The Boise Area Real Estate Update

Home Sales in the Boise Area Grow Year-Over-Year

2012-01-18T17:43:00.002-07:00

So, what did the past year look like for the Boise area real estate market? Well, believe it or not, 214 more homes were sold year-over-year. But, new listings were fewer. Those two facts made the available inventory tighten, and may be responsible for why average and median prices were stronger in the second half of the year. What's going to happen going forward is a toss-up. The direction of the macro economic situation has everything to do with potential buyers and sellers confidence. Currently, the trend looks like the market will continue to firm up, but growth over time will occur slowly. With rates historically low, it may be the time to pull the trigger on a purchase, or sale.

You can go to our website for an update on what the past six months of sales activity in Ada County looks like. Click here - BuySellBoise and go to the "Boise Area Market Statistics" page.

Here's a look at a breakdown among equity, short, and bank-owned sales over the past two years. Not a whole lot of changes from year to year.

Call us if you would like us to help you buy, or sell a house

Alan Smith - CSP (208) 473-0343

Shirley Amick Robertson - ABR (208) 866-6300

Boise Area Real Estate Trends

2011-10-16T09:46:00.001-06:00

I've just updated the Market Statistics page on my website. You can go there to see what the local Boise area real estate market is doing.

Here's the link to the page: http://alansmith-re.info/custompage.cfm?cpid=1800

One of the graphs there is this one showing where we are, and where we might have been, by extrapolating the pre-bubble annual growth rate out to this year.

If you want to know what the Boise area's real estate market is doing, this is the place to go.

The State of the Boise Real Estate Market – Thru June 2011

2011-07-06T10:20:00.001-06:00

I decided that instead of posting the usual graphs following the month’s end, I would just pull a bunch of various evaluating-the-market metrics. So . . .

The total of homes sold in Ada County Jan-Jun 2010 vs Jan-Jun 2011 = 3297 / 3008 That’s . . .

                8.8% fewer total sales, and
                466 fewer normal sales, 10 more shorts, and 166 more bank-
                        owned properties

For June, year-over-year, the distribution of those sales among the three types is almost unchanged:

                Normal - 53.6% to 55.5%
                Shorts - 17.0% to 16.3
                Bank-owned - 29.3% to 28.2%

The average price of a single family home in Ada County last June was $180,807, this June it was $177,253. We are back to where home prices were in the Fall of 2003 – the point at which home prices left their long-term appreciation rate of 3% to 5% per year, to begin their inflating-the-bubble ascention.

The sold price per square foot, by type, for last year vs this year (to-date) was:

                Normal - 100.10 / $93.62
                Short - $75.01 / 75.41
                Bank-owned - $79.18 / $72.72

Inventory has steadily declined. Comparing the average monthly active listings for Ada County, for the first halves of 2010 and 2011 shows how much: ‘10 = 3088, ‘11= 2277. For contrast, the average monthly active listings for 2007 were 4667!

So, the supply/demand equation is favoring is tighter now than it was in 2007. Then, the average monthly ratio of homes sold to homes listed was 12%. So far this year, that same metric is 21% That’s why the six month average for the ratio of the sold price to the asking price looks like this:

                Normal = 98%
                 Shorts =98%
                 Bank-owned = 99%

The raging deals are priced as raging deals, they’re not negotiated to raging deals. Home prices are low, rates are low, and breadth of choice is restricted. Two out of three still make buying NOW a winner.

2011-06-12T18:56:00.000-06:00

In a quick view, here's what happened in Ada County real estate in May:

Wow! Look at what the Average and Median price did. Why? I don't know. See if you can figure it out for yourself at the Market Statistics page on my website. I have some graphs there showing additional data that may, or may not explain what's going on. If you think you can discern the trend, tell me what it is.

Click here to go there.

Thanks for visiting, come back at least once a month.

Alan

We Just Need Some Gas In Our Economic Tank

2011-06-07T11:39:00.005-06:00

I’m a frustrated pragmatist. My tendency is for free markets. Imagining through the dynamics, I see supply-side economics as the effective market approach.

With demand-side economics, the government has the resources, and the peoples’ imprimatur, to exercise both for everyone’s benefit. But, a front-loaded stimulus cannot succeed alone. It's necessary though, because it can be implemented relatively quickly to start the economic growth process. In addition, the initiation of the effort helps to begin to rebuild the public's confidence - an important ingredient for rebuilding the economy. However, concurrent with an initial government stimulus must be incentives for the private sector to also make an investment in the recovery. For the government to make the full effort alone is catastrophic. We just may be beginning to see why.

An analogy would be the car that has run out of gas. After putting fuel in the tank, a shot of gasoline is poured directly into the carburetor of the cranking engine to fire it enough for the fuel pump to draw fuel from the re-filled tank. Only in this case, the government has not put fuel in the empty tank (incented the private sector for involvement). The engine fires, runs for a few seconds as the priming charge is consumed, and then stalls. The process is repeated . . . with the same result.

An idled private sector remits its taxes from a static reserve – so the reserve is diminished as taxes are paid. An incented private sector invests capital, and produces a return. A portion of that return is committed to the government in taxes. A portion of the remainder is reinvested, resulting in additional growth, from which an incrementally greater amount of taxes are paid to the government. The process is repeated . . . with the same result.

The current economic condition is such that, not until the private sector determines that the risk/reward ratio has become favorable, will capital will be committed for business expansion. Hiring and expenditures for capital equipment will occur, but current risks lie with what the ultimate costs of yet-to-be-written regulations, as directed by the new health care and finance reform laws, will be. So, even when there is clarity after all the regulations have been written, the costs of compliance may restrict the ability to commit capital for growth. The amount of operational cost-overhead added by these regulations – back to a car analogy – will amount to how much pressure has been applied to the (economic growth) brake pedal.

Boise Home Sales Ho Hum

2011-06-06T11:47:00.000-06:00

If there's a trend in the Treasure Valley real estate market, it's a subtle one. Houses are being listed and sold - but without any discernable thrust. Maybe we are truly bouncing along the bottom. Maybe macro economic factors are finally settling out and some unknowns are beginning to be known providing us with a better sense of our financial security . . .but, maybe not necessarily one of bounding opportunity.

So, the best I can do for you right now is present a couple statistical snapshots of elements of the market. In a week, or so, I'll have confirmation of sales activity for May. From preliminary numbers, it looks like another month's worth of proof that we're probably bottoming out price (decline) wise. So, check back here again, and on the "Market Statistics" page on my website. But for now, check out where the activity is - pricewise - and, the changing dynamic in the distrubution of total sales among normal, distressed, and bank-owned houses.

Boise Area Home Prices Edge Below Pre-Bubble Price Trend

2011-05-18T09:25:00.000-06:00

When did the real estate bubble begin to inflate in Boise? From what the chart below shows, it began in 2004.

From 1999 thru 2003, the rate of growth for the average and median single-family-home price was steady at 5% per year. Then, in 2004, that rate jumped to 8% and 10% respectively. The bubble continued to grow until mid-summer of 2007.

This April, the average home price was $165,064,and the median price was $135,000. The first time average home prices in the Boise area past through those levels was in mid-2001. So, prices have declined to less than their natural growth path in 2003.

That’s a 40+% drop! But, that really doesn’t mean much because the price levels at the peak weren’t tethered to any economic reality. Let’s go back to the point at which price inflation showed its first effects. That would be Spring of 2003. Prices are now 8% (avg), and 9% (med) below that level.

Click on graph to enlarge

So, that’s where we’ve been, and where we are. But, where are we going, and when? The best we can do to answer those questions is pay close attention to those factors that can have an effect on real estate activity.

Employment growth. There’s no other factor that comes close to having the strength of effect of job growth. It’s a near cure-all. Re-employed home-owners on the verge of losing their homes begin to earn again, thus averting many additional potential foreclosures. The reduction of distressed sale-price homes relieves downward pricing pressure, and the market begins to find its natural price level. As a major economic indicator, growing employment has a strong positive psychological effect on the entire population. Things begin to happen, consumer spending rises, investment of all kinds picks up, and deferred home purchases become an active plan again.

Housing supply. Monthly average listings total half of what they were in 2007. There’s no way to guess the number of home whose owners sidelined their sale until the market showed signs of recovery. If the real estate market picks up quickly, and there is little shadow supply, prices could climb quickly until demand can be met.

Home prices increase. Home buyers only purchase at the bottom of the market through blind luck. The only real indication that the market has hit bottom is when prices begin to climb. That’s when buyers get busy, and demand begins to drive up prices.

We’re at a point where the odds are better for news that would move the real estate market positively rather than negatively - which is like another way of saying “we could be bouncing along the bottom”. If I were a potential buyer, I think I would be checking listings to see if that perfect house is available.

Here’s where the current activity in the market is happening:

For more data on the Boise are real estate market go to my website http://alansmith-re.info/index.cfm and click on “Market Statistics”

Boise Home Prices Are Tight, But What's Holding Them Down?

2011-05-06T13:52:00.001-06:00

What is the sign of a buyer’s market? It’s sellers having to accept less for their house than they are asking. So, a sellers market is houses selling for asking price, or above.
A buyer’s market occurs because values are falling and/or supply is excessive. A seller’s marker occurs when values are rising and/or supply is limited.

Viewed as a ratio (selling price/asking price), below 1.00 is a buyer’s market, above 1.00 is a seller’s market. So, where is Boise right now? Maybe it’s in transition.

The change is subtle. So, much so, that I had to look beyond 2010’s numbers, to those of 2009 for a comparison to current numbers. And, from looking at price trends, increasing value is not the driver of the change. You can see from the chart below that the number of active listings has steadily been declining. The supply is getting tight.

So, we’re really not in transition. But, why do you think it could be that the supply is getting tight, and prices are not responding by rising? Because, the real estate market is unable to react freely to market forces.

Here’s a dirty little secret . . . (well, that's maybe a little hyperbolic - let's just say "here's an unfortunate market dynamic") - The tightening in prices is because bank owned properties are selling at asking price. So, what’s wrong with THAT, you ask? Well, (disclosure: the following is anecdotal) agents are competing against multiple offers on bank owned properties. Hmmm . . . a competitive market place – that’s healthy. No, there’s nothing competitive about it.

The banks are mispricing their properties. That’s why there are multiple offers on them. They’re not natural parties to a real estate transaction. If they were, they would recognize and react to the offer activity level and adjust asking prices. But, they don’t . . .they are monolithic asset-holders looking to get the asset off their books. And, the result is that market prices in general are held down.

