Market Impressions

I promised a sneak peak at the August numbers. And, overall, they're looking good. The number of closed sales looks like it stayed pretty close to July numbers. But those were good numbers overall. Inventory seems to have dropped significantly in most markets. Final numbers will be out next week and I'll have a more detailed analysis then.

And, while I'm giving you impressions, here are a few things that hit me after showing dozens of homes over the weekend.

• The showing instructions provided for many of the real estate agents were often wrong. There were a lot of people in homes where the listing agent had said they were vacant or out of town. Surprises are never a good thing!
• Overall, foreclosures are priced significantly below the rest of the market. There are a few banks who still aren't getting it. But most have priced these homes to move! However, most foreclosures will require, at a minimum new paint and carpet throughout the house.
• Short sale pricing is all over the map. And, many of the properties where the bank has already approved the short sale price are going to actually sell for much less. Or, the banks will not accept the offers and it will end up in foreclosure (at a much lower price).
• There were a substantial number of short sales where it was clear an offer had disappeared after buyers gave in to frustration when the bank took too long to make a decision. I suspect the real surprise is that there weren't more of those!
• For the first time in a very long time, we ran into other agents with clients showing the same homes at about the same time. That's got to be a good sign!

Buyer Avoidance

I'm fully booked this weekend showing properties to potential buyers.

Great news, right?

Here's the thing, out of all those buyers, not one of them wants to see anything in Fauquier, Culpeper, Rappahannock or Warren Counties.

Next week I'm going to do a very, very specific analysis between a few houses in comparable subdivisions in Fauquier, Prince William and Loudon counties. I think the price comparisons will be surprising to a lot of people.

Other Coming Attractions Next Week:

• Early Peek at August Numbers
• Poplar Springs Efforts to Go Green
• Re-inventing Warrenton

Have a wonderful Labor Day weekend!

No Foot Traffic for Toll, or Anyone Else

I always enjoy hearing Robert Toll, CEO of Toll Brothers, on his quarterly conference calls. He's always refreshingly honest and will undoubtedly make me laugh out loud at some point during the call. And the one this week was no exception.

"With respect to traffic, it’s still dismal. Traffic is -- it’s consistent, however. It has not gotten any worse for the last three quarters, so we feel as though we’ve stabilized but I don’t want to give you the indication that that makes us feel good. It’s as though we walked into the tar pits, sunk up to our nose, our feet are touching a ledge and we are not going down any further but that sure doesn’t make us feel that comfortable...But we are heartened that at least we are able to spook up the traffic. That indicates that there are buyers out there waiting to be nudged. It will take a general turn in confidence for the big nudge to occur but sooner or later, it will occur."

 He's hit the nail on the head as far as traffic goes. Here's a chart that illustrates this at a local level for Prince William County:

There is still a huge gap between where inventory is and the number of sales. And this is after a huge jump in sales in Prince William recently. If you look at nearby counties the discrepancy is often even more jarring.

Unfortunately, there aren't any charts that give us foot traffic statistics. But this clearly illustrates the dilemna for the market. Excess supply in a free market economy inevitably pushes down prices. As long as this gap is as large as it is currently, there's no sign of a bottom from a price perspective.

It's a good thing Robert Toll has a good sense of humor!

July Number and More Good News

I love good news and, fortunately, there's plenty available in this month's real estate statistics. The trends, across the board, are up! And, not only that, but if you look at trends over the last six months you see a longer term upward trend that seems to be developing.

Take a look at Culpeper County for example:

Month                   # Listings           New Listings       New Contracts    Solds 

This is great news! The most important thing here is the continued downward trend of inventory. Solds are generally trending upwards, although not quite as strongly. But it's a good news story.

Fauquier is also looking good:

02/08	730	153	44	32
03/08	734	140	56	35
04/08	764	168	68	47
05/08	764	145	79	49
06/08	753	128	61	67
07/08	745	141	68	117

In Fauquier the decrease in inventory is less convincing. But the steady increase in sales is helping to make up for that. If it continues we'll ultimately see a decrease on the inventory side as well.

