The cat wearing the hat

Your time spent online is yours alone, taking advantage of all the sources and distractions available. This can include reading current news stories, fake or otherwise. It could be sports scores or it could be health advice and new developments in human happiness. A cure for insomnia and relief for those with ingrown toe nails is out there also. Shopping can make you feel better sometimes. You might have to dig for a while or drill deeper than you thought at first, but sooner or later you can find almost anything you want to find on the WWW. Have dinner shipped to your doorstep. I will come by to dine with you.

If you have children and a spouse, and/or friends you connect with daily, its possible your online addiction could limit how much you have to give to those relationships. Maybe they are supporting your habit until you wise up and start participating in life with them again. Online addiction might be only surpassed by opioid addictions. Possibly the others are just as addicted and have not yet realized it; too distracted in their own way to notice your absence and fried brain and bloodshot eyes.

At times, I don’t want to look at the screen, but am willing to listen to the audio of an interview from a TV show, or a TED talk or podcast that dips into a subject of interest to me. Closing ones eyes can feel so liberating in a time of device screen paralysis. Unplugging from the short term pleasure of the skimpy rewards that being online gives you is not easy. I dropped off of Facebook months ago, after many more months of almost no activity or visits. Too many posts of kittens? Yes and too many nonsensical rants about Amurica and who has the right to believe what. I admit to getting news briefs from Twitter, in bites I can digest and at a time I want to take them in.

If I were a video or digital picture artist there are more venues than there are grains of sand. I could post a shot of each piece of toast I consume, with butter or not. I could post pix of my drive to my office, my walk from the parking lot to the office building, and my coworkers standing in my office door complaining about their current state of affairs. It might be fun to share photos of places I have been if only I were a more accomplished artist with a camera. I have photos of beautiful sandy beaches, castles on hilltops, amazing historic ruins only recently excavated, a beach wedding service, a farmers market in a foreign city, plus the selfies with me in all manner of dress and mood. How much fun can a person have?

In words it is left to the reader to paint the picture with a push and a tug from the writer. I write about real estate in this blog, touching on social issues that affect real property directly or indirectly. I occasionally rant about the things I see going on, but also realize if I rant then you are ranting too. Send me yours if it will balance things out between us. Words and numbers are the primary focus of my blog and I hope those numbers are easy to understand and useful to you. They continue to improve just a little bit each month and our residential real estate market in Santa Fe has solid footing and is almost completely finished clearing out the deadwood of foreclosures and short sales. The days of the super bargain are probably gone, even though those were not really bargains after all.

How many calls have I gotten from someone who sees a pretty photo of the front of a home that is listed at $220.000 with over 2000 square feet and 4 bedrooms plus a garage? Why is it so cheap? Well, the actual condition of the property is why. When you see a home in our MLS database that looks too good to be true, it has probably already been picked over by many people with similar ideas. How can I buy this and fix it up a little and flip it for a quick profit? An example where there was enough profit for two buyers went as follows:  First buyer purchased out of foreclosure around $120K and did minor touch up and painting. Sold it for $150K in a couple of months. Then Second buyer did more work to the home, leased it out for a couple of years and then sold it for $215K. Two parties made a few dollars on that one property. Today it is likely worth $250K and might be sold for that if the current owners wanted to sell.

So the cat with the hat is fun and entertaining. So are the Epic Fail clips. Reading Paul Krugman opinion columns online can be educational. Observing the White House roller coaster would be a hoot if it was not so disturbing. Seeing how your stocks are doing is fun as can be lately as the stock market breaks new ground almost daily. And seeing what your neighbor’s house is selling for is also interesting. Focus on what sells, not what is for sale. A for sale home priced at $500K does not inform you nearly as much as the home down the street that sold last month for $445K. Or the one around the corner that sold in May for $467K. Asking price is a suggestion. No more no less. The owner suggests your written offer to purchase should match the asking price or come as close to that number as possible in order for them to respond to the offer in a meaningful way. Ignoring an offer is also meaningful but in a different way.

Santa Fe sellers still collectively hold out a candle of hope that their home will sell quickly and for full price. But history, recent history being the only type that matters here, shows only the lower end price range homes in and around Santa Fe sell quickly and for full or almost full price. Why do other markets do things differently? In a recent referral of a listing ($280K range) in a Phoenix suburb, the broker I contacted did extensive market research and had the sellers do some work to the home before marketing it. Then the first day it was for sale was an advertised open house and 30 people came. Four offers came out of those visits and the one that won the bidding war paid about $11,000 more than asking price. The home closed on time and everyone was happy.

