Topics for June
- GLOBAL TRENDS HIT HOME
- THE DYNAMICS OF HOME FLIPPING
- A FEW FINANCING TIPS
- RECENT MARKET STATISTICS
TAMPA BAY is in the TOP 10 U.S. CITIES SEARCHED BY INTERNATIONAL CONSUMERS
Realtor.com has released data from a recent analysis of global consumer searches: 1st place was Miami, 5th was Orlando, and TAMPA BAY is 7th!… exceeding even the most enthusiastic expectations of real estate professionals in the global arena.
One such group is the Pinellas International Council, which operates under the umbrella of the Pinellas Realtor Organization. The PIC mission is to promote our area to other global real estate organizations so that we generate worldwide recognition of our beautiful Gulf Coast of Florida, our unmatched location and access, our opportunities for living, vacation, retirement, investment, business growth, recreation, sports, beaches, our vibrant cultural community…. PIC promotes education and understanding to encourage investment in our home communities. These goals are being achieved, as confirmed by this recent Realtor.com survey, through educational programs, conventions, cultural exchange events, and professional interaction and cooperation with and among real estate professionals around the world. At any point in time PIC consists of approximately 12 volunteer and nominated directors and chair persons, PRO staff, and several hundred Realtor members and Affiliates who expand our own business opportunities and resources globally to benefit our consumers as well as our Realtor association, while exhibiting high professional standards and generating positive economic and cultural impact for the communities we serve.
Many accomplished Realtor members build on this focus by pursuing NAR’s (National Association of Realtors) CIPS Certification. Through this program a Realtor is awarded the Certified International Property Specialist certification, joining an inspiring network of professionals around the world who take extended courses, train and partner with associated global professionals, to provide an exclusive level of service, knowledge, resources and expertise to all our consumers, sellers and buyers …whether it’s our next door neighbor Harry, looking for a vacation home in Costa Rica, or Antoine over in France who wants a condo on St. Pete Beach. The recent count of CIPS designated real estate professionals totals about 2,804 worldwide, in 40 different countries including the USA. It is an elite group.
Home Flipping Trends
The Florida Realtor Association published an article in their Florida Realtors News on-line edition of 5/9/2016 containing the following statistics and sourcing about home flipping: RealtyTrac is a real estate information company, also an online marketplace for foreclosed and defaulted properties in the United States. It was founded in 1993 and is based in Irvine, California. First Quarter 2016 RealtyTrac reports Home Flipping at 6.6 % of single-family and condo sales nationwide, a 20% increase quarter-over-quarter and a 3% increase year-over-year…still 26% below the peak of home flipping activity, which was 9% of home sales in the first quarter of 2006…still impressive. A Home Flip, for this article, is a property that is sold in an arms-length transaction for a second time within one year of the most recent sale.
Home flipping can be positive for a housing market especially when it is responsible, but when it becomes too aggressive or careless financially, it can contribute to an unbalanced market or produce unrealistic pressure on the market. Controlling factors can include investors who use their own money, as a healthy degree of caution is built in. Also a controlling factor is the availability of third party financing for such transactions. Realty Trac reports 71% of home flippers currently pay cash while only 37% paid cash at the height of the flipping boom prefacing the recession..
RealtyTrac further reports that Florida metro areas have hit a new high, 1 in 10 homes are sales involving a flip. The Tampa Bay area exceeded the national average by 10.8%. Obviously there is profit to be had for the savvy real estate investor. I am working with a gentleman who currently owns about 250 properties which he is in some stage of flipping.
In short, responsible flipping activity can be a management-intensive and lucrative operation as well as a beneficial impetus to markets. Of course, like anything else, there can also be too much of a good thing.
Some market effects related to home flipping may prove unsettling…… Home shopping has turned out to be a frustrating operation for several Realtor friends and would-be home owners. Home flipping surely could contribute to this in some arenas, magnified by an already low inventory market. This includes all price ranges, but it seems most frequently to affect homes priced in lower to median price ranges and even up to around $300k or $350k, depending on the local market pricing parameters. It is a range where first time home buyers/owners and young families moving up might expect to purchase a home.
I understand some of my fellow agents are carrying a standard ‘as is ‘ purchase contract form for every home they arrange to show a buyer in some of our extreme low-inventory areas. They have learned if their buyer decides he wants to buy one of the properties they see that day, they should present a purchase offer then and there. If it is a particularly good or suitable property or reasonable buy, the property is likely to have another offer before the agent can return to her office to write one up.
Any buyer who needs a mortgage to finance his purchase faces competition from all-cash buyers. Cash is king for most home sellers, especially including REO bank owned situations, and the home flipper is most likely ready with his own cash funds available to make his offer appealing…. which leaves a lot of folks shut out of these “deals”, including first time home buyers and, young families. For them, home shopping becomes an ORdeal and sometimes a heart breaking one. That is why it is important buyers work with a professional, take the right steps in the right order, work closely with their agents to be ready to move quickly, and to obtain proper written proof of pre qualifying for their purchase through a mortgage originator or financial institution prior to the first shopping trip. That is why it is important that these buyers be able to find appropriate financing in the first place, which they can afford, so their offer to a seller to purchase his property is as strong as possible.