Now the caveat, of course!

We are at the end of the summer, the busiest home buying period. We may very well begin to see the inventory numbers begin to rise again after August and see sales numbers fall.

Prices are nowhere near stabilizing.

But in a year of nothing but doom and gloom, there's a little good news here!

Lake Whippoorwill Update

Lake Whippoorwill is a subdivision on the DC side of Warrenton, just off of 605. The tax records show 122 homes in this community. The homes here are mostly colonials, generally on lots between 1 and 2 acres.

Culpeper Star Exponent Article

The Culpeper Star Exponent carried an update on the local housing market yesterday. If you've been regularly reading this blog you won't be surprised by most of what you read there! Wish they'd made the reference to this blog a hot link!

People charging money to "help" distressed homeowners with short sale and/or foreclosure information scum! This article over the weekend in the Washington Post talks about this racket.

Why I want to be the Rickie Lee Jones of real estate blogging!

Looking Deeper at Culpeper June Sales

The Culpeper numbers showed a healthy jump in sales year over year. I've been wondering what made up those numbers and so decided to do some additional analysis.

38 out of those 57 sales were foreclosures. That's two thirds of those sales.

While an increase in sales and a decrease in inventory always qualifies as good news, this probably doesn't warrant throwing a party to celebrate the end of the real estate downturn.

What this means is that two thirds of those homes sold at very steeply discounted prices. Here are a couple of examples:

This home was purchased brand new in October of 2005 for $345,000. It sold in June as a foreclosure for $149,000.

This home was purchased new in November of 2006 for $448,000. It sold in June as a foreclosure for $230,100.

Those are discounts of 57% and 48%. I analyzed 10 of these foreclosure sales. The average discount from the original sales price was 48.8%.

If your the guy who lives next door and you want to sell your home, how do you compete? Most homeowners can't or won't sell their home for half of what they bought it.

So, yes, it's good news that more homes are selling and inventory is shrinking. If they sell all the foreclosures, there's less downward pressure on pricing.

But right now, if you have to sell, be prepared to price your home very, very aggressively. The competition is based on price and it's vicious!

One quick note, I'll be in the Wildwood Forest subdivision in Amissville this Saturday afternoon from 1 to 3 p.m. If you've got a question on the real estate market in general, your home in particular or just want me to look into my crystal ball, let me know. I'm bringing free cloth shopping bags for everyone I talk to. Give me a call at 540-270-2742 if you'd like to chat while I'm in the neighborhood!

June Numbers

The official June numbers have been released for this area of Virginia. Let's take a look, by county, at what they have to tell us.

First, Culpeper County. Compared to a year ago, inventory is down (732 now vs. 784 then). New contracts written have jumped (61 now vs. 47 then) and we see the same thing with solds (57 vs, 31). It's all good news! The only thing we see that isn't positive is that we're still adding new listings at a faster clip than I'd like. There were 130 new listings in June, compared to 113 a year ago. Still, when you look at year over year numbers, this is some of the best news we've seen in awhile.

Fauquier county presents a more mixed picture. The great news is Fauquier is inventory. A year ago we were looking at 865 homes on the market. Now we're down to 753. That's a 13% reduction in inventory. Good news! And the trend seems likely to continue. There were 128 new listings this month compared to 171 a year ago. The mixed part is the number of contracts and sales. There were 61 new contracts written this month compared to 65 a year ago. And 67 homes sold compared to 65 a year ago. Those aren't terrible numbers, but they're not telling as good a story as the other numbers.

