickly as possible. Often the pricing is very aggressive, and you may be able to get answers to your offer within one to two business days. Sometimes these homes can be in very rough condition, so have a thorough building inspection completed. This is true of the short sales too.
I have not posted a lot of statistics for July, so here are the numbers with three days to go in the month. Closed sales so far 983 with a median price of $205,000. That price is down about $12,000 from where we ended up in June. We usually see a bit of a drop off from June, but I was expecting prices to be a little higher. This could be some of the foreclosures and short sales finally starting to close. I'll have to go back at the end of the month and see if we have a higher percentage of them getting closed. They have been running about 30% of the pending sales, but only about 20% of the closed sales. If we start seeing these pendings getting closed, look for the median price to drop some more. The active inventory is still down a bit with 26,680 for sale in the tri-county area. The pendings are still hovering at 3,543 with 1,676 new contracts so far this month. Last month there were 2,031 new contracts, so hopefully we will see some more come in over the next three days. Finally, homes in some stage of foreclosure are continuing to rise with 5,167 or about 19.3% of the active listings.
The FHA/Mortgage Bailout legislation that is probably going to become a law this week will do away with seller funder downpayment assistance effective October 1st, 2008. If you have been planning on getting seller downpayment assistance on your FHA loan, get it done by September 30th. This law is going to help a lot of people, but this particular piece of it is not helping anybody. Also, the FHA downpayment requirement is going up to 3.5% from the existing 3%. Don't get me wrong, I believe these are going to be good for people in the long term. I just don't particularly agree with these particular aspects of the legislation going into effect when we need to be doing more to help people get into homes.
The mortgage bailout looks like it is going to sail through congress now that President Bush has withdrawn his objection to the $3.9 billion set aside to help the neighborhoods effected the most by foreclosures. I can't say that I like all the aspects of this bill. As it stands right now there is give and take that helps home buyers then makes it tougher for them too. There is a proposed tax credit for first time buyers of $7,500 if they purchase before July of next year. That is the give. The take is the higher FHA downpayment requirement of 3.5% compared to the current 3%. There is another takeaway though. This bill will also do away with seller funded downpayment assistance.
I have written my Senators (Bill Nelson and Mel Martinez both are neighbors of mine) about this particular provision. The argument is that buyers that get seller funded downpayment assistance are more likely to default and pay a higher price. The bill does not eliminate all downpayment assistance, just seller funded programs. The seller funded programs have been unpopular with FHA since they began eleven years ago, and they are taking this opportunity to wipe them out purely for political reasons. Buyers need all the help they can get to purchase now, and many if not most sellers would gladly entertain providing downpayment assistance to effect a sale. With a national median price around $215,000 the 3% seller funded downpayment would come to $6,450. Rather than eliminating the seller funded option and providing a credit, these options should be expanded and promoted.
I do appreciate the effort, but I would rather see the seller funded downpayment assistance left alone. Buyers need the credit at closing not next year when they file their tax return.
Treasury Secretary Paulson, stated that he believes the real estate market may be turning the corner in the next few months. Bear in mind, his statements are relative to national numbers. Real estate is a local market place with local economic factors weighing more heavily than the national economy. For instance, a lot of good economic activity is happening in Houston Texas. From what I understand Houston added more than 100,000 new jobs in the last 12 months. The spike in oil prices is fueling much of that activity, so it is hard to say what effect the recent drops in oil will have. Right now though, they are selling homes faster than they can sell them it seems.
In the Secretary's comments he defines turning the corner as stabilization in prices and more buyers entering the market. Using that definition, Orlando certainly has the indicators suggesting we have turned the corner. If you look back on my blogs since January of this year, sales have increased every month and prices have been stable for the last couple of months. From the sales numbers I have looked at so far in July, we may see a small drop in sales and the median price. We definitely are seeing more first time buyers entering the market as our affordability index has improved greatly over the last several months. We still may see the median price come down a little bit more as short sales, foreclosures and the first time buyers begin to have a greater impact on sales statistics. All in all, I believe Orlando has turned the corner. Personally, I would love to see more of our public officials making positive comments. I think it is reassuring and encouraging which are two things most people need right now - even us optimists.