Cause and effect, opportunity or not, metro areas change. Only seasoned economists would try to predict how close we might come to some home flip pressure cooker effect. How will our communities and metro areas and demographics transform or evolve in years to come? What I can say for sure is the movement of real estate is a fascinating study and will always play a dominant role.
A few financing tips I have found useful in my business…..
VA Mortgage Guarantee Financing is available in our area for up to $750K for owner-occupied single family home purchase.
Conventional mortgages, both fixed and adjustable programs, may be re-negotiated once in their lifetime, generally for a fee somewhere around $350. For example, I have a conventional fixed rate mortgage for $400K at 4% annual fixed interest rate for 30 years, my principal and interest payment is $1908.66. Say I inherit some cash, or sell another property I own 3 years later and I am able to make a lump sum payment to principal in the amount of $200K. That leaves me with a $200K mortgage balance. I would be able that one time, to request my mortgage be re- amortized at the lowered principal amount of $200K. I pay my mortgage down to $200K principal balance and re amortize it over the remaining 27 years at 4% even if the market interest rates had increased since my original purchase….thus my new payment, over the remaining 27 years, would be $1010.42.
…Great Information….for example, for the buyer who wants to buy a retirement home, but for whatever reason he has not yet sold his home up north. He doesn’t want to be strapped with a big mortgage for life, and refinancing is expensive with additional risk that rates may be higher a year or so down the road.. This plan allows the buyer the flexibility to buy the retirement home now and substantially lower the mortgage payments once he retires or sells his other property without refinancing
Real Estate Statistics Summary
Now for a summary of recent Pinellas County Real Estate Statistics for April 2016, taken from information published monthly to Realtor members of our Pinellas Realtor Organization by CEO David Bennett.
Single Family Inventory is down 9.6% from April 2015 and Single Family property inventory is sitting at a 3.4 month supply for April 2016, the same as March 2016. Townhome/condo supply sits at a 4.3 months in April 2016 compared to 4.9 months in April 2015. Markets are moving across the board and buyers can continue to expect a very competitive Single Family market in Pinellas County for well priced listings. Comparisons are made on a year-over-year model so that seasonal fluctuations are not a factor of the analysis.
The number of closed sales for Single Family and Townhome/Condo combined for April 2016 was 2,202, up 4.8% from 2,102 in April 2015. Year-over-year, the Single Family closed sale segment was up 0.9% and the Townhome/Condo segment was up considerably more, 10.6%. County-wide Median Sale Price for Single Family was $200,000 this April, versus $180,000 last April, a substantial increase of 11.1%. Median Sale Price for the Townhome/Condo segment was up 9.1% from last April, at $138,000 for April 2016 versus $126,500 for April 2015.
New Listings for Single Family for April 2016 were 1,512, up 3.9% from last April, when they were 1,455. New Listings for Townhome/Condo for April 2016 were 952, up 3.9% from 916 in April 2015. Months Supply of Inventory for Single Family was way down again, 17.1% lower than last April. Months Supply of Inventory for Townhome/Condo was down 12.2% year-over-year. Active listings for April 2016 Single Family and Townhome/Condo combined were 7,035, down 7.0% from 7,562 in April 2015.
- Closed Sales April 2016, 2202/ April 2015, 2102, +4.8%
- Paid in Cash, April 2016,974/April 2015, 989, -1.5%
- New Listings, April 2016, 2464/April 2015, 2371, +3.9%
- Inventory (Active), April 2016, 7035/ April 2015,7562, -7.0%
(Representing nearly 7,000 members, the PINELLAS REALTOR® ORGANIZATION is one of the Tampa Bay area’s largest professional trade associations. The organization advances and promotes the real estate profession through professional development programs, government affairs, and political advocacy and maintains a high standard of conduct by real estate professionals through professional standards training and administration.)
BE SMART WHEN LISTING YOUR REAL ESTATE FOR SALE
Statistics are out for Pinellas County Real Estate Activity, March 2016, thanks to the Pinellas Realtor Organization* and CEO David Bennett. This is a county-wide report; there will be individual communities that experience somewhat different models. Generally speaking the best news for a healthy real estate market, properly priced properties sell.
For Pinellas County as a whole, homes went under contract more quickly and closed faster for more money year-over-year for March. Closed sales for Single Family and Townhome/Condo combined for March 2016 was 2,069, up 1.9% from 2,030 in March 2015. Broken down, Single Family sales were up 18.7% and Townhome/Condo sales were down 2.2% year-over-year. The median sales price for March 2016 was $200K whereas March 2015 it was $175K. Active listings (inventory) are down all around from last year this time.
Last month Florida Realtors® added the Median Percent of Original List Price Received statistic… For Single Family, it was 95.9% in March 2016, up 1.8% from 94.2% in March 2015. Townhome/Condo was 94.5% in March 2016, up .07% from 93.8% in March 2015. Reminder, this is County-wide.
