Real Estate

Mid Year Report

Nest has completed our 2013 Mid Year Nest Report. Download the whole report here. 2013_Q2_NR.

To summarize: The market continues a cautiously optimistic upward trajectory. Sales are up in the County and slightly down in the City. However, many believe that the City transactions have been limited only by a low inventory. In the City and Country median prices are up 4.6% and 6.4% respectively from this time last year.

Inventory is virtually identical in size to last year, producing a slightly lower months of inventory at 6.14.

3rd Quarter looks positive as contracts written in 2013 were up more than 12% in the 2nd quarter.

29.3% of homes sold in Albemarle went under contract in LESS THAN 10 DAYS.

And Nest is proud that through June 30, we were the #1 Firm in Central Virginia in volume of Buyer Representation. We helped more people than any other company find homes. And that makes us happy.

 

Accurate Pricing

We meet with sellers all the time and make estimates on price. We really do our best to provide guidance on what a house is worth. It is a fascinating art.

But what we try to stress over and over is that pricing right is not about finding the estimate and trying to get 5% more, to provide wiggle room. It’s a natural reaction for a seller. If we ask 5% more, we can always come down. If we price low, we leave money on the table. While this may make sense, it is not accurate in reality.

I have a buyer client who is currently attempting to buy a home. This home is priced right. I would certainly not say I think it is priced too low. I don’t think it is priced too high. What I will say is that it is realistic. We made an offer, a very good offer I felt… but guess what… so did someone else. End Result, we just sent a second offer that upped our initial one by 4.5%… Meaning, the seller is going to land up selling their house for MORE than asking, and in less than a week on the market.

Isn’t this what sellers want? If the seller had asked 5% more than they did, I don’t know that my clients would have fallen in love. They fell in love at the asking price… they were willing to pay more, but they fell in love at asking. If the seller had asked more, and my client’s focus had been at the higher number, there would have been a higher comparison. Perhaps there would have not been an offer, or only one offer. No one to push the other up.

Houses priced fairly are moving very, very quickly in the city. Properties that are priced high, are getting very little attention. Why negotiate with someone who is being unrealistic, when you have options with fair sellers?

On the buyer side… be prepared for a battle. Be prepared to offer quickly and a fair number. Gone are the days of you being the only buyer on a property. Gone are the days of stealing a home. This doesn’t mean you need to offer 5% over asking everything, but it does mean that if you think you can slow play an offer and hope to dance to the middle ground, someone else will be willing to do better. If you really want a house, don’t risk dilly dallying. It’s not always worth walking away.

More on City Assessments

I requested from the City a breakdown of all residential assessments for 2013 and the adjustments by neighborhood. They were kind enough to respond very quickly. I have reformatted what they sent to me, and thought I would pass it along here.

Below, you will find the 22 Neighborhoods that saw decreases in 2013 assessments from last year. This list does not mean that EVERY property in the neighborhood was treated the same. It means that barring any new information provided to the assessor’s office, this is the adjustment due to “General Reassessment”. The other 25 neighborhoods in the City did not have any adjustments this year due to General Reassessment.

DecliningAssessments

In looking for a pattern, there is nothing that stands out. Three of the ten most expensive neighborhoods saw declines, while eight of the bottom ten saw declines. Of those top three, two were university area (although oposite sides) and one was near downtown. Of those that declined, some were detached homes and some were condos. Some were new construction (Carter’s View / Brookwood / Burnet Commons) and some were among the oldest homes in town (Fifeville / Fry’s Spring / Ix – Belmont). Every elementary school district seems to have some neighborhoods that declined and some that stayed flat.

The flip side to all of these numbers is that inventory is currently at a 7 year low in the City, and competing offers are common. The fact that the Assessor’s Office is showing a decline from 2012 is not mirrored by the current exuberance for City properties.

 

Twelve Straight

February 1. Our January stats are far from being updated. We likely won’t have complete numbers for at least another week. But I had to peak anyway. And the numbers are remarkably positive so far. Keeping in mind that in the first week after a month, sales continue to be entered, and thus numbers only improve, we still have good and happy graphs to push out there.

