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Loyal readers will know that I have an affinity toward neighborhoods that do more than put folks in houses in close proximity to one another. I like neighborhoods that create communities. Neighborhoods that stand for more than just roofs over heads. I like places like RiverBluff. And I am proud to say that, thanks to one of Nest’s newest associates, Laura Winn Smith, she and I now represent such a place.

RiverBluff is a quiet little circle at the end of a cul-de-sac. (Yes, I have written about cul-de-sacs in the past.) It fronts the Rivanna River and the Rivanna Trail. It was a wonderful piece of land of just 19 acres. And thanks to thoughtful planning and a directed vision from the start, RiverBluff now has 9 homes, 1 home under construction, and 12 lots available for building. And of that 19 acres, more than 15 of those acres are still available for use by the community.

Those 15 acres are trails, and playgrounds, and community space. The land has been conserved rather than consumed. Pedestrians and visitors to the Rivanna Greenbelt portion of the city park system are still able to enjoy this land. And the residents of RiverBluff are richer for that community.

RiverBluff is more than just clustered houses. As I said, it was built around a vision. That vision is that land and homes do not need to overwhelm the environment. So, the houses are built to the highest of standards of sustainability. From green roofs to greywater waste systems. From super high efficient insulation to geothermal heat pumps. These homes are designed to impact the environment as little as possible. And the end result are buyers that don’t just “buy into” the vision, but live it out.

Rainwater gardens, community composting, active biofilters… all of these are intentional and desirable. And the beauty of the vision is that it does not require a specific style of home, just a consistent intent. Some of the homes are traditional, others are modern, but all are responsible.

RiverBluff and communities like it are the types of places that Nest Realty wants to work with more. We are proud that we have been selected to market RiverBluff, and I am proud to put my name on the sign out front. And many thanks to Laura Winn Smith who is working with me on RiverBluff. What a wonderful partner and what a wealth of information and energy.

I hope that as Spring arrives and this arctic tundra in which we live retreats, that many of you will make the drive down Market Street and Riverside Avenue to RiverBluff.

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Founded in 1982, Summit Realty grew to be one of the most well-known and respected real estate companies and brands in Central Virginia. Owners Bob Hughes and Bob Headrick took over Summit in 2007 and are enthusiastic about joining forces with Nest Realty as Associate Brokers.

In addition to a strong focus on technology and innovation, Nest Realty agents are held to a higher standard. All agents must have a minimum of three years experience, practice real estate full-time and earn their Broker’s license shortly after joining the firm. With almost $4.7 million in sales per agent and 13.75 transactions per agent, Nest Realty agents more than doubled the production for the average Charlottesville Realtor in 2009.

“We pride ourselves in having a team comprised of exceptional professionals, said Kauffmann. “We want consumers to know that if you work with a Nest agent, you are working with a true, full-time professional with high ethical standards. To date, we have had an extraordinary team; the addition of the Summit agents only enhances our strength. The combined experience and track record of Bob Hughes, Bob Headrick, and their entire team is a wonderful addition to the Nest family. We couldn’t be happier.”

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Rather than try and give you a long post, I’ll just tell you to grab the full report from the Report Downloads page. This is by far the longest and most extensive Nest Report yet. Let me know if you have any questions about the current issue.

2009 Year End Report

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Fair question.

I have in front of me a 56 page document that was just released by CRA International, a national research organization that studied the HUD-1 costs across the country and tried to determine how much extra buyers spend on attorneys instead of going straight to the title company and closing it with them.

The argument that settlement companies have made is that attorneys are expensive and unnecessary for these transactions. Without competition, attorneys would force the price of home loan settlement sky high and the consumer would be punished. The attorneys argue that in fact it is the title companies that keep prices high. They claim that title companies may charge less in the form of a “closing fee” but they more than make up for that discount in the price of the insurance policy that they offer consumers. Attorneys are able to price title policies from different companies and that brings price down.

The study looked at 839 financings that occurred in a single 12 month period, and included 366 new home purchases and 473 re-fi’s. In the case of re-fi’s, there are occasions when the lender actually performs the closing. So, in Virginia for instance, 50% of the cases studied were closed by settlement companies, ~30% by attorneys and ~20% by the lenders directly. Across the entire study 60% were closed by settlement companies, 17.4% by attorneys and 22.7% by lenders.