Prince William County is where things are really hopping! This is the best news of any jurisidiction. And it follows the nationwide trend of this housing recovery happening closer to urban centers. Inventory is down from a year ago (5501 vs. 5703). But look at the contracts written and the number of solds! 987 new contracts were written in June. Compare that to last June when there were only 454. That's an increase of over 100%. And the solds tell a similar story. The numbers in June were 834 vs. 456 a year ago. The number of new listings is also decreasing 1448 now vs. 1539 in 2007. There's not a spec of bad news to be found in Prince William! Anecdotal evidence supports this. There are numerous examples of not only quick sales, but multiple offers on the most attractively priced properties.

Rappahannock remains in its own little world! Inventory is up from 79 to 85. New listings are almost identical to a year ago (17 now, 16 then). New contracts are down from 7 a year ago to 4 now.  Solds are exactly the same at 4. In other words things remain much the same in Rappahannock County.

This is the most positive report I've seen in a long time. There's no way to look at these numbers and not be optimistic.  I'm going to go out on a limb here and say that in Prince William County they may have seen the bottom. We won't know for sure until at least 6 months from now, but it's possible.

By the way, if you're a seller that doesn't mean you can raise your price! The properties priced CORRECTLY FOR THE MARKET are selling. There are still plenty of them sitting there!

Ben Stein Takes the Long View

It's always interesting to find someone who isn't caught up in the crowd and parroting whatever the conventional wisdom is. Ben Stein, I think, has it about right in this Yahoo column.

Ben says he's a buyer in this real estate market! (Although I'm betting a thoughtful, selective buyer!)

Maybe this will become the new conventional wisdom?!

Amissville/Jeffersonton Price Per Square Foot

A recent lunch with a banker friend got me curious about current prices per square foot in specific local subdivisions. Apparently a builder had recently told my friend that he couldn't build a house (including land acquisition costs) for as little as the current price per square foot on existing homes. If you're a builder, that's trouble!

So, I'm going to do a series of posts, not necessarily sequential, looking at several subdivisions in a local area and what the average sale price per square foot looks like.

First I should define a few things. I'm looking at specific subdivisions because they are more uniform. It's easier to make comparisons without having to factor out the amount of land. They are usually built at about the same time. All in all, they are more likely to result in more accurate comparisons.

The sale price that I'm using is the sold price as taken from the Multiple Listing Service (MLS) minus any money paid by the seller to help with closing costs. So, it's a net sales price.

The square footage information is taken from the tax records. That means that occasionally the square footage is going to be inaccurate if, say, a homeowner finished the basement without getting the proper permits.

All that said, let's take a look at three subdivisions in the Amissville and Jeffersonton area.

South Wales had the largest volume of sales of the subdivisions I looked at with five sales since 1/1/2008. The average price per square foot of the homes sold is $118.89.

Quail Ridge had four homes sold. The average price per square foot there is $110.50.

Wildwood Forest showed only two homes. That makes the data more suspect here as the two homes had enough differences that I don't view this number as very useful. But, for what it's worth, the price per square foot, on average, was $125.91.

I wanted to look at two additional subdivisions in this area, Deerfield and Erinbrook, but there weren't even two sales in either of these (at least per the MLS).

If you live in the Amissville or Jeffersonton area and have a home for sale, you might consider taking a look at how your home compares with these numbers. Is it time for a price reduction?

If your a buyer, keep these numbers in mind as you look for the house you want, then compare the listing price to these numbers.

Behind the Numbers

Every month in this space I give you the statistics on what the market is doing in Culpeper, Fauquier, Rappahannock and Prince William counties. (With Warren thrown in occasionally!)

What I haven't really talked about is where this data comes from and what inherent flaws there might be in this data. It now seems like I'm overdue for that discussion.

Each month the data I use as the basis for my analysis comes from the Multiple Listing Service (MLS). The MLS that serves our area is called MRIS. The data in this system comes from what the agents input. They input their listings and they input the information when it gets sold.

So, here's the first weakness in the system, the human factor. People forget, get lazy, get busy, etc. It's the same problem with every system, anywhere, run by people!