First, I should say that no home is a commodity. Every property has a unique location, a personality, a feel, even its own smell. Condos are usually the most homogeneous properties, because there are usually several of the same floorplan within a particular building. Certainly, the exterior component is consistent, if not uniform, within an entire condo community. So how do you differentiate your unit from the others for sale.
Marketing people refer to the Four "P's": Product, Place, Price and Promotion.
Product is the most difficult area to find differentiation because your two bedroom, two bathroom unit is the same layout as the the others for sale. Here is where you need to point out why your location within the community is better than the others. You have a better view, such as water, pool, wooded or park views beat a view of the dumpsters or parking lot. You have a more convenient location such as being closer to the pool or fitness center, or parking lot. Make sure your condition inside is as good as, or superior to, your competition.
Place is not what you may be thinking - it is not where your unit is located, but the distribution network you have hire to market your property. In other words, the agent and agency you hire to list and sell your condo. With condos it is especially important to find an agent familiar with your community. There are always questions about what is included in the condo fees, pets, and other community rules. An agent with experience in your community can more easily answer these questions, putting prospective buyers at ease.
Price is always important, because if you price too high you risk losing the sale, too low and you give away hard earned equity. Price is also always relative to time. What I mean by this is that there is a two year price, a 90 day price and a price that will bring contracts tomorrow. If you are looking for a quick sale, you cannot expect to put the two year price on your unit. I have used the rule of thumb in the past of 2%-3% per month. If the norm in the market is four months to sell and you are looking for a sale within a month, you should probably look at pricing your unit 6%-9% below the competition. Speak with your local agent to see what is happening in your individual market. This is just what I have seen in the Orlando area.
Promotion is the final "P", and it goes back to your agent and the agency you choose to represent you in your sale. Ask your agent what kinds of promotions they will do for your property. Check out their internet presence, what other types of advertising do they do. How successful have they been at promoting other condos in your community. I would not be impressed if they advertise in the newspaper. Print is very much "out" these days. Google is "in". If you cannot find your agent on google, neither can the buyers. Of course I am an avid blogger, and 50% of my business last year came directly from the internet.
Even if you do all these things right, it still may take a while to sell your condo. Inventory levels are at all time highs in many markets. The Orlando market has just over a 17 month inventory of all types of homes available for sale. It is turning around though, in January we had about a 31 month inventory of homes.
Total inventory in the tri-county area is 26,540, which is down a little bit. The total pending contracts is also down a little bit to 3,486. Closed sales so far this month are also running a little bit behind June's pace. There are currently 486 closed sales with a median sales price of $205,000 (also down from June's $217,500). The pace of new contracts seems to be holding about where it was in June, and the inventory of foreclosures has creeped up a bit to 5,073. With all the bad news in the financial and mortgage markets lately, I am not surprised that closing are little behind. Hopefully, with the rally in the stock market today we may have a little more optimism.
Today on Yahoo Finance there is an article from Forbes naming the top 10 markets for real estate investment. Orlando is ranked number 10, although they do not really explain the rationale for the rankings. New York, San Francisco, and pretty much all the others in the top 10 have prices well above Orlando's median of $217,500 (June 08). The article is geared more toward the offshore investor, who seem to be the only investors with money these days. So, I guess the price ranges of some of these other markets are not as daunting.
The numbers are in, and they are looking up with 1,443 closed sales which is up from May's 1,347. The median price is also up over May at $217,500 compared to $211,400. Unfortunately, interest rates are up as well with an average rate of 6.35% compared to 5.94% in May. The inventory of homes available for sale and the months of supply both went down. The inventory stands at 24,575 which is a decline of 440 properties. The months of inventory supply is down to 17.03 months which is a decline from May's 18.57.
I will have the full Market Pulse posted to www.DavidWelch.com later today.
Later this week, I will be listing a townhome in the Avalon Park area for an unbelievable price. This will be a short sale, so you will need to have plenty of time as we negotiate with the bank. It will be worth saving $100,000.
I cannot think of a better way to celebrate independence day, than buying a home. The right to own your home is one of the fundamental opportunities that our forefathers fought for. The time is now with prices down, inventory up and interest rates still at historic lows. Sales have been trending up all year, inventory has been slowly coming down from its high last October, and interest rates are likely to go up. Contact David Welch today, and let's get started on your American dream.