Year-to-date, bank owned properties have been 37.5% of total sales. That amount of market-share can have a big effect on prices. Imagine if the banks engaged Realtors, as prospective sellers do, and used our consultations to adjust asking prices to match market dynamics. Sales prices would be optimized, and market demand would adjust freely.

If you are a prospective buyer, here’s how you take advantage of the situation: Buy before - 1 . . .banks wise-up, 2 . . . the number of bank-owned properties begin to wane, relieving their price constraint (sooner or later they will, you know – the economy improves, employment picks up, etc.), 3 . . . consumer confidence grows, and deferred purchasers add to the volume of current buyers causing supplies to struggle to match demand for months, until new construction can begin to match growth needs.

Boise Area Real Estate Market Summary For March

2011-04-11T15:59:00.002-06:00

As I said in my previous post, there weren't any big changes, month-over-month in Boise Area (Ada County) home sales. The amount of increase in total sales from February's number (+155) was expected for this time in the annual cycle. But, 55 more were sold a year ago March.

The Average Price changed by 0% ! You can't get any flatter than that. However, the Median Price dropped by 7.2%. You'll see from the graph below that that's an indication more of priice cosolidation than falling prices. That's a result of a spike in the number of homes sold in the $120K - $159K price range, over previous months - nearly 30% of the total homes sold.

Average total listings for the month was up 1.7% over February - but, down 29% over a year ago. The trend over the past nine months has been for fewer total listings each month vs a less than proportionate drop in units sold. Should there be serious news indicating positive prospects for the real extate market, a bump in activity could cause there to be a tightening of supply for a period of time.

If you haven't checked the more complete stats on my webpage, go there and check it out: http://alansmith-re.info/index.cfm - click on the "Market Statistics" page.
I apologize for the size of this graph. Zoom in with your browser to make it readable!

Early View of The Boise Real Estate Market Through March

2011-04-06T09:45:00.001-06:00

The real estate market here in the Boise area is getting more active - at least, I sense an increase in the activity level. But, not so much that it's anything other than the seasonal increase. Total sales will increase with each successive month through mid-summer. Total inventory offered will increase as well.

I don't have the sold prices data for March yet but, preliminarily, it looks as though it will show to be one more month of bumping along the bottom. What I do have though is a look at activity through March broken down by the type of sale. You could almost say there are three types of markets here. One for normal (non-default) homes, one for short sales, and one for bank-owned properties. Each has their own charateristics that affects pricing. And, since they're all three competing in the same market, they have an affect on each other.

Nevertheless, it's enlightening to see their distinctions. And, you can. I've posted the analysis on my website. Go here: http://alansmith-re.info/custompage.cfm?cpid=1800

I'll have more "thru-March" data posted by mid-month. So check back.

Alan

Boise Area Home Sales Make Trends Hard to Find

2011-02-19T09:15:00.000-07:00

The Ada County single family home sales results for January don’t indicate any change in the market for the Boise area. Not that nothing is happening – just not much. We’re still in the off season for home sales. So, with sales activity yet to come out of its cyclical nadir, there’s not enough data to safely assume why what happened happened.

But, ahead of the display of all the usual graphs, I’ll point out a comparison of trends that may indicate our market is still on track to balancing itself out – price wise, with the two table below. Comparing total sales vs prices for Decembers and Januarys of the past three years, a trend is obvious . . .total sales are successively greater, and prices are successively lower. The market for homes is being found. In other words, the bottom of the market is nearing.
That’s about as close as we’re going to get to knowing where the bottom is. There will be no flashing light, or bell that rings at the bottom. We’ll only know it after it has occurred. We’ll only know it after it has occurred. We'll know it when we see a change in the direction of average and median prices, a jump in YOY monthly activity, maybe a slight dip in inventory, and a narrowing of the sales vs asking price ratio (maybe even a reversal).

If you would like to see more data detailing the Boise area real estate market, click this link: http://alansmith-re.info/custompage.cfm?cpid=1800 go to the Market Statistics page of my website. There, you'll find 12 more graphs/tables displaying what's happening by looking at different facets of the market.

Home Inventory In Boise Area May Be At An Inflection Point

2011-01-13T14:48:00.002-07:00

The inventory of homes for sale in the Boise area has been steadliy shrinking. The peak in 2007 for the total number of average monthly SFH listings in Ada County was just under 5200. In 2010, the peak was 3323 in June, and this December's number was 2295. The Months-of-Inventory method also confirms that home inventory has been shrinking. In 2008, the market hit 11.2 months of inventory. This december, the number stood at 4.7

Here's why these numbers are important: The market will return to normal by demand. In a tight supply market, the response to demand is increased prices. The degree to which demand returns to a market of limited supply dictates the rate of increase. For prospective buyers, a suddenly tightening market could catch them off guard and spring prices beyoud their budget, ending their opportunity to afford the right home for their needs. If the number of listiings fails to start rising as the new year matures, and demand - created by promising policy indications from our government - rises, we could be looking at a high-class problem.

For a compete look at the numbers for 2010 - and comparisons to previous years, go to this page on my website: http://alansmith-re.info/custompage.cfm?cpid=1800

Negative Equity Does Not Mean Foreclosure

2011-01-10T14:23:00.002-07:00

Of all Owner Occupied housing units, 2/3 have mortgages.

Of those two-thirds, 1 in 4 homes have negative equity.

That makes 16.5% of all Owner Occupied housing units underwater.

. . .to some degree.

Underwater means the house is worth less than the amount owed.

It could be just a little less, or it could be a lot less.

That wasn’t the case when the home was purchased.

And, may not be the case again, at some point in the future.

Most owners are still able to make their mortgage payments.

Some have lost their jobs, and can no longer make their payments.

Loans reset for some, and now they can't afford their payments.

Odds are, the value of their homes is lower than the amount owed.

Foreclosure (or a foreclosure pre-empting short sale) will be the result.

And, when will the market be clear of this situation?

The market will improve as unemployment improves.

Supply and demand will cause the resultant dynamic.

Supply will begin receding, pressuring prices upward.

The rate at which the housing market returns has everything to do with:

- Employment

- The general population’s sense of opportunity and well being.

Alan - AlanSmith-re.com (208) 473-0343

Are We There Yet? Have Home Prices in Boise Hit Bottom?

2011-01-04T08:04:00.000-07:00

The Case-Shiller boys (economists Robert Shiller, Karl Case, and Allan Weiss) have determined through their studies that house prices in the 100-year period from 1900 to 2000 rose at an average 3.35% per year. Hmm, so where would our Ada Co. Single Family Home prices be if we hadn’t gotten bubbled by . . .
      ( . . .an easy Fed money policy, a “bring me whatever you got” Fannie and
      Freddie [remember, Barney said “let’s roll the dice . . .”], banks’ required
      participation per the the Community Reinvestment Act – to loan to
       low-to-middle (LMI) income borrowers who never should have been
      home buyers, and, loan brokers pushing ever-more inventive products
      that made sure anyone could qualify for a loan – after all, Fan/Fred
       would buy it!)
. . .umm, let’s say, unforeseen circumstances.

The graph below shows two tracks. One, at 3% - a little less generous than Shiller’s 3.35%, and one at 5%. I put in the 5% trendline because the Ada Co. yearly totals in 1998 and 1999 may have been indicating incipient growth, occurring as a natural result of the area’s desirability.

For reference, the average Ada Co. home price in 1998 was $139,900. In 1999 it was $147,530 – a 5.4% increase over the previous year. By February of 2006, the average had risen to a peak of $280,869 – 201% of 1998’s average price!

So, if we pretend the bubble never happened, a 3% per year home price increase over the past eleven years would have made this past November’s average home price $200,714. What was it actually? It was $178,389. So, by this little “what if . . .” exercise, the Boise housing market has theoretically hit bottom, and then some.

Please don’t take this little amusement for anything other than that – just an amusement. In addition to the RE bubble, this economy also suffered from a succession of financial implosions. We may have truly had our average home prices reset to a lower trend line. Less pessimistically, prices could stay and/or go lower until the proportion of default listings recedes, lessening its negative effect on the natural price level. And, at that point, the market could possibly rejoin the trend line.

On the optimistic side, the new congress could bring positive economic policies for individuals and businesses, creating confidence and a willingness to invest, thus spurring a growth rate that would vaporize the current moribund predictions for the economy - and the housing market.

Boise Housing Prices Ready to Move?

2010-12-15T16:55:00.004-07:00

The Treasure Valley Real Estate market, as expected, did not make any big directional changes in November. In Ada County, 442 Single Family Homes were sold. Total listings declined, just as usual for this time of year. What's NOT usual is the declining trend in Months of Inventory.

The Trailing Three Month leading indicator is pointing to continued shrinking of inventory. This market measurement demands close monitoring. Should strong, positive macro economic events (tax reduction extension, job growth, retail sales improvement, etc.) occur in the near time frame - firing up the real estate market faster, and sooner, than anticipated, a supply deficiency could lead to a rapid increase in prices. Or, at the least, a more accelerated rate of return towards a normalized market.

Or . . .new listings after the first of the year could be greater than usual as a result of growing confidence in the market's direction. That would work towards moderating a possible supply crunch should the number of buyers begin to rapidly increase.

Job growth, and indications that hiring is on the increase, will have the greatest positive effect on the housing sector. Employment will bouy those who, because they were jobless, were edging towards or were in default. For those who are employed, but felt their jobs were threatened, a positive employment picture will provide a greater sense of security - increasing their desire to weather their negative equity position through to one that is positive. When this happens, short sales and foreclosures will begin to evaporate, no longer negatively affecting market prices, and the market will begin its recovery.

On my website I have many more stats on a range of market metrics relative to single family homes in Ada County . To view them, click here

- Alan

Boise Short Sales, Bank-Owned, and Non-default Home Sales for November

2010-12-07T13:05:00.000-07:00

The annual sales activity pattern, shown by the graph in my previous blog, pre-tells what this November‘s numbers would look like. Unofficially, 448 single family homes were sold in Ada County. So sales in the Treasure Valley area stays true to the graph's form, albeit with less quantity than pre-2007.

I’ll update November’s results completely by the 11th or 12th of this month. But, for now, here’s a slice of the market relative to what have become the three types of sales that occur in today’s market. Before 2007, short- and bank owned sales were oddities. But the volume to which they have grown, through the forces of our economy falling off the cliff, have made them target-home purchase options (individual buyers’ situations will have a lot to do with which type offering makes the most sense).