There are brokerages that still don't list properties in the MLS. They are few and far between, but a few of them still exist. (By the way, if you really don't want your house to get sold, just keep it out of the MLS!)

Builders generally don't list every house they have for sale in the MLS. They'll list, perhaps, one of each model they have. So the MLS always understates the total inventory and seriously understates new construction inventory.

While many For Sale By Owner (FSBO) properties are now in the MLS, many more are still not, relying on the handwritten sign in the yard. Again, this understates inventory.

But for whatever flaws there are, the MLS is the best system we've got. It's as close as I can get to getting a total snapshot of the market at any given time.

Too Much Inventory - May Numbers

There's a constant refrain here. And, I know I sound like a record stuck in a groove. But May numbers continue to reinforce that we've still got too much inventory.

Culpeper County shows we're only eight units off where we were last year at this time. The good news is that sales jumped substantially this month. And, I'm not using month over month comparisons, but year over year. Both new contracts and closed sales took a big jump. But that pace is going to need to continue for months in order to start to see the reduction in inventory we need in order to stabilize prices.

In Fauquier County last year at this point in time we hit our highest number ever for inventory. Unlike Culpeper, we've come down substantially. A year ago there were 867 homes for sale and now it's only 764. The contracts written and the sales closed are both also up, if not quite as much as in Culpeper.

Prince William County actually has a large increase in inventory. While contracts and sales are up, the increase in inventory means no firming up of prices there any time soon. Since Prince William County is one of the hardest hit counties in Virginia for foreclosures, this will likely take some time to resolve itself. But bargain hunters are out there.

Rappahannock County remains a place apart. The market is almost exactly where it was a year ago. Days on market are longer there as well, inventory is higher than it was several years ago. But it's a very different market than what we're seeing in the other three counties.

Our numbers reflect the national numbers pretty well. New contracts are up across the nation. The numbers you hear from NAR and from most of the national media are primarily comparing May, 2008 to April, 2008 and of course the numbers are going to go up. The more meaningful number is always year over year.

We've got some good signs out there. There are buyers out there. They're looking for bargains. They've got the right market for it.

Amissville House

It's time to tell another story about a specific local house!

This house is located in Amissville in Culpeper county on a quiet country road. As with many local properties, it was once part of a larger farm. And, in fact, one of the things I love about this house is the old farmhouse that is at its core.

It's been nicely renovated in ways that allow you to still see the original and it's special character. The second floor is all hardwood floors, a very rare thing these days, but fairly common in 1940 when this house was originally built. It sits on just under 2 acres with some nice fencing.

There are 4 bedrooms and 2 full baths. The kitchen is modern and large with lots of light. It's got that great front porch and some beautiful mature trees. In short, there's lots to love about this house.

For horse people, there's adjoining pasture that rents pretty cheaply. ($200/mo.)

The house sold in December, 2004 for $314,000 with a $9000 subsidy to the buyers to help with closing costs. It was on the market for 127 days before selling. In 2004, that was actually a long time. And, at that point in time the $9000 help for the buyers was also unusual.

It next sold in May of 2007. This time it was on the market for 292 days before being sold for $360,000.

It's back up for sale now. It's been for sale for 86 days. It was originally listed at $349,900 and is currently listed at $299,900. It's a short sale this time around, meaning that the owners owe more to the bank than the home will sell for. The possibility of foreclosure looms if the property does not sell.

If the home sells for full price (unlikely in this market) it will be 17% off the highest sales price. That's a little less than the price declines we've seen overall in Culpeper County.

I believe, overall, this home is a pretty good value in this market. Part of why it's lingering at this price is the fact that it's a short sale. Real estate agents are reluctant to show short sale properties. There are a number of reasons for this, including a lengthy/complex process that frustrates their clients and usually produces a smaller paycheck for them.

It may also be sitting because of the new home that's being built nearby. While there's enough distance between them that it's not intrusive if you're a city person; people moving out here often want no sign that neighbors even exist!

