Tuesday, June 17, 2008

Aftermath: Info, Tools & Tips for Bubble Buyers & Sellers

Today is the final installment of the Wash Post's Bubble: Anatomy of a Meltdown. Don't miss Part III, Aftermath, as it details the "ripple effect" of the housing collapse and credit crisis.

After reading these articles and thinking about the national and local economies, the following will be covered today:

I. June Market Report (May Numbers)
II. Info for Bubble Sellers
III. Tools & Tips for Bubble Buyers


2,600 = Number of houses for sale in Charlottesville and the counties of Albemarle, Fluvanna, Greene and Nelson in May, 2008. Sales were down 35% compared with one year ago. The median price dropped from $287,000 in May 2007 to $274,000 this year.

Breakdown of Days on the Market:

312 properties have been on the market for more than one year.
properties have been on the market for more than six months.
properties have been on the market for more than three months.
properties have been on the market for more than one month.

These numbers have been compiled from the CAAR MLS by RealCentralVA blogger Jim Duncan, who notes that the information is only as reliable as the people inputting it into the system.


Duncan says, "IF YOU PRICE YOUR PROPERTY WELL, IT WILL SELL. [His caps.] You may, however, come to realize that the price at which you can sell your property is either a) less than you expected/hoped for and/or b) less than you owe on your mortgage. What you need to make is irrelevant to the fair market value." [Our red bolding.]

Sellers should heed this candid observation in order to move their houses and our economy. Besides financial need--having a mortgage that's "under water" or a maxed-out HELOC--there are also psychological and emotional issues tied to why sellers won't drop prices. The New York Times' "Economix" Columnist, David Leonhardt, addressed this issue in "Be It Ever So Illogical: Homeowners Who Won't Cut the Price."

Real C'ville encourages Sellers to read this (and other RE/bubble blogs) to get an idea of what many Buyers think and know.


In his report Duncan also says, "Be aware that well-priced properties are occasionally seeing multiple offers. If you are buying - look at the data, days on market, condition, external uncertainties and uncontrollable factors that may affect resale."

Good advice. We've compiled a list of tools Buyers have at their disposal. Please note: the following list doesn't include Mortgage info because we're assuming that anybody entering the market has Good-Excellent Credit, an acceptable Debt-to-Income Ratio, and a Down Payment--the basic requirements Buyers used to meet before Insanity came to Main Street.

1. Know the history of a property's sales. For Charlottesville, you can access that information through the City Assessor's Office. For Albemarle County, you may access the information here.

2. Read Duncan's entire June Market Report at REALCentralVa.

3. Use the US Bank Mortgage Calculator to discover the actual cost of a property over the life of the loan.

4. Use the "Own v. Rent Calculator" to compare the cost of buying and renting equivalent properties.

5. Know that "Lowball Offers" are on the rise.

6. Consider using a version of Ron Leiber's "Letter to Seller Explaining a Lowball Offer" when going to the table.

7. Talk to neighbors, friends, acquaintances when considering the purchase of a property. You'd be amazed at what people with absolutely no connection to the owners or the house know about condition, improvements, problems, pricing, history.

8. Get a Buyer's Agent whom you trust like a spouse or parent. We heartily recommend this unless you've bought and sold houses several times before; you're a lawyer or your sister is a lawyer; or you have supreme business acumen and/or an MBA. Besides, in this market, in most cases the Seller Should Be Paying Buyer's Costs.

9. Read this blog (and others, linked to the side). We are now Taking Comments. If our email is any indication of what kind of material people will leave, folks know what's what out there in Bubbleville.


Dave Phillips said...

We have been advising sellers for months to either price their property to current market conditions or take it off the market. Over-priced listings just clog up the market and waste the time of buyers and their agents.

We published several articles about this on the CAAR Blog with the most popular one being http://www.davidrphillips.com/?p=116

We also have a video podcast posted on nbc29.com/homeplace.

Sebastian said...

Wow. I just used the rent/own calculator. I pay $1700 month rent for a 1200 sq ft house in Belmont (of course). I know it sold for $345,000. If I were owner i'd have to live here 19 YEARS to make it better than renting.

Anonymous said...

Over-priced listings just clog up the market and waste the time of buyers and their agents.

Heh...What a Crock! In addition to the grievous inconvenience to RE 'professionals', the glut of properties also illustrates just how much inventory there is and how out-of-whack demand and supply are. It's kind of hard to sell the line "we're turning the corner" when clearly more and more just keeps coming on.

This is the price RE 'professionals' pay for pumping up so much churn in the market over the past five years. I hope everyone over at CAAR saved their nickles for this rainy day. It's tough when you actually have to do some work to get a cut of someone else's hard earned cash.

Anonymous said...

We have been renting downtown near the University for 4 years. The money that we save on a mortgage payment on a comparable property has been put into investment accounts.We feel like we have actually made money by staying out of this insanely overpriced market. It is so sad to see that sellers just don't get it here. Their salad days of gouging buyers are probably over.
The local market was overvalued by an estimated 25% almost 4 years ago, and it hasn't gotten better. Our family refuses to buy in this town for these reasons,and frankly we feel like we've made a great choice. We LOVE your blog. Finally someone tells it the way it is.