What is the difference between that market and ours? Here the seller and listing broker will price the home somewhere between 3% and 12% above what it will likely sell for. Then they battle to get people in the home and interested in the property. Time goes by and the broker and seller discuss a price reduction. When that hits the internet there is a flurry of activity on the home; some showings and some phone calls with questions about details of the home. But no offer comes and so after a few more months, another price reduction is entered into the system and another flurry of activity starts. Each time the new price is entered, a new group of prospects shows up online or in person. Once the asking price gets really close to the eventual sales price, then negotiations begin and serious contract preparation commences. A meeting of the minds occurs and escrow begins. Once all issues are resolved the closing can occur. And everyone is happy we hope. But maybe the seller waiting say nine months to sell and could have received the same net proceeds in two months had the first asking price been closer to the actual value. And we know that the actual value is what someone will pay for it, not what the seller has invested in it or what they hope to get. I hope to get to the top of the Eiffel Tower someday but I am OK if it does not happen. Sellers maybe should find a way to be OK with a faster sale instead of the same results after many months of anxious waiting and blaming the listing broker. It takes an honest assessment of the market and a Realtor willing to tell the truth to the seller.

Some sellers are not in a rush. Those people have alternative motivations and timelines. They might have $1,200,000 into a property and have already bitten several bullets to get the asking price down to $950K, while in everyone’s heart the final sold price will be closer to $850K. Is this normal for our market? Yes it is. Many examples are out there that are similar to the above recap. A buyer’s task is to separate out the highly motivated sellers from the ones that are just testing the market. Like the wolf going after the slow and slightly lost calf in Yellowstone, buyers will find the seller that wants to make a deal today and is not willing to wait 6 months. If you want to be that seller, that buyers surround and attack, price is your primary weapon. Price it to sell or price it to sit and look pretty. You can find your place in a magazine and wish they used different photos or you can be at the Bank depositing your sale proceeds.

When I get a cat I am going to get him a hat. Until then thanks for stopping by this blog site and feel free to use the statistics with proper attribution. You can disagree or you can do what many others do, use this information as if its your own. Then get a good nights sleep. And turn off your phone.

Fresh numbers that show we are working on it

That may be a lame title…we are working on it? You may decide how lame, but the point is that if your head is buried in something like sand, or paperwork, or personal problems, or worldly problems such as our POTUS election cycle and the sick drama it features, you might not know that we continue to climb the charts and continue to improve on our real estate market numbers. That’s a long sentence, but it says we are doing well enough to write about, just not as well as our neighboring states and what our bankers and creditors would want to see.

We still are selling foreclosures, pre-foreclosures, short sales and homes that are selling below what the owner paid years ago (underwater defines homes where the debt is greater than the value). Who knew that some nine years after the bubble started to burst that we would be still up to our necks in problems? If you knew then, what would you have done differently?

Asset managers still have a death grip on humorless communication as they try to unload stuff they should never have made loans on in the first place. Whether you blame the lenders for the mess we are still repairing, or blame the “political system” for the agenda and candidates facing off this November, we made the world we live in. Investors and stockholders wanted higher returns from those banks and mortgage companies (to support lavish lifestyles maybe) so they pressed for more loans to be made, more creatively and more more more such that every American could be a homeowner. Never mind that many had no nickel to rub against a second nickel, to coin a phrase. Many should not have been home owners since they had no reliable or steady income, no track record of responsible financial behavior, no savings in case of illness or a layoff. Yet we loaned them the money anyway.

Try selling a home in Chimayo or Pecos or La Mesilla or Madrid that has a debt well above the home’s value today. What do you do? Give it away? Discount it in a short sale and leave the lender with a deficit? Back to the election, what do you do when your choices are thin? Do you go with a third-party? Do you bite your hand when you pull the voting lever and pray that our America does not crumble as so many on all sides would have us believe? Do you start shopping for a home in Canada? Probably the best answer to these and similar questions is that you get to work. Yes you. Get busy fixing the world you live in. Get busy fixing the economy and the real estate market. If you want to super charge our relatively flat real estate market conditions, try bringing an additional 15 home buyers into the picture each month. But make sure they have income and good credit and maybe a years worth of payments in the bank. Try selling that 30 year old home that is priced as if the floors are gold leaf and the cabinetry is silver plated. The point is to sell homes to people who will nest there, keep them in good shape and build memories and lives in that home. The point is not to make some bankers and lenders extra money so they can buy another car and take an island vacation while we wait for trickle down. How was your trickle down?

Whats up with our market today? True that inventory is way down, keeps going down in fact, although we are now entering the typical spring season run-up of new inventory. It’s not “new”, by the way. These are older homes that did not sell last year. They are homes the owner stayed in or leased out after realizing they could not sell them a few years ago. Many people said to me and said to themselves back in 2008 thru 2012 that they would wait for the market to improve. They would wait for the market to catch up to their home’s true value and then sell it when they could get all of their money back. There is a special place at the back of the diploma line for those folks. Realistic expectations never landed in their laps and the market did not magically return to those days of liar loans and no doc packages that put people into homes they had no business owning, or living in. We learned that lesson. Why would someone wait for our market to return to the days of home sales that was completely unsupported by facts and real numbers?