Bear in mind that there’s a lot of narrative behind what the graphs depict. And, I would imagine that there might be a lot of questions that a prospective purchaser might have after looking them over. That’s why working with a Realtor is important (and, it’s free! - the commission is a sales expense). The Realtor is your purchase consultant. Based on the buyers’ situation, s/he can provide direction and assistance aimed at achieving the most satisfactory outcome. Call me, I’ll be happy to talk to you about the different dynamics among the three types of transactions.

Alan - (208) 473-0343 - or, email me: Alan.Smith@Remax.net

Boise Area Real Estate Trends

2010-11-20T12:52:00.000-07:00

This is a follow-up note on my previous blog.

The real estate market is cyclical. If total home sales of successive years are compared January to December, a pattern is apparent. As shown by the graph below, sales grow through the beginning of the year, peaking late in the second quarter to early in the third. Then, activity drops off through the remainder of the year. There may, or may not be, a brief spike proceeding the holiday season.

This cycle means that trying to determine trend direction and rate by comparing successive months’ totals needs to be rationalized by same-month year-over-year changes. Even at that, anomalies can distort any perceived trend, unless the sampled period is greater than two or three monts.

On the graph below, compare the general shape of 2005 to 2006. 2006 mimics 2005, but is proportionally smaller. So, on a year-over-year basis, the trend is obvious. Now compare 2009 to 2010 (thru Oct).

At first glance, it looks like this year, so far, is better than last year. Not really. Through October this year, 30,931 sales have closed compared to 36,762 for the same period in 2009. The First Time / Move Up tax credit had the effect of creating sustained sales over an extended period in 2009, while a narrow spike in the first half of 2010 gives a false impression.

And finally, if you’re curious, here’s the sales for the past three months (Aug, Sep, Oct), and the respective corresponding YOY percent difference: 421, 493, 424; -3%, -4%, -3%

Boise Area Real Estate Market

2010-11-12T13:19:00.000-07:00

I'm overdue for this update- but, it's hard to get excited about this market. We're just absolutely bouncing along on the bottom waiting for signs to indicate the economy is on the rebound.  On the macro side, it's jobs and tax policy. Job growth is the magic cure-all. And, tax policy needs to have its direction confirmed. On the micro side, the primary and secondary mortgage markets need to see a rationalization of structure and policies that will lead to the re-establishment of a functioning lending process.

Metaphorically, for the housing market, it's like we have been driving through a long tunnel. Finally, the far end is growing closer, and the landscape beyond it beginning to be discerned. But, we can't yet see exactly how verdant it's going to be. How well the issues noted in the previous paragraph are dealt with will determine the rate of improvement, and velocity of rebound in the housing market.

So, here are the current stats for Single Family Home sales in Ada County. Some relative past numbers are included, but the significance is mostly historical - right now, they hardly hint at a direction. In the coming months, these numbers could become really interesting. So, for now, I leave what these numbers may mean up to you. At least, I think you'll find them interesting.

TTM = Trailing Twelve Months

Total Homes Sold in October = 424    Average Price = $174,262
TTM Average = 478                            TTM Average = $184,397
High Month = Apr 659                       High Month = Jul $195,595
Low Month = Feb 350                       Low Month = Apr $173,981

                                                          Median Price = $147,900
                                                          TTM Average = $158,000

Sold Distribution:
October                                  TTM Average
Conventional = 216     51%      275      55%
     Short Sale =   62     15%        83      17%
Bank Owned =  146     34%      139      28 %

Ratio of Sold Price to Asking Price - 2010 Thru October
                     All Ada County = .97
                            Conv Sale = .97
                            Short Sale = .96
                         Bank Owned = .98

Days On Market, October Sales           TTM
              Conv Sale =   88                   83
              Short Sale = 174                  161
           Bank Owned = 56                    47

Months of Inventory = 5.7 High = Nov 7.6 Low = Oct 5.7

This last stat is one of the more interesting. It hints at a supply and demand dynamic with the potential for a price increase, or at the least a spike, if positive events effect a market reaction.

I don't anticipate these stats to show any activity until the first of the year. But, of any trends develop as a result of November's sales, I'll post them.

- Alan

Boise Area Home Sales Results for August

2010-09-01T12:58:00.000-06:00

Here's the quick-and-dirty home sales results for August. These numbers relate only to existing Single Family Homes sold in Ada County. The numbers shown are preliminary. I'll post the final numbers about the 10th or 11th of the month.

                                    Average Price      Median Price     Ttl Sold
This month (Aug'10)      $187,724           $159,900              400
Last month (Jul'10)        $195,595           $160,000              392
Last year (Aug'09)         $191,627           $169,900                511
Last 12 months             $185,543           $158,742

Are we at the bottom? Should you wait longer before you buy? For what?   Lower Prices? . . .Lower Rates?

Case-Shiller says there's a possibility prices (on a national average) could drop another 10%. So, that would mean that, locally, the average price could go down to $168,500 - an additional drop of $18,800.

Now, where do you assume, in the long-run, that mortgage rates will go? That's right . . .Up!

Consider this: A $200k loan at 5% for 30 years will cost you $186,510 in interest. That same loan at 6% will cost you an additional $45,165 over the life of the loan. Waiting too long, and passing up the current outrageously low mortgage rates could be the wrong strategy.

Even if prices do drop before they begin to recover, they will soon eclipse your purchase price on their way up to an ultimate rational market price. You will have purchased your house at near market-bottom pricing for an historically low interest rate, and be positioned to capture every bit of appreciation as home values ultimately return.

Boise Area Real Estate Market and Home Sales

2010-08-18T20:09:00.000-06:00

For the month of July . . .

392 - Single Family Homes sold in Ada County in July.
510 - the number sold during July 2009. 24% fewer.
17% - were short sales
29% - were bank-owned
54% - were non-default.
160 – days on market for short sales
48 – days on market for bank owned
82 – days on market for non-default
$195,595 – average price for SFH in Ada Co.
$160,000 – median price for SFH in Ada Co.
3288 – number of active listings in July
.0972 – ratio of sold-to-ask price for non-default sales
.0971 – ratio of sold-to-ask price for bank-owned sales
.0976 – ratio of sold-to-ask price for short sales

So, there are the stats for single family home sales in Ada County for July. But how do these numbers relate to their trends? Where is the market going?

Right now, that’s not an easy question to answer. The usual, annual real estate activity cycle has been skewed by the on-going macro-economic environment. The usefulness of Year-over-Year comparisons has been diluted. Market disturbances caused by short sales and bank-owned properties throw off trend-reading to the extent that extrapolations are strictly for entertainment.
So, I’ll provide the analogs, and you can make your own assumptions.
Here are the monthly home sales for the year so far:
J/279, F/350, M/567, A/659, M/625, J/630, J/392

The profile for home sales activity through each year is a fixed perennial template. To wit: (click on graph for full view)

The only thing that really changes is the amplitude, depending on the level of activity, for any particular year.

Average and Median prices: Providing there are no more government-policy, or finance- industry unexploded IEDs, it appears that local prices have bounced off the bottom twice. The latest trough may have been a result of the volume of buyers taking advantage of the First-Timer/Move-Up tax credit. The bulk of those sales occurred in the lower price- strata, pulling the overalls lower, up to the time of the offer’s expiration.

Here’s what prices look like graphically, beginning from January ‘07 (click on graph for full view)

The most interesting statistic is the sold-to-ask price ratio. This may be another indication that prices have bottomed. Each is less than three percent lower than the asking price. A year ago, this ratio was around 5 to 6 percent of the asking price. This current compression just might be signaling an impending transition from a buyer’s to a seller’s market. At the least, we may be looking at an impending balanced market.

Finally, what has the composition of sold homes been doing? Are there really more short sales coming into the market? Or, are foreclosures overwhelming normal, non-default sales? See for yourself . . .(click on graph for full view)

It looks as though the trend is that non-default offerings are returning to being the norm – but slowly. Keep in mind that those that were once among the short sale offerings may shift at any time by force of foreclosure into a bank-owned offering. So, the short sale results are more like the result of a snapshot than a true comparison of short sales vs non-defaults vs bank-owned properties.
My conclusion: If you have been thinking about buying, or selling, but waiting for a sign –you may be staring into an incipient Green Light.

Alan Smith http://www.alansmith-re.com/ (208) 473-0343

HUD Changes FHA Mortgage Insurance Costs

2010-08-09T16:35:00.000-06:00

Congress has recently passed H.R. 5981. This bill gives FHA authority to adjust (increase) its annual mortgage insurance premium. Concurrent with the increase will be a decrease to the Up Front mortgage premium. This will become effective on September 7, 2010. HUD Assistant Secretary David Stevens said that this would yield approximately $300 million per month in value to the FHA Mutual Mortgage Insurance Fund. As the reserves are critically low as a result of the effects of mortgage defaults, this is a necessary move.

All FHA guaranteed loans must have mortgage insurance. The premiums are two-part: 1 – the Up-Front mortgage premium, which, on September 7th, will be 1% of the loan amount. And, 2 – the monthly premium, which will be .85% to .90% of the monthly payment.

The hit on a $200k loan with a 30 year term will be an additional $43 per month. Over the course of the 360 months of the loan, the cost to the borrower will be an additional $15,480.

Unlike conventional loans, where once the principal is reduced to 80% of the value, the MI can be dropped, FHA requires MI for the life of the loan. The primary benefit of an FHA loan is that the borrower can purchase a house with as little as 3.5% down.

If you’ve been looking to buy via an FHA loan and can get it done before September 7th, you can save yourself some serious money.

Regardless, house prices are really low. The average price hit a low last April at somewhere around 38% below what it was four years ago. And, loan rates are hitting historic lows. If you can do it, now is the time to buy.

The Boise Area Real Estate Market and Consumer Confidence

2010-08-02T10:34:00.000-06:00

On July 27th, the Conference Board reported that its Consumer Confidence Index fell to 50.4 from June's revised reading of 54.3.

When will confidence improve? We all know the two basic answers to that question are: One, just as soon as individuals begin to see steady increases in employment, and two, as soon as the general public gets a sense of how their personal finances and tax burden are going to be affected by all the recent government actions.

A big boost to confidence will come with Job growth. New jobs are not only good for the unemployed, they also provide a greater sense of security to those already employed. Additionally, there soon will be some clarity on how our individual tax liabilities are going to change. Then, consumers can again begin making decisions on longer-term commitments. These two facts will have a compound positive effect on the housing market. For, as confident buyers emerge, the housing market’s return will accelerate, and values will begin to climb. Along with that, under-water owners will be floated to a positive equity position again, reversing the foreclosure trend. There is potential for the return of the housing market to have an accelerated start.