Still, for someone with horses and not a big house hunting budget, I think this has a lot of appeal.

Surrounding sellers will no doubt be unhappy with the low price on this. If this sells for under $300K, and it ultimately will, many surrounding properties are clearly overpriced. Or, at least, that's what potential buyers and appraisers are likely to think!

Local Government Role

The Fauquier Times Democrat had an editorial this week that was right on the mark. This is a great opportunity for local governments to address affordable housing.

The editorial talks about what's being done in Prince William and Fairfax counties. The Prince William model may work better here. But maybe there's a third way.

I'd like to see a public/private partnership between Fauquier County and Habitat for Humanity. The two groups together could certainly do more than either group could on its own. And, while I mention Fauquier County here, because that's what the editorial addressed, this solution could just as easily be applied to Culpeper.

There's a growing inventory of vacant homes in the area. These vacancies hurt all existing homeowners. And, there's a huge pool of potential home owners that have been driven out of the market because of lack of affordability.

Seems to me there are potential solutions here for everybody!

Cancelled Projects Equals Good News

The Culpeper Star Exponent reports that two condominium projects slated for Culpeper have been pulled due to current economic conditions as well as the state of the local real estate market. It's not that Culpeper wouldn't be better off with more condominiums in the housing mix, but it's definitely the wrong time. For weary sellers, less competition is good news!

And, that's only a small piece of the good news in the real estate market.

Fannie Mae and Freddie Mac have dropped their "declining markets" indicator. Since just about every local jurisdiction had been labeled a declining market that's big! This indicator meant buyers had to come up with more cash to buy homes in this area. In a market already starved for buyers, this was not helping! Don't expect a flood of new buyers as a result of this, but it should help out a few buyers who were short that extra cash.

And, let me leave you with one more piece of good news. No housing market is completely depressed or completely robust. There are always pockets that are thriving even in the toughest markets. One of those areas here is the rental market. Rentals that are well-priced and in good condition are moving, sometimes pretty quickly. The summer season should be a good one for the rental business. And some sellers might be well-advised to consider renting out their properties that aren't selling.

Misconceptions

People talk to me all the time about real estate. Obviously customer and clients do that. But people who barely know me but know I'm an agent also do that. That's a good thing! I like hearing what's on people's minds and how they're seeing the current market.

Lately I've been hearing some things that don't quite ring true. So I thought I'd set the record straight.

First of all there's the current chart topper "I know that a bank will take any offer just to get rid of a foreclosure." It's a lovely thought, but just not true. In fact, there is quite a range of policy on this among the various lenders. While, in theory, no bank wants to hold a property a day longer than they have to, each lender has its own policy as to what's an acceptable offer. That may be a percentage below the listing price or it may be based on a percentage loss they are willing to absorb. It may be a combination of factors, including how long the property has been on the market.

Unfortunately, no one hard and fast rule covers this. But be assured, I've seen banks reject lowball offers, even perfectly reasonable ones!

Here's what sellers tell me a lot these days. "I know you're probably right about the price, but I just want to try it at this higher price for a little while."

Here's the problem. Prices are declining. So, while you're sitting on an overpriced listing that no one comes to see, prices have gone down further. Now, just to catch up to the market, you need to come down further in price than where I originally suggested. All you've done is reduce your likely profit.

And, of course, real estate agents have their own misconceptions. The one you'll hear most often these days is "It's a great time to buy a house." One agent last week told me he's never stopped saying that! I'm guessing his clients who listened to him a year or two ago may not be thanking him now!

It's a great time to buy a house if you're likely to stay in it at least five years. Given current market conditions and where I think we're going, I still won't guarantee anybody will make money in five years. But I think, if you include the tax advantages, you have an excellent chance of breaking even or even a little better.

If you're likely to get transferred in a year or two, it is clearly not a good time to buy! If you're looking to flip a house for a quick profit it is definitely a very bad time to buy! If you're looking for a long term investment, say a rental income property, it's a very good time to buy.

