2009 Market Projections

Originally Published January 4, 2009

Just saw an article that was published by CNN that showed the 2009 projections for the worst 10 cities in America for home prices in 2009. Of the 10 cities listed, 8 were in California, plus Miami, and Washington DC. 8 in one state. Yes, it is the largest population, but that is seriously messed up. Foreclosures were the biggest problem cited in the article. In Stockton, CA one in every 94 homes got a foreclosure notice IN NOVEMBER. Over 1% in one month… Can’t be good. I am blessed to be in Charlottesville.

Prognosticators and The Charlottesville Market

Originally Published May 8, 2008

I’m not sure if I believe that the media tracks trends or causes them. No doubt that USA Today claimed the real estate market nationally was going to crumble. Of course, they started saying it in 2003 before the largest run up in history. But, you have to listen to some one, so it might as well be the media. CNN and Money Magazine have just released projections on some 380+ U.S. markets and their projections for 2008 and 2009. Read on to see how Charlottesville fared.

Oh goody, another list, and another prognostication that may or may not be right. But, let’s hope this one is.

According to a CNN/Money report that was released recently tracked 381 MSAs across the country and predicted the next two years of real estate price changes. Additionally, they showed some stats I had not yet seen. Among that information is the fact that the WORST 12 month price change in Charlottesville history since 1980 was in 1982 when house prices fell a whopping 2.7%. Now, I don’t know about your financial advisor, but I know I’ve had stock years a lot worse than that. In 1982 mortgage rates were well into the double digits, and houses weren’t selling. It was getting better, but the “good years” really didn’t get going in the housing market until 1990 when mortgage rates got to reasonable levels.

Some interesting predictions: I am listing here the city in Virginia followed by a 2008 prediction and a 2009 prediction for real estate values in those areas.

City (MSA)             2008         2009
Blacksburg                +1.3%         +1.0%
Charlottesville   +0.3%       +0.1%
Danville                     +1.3%         +1.0%
Harrisonburg           -4.0%         -4.2%
Lynchburg                +0.4%         +0.0%
Richmond            -1.2%            -1.3%
Roanoke                    +1.2%          +1.3%
Virginia Beach         -4.9%           -6.2%
Winchester            -7.6%           -6.3%

And Northern Virginia / Washington DC????
-12.4%         -7.2%

It may not be the greatest gain ever, but staying in positive territory while the rest of the nation is in decline is pretty good.

The bottom 10 cities in the country contain 5 cities in Florida, topped by Miami with a predicted 23.8% loss in 2008 alone and an additional 18.2% loss in 2009. That would bring a $500,000 home down to less than $315,000… Equity is gone.  Charlottesville should be happy if we have two years of level prices. Large sways one way or another are never good.

VOWs and Real Estate

Originally Published on May 28, 2008
Earlier this week, the National Association of Realtors and the Department of Justice came to a settlement regarding access to the Multiple Listing Services or MLS’s around the country. The case centered around Realtors denying access to an MLS by non-full service brokers who typically discount their fees. One of the specific changes deals with a group of providers who operate Virtual Office Web sites or VOWs. What they are and why they exist may surprise you. It certainly is not to lower the transactional costs of real estate.

In the CNN report that I read first, the DOJ settlement sounds like little more than an agreement to stop bad mouthing limited service agencies. In fact, there are no punitive aspects of the settlement and no admission of wrongdoing. If you can survive a DOJ inquest with this outcome, I’d say, “Well done.” However, the other reports that I have read discuss who will benefit from the settlement, and I find the answers to be rather odd.
One company Sawbuck Realty claims that they have a new way of saving money for real estate buyers. I have gone through their web site and can’t quite figure out where the big savings are, and certainly can’t see where the service is or the advantage. But it is an interesting enough model to discuss here.

A full service real estate agent is one who represents you through the full process of buying or selling a home. In buying a home, this includes being prepared to talk with your or refer you to someone who can handle the financial questions regarding qualifying. It includes educating a client about the market, the neigborhoods, the builders, the schools, everything. For persons moving from another city, this is enormously important. The full service agent helps to cull the data so you don’t have to. Previewing property is but one thing an agent does for his or her client. Being able to provide information about homes already sold (and not just prices and square footage). The full service agent helps to understand the right price to offer on a good home once it has been identified. In contract negotiations, the full service agent creates a Chinese Wall to keep the buyer at a distance from a listing agent or seller and maintain control. Once a contract is obtained, the agent is responsible for helping find the professionals for the home inspection, the insurance companies, further negotiations on agreed repairs, etc… Clearing the attorney and getting through closing with financing in place.