The return of the housing market will be driven by two strong forces. The first is buyers who deferred their purchases when the market slumped. And, the second is the back-up of new buyers as a result of population growth over the course of the downturn.

This will put pressure on inventories. On a Trailing-Twelve-Months basis, Ada County currently has 6.6 months of inventory. That number as of early last year was in the 14’s. There is no slack in the system. New home construction has been negligible for the past couple of years, and a start up won’t happen quickly since development of the land is necessary before any construction can happen.

These dynamics indicate that the early bird will: get the best selection, lowest price, capture the greater amount of appreciation over time, and at today’s rates, borrow at the lowest rates in over 60 years.

So, monitor that consumer confidence. But, it will only confirm what you’ll already sense – everything seems a bit better than it did yesterday . . .last week . . .last month. At this point, the green light comes from your gut. Make the move!

I’ll help you do it. – Alan Smith - http://www.alansmith-re.com/ (208) 473-0343

Boise Area Real Estate - The Trend

2010-07-16T09:27:00.000-06:00

What are Boise area single family home prices doing? Are there more, or fewer Short Sales and Bank-Owned properties? Where is the market headed in the next six months?

Well . . .let’s see. Sales Activity: . . .after a no-surprise, anemic January and February start for Ada County, total sales jumped up to the low 600’s in March, and hit the high 600’s in June.

Prices: Since last November, the Average and Median SFH (Single Family Home) price in Ada County has bottomed twice. Since the second bounce in April, both Average and Median prices have risen over the past two months.

Shorts and REOs (Bank-Owned): . . . for the first six months of the year have averaged 16.7% and 27.4% of total monthly sales, respectively. The trend has been that each has given up share to greater sales of non-default properties . . .yes, really!

Values: On a Dollars-Per-Square-Foot basis, the Ada County average is $101.77 – ranging from a high of $125 (NE Boise) to a low of $76 (Kuna). There’s no denying that default properties have affected the prices of Non-Default listings. But there still is a pricing premium for no-stories offerings. That premium amounts to an additional (county average) of 18% over Shorts, and 24% over REOs. Like with Dollars-Per-Square-Foot, pricing premium differences by type of sale vary from area to area.

The Next Six Months: Who knows. I mean really. Right now, it’s hard knowing how the implementation of new, major legislations (health care, financial regulation) will affect the public and private sector tax-wise. That will become clearer as time goes by, as regulations and policies directed by the legislations are written. The problem is, right now it’s hard to judge the extent of the hit. But, over time, individuals will begin to find out how they’ll have to adjust, financially. At that point, collective economic activity (retail purchasing, saving rates, capital spending, and hiring) will begin to indicate the rate at which the economy is going to return.

We are heading for a rebound. It appears that the local real estate market is improving. Coincidentally, loan rates are at historic lows. If I were looking to buy, or considering selling (to buy up or down), I’d think about taking advantage of the situation. It may sound counterintuitive to sell now, but it’s either sell low and buy low, or sell high and buy high.

Call me. I’ll be happy to do a quick analysis of your house and its relative market. If you’re looking to buy, I will provide you with data to help with your selection decisions.

Alan Smith – www.AlanSmith-RE.com (208) 473-0343

Boise Area Real Estate Market - Short Sales and Bank-Owned

2010-07-01T12:28:00.000-06:00

For sales of Single Family Home in June for Ada County . . .of the three type of sales (Non-Default, Short, and Bank-Owned), here are the comparative numbers for their average square feet, average dollars-per-square-feet, and the average lot size.

                         Avg SqFt    Avg $$ PSF Avg Lot Size (ac)
Non-Default         1975           $106.21         .224
Short Sale            2215           $ 89.08          .295
Bank-Owned      2343           $ 84.17          .31

Here’s what that tells us: Bank-Owned sales prices are 5.6% less than Short Sale prices. Sold prices of Non-Default homes are 19% greater than those for Short Sales and 26% greater than those bought from the banks.

There is a premium buyers are willing to pay for a “no-stories”, conventional transaction. Adventurous buyers, looking for a bargain are willing to attempt to find it via a Short Sale – accepting an “as-is” property condition, and a third party to the sale (the lender). An even greater bargain can be found with Bank-Owned offerings. The trade-off here, is that the “as-is” condition most likely has been affected by a longer period of dereliction.

Additionally, a trend not shown by these numbers, but none-the-less interesting, is the share of total sales for Non-Default homes over the past five months, ie. 46%, 52%, 51%, 55%, 62%. The remainder being split generally 2-to-1, the heavy side going to the Bank-Owned properties. The loss given up for the shift to the increased share of Non-Default homes comes almost wholly from Short Sales. So, the monthly average so far for this year for the share of Short Sales and Bank-Owned properties to total sales is 17% and 29%, respectively.

So, what’s that fact worth? Nothing, really, when trying to devine a trend. And that’s because, there are so many factors that are currently influencing the market. Any one, or number of which, can influence different people differently. And that will be the case until some of the vagueness as to how individuals and the economy will be affected by all the recent government actions intended to improve the economy and our lives, resolves to clarity.

Here’s what we do know: Mortgage rates are at historic lows. Housing prices are at, or near, the bottom. The economy will eventually recover. The average length of home ownership is seven years. And , using the past 75 years of home prices as a guide, home values in seven years will be higher than they are now (and the same can probably be said for mortgage rates).

Alan - http://www.alansmith-re.com/

Boise Housing Market: Low Rates, Low Home Prices.

2010-06-28T10:50:00.000-06:00

Freddie Mac, 6/24/2010 – “30 yr fixed rate at 4.69, the lowest level in 39 years. 15 yr fixed at 4.13%”

There’s no better time to get out from under that higher-than-current-interest-rate-mortgage you have by refinancing to one of today’s low-rate loans. Better yet, if your home no longer provides the solution to your practical needs, use that new low-rate loan to get a house that does!

Whether you need to move up, or want to downsize, doing it now makes the most sense. Rates are low, homes are a bargain, and the housing market is poised to begin its upswing. The return of the market may come at a less robust rate than its historical average, but appreciation is appreciation.

So, if you’re considering a new mortgage, you might as well apply it to a house that will put a longer-term smile on your face.

Call me, I’ll find that Boise area home for you.

Alan Smith - http://www.alansmith-re.com/

Boise Home Prices Edge Up Slightly In May

2010-06-17T12:33:00.000-06:00

In the previous post, I speculated on what the May activity results for the real estate market for single family homes in Ada County would be. As I assumed, the number of active listings did edge up (from 3106 in April to 3202). Average and Median sales prices crept up 2% and 3% respectively. Normal (Non-Default) home sales continued a slow increase in share of total sales, over Shorts and Bank-Owned sales. The distribution of each, within total sales, is pretty much the same May last year, except the total numbers for each is greater now.

Here's some other interesting facts:

If you're think of buying, or selling, give me a call, I'll help you get it done.

Alan Smith - http://www.alansmith-re.com/

Like In Politics, All Real Estate Is Local

2010-06-04T16:50:00.000-06:00

In the next few days, the media will be reporting the home sales results for May. The numbers will be interesting, but probably misleading. That’s safe to say because what’s reported usually is a very broad result – a national number. Viewed more finely however, a more useful story emerges. You’ll find that there are regions which are still languishing, and others that are rebounding. If you own, or are looking to buy, a house in say, Ada County, it makes a difference.

Here in the Boise area, what you should hear about local median and average home prices for May, is that they rose month over month. I’ll have exact numbers in about a week, when the local association reports.

For a fuller understanding of market direction, there are additional pertinent numbers, such as total sales and number of active listings. Look for May’s total sales to have not changed much from April. The number for average active listings should have edged-up month-over-month, as it has since January.

The most interesting trend is in the distribution of types of sale. Non-Default (conventional) sales have been rising steadily, from below 50% of the total sold - where they were in January – to possibly over 60% for May. The larger part of the shift is coming from Bank-Owned properties, and the remainder from Short Sales. I’ll break this out too. Keep checking back.

Alan Smith http://www.alansmith-re.com/

What is the best bargain for home buyers?

2010-06-02T15:11:00.000-06:00

Easy. The services of their real estate professional. The resources they have available to source, select, and screen for qualifying properties can’t be matched by anyone. The Realtor’s value is additionally enhanced by the Realtor’s personal knowledge of, and experience with, the area they serve.

All this is provided to the buyer for free, as the seller is the party that pays the commission. There is no better deal on the planet. So if you’re at the starting point of looking for a house, engage a professional. A licensed Realtor is equipped to manage the necessary disclosures, documents, and process to make a stressful transaction as stress-less as possible.

With consideration to the seller providing the commission, there’s a considerable amount of value received on that side of the transaction as well. With respect to the listing agent’s resources at hand, there is no better way to optimize the marketing of a property. The greatest element of the value received, is time - as in successfully selling a house in the shortest amount of time possible. Obviously, this is unquantifiable. But, a home on the market month after month continues to generate utility bills, taxes, and mortgage payments. Each successive month on the market effectively reduces the seller’s realized equity.

A house isn’t sold unless it’s seen. Bringing it to the attention of prospective buyers is another value a Realtor can provide. Property listings in the regional Multiple Listing Service database are also reflected in searches home shoppers enter on the Realtor.com website – you can’t broadcast any more widely than that. Add-in the exposure from other media sources like Craig’s List, Facebook, YouTube, and others, and a Realtor’s leverage for marketing the sale of a home can optimize the speed at which the home sells.

If you’re looking to buy, or sell, in the Boise, Idaho area, give me a call. Also, I have experience with relocations. If you have chosen Boise as your new home, I can help you find a home and settle-in.

Alan Smith – http://www.AlanSmith-RE.com

Boise Area Home Prices On The Rebound?

2010-05-27T12:27:00.000-06:00

This is an update on my blog of May 13th - which was a “to-date” snapshot of May’s sales activity. My general point in that blog was to show that April’s decline in average and median home prices in Ada County was a result of an increased volume of purchasing in the lower price ranges as buyers took advantage of the First-Timer / Move-Up tax credit before it expired – and prices would “re-adjust” following the end of the tax credit offering. Tax-credit-advantaged sales contracts were no longer allowed after April, and must settle before the end of June.

Checking-in again on May’s sales still supports that assumption. Through the 26th of May, average and median home sales prices have risen 4% and 3% respectively. Total unit sold now extrapolate to 544, rather than the 421 indicated earlier in the month.

Here’s the graph with May’s extrapolations plugged in. If this was a chart of two stocks, you might hear some analyst saying . . .“looking at that double bottom, I’d say we’re done dropping”.