We have seen about 10 homes a month sell in the One Million plus range for many months now. Let us home we can see that number grow in the next year or two since we have several hundred plus homes listed publicly for sale in that higher price range. A great target would be 12 or 13 a month! At the other end, below $500K and even more so below $300K, homes sell quickly and without much fuss. Buyers in those price ranges usually want and need to buy and would love to get settled soon; while sellers usually have little choice but to sell; the opposite of the high-end transactions. Try talking a seller of a $1.8 million dollar home into selling at a deep discount when their other two homes are in different time zones and are highly sought after prizes. It’s difficult to accept that their beautiful Northern NM gem is not worth what they paid for it a decade years ago.

Help yourself to the numbers in the various spreadsheets and charts available on this website and blog. They are for your enjoyment and education. They are not perfect, nor is the blogger, but we try to be fair and even-handed, never playing favorites or grinding our own axe when its yours that needs sharpening.

So sharpen away and feel free to share this information with real estate players in all price ranges. There is always something to be gained by reading and understanding.

If you need assistance, I know someone that can help you buy or sell. Or both. Contact the author.

Thank you.

A moment of balance

Librans like to focus on balance and harmony. There is a time when balance in the real estate market can be found and its right about now. This is the time we change over from cool to warm when taking the temperature of our market. We’ve had enough of tepid. What happened in June is quickly washed away by the increase in activity and showings in July and after. It would be easy to be pessimistic in early and mid June because that wave of buyers has not returned quite yet.

You know the ones I am talking about. Buyers who have looked at homes off and on for several years might be coming back for real this year. Buyers who have waited to time the market (good luck on that one) might figure out that this year it is finally time to buy, while we see the creep up of higher interest rates and the shrinking of quality inventory. At any time, such as 2 months or 2 years ago, one could make the case that now (I mean then) was not quite the time to buy. If that even entered your thoughts or affected your actions or planning, allow me tell you that time has passed. There is no better time than now (or in the next 120 days) to buy a home in Santa Fe. Not yesterday or 2010, but now.

Why would I say that? Think of the past 8 or 9 years with not only zero appreciation of home values, but actual documented lower prices and values. That might finally have run its course. MAYBE we will start to see appreciation later this year and next. Interest rates? Yes, that is a direct factor for about half of home buyers in our market. Every quarter point increase in rates will knock out a percentage of buyers, or at least force them to buy a less expensive home based on their qualifications. The inventory of homes available is smaller than at any time in recent memory and almost no new homes are being built that are not already pre-sold to a buyer. The exceptions are worth a look. So the new inventory is coming from where, exactly? From homeowners that are ready to pull out and ready to sell, whether the home pays off all of their debt or not. There still are short sales coming up and there is a mini wave of defaults also coming, as a large number of HELOC loans convert to amortization from interest only terms. An example: an old friend’s HELOC (home equity line of credit, usually a 2nd mortgage) payment went from $180 a month to $650. He is not sure he can afford that and may have to default. It is not news that many people, even owners of homes, live paycheck to paycheck and a change throws off their ability to have that tooth crowned or set up that family doctor appointment. Never mind the trip to Alaska…thats out of the question.

To balance your checkbook is one thing, but its another thing entirely to achieve balance in a real estate market. As we shift to more of a seller’s market (we are not there yet, but steadily moving that direction) that tipping point when sellers and buyers are on level ground will exist, if only for a month or two. I have no idea how long we will be in balance, but lets enjoy it while we can. Librans really know how to talk about balance. I hope I have come close.

Another example of viewing balance in a real estate market is comparing new listings to sold listings. There are always more listings than there are solds. Some go on the market and never sell. Other listings expire after 6 or 12 months and then a new listing might take its place. That’s at least two listings for one sold, if it does in fact sell during the 2nd listing term. Over the last 15 days, per our MLS database, there have been 245 new listings and 175 sold listings. Thats about as close to balance as we could design and invent. Compare to early spring when new listings outnumbered solds by 5 to 1 or even more at times.

So where exactly are we? Of sold homes reported to our MLS, something like 90+ percent, had at least one price reduction since first listed. Clever and sly Realtors and homeowners can scheme to hide the truth of how long a home was on the market. Ask if it matters to you. There is a magic number/price for listing a property. Most all listings start above that number and then settle for the true market price. That true price is literally what someone will pay, and does pay for it. Santa Fe residential real estate buyers expect to get a price below the asking price, while the market is still favoring buyers. Once the shift kicks in and we enter the seller’s market we are heading into, that might eventually change. Except maybe not. By then, sellers will expect to get a higher price instead of putting it out there at a price that will bring immediate offers. So who can blame a buyer for making a low offer? A seller has the right to be insulted by a low offer. But insults don’t write checks and show up at closing, so bully for your right to feel that way. Get over it and counter with a number you like and start the negotiations.