A limited service agency is not necessarily a discount broker. The term discount broker simply refers to someone who charges a lower than traditional rate for transactions. These may be set fees, they may still be a percentage commission. In some sense, all agents are discount brokers in that commission schedules are always negotiable. For instance, clients that list a home and purchase a home with me always receive a rebate at the second closing.

In limited service agency, real estate agents or brokers provide an a la carte menu of services and charge for them. One broker in particular will list a home on the MLS for a set low fee. However, in the contract it states that if you call and talk to an actual agent, there is an automatic $2,500 fee assessed. For sellers who believe they can do everything themselves and do not need any representation, this is not always a bad option, and money can be saved.

But now on top of full service and limited service agency enters a no service agent on a Virtual Office Web or VOW. Sawbuck Realty is just such a company. Their web site discusses why agents are important, and then incorrectly discusses kickbacks that they claim take place in the market. It is illegal in RESPA to take a kick back from a mortgage lender or a settlement company, so fact is, nationally, this isn’t happening. Real Estate firms are indeed forming separate companies that own mortgage brokers or settlement fees, and those relationships are spelled out very clearly, and agents are not allowed to be compensated on their use. The advantage to the agent and consumer is that many of these mortgage brokers answer almost exclusively to a single firm, and thus their customer service and committement is higher to those agents. It is not a monetary thing for the agents.

Sawbuck has formed relationships with companies and in return have negotiated lower fees. Interestingly, agents do this all the time, but Sawbuck seems to ignore this. I work with prefered lenders all the time on new construction projects, but never are clients required to use them. It is always at the discretion of the client.

The Sawbuck model is simply a web site to collect names and e-mail addresses. They actually provide no service at all. They interview agents who they claim are experts in their markets; however, nowhere do they define the requirements for these experts. You fill out the web registration and your name is SOLD to an agent in your area. It’s that simple. It is nothing more than a referral site. Wonder how much you were sold for? If you are buying a $400,000 home, you were just sold for around $3,000. (Full disclosure here: I do not work with Sawbuck, and they may take less than the industry norm…. or maybe even more… There are plenty of corporate relocation companies that take $4,200 on this size transaction.) Now when you meet with your agent, you have no ability to negotiate a fee. Keep in mind the agent just lost $3,000 of their commission. This was the buyer’s money. But they never knew that they were going to pay a fee. In fact, the web site says that their service is absolutely free.

Working with any agent buyers and sellers must always keep in mind that fees are negotiable. Unfortunately, signing on with a VOW gives your negotiating power away. If interviewing agents is all Sawbuck does, I’d Google for some questions to ask agents and move on from there.

Another List to Belong To….

Originally Published April 9, 2008

Well, I’m pretty sure this list isn’t going to make CNN’s Headline News or even NBC29 news, but it’s still pretty cool. It is actually a CNN list after all… #1 on the new list – Bellevue, Washington #2 Georgetown, Texas and #3, Buford, GA… Where is Charlottesville? … #18

OK, so it isn’t “The greatest place on earth to live.” And we didn’t come in #1, but it’s actually a pretty good list, and a pretty good one to be ranked on.

We are #18 on CNN Money’s new list of “Best places to live and launch”. These are the top 100 towns to launch a new business from.  This is a survey of places in the US that are friendly to start up businesses. Although in reading through the first several towns, it appears that it is more of a list of towns without taxes. Not that lack of taxes are a bad thing..

From the CNN Money web site…here is what they have to say about us.


Population: 40,877
Pro: A lively college town
Con: Served by a small airport

Home to the University of Virginia and Thomas Jefferson’s Monticello, Charlottesville is also a business-minded city with a diversity of industries, including manufacturing, medical services, life sciences, and technology. High-tech businesses in the area generate an estimated $4 billion in annual revenues.

The city’s Industrial Development Authority helps finance businesses by issuing tax-exempt industrial development revenue bonds with low interest rates. SCORE (the Service Core of Retired Executives) keeps its local office in Charlottesville’s Chamber of Commerce Center, and counsels entrepreneurs and business leaders on topics ranging from taxes to human resources. In addition, there are federal contracting preferences in certain HUBzones (historically underutilized business zones) in the area.

A lively college town, the Charlottesville is full of arts, culture, and shopping venues featuring antiques shops and clothing boutiques. Outdoor enthusiasts will love the local rivers and lakes, where they can sail, kayak, canoe, and fish. -Kelsey Abbott


While I won’t deny anything stated above, I think they missed a lot of the great things about Charlottesille..

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