The total number of home listed has risen also. So, even in the headwind of a larger supply, prices are showing a rebound.

If you’re considering buy or selling, call me. I am happy to consult with you regarding your plans, and how to make the most of them in the current market.

Alan Smith - http://www.alansmith-re.com/

Are you looking for a Great Home, or a Good Deal?

2010-05-19T10:07:00.000-06:00

A good deal on a house is considered having purchased it below market value. And, if a good deal is your prime objective, it can be achieved. But, other objectives like location, condition, and floorplan, will need to be sacrificed. If price is the major focus, these other preferences may not be a feature of the Good Deal home.

On the other hand, if buying a “great house” is most important, it means the home you’re looking for is the one that will most closely meet all of your needs and preferences. A Great House, and a Good Deal aren’t mutually exclusive, just rare.

Before you start looking for a house, list your desires in order of preference. Keep them general, like price range, location, floorplan, etc. (price range should be first, because it’s absolute). As you look at homes, let additional preferable features you may find in each surprise you. Homes you find that score well, preference-wise, are worth more to you than those that don’t, irrespective of their asking price. That’s simply because you’ve found what you’re looking for. At that point, offer, negotiate, and buy.

http://www.alansmith-re.com/

Un-Mixing The Home Price Signals In Boise

2010-05-13T11:51:00.000-06:00

In my previous blog I reported that the Average and Median sold prices for Single Family Homes in Ada County had dropped again for April. But, I also suggested that the true market in the Boise area was flat, or beginning to rise. The continued decline in home prices as reflected in April’s numbers was skewed by an unusual amount of activity in the lower price ranges as buyers took advantage of the buyer’s tax credit before its end.

So, let’s take a look at May’s numbers so far. To date, 153 houses have sold at a median price of $159,684 (vs April’s $149,900), and an average price of $183,934 (vs $173,981). Activity has likewise adjusted. There have been eight sales days, with 22 remaining. Extrapolating the 153 sales to the end of the month suggests total sales will be 421. That’s a good bit off of April’s Tax-Credit fueled 659. However, it’s back within the usual range of 14 to 17 percent of total listings offered.

So, at least through one third of May, sales results indicate that the market is not continuing to decline. Good news! I’ll confirm it when May concludes. This is the most current indication of the Boise real estate market I can provide. But, if you’re contemplating either buying or selling, you need to have the most current information possible.

When you decide to pull the trigger, give me a call. I am looking forward to helping you.

www.AlanSmith-RE.com

Mixed Signals For Home Prices In Boise?

2010-05-11T14:05:00.001-06:00

The Median and Average Ada County home prices continued their decline through April. In December and January, both had risen slightly, only to retreat continuously over the next four months. But, I think that trend is a phantom, and we’re doing better than that, price-wise.

Here’s why: The First-Timer, Move-Up tax credit qualification ended with April. The rush by buyers to take advantage of it had an effect on the volume of purchases at the lower price ranges. That volume is evidenced by two facts. One, 62% of April’s sale prices were at, or below, the Average Price for April. Two: total sales represented 21% of total active residential offerings for the month. Going backwards to December, that metric looks like this – 18%, 12%, 9%, and for December, 12%.

Without that tax credit effect, there would be a more usual distribution of sold prices. There would be less skewing to the lower price ranges. We’ll see for sure in May’s results. But, I’d be willing to bet right now, that the trend we will see will be an indication of support for a bottom, or possibly even a slight trend up.

If you have been contemplating selling your house, but waiting until prices began to return, then now is the time to start conditioning your house for the market. I’m pretty sure you’ll hear the starting gun fire as soon and May’s numbers are compiled.

Then, call me. I’ll sell your house for you. (208) 473-0343

http://www.alansmith-re.com/

Boise's Race For The Cure

2010-05-10T10:49:00.000-06:00

Our office participated in Race For The Cure, here in Boise, last Saturday. The overall event was a tremendous success, raising over $245,000, and drawing 16,000 participants.

Our booth was busy the whole time. We handed out about 900 bottles of water, almost 1500 balloons, and had drawings to give away eight gift baskets. But, our real connection to the Race's cause is our pledge to donate $100 in the names of our clients, for every closed transaction until the end of the year. As the market comes back here in Boise, we hope our pledge will generate a substantial contribution to help the work that The Race For The Cure supports.

Comparing Boise Area Home Prices – Normal vs Shorts and Bank-Owned

2010-04-30T16:58:00.000-06:00

If you’ve been wondering what effect the prices of Short Sales and Bank-Owned properties have had on non-default homes in Ada County (the general Boise area) here’s the answer:

Using Price per Square Foot as a simple comparable, the average for a non-distressed home in 2009 was $105. That compares to $93 and $86 for Short Sales and Bank-Owned properties, respectively. It looks like the numbers so far for 2010 are holding generally the same. It’ll take another couple months of data to see if there’s any shifting going on. So there’s a price premium for a non-default property of about 13% over Short Sales, and 22% for Bank-Owned houses.

Why? Probably because home shoppers quickly learn the characteristic differences of these types of sales, and then target the sale type which best suits their tolerance. Buyers are willing to pay a slight premium for a timely transaction, on a no-compromises, no-stories property.

Here are two final pieces of information – 1. The sold price on each of these three types of transactions averages out to about 95% of the last asking price, and, 2. From area to area within the county, these numbers shift due to location and supply.

Alan http://www.alansmith-re.com/

The Fannie Mae National Housing Survey

2010-04-07T12:30:00.000-06:00

(http://www.fanniemae.com/about/housing-survey.html)

Here’s a condensed version of the report’s results:

80% - consider homeownership important to the economy
31% - think the economy is on the right track, but,
44% - expect their financial situation to improve in the next year, and,
56% - of renters, are more optimistic about their personal finances than mortgage holders,and,
63% - of delinquent borrowers feel likewise

64% - think it is a good time to buy a house . . .
31% - of those, think it is a very good time to buy a house
66% - number responding in 2003 that it was a good time to buy a house
73% - think housing prices will go up or stay the same over the next year . . .
37% - of those, think prices will increase . . .
36% - of those, think prices will stay the same

70% - say homeownership is one of the safest investment available. In 2003, 83%
74% - think putting money into a savings, or money market account is safe. In 2003, 79%
17% - believe buying stocks is a safe investment
65% - prefer owning to renting
43% - for safety
33% – for schools . . .both, ahead of economic considerations

90% - satisfied with current mortgage
93% - of those, with 30-year fixed rate mortgages
76% - of those, with hybrid adjustable
68% - of those, with adjustable mortgages
(and, the last two groups are more likely to be delinquent)

Of renters . . .
79% - feel renting has been positive for them and their families
75% - believe that owning makes more sense than renting
54% - feel their credit history is not good enough to qualify for a loan
47% - feel they couldn’t afford purchase, or upkeep
67% - plan to buy a home at some point in the future
70% - think purchasing today is harder than it was for their parents generation
44% - would buy a house if they had to move
23% - would purchase a home later than they planned

Of all respondents . . .
60% - think purchasing today is harder than it was for their parents generation. In 2003, 49%
68% - think getting a mortgage will be harder for the next generation

Top obstacles to obtaining a home loan:
22% - poor credit
19% - income
15% - job security
15% - lack of sufficient down payment

76% - were confident they would receive good loan consultation for new loan, or refi
47% - were very confident
51% - are making personal sacrifices to own a home
24% - are sacrificing a great deal
76% - would pay mortgage before other bills
42% - would give a higher priority to bills over their mortgage
48% - say banks should foreclose on owners who are unable to pay their mortgage
43% - feel otherwise
53% - feel homeowners are responsible for getting loans they can’t afford
88% - feel it is unacceptable to stop making payments on an underwater mortgage
70% - of those who are delinquent, feel the same
8% - believe it is acceptable

“Does financial distress make stopping payments on an underwater loan acceptable?”
15% - answered yes
8% - felt it was acceptable generally

Most likely motivators for keeping mortgage payments current:
35% - impact on credit score
33% - moral qualms
2X – likeliness of over and under borrowers to consider defaulting because they knew someone who had

- Alan, http://www.alansmith-re.com/ direct: (208) 473-0343

Boise Home Sales Activity in Transition

2010-04-06T13:34:00.000-06:00

Supply up, sales up, average and median prices down.

For Boise, the real estate market peaked over the summer months in 2007. Average prices had lofted to $280,641,and median prices almost made it to $240,000. For those months, the number of homes sold represented between 13% and 15% of the total homes offered.

Understandably, today’s average and median prices are at 64% of their peak, and the average number of homes listed has dropped to 84% of the peak. What is surprising is that the turnover for March was 14%!

It’s hard to tell how much the First-Timer and Move-up tax credit affected the increase in activity. But, that it did have some effect can be assumed, since March's average and median prices were 6% and 5% lower than February's, respectively. The opportunity to take advantage of the credit ends on the 30th of this month. With that incentive over, successive month’s stats should more accurately depict the market.
- Alan http://www.alansmith-re.com// (208) 473-0343

The Boise Area Real Estate Market - You Make The Call

2010-04-02T12:08:00.000-06:00

(My previous post is made somewhat less relevant by this one, due to additional, and more current data.)

What’s currently happening in the Boise real estate market? Right now, your guess is as good as mine. So, here’s some data to help educate your guess. The way the data are at odds with one another indicates a transitional state – which probably will resolve itself within the next month or so. Good vision now can position your purchase, or sale, at the leading edge of the wave.

. . .for Single Family Homes in Ada County in March (these are tentative numbers):
There were about 915 new listings, increasing the average monthly listings by 40% over Feb.

New-listing distribution was: Non-default = 65%, Short Sale = 20%, Bank Owned = 15%

Sales distribution for Jan/Feb was: Non-default = 49.2% , Short Sale = 20.3%, Bank Owned = 30.5%

Total homes sold was about 620 – a 177% increase over February’s 350

Sales equaled 14% of inventory – Jan / Feb numbers were 9% and 12% respectively

Average sales price declined by 6% to $180,400

Median sales price declined by 5% to $154,900

Average Days On Market for March Solds was: Non-default- 94 , Short Sales -187 , Bank Owned -46

For reference, 2009 DOM average was: Non-default- 84 , Short Sales -134 , Bank Owned -60
source: Intermountain MLS

So, activity has definitely picked up. Selection has increased, deflating demand, and reducing sellers’ leverage, resulting in lower sales-price results. Non –default homes are still the bulk of the market, and are competing price-wise with only a small, but reasonable premium over Shorts. Homes offered as potential short sales reside in “Foreclosure’s Waiting Room”. That’s because, due to inherent difficulties with short sale transactions, which lengthens the process and adds to their volatility, they have a less than (anecdotally) 50% success rate. So, many are foreclosed on before they can be successfully sold.