Summary Statistics March 2016 compared to March 2015:
- Closed Sales… Up 1.9%
- Paid in Cash… Down 10.4%
- New Pending Sales… Down 7.9%
- New Listings… Up 1.7%
- Pending Inventory… Up 1.8%
- Inventory (Active Listings) Combined Single Family Homes & Townhomes/Condos… Down 7.9%.
*Representing more than 6,000 members, the PINELLAS REALTOR® ORGANIZATION is one of the Tampa Bay area’s largest professional trade associations. The organization advances and promotes the real estate profession through professional development programs, government affairs, and political advocacy and maintains a high standard of conduct by real estate professionals through professional standards training and administration.
If you are a prospective seller you’ll likely interview a number of real estate professionals in your market to determine your best “fit”… i.e. the overall reputation, the expertise, the networks and marketing plan offered, the references, the service you expect and the hands on management of the program best suited to your specific goals.
You next major decision will be PRICING.
The following graphic was generated directly off our MLS Matrix system for St. Pete Beach, 33706. It shows the spread between the median ORIGINAL offering/list price and the median price where these properties actually sold. What must be factored into your pricing decision is time on the market, because it is proven today just as it was before we had computers, the longer a property sits the lower the sales price.
The take away is this, pricing a property for the most successful sale is not only a science, based on what actual statistics tell you, it is also an art that the professional Realtor develops over years of experience and intimate study of your home real estate market and the relative sales climate at any given time.
I just read a great article written by Joseph A. Rand, a managing partner of Better Homes and Gardens Real Estate, which was published in an on-line newsletter dated 5/1/2016 in the professional real estate journal, Inman.com . Here I’ve paraphrased and commented on his valuable discussion about the 6 BIG MISTAKES sellers make in pricing their property.
1. Biggest mistake, pricing to what has not sold rather than what WAS sold.
When I was a new Realtor the saying went like this, “Price a little high, and a little low…” given a stable market, you can successfully price a little higher than what just sold, but also price it lower than what is currently offered for sale, i.e. the competition.
In today’s world, the real estate market is quite transparent, and consumers have many sources available at their fingertips to educate themselves about current and historic market trends locally as well as globally, along with all specific sales data.
2. Overvaluing the amenities.
What is important to one owner may not be important to another, or even preferred, such as granite countertops and high end fixtures and appliances. Even a pool may be a drawback, perhaps for an out -of -town owner who doesn’t prefer the added maintenance and liability, or a family with an infant who are concerned about family safety.
3. Reflecting improvements you’ve made dollar for dollar in the list price for your home.
Although not a set rule, buyers may not appreciate the improvements you’ve made along the way as much as you did when you paid for them, especially if they’re a bit out-dated or used up. A car never brings the same price 5 minutes off the lot. I believe it’s safe to say, dollar for dollar return, a fresh coat of paint and/or colorful or pleasant manicured curb appeal is your best investment…after de-cluttering, de-personalizing the home as much as possible so that it appeals to the widest range of prospective buyers. They are not buying you along with the house.
4. Pricing with your next home purchase needs in mind.
Buyers won’t care what you need to net for your next purchase.
5. Pricing according to on line computer estimates, Zestimates, automated valuation models.
These sites are available everywhere, even on some agents’ websites (!), fun tools to “see where you are today”… But these are macro-level, at-a-glance unwarrantable valuations that no one, even the people who create them, believes to be accurate enough or substantive enough to be dependable indicators of where a property is properly placed on the market. A good buyer, one who will pay the price, will also seek professional guidance and expertise.
An example given by Mr. Rand:
“For homes with Zestimates of , say, $400K, only half those homes are going to sell inside a range of about $368K to $432K. The other half is worth more or less than that range.” What if an agent knocks on your door and suggests you list your home in a range of $368k to $432K, then adds he’s confident you have a 50% chance of selling it in that range….? That’s essentially what you get with an AVM.
6. Ignoring feedback and traffic indicators.
Really look at the listing to selling to time ratios when you price your property. AND once you have listed your property on the active market, stay engaged. Listen to what the market is telling you: listen to what buyers are saying and feedback from showing agents, watch the traffic patterns, on-site and on-line, keep up with what your neighboring competitors are doing, and find out what your prospective buyers bought instead of buying your property.
Your agent should be prepared, in writing, to help you make an informed decision about pricing your property. Then your agent will be kind, your agent will be understanding, and ultimately your agent will do his or her best job to continuously counsel you and to ensure you’re not still sitting in your home six months later, along with the other Un Solds.
I’m happy to provide any reader a 3 month snapshot, real time, of market statistics in our community. I’ll also provide a more detailed report containing a wealth of information on your community, current and recent statistics as well as real estate market trends in your area.
Further, I can provide an analysis of a specific property in relation to these statistics and trends, valuable information for assessing the proper market position of any residential property in the area…and for establishing the proper marketing plan if you’re ready to sell.
TIME IS MONEY. BE SMART, INTERVIEW, ASK QUESTIONS AND DISCUSS VIABLE GOALS. A REAL ESTATE AGENT’S PRIMARY GOAL IS HELPING YOU REACH YOURS.
If you’d like to receive a comprehensive, professional report to help you assess the viability of your goals in investing, selling, buying or remodeling a property, please contact me today.