Lockboxes – Limitations

I recently posted a study on lockboxes in the Charlottesville area on our Nest Report site. We keep that information up to date all the time in house. But we don’t release it very often in the public realm. The reason for that is that sometimes information exists that is hard to interpret, and which can include inaccuracies. This is one of those areas. We like our lockbox data, but I want to explain the limitations and potential errors.

First and foremost, these boxes are great, and I can’t imagine my job without them. In terms of functionality, they rank super high in the customer satisfaction ratings. If you ask agents if they like them, they probably don’t even think much about them, because they just plain work… almost all the time.

A primer on how these boxes work. There are two parts to the lockbox, There is the lockbox itself which stores the actual key for the house and stays attached to a doorknob or rail. The other half is the actual key that agents carry with them. When an agent arrives at a listing, a passcode is entered into the key and it communicates via IR technology to the lockbox which subsequently opens. The key then stores the lockbox serial number in its memory along Google Image Result for.jpg with a time stamp. Each evening, the key must communicate via either computer or phone line with GE who takes that serial number and time stamp and alerts the listing agent of who showed which house and when.

Then, Nest collects that data from GE and puts together the trendline info you saw in the article. But there are some real limitations to the information.

Agent cooperation: The key that is used to open the lockbox is sometimes a smart phone, and sometimes a little black box like the one pictured here. When Real Estate Keys.jpg it is a phone, no problem. The phone automatically updates pretty much instantly that the house is being shown. But… if the little black box is being used, the agent needs to take some action for the upload to occur. Let’s say an agent shows a listing, but doesn’t go out for another week or so to show more clients. That agent doesn’t NEED to update their key, and so the info takes as much as a few weeks to update. The listing agent finds out 10 days later that their home was shown. And our data gets updated 2 weeks late.

Workaround: We looked every week for several months at the weekly data. We compared Week X data at the end of the period, a week later, two weeks later and so on out about 2 months or so. What we found is that at the end of the week, as few as 60% of showings are accounted for. BUT, within 2 weeks, roughly 95% of showings are in the system. So, we just ignore the most recent two weeks. We start paying attention about 14 days out. As more and more agents are going smart phone, the time delay is going down.

Agents opening boxes, but not showing property: You may not think this is a problem, but it is. Remember, we can’t see what boxes are being opened, or by whom, or why. So, an agent who is listing a new property may very well be in his office and open a lockbox to check that there is no key inside. He then may go to the house and open it again to insert a key. He may then go back with a photographer, or a contractor, or a floor plan artist. The house still isn’t listed, and a lockbox associated with it has been opened 5 times.

Now, think about the other end. When a house sells, typically a buyer looks at a house multiple times, then puts in an offer. After under contract, the buyer goes back for at least one inspection. Plus a contractor to price repairs. Plus the termite inspector. Plus the listing agent getting the key out. Again, this is 4 openings of a lockbox that do not count as a showing. All AFTER the contract is written.

How about the listing agent. On a vacant property, a listing agent might check the property as often as once every other week. Again, openings that don’t count as showings.

So, what is the trendline good for? Lots. All these openings that don’t count… They provide us with a baseline. Even if no one shows a single house in all of Charlottesville, there are still going to be some openings. You just get used to this. So what we look at is not the actual number of openings, but the change in that number from period to period. We are looking to see if showings are up or down from last week to this week and from this time last year to this week this year.

But, because there is a baseline, and we can’t know EXACTLY what that number is, it means that a 5% shift is really MORE than a 5% shift. Up or Down.

Take the change from the weeks of Sept 1st to the week of Sept 8th. The lockboxes showed a decrease from 1390 to 1299, a decrease of 6.5%. BUT, if the number of those openings that wasn’t really a showing was say 400 in each period, then the real shift is from 990 to 899. And that difference is 9.2%. However, it is easier and more consistent for us to just use the actual numbers than for us to try and determine what the “true showing value is” plus… we’d never get it right.

3rd Quarter Nest Report

Each quarter, as I hunker down with numbers, I get a little more ambitious. At the end of the process, I think, “I hope I didn’t include too much.”

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.

Mid-Year Report – Condos

On Friday, we put the finishing touches on the Nest Report, Nest Realty Group’s Midyear report. (For a pdf version, click here.)

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.


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.)

The City By Month

For about two years now, I have been creating reports on various neighborhoods throughout the city and subdivisions in Albemarle County. One of the things I have done is to look at homes by the price per square foot, hoping to minimize as much as possible any bias toward the product mix of homes being sold. Last year, big homes were selling, this year, it is the entry level homes that are selling. (When I can get time on my PC and do a histogram in Excel I will. Apple number crunching bites.) One of the things I haven’t done, until now, is to look at the entire city of Charlottesville as a single unit in the same manner.

At first, when I looked at this graph, I was shocked. I thought for sure the market had moved more than the graph appears to demonstrate. Then I calculated out the percentage shifts and realized that actually the market is about where most people thought. In general, pricing in the City is down. And, as known, the pricing is, at best, erratic and, at times, somewhat irrational. The most obvious part of this graph is a quick look at Days On the Market (DOM). We have known that it was going up, and this sure makes that obvious. I had originally figured that I would need to do two scales, one for DOM, and one for Price per S.F. But alas, the DOM actually exceeded the Price / S.F. at one point.

The graph below is fairly straight forward. I have pulled every detached home that has sold since January 1, 2005 in the city of Charlottesville. I then calculated the Price / S.F. for each home and then pulled the average $/SF and average DOM for every month since January, 2005. The results were then graphed.

City_Monthly.jpg When you look at the green line ($/SF) it looks fairly flat, but in reality, that is just the scale. In fact, I looked at the rise and fall over every three month period during the 05-09 years, and found 5 periods that the price showed over 10% drops during 3 months. There were also nine corresponding positive periods in which the prices rose more than 10% over a three month period. Again, erratic behavior.

But as you look at the line over time, you see the trend downward. From the peak in April, 2006 to current month, we find a price adjustment of roughly 10.5%.

I would have guessed a larger devaluation of the market overall, but if you look back three months to March, 2009 the price was showing values 38% below today’s prices. Obviously, the city has not gone up nearly 40% in three months. Instead, what you are seeing is a light month of transactions where a single deal can dramatically change the average.

So where should this line trend in the next few months? I would be surprised if we see what looks like a positive trend continue much more. I think the city has found a good number of sales in lower priced properties for the entry level buyer. At the time of this writing, there are 85 properties under contract in the City. While this is not similar to 2005, it is a fair number of transactions occurring.

I have addressed this numerous times in other posts, but I continue to shout it, because it matters so much: The big “What If” for the city is the unemployment rate. We are still at the top of the state for our numbers, but the rates are no longer as good as they once were. We are way up. The most recent Bureau of Labor Statistics shows Charlottesville as the healthiest MSA in the state with civilian unemployment rates of 5.5%, but that is a far cry from one year ago when we were at 2.5%. This is going to play a major role at how many homebuyers are in the market. No one buys a home when they are afraid of losing all their income. So, we need to keep an eye on it. The BLS numbers project April to be lower than March, but most analysts are projecting the US rate to rise through the end of 2009.

A New Section

I have been trying to find an opportunity to get this done for some time now. Well, today is your lucky day. You will note that I now have a new page “Report Downloads” at the top. This section will provide you with access to all of my published quarterly reports from the past. I have added all my 2008 reports as well as some other interesting things. Enjoy.

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