And, as always, what you buy and where you buy make a huge difference!

April Numbers

The April numbers are finalized.  I did a sneak preview for you about ten days ago, before the numbers were official. And, the picture hasn't changed much.

In every county, the pattern is the same. Inventory has risen again, as has the number of new listings. After a dismal month in terms of sales in March, April looks better, both in terms of new contracts written and sales closed. But the number of houses sold is not keeping pace with the new listings coming on the market.

Fauquier, Culpeper are each showing about 16 months of inventory. Warren is looking worse at 24 months. Prince William is in the best shape at only 9 months. Rappahannock, being a special place, has about 3 years worth of inventory. But, again, the numbers generally don't give a very realistic picture of Rappahannock.

The more interesting comparison, of course, is year over year. Since real estate is very seasonal, that's always true. In general, inventory is higher than it was a year ago and sales are slower. There are some exceptions, but it's too soon to say if those are a blip or a true change in market conditions.

No bottom in sight would be my reading of current conditions. There is nothing to suggest we've turned a corner. (Although I remain hopeful that I'm wrong!)

Another Victim of the Housing Downturn?

There's a lot of fall out from the real estate market beyond what you read in the headlines. Sure, families are losing homes. Homebuilders are going broker or laying people off in droves. And, all the tradesmen who work on those homes are scrambling as well.

But there are some less visible casualties as well.

Newspapers are hurting. The big papers have gotten the press attention, papers like the Star Tribune from my home state of Minnesota. A lot of revenue for newspapers comes from the real estate agents and real estate companies who advertise with them. The truth is, a lot of that advertising should have been disappearing eons ago given how much less effective a medium it is these days for attracting buyers. But hard times has forced most agents and companies to cut back their advertising substantially, or, in some cases, stop it altogether.

And, while the big papers make the news when they're in trouble, the small, local papers are not immune.

The Times Newspapers here locally have cut staff. (Full disclosure: I'm a blogger for the Times Newspapers and a former columnist.) If you get the Fauquier Times Democrat or the Rappahannock News you've seen the size of your paper considerably reduced. In fact, given that the two reporters for the Rappahannock News are gone, the editor is leaving soon and the population of the county is not growing, how long can the paper continue to be economically viable?

We're not to the end of the carnage from this mess yet. The damage is more widespread than most people realize and hits industries no one has really thought about.

Where Are the Move Up Buyers?

I walk talking to a colleague a couple of days ago about how the lower end of the market is where all the deals are being done right now. A house under $300K has a significantly better chance of selling than anything above it does. (Of the 41 houses sold in April in Fauquier County, half were below $300K. Another 10 were between $300K and $400K.)

She said that's good, because then the people who sold those houses will move up and so on and so forth. That's how the cycle works. And, I agreed initially. But as we discussed it further it occurred to me that the cycle seems to be broken right now.

There are still quite a few first time home buyers out there, and, an increasing number of investors. Typically the houses they buy are starter homes and then the sellers of those home move up the rung to a larger home.

But almost every home I show these days is empty. And, a large number of them are bank owned or on their way there. There are no owners living in those homes to move up to the next level of home ownership. They've already left and, in most cases, it was to go back to renting.

There are some empty homes where the owners got transferred and are gone because they're buying another home in another community. But a lot of the sales of starter homes are not producing the normal "move up" buyer that we usually see.

How We Got Here

John Tuccillo was once the chief economist for NAR, a position currently held by Lawrence Yun. I continue to find John's insights some of the most accurate and enlightening out there.

This post on his web site goes through how we got into this mess and what John sees as the prospects going forward. I think it's one of the best analyses I've seen.

One of the most interesting pieces of this is the third point about how large national home builders began to replace family businesses and how they're driven by different economic realities. It's a piece of this puzzle I hadn't heard before and I think it's right on.

I'll be interested in hearing what you think; what John's gotten right and where your opinion differs.