Buyers almost never start with their best offer. A most recent example: the first offer came in at about 12% below asking price. During the back and forth of negotiations, another buyer stepped up and made a strong offer. The seller decided to ask both buyers for their best new offer and both responded. The first buyer ended up paying a price about 1% above asking price. What will that 13% additional net proceeds mean to that seller? Why did that happen? The seller not only did not have to lower the price; the seller got more than asking price. The starting price was such that immediate interest and offers within a day or two showed up. Every home has its magic price. If timing is everything and you don’t want to be sitting on that home in November, unsold and shopworn, find that number and run with it. What is the advantage of having your home on the market for 6 or 12 months when you likely will not get your asking price anyway? Remember the situation we are in today; over 90% of homes that sell had at least one price reduction during the listing period. One might say that price reduction is why it finally sold.

Does any of this make sense? I try to write in a conversational manner that I hope makes it easy to follow and comes across as logical. We can make this complicated or we can keep it simple. As we move into balance, be prepared to take action accordingly. A buyer maybe should act soon. A seller maybe should rethink their asking price if they want success this summer. Now that wasn’t too complicated, was it?

I am always ready to discuss your own real estate situation and goals with you. Knowing what is going on is of great importance. My strength is getting you through the negotiations and to the closing table feeling good about the process. Anyone can crunch numbers. Making sense of them can be a challenge.

At the first quarter pole

Three months in the books and we can say the year looks promising, although best ever or wonderful do not need to be said. No predictions here, yet March this year was a busy month with more sales recorded (from the Santa Fe Association of Realtors database known as MLS) than all but 4 of the last 95 months!

And inventory of homes listed for sale is in a range that we have not seen in over 12 years. Lower inventory means more urgency on the part of buyers; at least that is conventional wisdom. But since we have not seen lower inventory here in so long, will the now strong fixation buyers have with price prevent them from seeing the market shift to a balanced or even a seller’s market? A buyer trying to time the market shifts is often unable to lock in real savings when you consider the escrow process and the time it takes to complete a purchase.

There continue to be pockets of price and location that are not exactly the same as the rest of our market. I believe that homes between say $600K and $800K are in short supply because there have been very few new homes built in this range in the last 8 years. Some areas have good activity and proven success for sellers that price their homes to sell. Some would describe Nava Ade and Eldorado as warm to hot segments of our market. Homes and ranchitos that are some 30 minutes out are not in demand, by comparison. And lot sales are still creeping along slowly, although renewed interest is noted as some future homeowners cannot find the right home and decide they will maybe hire a contractor and build. The numbers on that are still weighted heavily toward buying resale as labor and materials make buying new an expensive approach. Also, materials and systems within homes are advanced beyond the quality and integrity of 20 plus years ago so a new home might be worth the cost to those that want the latest and best.

It is fun, with pleasing results, to compare sales for any 12 month period between 2008 thru 2013 with today’s most recent 12 months. We are so much better off now its hard to fathom how we stayed strong back when 100 sales a month was the norm. Now averaging around 150 a month, there is a larger pie for everyone to have a slice. Will we get to 200 a month levels anytime in this lifetime? We were there in 2004 and 2005 and 2006 so yes, it is possible. But it is not promised. Many sales then were to buyers mostly unqualified to buy, without sufficient income and lacking reserves to weather the changing payments as rates fluctuated. There was also a large-scale recession that wiped out substantial middle class net worth and crushed many jobs. Do mortgage lenders that were in business 10 years ago do things the same way now? Absolutely not. They could not get approval on maybe as many as half of the buyers and borrowers that they placed 10 years ago. Ask them to confirm. That is just my ‘oldtimer’ guess.

It’s not a simple math problem to calculate where our market is today when comparing with the past. That darned real estate bubble created some space between reality and dreams that seemed to make those dreams possible. But many were not sustainable and our slog through the mud of foreclosures and short sales has kept us humble and working harder than ever to stay even. If one were to guesstimate what sales would have looked like 10 years ago if the same loan qualification standards were in place then as they exist now, home sales numbers would have been much lower. There is no exact way to know how much, but I do appreciate the comparison of then versus now because the improvement in our market is actually better than it looks at first glance. We still have some foreclosures, of course. Just not as many showing up as we saw just a couple of years ago.

Keep reading and keep learning if you want to be in a position to make the correct decision about your own real estate transactions. Ask lots of questions and ask for proof of statements that seem too good to be true. You already know how that works.