I keep hearing from the media that it’s a “buyer’s” market right now. Really? The numbers I look at don’t seem to imply that. If anything, it’s a strong seller’s market Consider this, as of today (6-22-09):
Seaside has 38 active listings available for sale. They also have 70 properties in escrow.
Marina has 24 active listings for sale. They currendly have 40 properties in escrow.
Greenfield has 33 active listings and 92 properties in escrow.
Affordable housing in Monterey County is red hot, and unless we see more inventory soon, it’ll continue like this until interest rates go up. It’s not uncommon for good properties to get double digit offers in a week. There’s no shortage of buyers.
This is a very difficult concept for buyers to wrap their head around. They see a home being marketed at a certain price and they assume that’s what the home is worth to the seller.
Wrong!
The home is worth “market value”. What exactly is market value? It’s what a buyer is willing to pay for that type of property at that time. It could be more than the listing price, it could be less.
Here’s the problem, buyers are not used to buying things like that. Oh, we go car shopping and see the sticker price and start negotiating down from that, but who goes to a store or showroom and expects to negotiate up? No one. And yet, this is what it takes to buy nice homes in this kind of market.
How much more? You need good information and data to make that determination. I’m doing market analysis on properties for my buyers so that can make smart decisions on what they should pay for properties.
Don’t get caught thinking that list price equals market value. In many cases, it does not…..
Well I lost an escrow this week. I started kicking myself because I’ve had such an excellent record of closing this past year. As soon as I began talking to other agents about it, I realized I’m not the only one struggling to get buyers through the loan process.
Banks and asset management companies are going through some tremendous changes right now. Remember all those bank mergers last year? Well the big banks are just now starting to realign the banks they bought. Departments are being phased out, managers are being replaced and companies are going through the inevitable "downsizing". All of this adds up to chaos and confusion for real estate agents trying to buy and sell their properties.
Patience is the buzz word in this situation. Escrows are going to take longer. Some deals that should be slam dunks are going to crash out. I’m educating my buyers that escrows are going to be more bumpier than normal. The winners will be the buyers who have the fortitude to ride out this storm and stay the course.
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I’ve read that California Governor Schwarzenegger and President Elect Obama want to have a 90 day moratorium on foreclosures. You can hear Arnold’s reasoning here.
http://www.npr.org/templates/story/story.php?storyId=96753445
At face value, that sounds like it could be a good idea. The thought would be that a moratorium would allow the market to stabilize in hard hit areas, home owners would have more time to work out loan modifications and private sellers would get a needed break in competing with bank owned properties.
On the other hand, this could have a devastating effect on the market as well. What makes Obama think that most home owners want or could qualify for loan modifications? Here are the problems I see;
- Many owners are frustrated that their property values have fallen so much. They resent the fact that the new neighbor who just bought next door is paying half the property taxes they are.
- Many owners feel they will need to hold on to the property for a very long time in order for it to rise enough in value to create positive equity.
- Loan modifications will only be allowed if homeowners didn’t commit fraud and “pad” their stated income. The majority of people who purchased a home with an adjustable rate mortgage over a half million dollars certainly did that.
- Distrust of the banks. Many minorities were put in loans that they didn’t need to, with adjustable rates and long pre-payment penalties. They don’t believe that the bank will suddenly become honest and helpful.
- What good would a loan modification do if the homeowner gets behind on their property taxes? When homeowners decide to walk away from a property, they usually stop payiing everything. Unless the bank is going to pay the taxes current, most properties late in the foreclosure process are not going to be redeemable.
The big question I would have is, what happens after 90 days? A flood of foreclosures? The banks and investors certainly shoulder much of the blame for this situation, but what about homeowners who used their house like an ATM? They helped themselves to equity cash, bought that big beautiful Tahoe and loaded up all their appliances on the way out the door. Do they deserve 90 more days of free rent?
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Perhaps I’m the only one who feels this way, but I find Countrywide’s insistence that I get my buyer pre-approved through them BEFORE they’ll even look at my offer to be an unfair negotiation tactic. Other banks and private sellers are content to accept a pre-approval letter from a reputable lender, why not Countrywide?
How fair is it to know EXACTLY how much money the buyer has BEFORE an acceptable price is negotiated? Why not agree on selling price first, THEN insist on looking at financials before going to escrow? Because Countrywide wants to know how much they can counter offer the buyer. That’s not an arms length negotiation, that’s one where one side has an advantage.
Will Countrywide share with the buyer how much net they will accept BEFORE agreeing to purchase price? Of course not, they want the buyer to guess, hoping they will bid over that amount. Will Countrywide share with the buyer what the current "highest and best" offer is? Of course not, they are hoping the buyer will desperately overbid to get the property.
I find it highly ironic that now Countrywide insists that buyers be "properly qualified", when they were the leaders in poorly written mortgage loans. Why didn’t Countrywide check employment history and financials themselves during the sub prime heyday? Chase Manhattan did. Instead they relied on Mortgage Brokers who’s best interest was to see that buyers got approved and bought homes.
Chase Manhattan insisted on underwriting "safe" loans. They certainly didn’t have the profits that Countrywide had, but they also don’t have the number of foreclosures that Countrywide has to liquidate. Countrywide got greedy and paid the price. How interesting that the few foreclosures that Chase Manhattan has to sell don’t require the buyer to get pre-approved by Chase themselves…..