The empirical evidence is that the attorneys are correct that title companies charge more for their policies, but they are wrong that it always costs more overall. The study showed that in states where Attorneys handle all the closings by law and the states where settlement agents are dominant the charges are roughly equal. There does not appear to be any influence that regulations have on the costs of closing a loan. In states, such as Virginia, where consumers have a choice, the numbers that make up the total for closing costs may be different, in the end, the costs are roughly equal.

The CRA study found that “High or low closing costs appear to be at least equally – and frequently more strongly – associate with a wide range of other factors (such as details of the loan, the characteristics of the state or loan area, and the characteristics of the borrowers);” Translation: While different loans cost different amounts to close, it is based on size of loan, credit score, local taxes (GRANTOR TAX!!!) and other factors, not who the settlement agent was.

So, what does an ambiguous study tell us about how buyers should choose their settlement agent? Very little. Instead, it says that the price conscious buyer isn’t going to save money. So the question that a buyer needs to ask is, “How will I best be served?” Given that settlement companies are not allowed to act as attorneys or provide legal advice in the case of legal issues arising, my advice is to stay with a local attorney who can represent you if you need it. The cost of bringing a lawyer on board down the road is much higher than having them with you from the start.

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Builders operate in much the same way. The problem is that a project must go to the city or county months or years before construction begins, and that can be 6 months or more before the first buyer can occupy the residence. Therefore, there is always the risk of over building a certain type of home. Below you will see a graph by quarter from 2003 to Present for the combined Charlottesville and Albemarle markets. Each line represents a product type: Detached, Attached, and Condo.

(Click on the graph for a larger image.)
The quickest thing most folks will notice is the enormous bump that occurred in the 1st quarter of 2005 when the first condo conversions became available to the general public. The condo market was steady until it got another bump mid year 2006 and then slowed until the end of 2008 when it hit the skids.

This is a fascinating tale of what the right project was to work on then… and not now…

Builders watched as the early developers sold their stock quickly, but trends shift, and the developers who brought condos on the market at the end of 2008 were greeted with credit issues as well as an over built market.

Contrast this with attached homes which saw a bump in prevalence just as condos were slowing. While I cannot state for sure that I know what was happening, I do have a theory here. Detached homes tend to be the priciest of the three product types. Therefore, those who may not be able to afford the 3BR/2BA home on a 1/2 acre in the county look to more affordable options. Those options tend to be condos and townhouses. When credit became impossible to get on condo projects, the attached home was the only solution.

But, take a look at the last 3 quarters where detached homes have grown in popularity even while attached homes fall off sharply. This coincides with the convergence of prices across the different product types. For the first 9 months of the year in the city, the median home price of a townhouse was $242,000. But the detached home price median in the city was only $261,000. A difference of only $19,000. That’s just over $86 month in mortgage payments on an 80% loan.

So what does product mix tell us about the future market? It says that as long as the price between detached homes and their counterparts are small, the detached homes should continue to rise as a percentage of the sales. It also reiterates that we need financing to be eased in reference to condo projects.

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This quarter is certainly no exception. The report expanded by over 100%. I have included far more information on condos, attached houses, and general macroeconomic conditions. The same information as in the past is available for the detached homes. All in all, I’d say it is the most comprehensive analysis available. Of course, I have a bias.

For those who wish to read the report, click here to grab a pdf version. I will be pulling out some items over the next few weeks to publish some more in depth items. Hope you enjoy.

Click here for the report.

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WE WON!

Immediately, my phone rang. It was my other partner, Jim Duncan. “Dude, we won. It’s all over Twitter.”

Frankly, I didn’t believe either of them. It was too good to be true, and, after all, Nest is only six months old next week. But it was true. And over the past few days I have gotten excited and downright giddy. I have wondered if I was dreaming. I have bragged. But as of today, I have begun focusing on a different side. It is our reminder that we have accomplished much, but we still have a long way to go, and we can’t rest.

What we won was unexpected, but much appreciated. Nest Realty Group was named Most Innovative Brokerage in the country by Inman News, the real estate industry’s leading news source. Each year, at their annual “Inman Connect” conference, they select one brokerage who is changing the way business is done and honor them. Additionally, they recognize bloggers who are having an impact, service providers, and overall market innovators. But this year, it was Nest who came out on top.