Perennially, the real estate market peaks in mid-summer, after having slowed down into the holidays and the new year. Cycle-wise, we’re just in the middle of the Winter-to-Summer ramp-up. There’s little question that prices have, generally, bottomed. Now, for those who have deferred their buying or selling, it’s just a matter of using all the current indicators to determine when to take action.

The long-term price trend for housing is up. Once all the factors favoring a positive direction of activity in the housing market are obvious, any delay in making a move surrenders additional appreciation. When you decide it’s time to make the move, give me a call. I’ll provide you with a Market Analysis of your home, so you can confirm your decision.
Alan Smith, visit my website (208) 473-0343

Boise House Market Set To Return

2010-04-01T14:28:00.000-06:00

Six to Seven years is the average length of time homeowners stay in their homes. Choose most any seven year period from the graphs below, and the chances are pretty good that the “out” value was greater than the “in” value. For those who remain in the same house for longer periods of time, capturing appreciation is virtually assured. Buy near a market bottom, and the appreciation is maximized.

That’s where we are NOW. In Ada County, the median Single Family Home price peaked in July of 2007. Since then it has declined 29.5%. Over the past three months the pricing seems to be forming a trough. The rate at which home price appreciation returns will be determined by a number of factors. Suppressing the rate will be slow growth in employment and the unknown (as yet) tax consequences of the new health care bill. A factor that can increase the rate will be how supply is tested by the potential demand from deferred purchasing, unbundling of combined families, and echo-boomers.

Either way, today’s conditions all point to this being the beginning-point for a lengthy period of home price appreciation. For renters, there is no better argument for developing their own equity, instead of their landlord’s. For current homeowners, this is the most cost-effective time to move up to a larger house.

Since the census data ends with 2000, I researched the Ada County median prices from 2001 to 2009. The graph shows that prices continued to rise until mid-2007. I carried the numbers through to include the first two months of 2010 to further display the directional change.

If you're ready to buy and/or sell, call me. I'll me happy to do a Market Analysis to determine the current value of your home.
- Alan http://www.alansmith-re.com/ (208) 473-0343

Boise Mortgage Rates . . .What’s The Trend?

2010-03-29T15:00:00.000-06:00

In this market, at this time, the direction of mortgage rates will be a factor of:

- The movement of benchmark treasury yields

- The level of perceived risk of Mortgage Backed Securities

- The supply & demand of/for loans

Recent treasury auction demand has been tepid. Uncertainties regarding the deficit have sidelined participants. Consequently, there isn’t much buying competition – resulting in higher yields. Mortgage investors in the secondary market use the 10-Yr treasury yield as their benchmark. As long as the outlook on the deficit is foggy, or worse - that it will continue to climb, investment in the United States of America will require the current – or a greater, yield.

If the government should choose to end their intervention of the GSE’s (Fannie/Freddie) which supports the semi-explicit guarantee, their insolvency would be exposed. This uncertainty creates investors' reluctance to invest in their portfolios, pressuring higher rates. This severely slows the agencies functioning, which has a whole “downstream” affect on the mortgage market.

The Mortgage Bankers Association expects 2010 loan production to slow at least 40% from 2009. Loan production in 2009 was restricted by higher down payment and credit rating requirements. Easing on these requirements is not anticipated for 2010. Also hitting loan activity negatively will be refinance originations, which will drop drastically as the bulk of qualifying positive-equity properties have already taken advantage of historically low rates.

So, it appears that rates through the year could increase by ½ to 1 percent. Improvement in any of the above factors could ease the upward pressure, keeping rates from rising quite that much. Contrary to national statistics, home prices in the Boise area (Ada County) have climbed slightly over the past two months, after forming a base in October and November. March over February total home sales is projected to be 28% greater. Increased sales activity will probably hold the average price of the low $190’s from climbing.

The Real Estate Bubble - How Did It Happen?

2010-03-24T11:26:00.000-06:00

AN IMPERFECT STORM

Over a period of nearly a decade, a cast of agencies, regulators, and market players took actions that resulted in the creation of an asset bubble that nearly collapsed our economy. They didn’t do it in concert - these were mostly disparate actions. However, some were precipitated because of inadvertent advantages afforded by a previous one. In major new policies, or policy changes, there are often unintended consequences. There shouldn’t be, but the scale to which the economy has grown, and the sophistication of its mechanisms, exceeds policymakers comprehension. The “teaching moment” presents itself as a by-product of nearly every new policy, but ideology or political ego-greed keep that from happening.

The major participants and their contribution to the ultimate result are listed below. Timing, or the succession of certain policies or actions weren’t that critical. It’s just that they all occurred within the right time-frame. It was truly an Imperfect Storm. The unconsciousness of it all is astounding. So, there’s no order of any sort to the participants. After reading how all were involved, a time-line of how some may have been affected or influenced by the other will be evident.

. . .for the rest of the story, go here: http://www.alansmith-re.info/custompage.cfm?cpid=1604

Boise Area Real Estate Trends for Short Sales and REOs (Bank-Owned) Properties

2010-03-15T14:41:00.000-06:00

If you rely on the media to get an idea of what is really occuring in the housing market, you may have drawn a conclusion other than what is really the case. Is our market flooded with short sales that are overwhelming the values of non-distressed houses for sale? Well, here's a chart showning the last seven month's distribution trend that will give you an idea of what's really going on.

You can see that, thru November, roughly 65% of Single Family Homes sold in Ada County were "normal" transactions. Short Sales and Bank-Owned properties gained share in December and January - these are transaction types that are less affected by the holiday season. Confirming that, is the return of share growth to "normal" transactions.

So, if we take a long-term view, it looks like Short Sales and Bank-Owned will moderate. They'll drift back to generally occupying a combined 35% of the market.

Interestingly, if this were a chart showing the distribution of Currently Listed homes, Short Sales would swap places (and then some) with Bank-Owned properties (a snapshot of active listings as of the date of this post reflects 32% for the former and 9% for the latter). Because of the nature of a Short Sale transaction the success rate is not that high. Some succeed, some have successive offer attempts, and some eventually are foreclosed on by the lender.

As far as distressed properties negatively affecting the market pricing, that can't be denied. But, there is a discernable premium for "normal" over distressed sales. The basic reasons for this are that buyers become aware that distressed sales: involve a third party, as sold "as-is"; often take much longer to complete; and in most cases have been left in a vacant state for a period of time.

What Is My House Worth?

2010-03-10T14:59:00.000-07:00

If you own a home in Boise, Meridian, Eagle, Star, or any of the towns comprising Ada County, here’s quick and general guide to finding out what your house is worth. Compared are the averaged Original listing price, the most recent Asking, and the actual Sold price for Normal (non-distressed), Short Sales, and Bank-Owned properties sold during January and February. For additional consideration, the average Days On Market, or length of time it took to sell the house, is shown by category.

Here’s the tools you need to find out what your house might be worth: First, find as many comparable homes for sale near your location as you can. Look for homes that are of similar square footage, and configuration, with the same type of amenities. If you live in a suburban neighborhood, you don’t have to worry about lot sizes that much – unless yours is uncommonly large or small for the area. Second, average out the comparable homes' collective price per square foot. And, third, use these guidelines to compute what a competing price for your house might be.

Now, here’s where the art comes in. To refine your result as sharply as possible, use these considerations . . .

Owner’s have wishful price expectations for their homes. Over exuberant Initial asking prices are usually moderated by the listing agent. Nevertheless, no one wants to leave money on the table. Initial asking prices have to be relevant enough to attract attention to the house. If there is no action, the price has to be adjusted. When the seller and prospective buyer negotiate to a mutually agreeable price, the market price for the house has been found.

Or, you can call me. I’ll be happy to provide you with a Market Analysis for your home. If you decide to sell your house, I hope you’ll choose me to represent it, market, and sell it.

- Alan http://www.alansmith-re.com/ (208) 473-0343

Boise Area Real Estate Pricing Analysis

2010-02-27T11:24:00.000-07:00

If you were wondering what the pricing effect of distressed homes might be on normal (non-distressed) sales, here's a simple overview:

Narrowing the evaluated pool to Single Family Homes in Ada County with asking and sold prices between $200k and $250k, 4+ bedrooms, and 2.5+ bathrooms, yielded 1292 homes currently offered for sale, and 101 homes sold in January. The source is the Intermountain Multiple Listing Service.
Using average prices, the Asking Price premium is 26.6% for Non-Distressed over Short Sale offerings. For actual Sold Prices, Non-Distressed sales were 1.5% higher than the average Short Sale price.
This is interesting only in the sense that it displays the current market, where the pricing dynamics are affected by three sales-type elements - normal, short sale, and bank-owned transactions.

Has the Boise Area Real Estate Market Finally Bottomed?

2010-02-12T11:07:00.000-07:00

Single Family Home average and median price trend in Ada County. Check out the latest four months.

It looks like it might be time to get busy.

Selling A House - Eliminate Bargaining Leverage

2010-01-21T12:39:00.000-07:00

The majority of prospective home buyers are looking for a clean, well-maintained, ready-to-move-into house. They understand that there is a value premium that comes with a home in great condition. For sellers, if they have been diligent about maintaining their house, preparing it for sale may require very minor labor, and minimal cost. Regardless of the amount of conditioning required, the cost-in, to value- gained benefit, is tremendous. So, the first strategy for preparing a house to be sold is to maximize its value.

Buyers looking at houses remember those that made an impression – good, or bad. Those that made a bad impression are eliminated from the “contenders” list. If a Realtor has done a good job of selecting the most appropriate offerings for his or her buying client to see, they should all be so comparable that “condition” will remain as the only major deciding factor.

So, the extent to which a house is prepared for sale has a direct relationship to the amount for which the house ultimately sells. No surprise there. But a supporting reason why that is the case, is because if a prospective buyer cannot find faults, they will have no justification for taking “allowances” in their offer.

So, the second strategy for putting a house in excellent condition is to eliminate potential issues for negotiation. In a sale, negotiations will occur. But, the greater the number of initial faults a prospective buyer can identify, the lower the initial offer price will be.

For homeowners, identifying all the preparation needs of their house has an inherent “forest-for-the-trees” liability. That why it’s a positive-value-move to engage the services of a real estate professional. A Realtor not only brings an outside eye to the house, but they know the mind of the prospective buyer, and how to set-up the house to avoid anything that might unsettle their expectations. A Realtor’s start-to-finish resources and experience means an effective focus will be applied to all elements of the process, making sure your house sells quickly, and for a favorable price.

