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.

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

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.

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 the graphic to enlarge)

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 

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 . . .

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.

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.

On July 27^th, 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

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

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).

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/

Here’s some other interesting facts:

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

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