This is not an honor bestowed upon new and up and coming firms typically. In fact, the firms who were finalists with us are some of the most well respected firms in the country.

• Redfin – The leader in Internet based real estate transactions
• @Properties – An eight year old firm with the #1 market share in the Chicago MSA
• Better Homes and Gardens – An international franchise company
• John L. Scott – A 75 year old brokerage with offices throughout the Pacific Northwest
• Coldwell Banker – 3,900 Offices across the globe from a firm founded in 1906.

And, Nest Realty Group, a company of 6 agents founded in Charlottesville just six months ago.

So, why did we win? A number of reasons. Inman cited our web site as the number one reason they believe we are changing the face of real estate. What is different is that the web site provides information and a customer search in a way that actually provides value. There are neighborhood synopsis over over 175 neighborhoods. There are videos of many of these areas. There are searches based on amenities, not just price. There are searches by area, not just county.

It is not that the web site is so dramatically different that brought us to the judges attention. It was that the web site was the end result of a firm founded on the principals of transparency and customer centric service. This is not a web site designed to keep the information in the hands of the agents. We offer the most comprehensive quarterly updates of any real estate firm I have ever seen, regardless of size. We are different in our willingness to not just utilize social media, but to embrace it.

In marketing properties, we are the only firm in Charlottesville that provides customized signs. We offer video on every listing. We offer professional photography. We offer floor plans. Some of these may not be high tech. And I certainly concede that there are other agents who offer some of these items. But only Nest provides it for every listing, regardless of the agent. It is who we are, not just as individuals, but as a team.

And for that team, I am eternally grateful. I am proud of what we have accomplished.

Jonathan and I had a chance today to talk for the first time face to face since he returned back from InmanConnect in San Francisco. And the first thing we discussed was what we would improve, and what we wanted to plan for the next year. I have spent this evening searching out partners for some of our plans. And I can’t wait to start implementing.

And, I’m happy to admit that having our Inman trophy around IS pretty cool.

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I wanted to look at what school districts have homes that are selling the best, and so I looked not at price drops, but at the ratio of homes listed to homes sold. Seemed simple enough. And the results were not quite what I expected. I have buyers who ask for specific school districts all the time, and that request is based typically on a desire to stay in a district or it is driven by school test scores, or proximity to work, the interstate, or some recreation in which the family regularly partakes.

I’ll talk about the City first, as I found the results really interesting. (Click on the below graphs to expand.)

What I have done is created a graph of all sales in the city by elementary school district. Having only 6 schools makes this very easy to visually see what is happening here. The second pie chart shows all the active listings in the city as of today. By comparing these two charts, we can see if there are districts that contribute to more sales than they should based on the number of properties listed, or vice-versa. The first thing to note is the green section, which relates to Clark. This includes all of Belmont. While 25% of the current listings in the city are in Clark, only 19% of the sales are from this area. It follows logic to say that perhaps Belmont had its run-up during the Bubble, and is now retreating more than other areas of the city.

The flip side of that coin are Greenbrier and Jackson-Via which had 4% and 14% of the city listings respectively and yet have contributed 8% and 20% of the sales in the city thus far this year. Both of these areas are relatively affordable, with Jackson-Via’s median being only 1.5% above the median for the city. Greenbrier is priced higher (18% above the median), but still 8.5% below the pricy Venable district. Given that 71% of the houses sold this year in the city were sold for less than $325,000, this demographic seems right on target for the year.

The county was equally interesting. However, with 16 elementary schools, the graphs get a little harder to read. There is however, one clear winner district this year, and one or two districts that have struggled.

On the high side, Cale Elementary is showing a lopsided number of sales compared to its listings. Again, with a median sales price below $300,000, this puts it squarely in the target for 2009 buyers. Additionally, as we have pointed out over the last year or so, homes in the urban ring have fared better than far out in the county. Cale is located on the city border to the South, and is convenient to The University as well as downtown. Neighborhoods such as Lake Reynovia and Mill Creek have managed price declines with some resistance and it appears that location, location, location may simply be playing out here.