If you’re ready to put your house on the market, give me a call. I will provide you with a Market Analysis showing the value of similar homes in your neighborhood. I can also develop a selling preparation plan so that when your house is placed on the market for sale, it will attract all the attention – and ultimately a quick and favorable sale.
- Alan http://www.alansmithrealestate.com/ (208) 473-0343

Now Is The Time To Start Thinking About Selling Your House

2010-01-18T12:34:00.000-07:00

Here in Boise, as well as in the rest of the country, the busy season for Real Estate is starting up. Sales activity will increase through the first half of the year, eventually peaking (usually) in June. Or, at least that’s how it’s gone in previous years. There’s no reason to think the profile will be any different this year. However, depending on the rate of the economy’s recovery, the amplitude may be stunted. Here’s an up-dated version of a graph I posted back in September that depicts the yearly home sales profile for Ada County. It shows the yearly activity cycle by month beginning with 2002. The vertical lines separate each year.

If you are considering putting your house on the market this year, now is the time to start developing your plan. In 2009 the average Days On Market for a non-distressed property was 84 days. Backing-up from the general peak of the market, June, that means your house should be on the market no later than the end of March.

Plenty of time? Not really . . .unless, you want to compete in the market when the greatest number of homes are offered. Bullet point one: Get ahead of the curve.

But wait . . .I’m getting ahead of myself. The selling plan you’re developing needs a title – it should read “Getting the most for our house and selling it quickly”. If that’s not your objective, then you don’t need to read any further.

You’re still with me – good. Here’s bullet point number two: Fix-up, clean-up, paint-up. To home buyers, condition equals impression. You want buyers to be the most impressed with your house over all the others they see. This is all non-intrusive, DIY labor that, for the effort and cost, returns the greatest increase in the value of the house.

Actually, in its complete form, this bullet point reads: Fix-up, Clean-up, Paint up, Update , Neutralize the interior, Enlarge the space, and De-Clutter. Call, or email me, and I will send you a description of what each of these involves.

I have been in very few houses that didn’t need some conditioning before being market-ready. So, depending on how much needs to be done, you’ll need to back-up some more on the calendar. Let’s say, you’ll need about four weeks. We’re (back) up to the end of February. That’s coming right up!

Bullet point number three: Engage a real estate professional to market and sell your house. The stat about houses being on the market an average of 84 days in 2009 refers to professionally marketed houses. I have no stat for owner-sold houses. But, I can guess that without the robust marketing infrastructure as is found with Realtors, For Sale By Owner houses can’t get the visibility they need in order to sell quickly. The first post in this blog explains why using the services of a Real Estate professional can pay for itself.

If you want to optimize both the time on the market and the selling price of your house, let me help you. I will be happy to provide you with a Market Analysis to give you an idea of your home’s value.

Short Sales Aren't For Every Buyer

2010-01-16T13:16:00.000-07:00

Does the idea of buying a home for less than market value sound too good to be true? For the average home purchaser tempted to go after a Short Sale, that may be the case. Many would-be buyers have heard stories about the “unbelievable Short Sale deals available”.

Actually, houses are listed as “potential” short sales. That’s because offers to purchase for less than the amount remaining on the loan require the acceptance of a third party, the lender. It’s not unusual in housing downturns for a house’s value to drop below the current mortgage amount. Most commonly, this occurs to buyers who purchased at the height of the market, with very little money down, and with an inappropriate type of mortgage for their financial situation. A structured mortgage rate reset is all it might take to make this kind of buyer unable to make the higher mortgage payments.

The banks/lenders become a third-party to the transaction because they must accept a purchase offer if it does not cover the loan amount owed. If there is a second Trust Deed holder, their acceptance is also necessary. At this point, the likelihood of a successful Short Sale is seriously threatened. If there is Private Mortgage Insurance supporting the owner’s loan, it will probably nuke the deal.

Prior to third-party approval, a BPO, or Broker’s Price Opinion must support the offered price. If local comparables show higher sale prices, the offer will most likely be rejected. Oh, and by the way, a Short Sale is an “as is” transaction. A buyer can have the house inspected, but any deficiencies found are the buyer’s responsibility. A great number of Short Sale homes eventually sit vacant for some period of time as the foreclosure process proceeds. Deterioration happens. In this regard, a bank owned property has more exposure (pun intended) to this undesirable element.

The process does not clip right along. Why? Who knows. It’s probably safe to assume the banks are overwhelmed with a huge number of Short Sale transactions. Also, why would a bank want to automatically lose money? . . .not without a fight. It can take months for the lender to respond to the offer. They might counter with a higher price, or reject the offer! Just because the Realtor did their homework and came up with a "fair" listing price does not mean that the lenders will agree with that price.

Finally, here’s some data that speak to the more difficult nature of a Short Sale over a non-distressed (normal) sale: For 2009, the average monthly listings for Single Family Homes in Ada County was 3579. The monthly average number of homes sold was 443.

So, fewer Shorts happen, and they take longer. Some of the slippage can probably be attributed to distressed properties eventually becoming Bank-Owned properties through Foreclosure. But the main reason is because the procedure has added complications which make the transaction time longer, and adds to the chances that it could fail before reaching a successful conclusion.

I’d say the better deal is to find, and make an offer on a property that is not a Short Sale – there are only two parties in the transaction, and it will close more quickly.

Getting the best price and the quickest sale

2010-01-08T11:22:00.000-07:00

What are the two primary things all home sellers want? They want to sell their house quickly, and, for a lot of money . Realtors want the same thing for their clients, but you can see how those two things might be mutually exclusive. This is as much the case here in Boise, as it is in any place in the country.

However, if each of the three Elements of the Sale are optimized, the result should be (relative to the market in which the home is sold) a reasonably quick sale, at a satisfactory price.

The Elements of the Sale
Pricing
Condition
Marketing

Pricing: A house isn’t going to sell unless it gets shown. But, it isn’t going to get shown unless it’s priced to draw attention. It won’t draw attention if it is priced beyond other like-homes on the market. Optimizing the asking price for any particular house is an art effected by an experienced Realtor . A Realtor will determine the correct asking price for a house by evaluating the prices of current “comps” on the market, balanced by the results of recent sales of similar homes, and then adjust for factors like location, adjacencies, and condition. “Correct” is the operative term. It means the price at which the house will draw attention and sell faster than other homes, yet is optimized for the market.

Condition: The price also must be relative to the condition of the house. Condition is the most powerful differentiator for any home. It’s not an objective feature like square feet, or number of bedrooms. It’s subjective. Listing statements most always say something positive about the condition of the house – why wouldn’t they? But, clean is clean, neat is neat, well-maintained is well-maintained. You know it when you see it. Walking through a number of similar houses for sale, it will be the condition that ultimately determines a buyer’s impression of any particular house.

The seller determines what the condition of their property will be. How they choose to present the home and property will have an effect on the price – both asking and selling. Condition is the Element of the Sale over which the seller has all the control. The agent can inspect the house and develop a plan to prepare the house for sale, but it’s the seller who must execute the plan. Preparation can include some or all of the following (elaboration on each of the following bullet points can be found on the “Selling” page of my website):

Fix-up, Clean-up, Paint up
Update
Neutralize the interior (de-personalize)
Enlarge the space
De-Clutter

Over the course of their occupancies, all homeowners do not attend to the maintenance of the structure and substance of their houses the same. Some properties may need much less work than others in order to be well-presented. Some owners may choose not to put forth any time and/or effort, and must accept that it will have an effect on the value of the house.

Marketing: The agent’s responsibility is to generate potential buyers. Utilizing the Multiple Listing Service, websites, blogs, video tour postings, social media, yard signs, printed collateral, and other methods, the agent can broadly promote the property. With correct pricing and effective marketing, interested buyers will want to see the house. If the house has been well prepared by the sellers, the impression it will make over its competition will bring offers.

If you are planning to sell your house, call me. I can prepare a Market Analysis for you that will show you the value of homes in your area that are comparable to yours. From that, based on the condition of your house, or the condition to which your selling preparation will bring it, an asking price can be determined.

- Alan http://www.alansmithrealestate.com/ (208) 473-0343

Buying a home in Idaho? Mortgage Assistance available

2010-01-08T11:12:00.000-07:00

For homebuyers in Idaho, there is assistance available that will make purchasing your dreamhouse financially achievable. In conjunction with participating local lenders, there are local agencies and associations that exist to promote economic and social opportunities in Idaho. In other words, if their objectives can benefit you, the state benefits.
Two of them are the Idaho Housing and Finance Association, and the USDA Rural Development Office for the State of Idaho. You can find them here:

http://www.ihfa.org/about_purpose.asp - IHFA’s Main site http://www.ihfa.org/idamortgage/default.asp - IHFA’s “IdaMortgage” page http://www.rurdev.usda.gov/id/ - Idaho Rural Development’s main page.

Each offers a range of programs that include down-payment assistance, special mortgage rates, purchase assistance grants, refinance and loan modification programs, homebuyer education classes, and more. Check out their websites, and then give them a call to see what they have to offer that will help you move into your new home.

Short Sales and Private Mortgage Insurance

2009-10-30T12:20:00.000-06:00

Private Mortgage Insurance is required on all home loans where the borrower’s down payment is less than 20% of the contract price. Lenders take out the PMI policy, and the borrower pays for it. If there is a default, the lender makes a claim for that portion of the loss over 80%. The end-run around this situation for some buyers was the creation of 80-20, 80-10-10, 90-10, etc. loans. All FHA loans require PMI for the full term of the loan.

In a short sale situation, the seller presents the lender with a buyer’s offer to purchase at an amount less than what is owed on the loan. If the loan is covered by PMI, the lender will submit a claim for the loss, prior to accepting the offer, and request an early payment from PMI. PMI is under no obligation to pay until there is a documented loss. Lenders are reluctant to go forward with the transaction unless they know they're getting some reimbursement on the loss. But, if the borrower/seller signs a promissory note for the amount of the claim, or some negotiated amount, PMI will pay the claim amount in advance. Clever. PMI collects the premiums along the way, and then when there’s a claim, leverages the borrower to foot their payment of the claim to the lender.

So here comes the modern day Catch-22: If the short sale is occurring due to a genuine economic hardship, then the seller most likely does not have the means to assume a hefty promissory note.