Jan_2013_S_and_InvAbove are the sales and inventory numbers for Feb 2011 through Jan 2013. What this marks is the first time in a long time that we have seen 12 straight months of increased year-over-year sales growth and inventory reduction. While the January chart may look like sales are slightly down, that is a graphical anomaly I blame on shading. As of today, we have one more sale in detached homes in Jan 2013 than in Jan 2012. (Small, yes… but still growth.)

Over the last twelve months, the increase in sales reflects a more than 20% increase for City and Albemarle. A shift from 1002 to 1214 sales.

Compared that with the attached home market, where the twelve months ending yesterday look promising with a total increase in sales in the City and Albemarle of  roughly 9.7%. But that doesn’t really tell the whole story. When you look at month by month movement for the last 12 months, you find only 8 periods of year-over-year growth. In general, the overall trend is positive, but the trajectory is not nearly as clear. Additionally, the attached home inventory is 5% higher than it was at this time last year, and that brought the months of inventory up by a month and a half to 13.9 months.

The condo market moved similarly to the attached home market. Total sales over the year were up 14.9%, but that reflected only 8 months of year-over-year growth. (The condo market, however, is very small and thus new projects, lower prices on existing projects, etc… can sway the numbers months to month greatly.)

As a final quick note, Contract Written. In Jan 2011, we saw 71 contracts written on detached homes. In 2012, that number jumped to 102. This past month, we have records of 98 thus far. This is a big jump. The reason for this is that the way in which our MLS keeps records, many properties are Contingent for more than 2 weeks before they are moved to the Pending status. It is not until that time that they get a Contract Written Date that we can track. If you figure the average closing is 45 days, and 15 of those days are not accounted for, that is as much as 30% of deals. So, it is possibile that our 98 may go up to 120-130 before all is said an done. Of course it could go up to only 110… we can’t know. There are currently 126 properties under contract that do not have Contract Written dates. Not all from January to be sure.

No matter how you look at it, our numbers are still looking very strong, and the anecdotal evidence seen by real estate professionals supports that this is not likely to change in the short run.

Vacant Showings

I went out yesterday and showed 5 properties to buyer clients. Nothing odd about that. Except that, for the first time in my recent memory, all the properties were vacant, and none were new construction.

VacantHome

The houses I showed yesterday were all in the $300-400,000 range. These are not homes where owners regularly pay cash, nor are they owned by folks for whom owning “an extra home” is not a problem. And so I have to wonder, “What is going on here.”Hmmm. My partner Jim Duncan has written about this phenomenon in the past, and I have certainly commented on it. But, frankly, I’m surprised that I’m still writing about it.

Currently, we have a very small inventory. Across the city and Albemarle County and all product types, there are only 903 properties for sale. Take out those that are “proposed” (meaning not yet started pre-sell new construction) and that number drops to 715 properties. And within that group, there are currently 206 homes that are listed as Vacant for showing instructions or 28.8%. This is certainly down from several years ago when the bubble burst, but not as much as I thought it would be.

There are several reasons for a home being left vacant. 1) The owner has taken a job in another town. 2) The owner purchased another home and has moved out. 3) House was originally a rental property and the owner has ceased renting pending a sale. Or 4) The owners have moved to a retirement facility or passed away. I’m sure there are other reasons that I’m not mentioning here, but these are the big causes.

In case 1, occasionally a new company will be paying expenses during the move, so the vacancy is less painful. But in all the other cases, this is a real expense eating away at cash flow and wealth. Even if you pay cash for a home there is still a cost of capital to the investment costs, plus taxes, utilities, maintenance, and heaven forbid repairs if something should go wrong such as a water leak. There is a reason many home insurance companies drop vacant homes from their rolls, or significantly increase the premium.

During the run-up to the bubble, when people thought houses were guaranteed to sell in 7 days, a vacant house was not necessarily a bad plan, but today, homes need to show their best. And vacant home rarely show as well as furnished homes. One of the homes I went to yesterday had filthy carpets, sticky countertops, and the only blinds that remained with the house were those that were broken. My client instantly knew the property had not been cared for. The price expectation went down a solid 10% upon seeing the condition. (If this is what I see, what do I not see?)

There is not doubt that there will always be some vacant homes on the market, but if you need to leave your home vacant: Maintain it like you live there. Keep it fresh and clean. Run water in all the sinks and tubs once a week to keep the gasses from come through the pipes. Furnish it as best you can. If it looks great when it is vacant, buyers will know you cared about the home when you lived there.

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