The downside districts in Albemarle include Stone Robinson, which is home to Glenmore and the parts of the Keswick area. With the third highest median price in the county, these high end properties just aren’t having a banner year. Homes between $600,000 and a million dollars represent only 14% of the homes sold this year. Stone Robinson had 16% of the active listings. They just can’t keep up with the market. The demand is simply not there for the larger, new homes in 2009.

In the wine world, we talk a lot about wines with a good QPR or Quality to Price Ratio. In 2009, we are seeing a similar flight in sales. Lower priced homes that offer convenient locations are ruling the roost. If energy prices soar again (which they certainly look like they could) this directive could become even more pronounced.

As always, I welcome comments and thoughts as well as requests for future studies. These are always interesting looking into.

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One of the interesting things that we started talking about in the office was the future of Condo projects in and around Charlottesville. From the Nest Report:

Both City and County condominium sales continue to slide as well. There have been a total of 32 condos sold in the County so far (off 25.6%) and 25 sold in the City (down 46.8%). However, Charlottesville City condo sales rebounded quite well in the Q2 2009 with 22 total sales, bouncing back from a dismal Q1 which saw only 3 transactions close. There are still condo projects in front of the City Planning Department with the potential for near-future development. Whether or not those projects can obtain funding, and when they will be built is still up in the air. Additionally, we fully expect the absorption rate (time it will take for new condos to be purchased) to be lengthy compared to years past, as some of these projects are approved to include more housing units than have sold across the whole city this year.

I thought I would expand a tad on what I said in that last sentence. There are some projects that have been approved that include more units than have sold in the last year. This is absolutely the case, and its not a small number. I called the city asking for a current “development report” and they have not put one together in the last 15 months. So, what I have is not on the newer side, but the projects that haven’t been built yet, are still lingering out there with approvals ready to go.

The only major condominium project downtown that is under construction at this point is The Gleason. According to the most recent City report, the Gleason was approved for up to 65 units. The Gleason web site shows 36 residential units are being built, along with two floors of office and two (partial) levels of retail space. Of the 36 residential spaces, 16 are shown as sold, leaving 20 units, 80% of the city sales thus far this year. In addition to The Gleason, other projects in the downtown area that are approved by the City are:

• Comyn Hall Condos – Approved for 11 units – Park and Parkway
• Waterhouse – 65 Units – Between Water and South Street
• The 550 – 12 Residential Units and 10,000 S.F. of Commercial located on Water Street in the old train station. (7 of the units are priced at $1.195 million for the shell)

Projects that have gone before the planning commission, but whose outcome has not been updated by the Neighborhood Development Services on their web site include:

• Grove Square – Applied for 24 Units – Rosie Brown Blvd and Grove, along the RR Tracks
• Coal Tower Property – Applied for 287 Units – Running the North side of the RR Tracks from Carlton to 10th Street
• Sycamore 10.5 – Applied for 16 Units – On West Main in the old Under The Roof location
• 201 Avon Street – 100 Units – The old Beck-Cohen building
• The Station – 25 Units – Across from the Gleason on Garret Street

And this listing is still partial, and focuses only on the area in downtown. Further, it does not touch on the condos that have been built and have not yet been sold. Condo sales can be driven up by a great project, but the buyers have to be there to make these projects make sense. The Beck Cohen project for instance was once announced to be a LEED registered project. With 100 units on the line, a developer is going to need more than 70 reservations / contracts for sale to make this project move forward.

Most likely, what you will see is a few of these projects getting built in the next few years, but they will be scaled back. It would not surprise me to see the Gleason be the last condo project of its size built for at least 3 years. Other projects are going to look for smaller footprints, lower costs, and easier break-even points. And even then, developers are going to be looking for enough contracts to guarantee they won’t lose money even in the worst case scenario.

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2009 Condos sold Jan 1, 2009 – June 30, 2009

8 in 1800 JPA
3 at Monticello Overlook
2 at The Randolph
1 at McGuffey Hill
5 at Walker Square
2 at Cream Street
1 at Belmont Lofts
2 at Melbourne Park
1 at Wertland Commons
1 at The Corner Village  
and 1 at The Economod Condo

(NOTE: There are 27 condos listed here. The Nest Report states 25. The difference results from Realtors who input sales late. We pull data for the Nest Report on one day to write the larger report. However, the information here was pulled today, July 20, 2009.)

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