It’s safe to assume a financial hardship is the reason a seller decides to undertake a short sale. So, unless the seller wants to trade a secured loan for an unsecured loan, and punt the debt issue down the road to be dealt with at a later date, the short sale attempt comes to an end, and the borrower’s mortgage situation will trundle on towards foreclosure. There are numerous reasons why the market is having difficulties clearing the market of distressed properties – this is an example of one of them.

-Alan http://www.alansmithrealestate.com/

Helpful Stuff

2009-10-19T15:11:00.000-06:00

OK, time to go Un-Real Estate. But, I still think you will find the following information useful. Below are two items I have recently become familiar with that I think are really cool.

The first, Supercloth, comes by way of my wife. She was given one by a relative who saw it on QVC. She has since bought a number for for herself, and as many more to give to friends. Supercloth is a polyamide / polyurethane blend (I really don't know what that means). And what it does so well that earns my wife's whole-hearted recommendation, is clean stainless steel surfaces. And, all you do is dampen it! I guess, considering what it's made of, it works kind of like a wet eraser. The site offers 2 for $18. You can check it out here:

http://www.supercloth.it/php/supercloth.php

All of today's digital cameras are cool, and take amazingly good pictures you can print, or publish instantly. For a real estate agent, they're terrifically useful. Except - their native field-of-vision is too narrow to take helpful interior shots. A wide-angle lens would be helpful, but how would it be attached? Magnets? Yes! And, they work great! I have one for my digital camera, as well as one for my Flip. They're in the $39 range. There are multiple sites that sell them. I have used the site below twice with good results. There is also a site called "magneticwideanglelens.com" - but, I haven't had good luck with their turn-around, or customer service.
http://tinyurl.com/ylcbgwb

UPDATE: Stats YTD through September

2009-10-12T13:30:00.000-06:00

Sales of homes in Ada County in September continued to prove that our market is forming its bottom. In fact, one statistic – “Total Sold”, may be hinting at a beginning of the return to life for the area. From January, the total homes sold month-by-month look like this; 232, 265, 369, 419, 428, 559, 510, 511, 546. Aside from a busier June, these numbers make a unified directional statement. Now, compare this to total homes for sale by month, which has declined 10%since January. Supply is lessening and demand is growing. While the movement may be subtle, it's there.

The average sales price is now $190,608, and the median is $162,900. Over the past few months, the median price has steadily declined. This is probably a result of the $8000 first-timers incentive. In fact, the increase in sales in the $0 - $120k home price range increased 55% September over August. This incentive is set to end after November 30th. Home sales totals in the $120-160K, $160-$200k, $200-$250k, and $250-$300 ranges were all within 1% of their respective previous month’s totals.

So, the real estate market appears to be finally turning positive. Unfortunately, there is no data existing anywhere that can indicate the rate at which it will return. Even if there were, there are currently national and global issues that, the resolution of which, could affect our economy for the better, or worse, and by extension accelerate or retard the Real Estate market’s return.

-Alan http://www.alansmithrealestate.com

Do It Yourself Credit Score Maintenance

2009-10-12T10:30:00.000-06:00

During a break at a recent lending-related seminar, we were discussing general issues that are inhibiting the intentions of some recent government policies intended to aid homebuyers, and homeowners. In other words, the unintended consequences of the politicians’ “do-gooderism” (which, is definitely a subject for a future blog/rant). Tangential to one of those discussions, a Realtor there related a story about one of her clients who was incredulous over the fact that a credit score inquiry returned an unfavorable result. He had expected that he would max the score because, “after all”, as he explained to her, “I don’t have any debt. I pay in cash for everything”.

Personally, good for him. But, it’s called a CREDIT SCORE for a reason. Lenders are interested in the borrower’s repayment ability and dependability. By living in the “Cash Only” line, the borrower had developed no proof of either. On the surface, it seems counterintuitive. But, put yourself in the lender’s position, and after very little consideration you would begin to think twice about underwriting a loan against no credit (payment) history on the part of the borrower.

So credit is good. And, relative to your credit score, conservative use of credit, and consistent and timely repayment is better. “Conservative use of . . .and consistent and timely repayment” are critical terms. For instance, even if you can afford to take your credit card to the limit each month – and pay it off, that extreme extension is not looked on favorably by credit raters. If that’s your habit, your income background can probably qualify you to have your limit increased by the card issuer, thus providing a buffer between your spending and the credit limit. Other debt payments should be managed using the same principles. This discipline, exercised over time, creates a favorable credit-use profile that returns better scores from the credit rating agencies.

Your total debt is another rating measure where you can exercise the “Conservative, Consistent, and Timely” principles to affect your credit score positively. If you are planning on applying for a home loan, you can get an idea of your chances of qualifying, relative to your total monthly debt, by computing what lenders call your “front-end” and “back-end” ratios. This is a comparison of your income to your mortgage payment exclusive and inclusive of your other debts. Your monthly mortgage payment (PITI – principle, interest, taxes, and insurance) divided by your gross monthly income (all sources), is the “front-end”. Next, do the same, except this time add in your other monthly debt payments to the mortgage payment amount (car payment, child support, other loans, credit card payments, etc). This is the “back-end”. Lenders considering an application for a loan want to see these ratios below 31% and 43% for an FHA loan, and 33% and 45% for a conventional loan. If you’re a renter, use “what if” monthly loan payment amounts with this exercise to zero-in on the size of the house payment you can afford. If your ratios are over the limits, examine your debts to see where improvements can be made. My website has calculation tools that will help you determine these numbers. With them, you’ll also be able to calculate the price of the house you can afford.

So, it is possible to manage your borrowing to affect your credit score to the positive . . .or, to the negative. Don’t wait until you need to qualify for a home loan to start better credit-use habits. Start using them now.

- Alan http://www.alansmithrealestate.com/

Do you know how low rates really are?

2009-10-08T11:46:00.000-06:00

I don’t mean low like, “have-you-seen-what-the-30-year-is-today?” kind of low. I mean, low – like not since the mid-fifties! If your credit is good, conventional 30-year loans are barely above 5%.

From July 2006 to August of this year, median home prices for Single Family Homes in Ada County have declined 32% - from $247,000 to $169,000 (rounded to nearest $1K). FYI – the drop in the Average Price is the same, within 10ths. That decline has flattened over the past six months, indicating a possible bottoming of the market.

Total homes listed for sale through August of this year has averaged 3,775 per month. So we have low rates, low prices, a large selection, and the indications of an incipient return to appreciating home prices. That’s a coincidence of favorable states that makes NOW the perfect time to buy a home.

Then . . ., is it the perfect time to sell a home? Absolutely. And, especially for a homeowner whose family has outgrown their current home and is looking to move up. Within any market, all homes float in the same ocean, price-wise - so, the price difference between moving from a smaller house to a larger house is relative. But with today’s rates, and overall low home prices, the advantage comes in the form of lower total borrowing cost. Additionally, as the economy improves (it will, it’s just still unknown at this time how quickly) home values will appreciate – that’s when those who bought homes now will all begin to talk about the good “investment” they made.

Let’s examine that “investment”. Today, ten years into a 30-year, $200,000 loan at 6.90% (the avg good credit rate in 1999), a borrower would have paid $171,218 in interest. A $200,000 mortgage at 5.25% (today’s good credit avg.) ten years from today will have collected $96,424 in interest from the borrower. That’s a difference of $32,858 less in interest. That’s a new car, college tuition, several cruises, . . .you name it. Now, here’s where this whole “investment” compounds – We are currently at the bottom of the housing-price cycle. Unless some space-borne plasma tsunami wipes out planet Earth, home values will begin to re-appreciate. Even if the rate of appreciation is no greater than the rate of inflation, the initial investment in the house – the down payment – is protected. For the time spent living in the house, the “rent” is the interest side of the mortgage payment. In the case of our example above, over 10 years, that interest averages out to $804 per month - pretty cheap “rent” for living in a nice house in the location of your choice. Additionally, the “principle” side your mortgage payments each month, reduces what you owe the bank – continually adding to your equity.

Oh, yeah, and don’t forget the tax deduction on the interest. All these current positives for home ownership, will offset the renters’ arguments about the “other” costs of home-ownership; i.e., property taxes, insurance, utilities, maintenance, etc. The homeowner has something to show for the money. The renter doesn’t.

So, if you’re not upside down in your house, and you feel pretty secure about your continued employment, and your living situation would be improved by a different house – THEN, GO BUY IT!

- Alan http://www.alansmithrealestate.com/

Here's a graph of Single Family home sales in Ada County, by month, since 2002.

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The vertical lines separate each year. Note the similarity of the shape of the sales activity for each year. Peak amplitude hits in mid-'05, after which you can see the "bubble" deflate. Higher total sales carried further into the final months of 2009 due to "First-Timers" taking advantage of the tax credit. Although the tax credit was extended thru April of 2010, the decision to do so came too near the original expiration date. The buying momentum that had been developed waned because to claim the credit, transactions had to close before the original end-date. That is probably the reason why total transactions fell so dramatically from November to December.

- Alan http://www.alansmithrealestate.com/

Fizz-Bo . . .For Sale By Owner.

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Why a Realtor is a better deal.

If It’s Not Seen, It’s Not Sold. Effective marketing of a home is primary. It must be pervasive and persuasive. The marketing must create strong enough interest in the house to motivate prospective buyers to want to personally see it. And, seeing it should be easy and convenient for them to do. For a Realtor represented property, the lock-box, and cooperation of the sellers, makes showing the home an at-will function. Owner-seller managed showings are less flexible. The pace at which a house can be personally viewed, and considered among other offerings, is impeded. A Realtor represented house can be shown virtually any time.

. . .And, If It’s Not Priced Right, It’s Not Seen. Without a Realtor involved to act as an experienced pricing consultant, an owner’s wishful price expectations can lead to overly ambitious pricing that will not attract any attention to the property. It will do nothing but take up time on the market, and add additional costs to the process (i.e., continuing monthly mortgage payments, utility bills, insurance, pro-rated taxes, etc . . .). Add to that the other initial and one-time costs such as FSBO website utilization, property appraisal, a yard sign, flyers, generation of photos and brochure box flyers, ads in local FSBO publications, and the owner’s personal time, and the Do-It-Yourself savings proposition begins to shrink considerably.

Offers, Negotiations, and Settlement. How about documents? What’s required? Where will they come from? Who will manage the process? There is a lot at risk. That’s why there are Realtors. They have the tools, knowledge, and experience to manage and market, from listing to settlement. For a Realtor’s expertise at optimizing both the price and pace of the sale of your home, against the potential costs and risk of doing it yourself, their commission is an easily understandable value, and maybe even an investment!.

- Alan http://www.alansmithrealestate.com/