Real Estate Marketing 101

To my delight, I was recently requested to take care of my six year old granddaughter for a couple of days. Realizing that she probably wasn’t going to enjoy one of my high fiber breakfast options, our first outing was to purchase a more kid-friendly breakfast cereal. So we went to the grocery store and headed down the cereal aisle. That was probably my quickest trip ever to the grocery store, as she focused like a laser beam on a box of Cocoa Puffs. That particular cereal would not have been my first choice as a mom, but I’m the grandma. I’m here to please. So in the basket it went.

This outing reminded me that cereal marketing and real estate marketing have a lot of similarities. Eye catching packaging and optimum product placement made my granddaughter’s choice stand out among the others. In marketing real estate, we strive for the same thing. We want to “package” the listing well and place it where potential buyers can easily find it. When a Realtor enters a listing into the local multiple listing service (MLS), these two basic marketing principles should be a top priority.

Packaging a listing involves writing a compelling narrative and taking great photographs. The MLS description field allows only 500 characters, so the product description must be concise, yet comprehensive. MLS allows 32 pictures; one picture on the main page and 31 additional pictures on a secondary page. The primary picture is what most people see first when reviewing their searches on-line. A realtor typically dedicates this picture to capture a home’s curb appeal and entice the viewer to spend more time exploring the listing. If successful, there is a good possibility that the viewer will look at the other 31 photos to see the interior and other exterior views. Pictures should always be well framed, properly exposed and staged to the extent possible to portray the home at its best and to allow potential buyers to envision themselves living in the home. The narrative and number of pictures can be expanded as needed through the use of virtual tour and slide show programs as well as individual Realtor websites.

Optimum product placement involves placing the listing where potential buyers can easily find it. That means entering the listing into MLS, which is the listing’s passageway onto the internet where 90% of potential home buyers begin their search. And properly entering listing information into MLS is of upmost importance as online searches are data driven. All data must be 100% accurate. Price, number of bedrooms, and school district are just a few of the many pieces of information entered into MLS. Inaccurate information could prevent your home from being included in potential buyers’ online searches. It should also be noted that entering a listing into MLS provides a broad internet presence as the MLS data feeds into the most popular real estate websites, such as HAR.com, Realtor.com and Homes.com. And for those few buyers that do not rely on the internet for home searches, print advertising can be useful.

Yes, listing agents and cereal manufacturers have some things in common. But while cereal manufacturers have the resources of large marketing departments to help with product placement and packaging, Realtors go about their business with little or no oversight. So it is most important for home sellers to select competent Realtors that have the experience and attention to detail to get their home presented in the best light and in front of every potential buyer.

Thanksgiving, Real Estate, and the Internet

Thanksgiving Day is right around the corner and I’m almost ready. I’ve purchased a nice Butterball, some yams, and all the ingredients for the expected green bean casserole. Everything seemed to be on track until I realized I was short 4 forks from my set of flatware. This was quite a disappointment as I’ve had this set since I was a teenager building my hope chest. So what should I do now? Buy a whole new set? Try to find matching forks? Or perhaps I should just serve turkey soup. Like my approach with many dilemmas these days, I enlisted the help of Google. After a minute or so of browsing, I found out that the pattern was still available from the manufacturer. A couple of keystrokes later and the forks were ordered, paid for and in the shipping department. Looks like I’m back on track for Thanksgiving dinner.

Anyone who has an internet connection probably has had similar experiences. The internet has simplified so many tasks. And searching for real estate is no exception. The real estate industry has embraced the internet for many years in order to facilitate and enhance the buying and selling experience for both Realtors and consumers. The local multiple listing service (MLS), which contains details and photos for all homes listed by Realtors, has been online since the early years of the internet, courtesy of the Houston Association of Realtors (HAR). HAR offers a free website, aptly called HAR.COM, that has the MLS detail on every listed home in a user friendly searchable format.

While many Realtors and real estate companies have their own websites, HAR.COM is the local workhorse and is the original source for most of the local real estate information seen online. In addition to over 500,000 visits a month, HAR allows its Realtor members to extract and utilize MLS data for their own personal websites. It also provides daily transmission of MLS data to other national websites like Realtor.com and Homes.com. Everyone who accesses HAR.COM soon appreciates its power. Prospective buyers can perform searches on listed homes by location, price, size of home and a number of other parameters. Real estate agents who are members of HAR have access to an even more powerful search tool to help their clients quickly hone in on their dream home.

HAR.COM has another feature that is very helpful for both prospective buyers and sellers. It’s a relatively new feature called the Client Experience Rating. After every real estate closing, the buyer and seller involved are sent a questionnaire by HAR concerning their experience with their Realtor. They are asked to rate their Realtor on a scale of 1 to 5 in several categories including competency, market knowledge and communication. Individual Realtors can elect to not participate in this program. But for those of us that do, it is a great opportunity to make our reputation more transparent to existing and potential clients.

Much like the development of the printing press, radio and TV, the internet is a major advancement in our ability to access information. And while it doesn’t come close to replacing the knowledge and experience of seasoned real estate agents, it does provide the consumer with information on both homes and Realtors to help them make better real estate decisions.

Getting back to my preparations for Thanksgiving, I should remind everyone that missing forks are the least of worries of many of our less fortunate neighbors. Having been a board member of the Montgomery County Food Bank for many years, I’m profoundly aware of the struggle that many have to feed themselves and their families. As part of your Thanksgiving preparations, please make a donation to the Montgomery County Food Bank, or a hunger-relief charity of your choice.

The Envelope Please

I enjoy watching award shows for the entertainment industry, especially the Academy Awards. I must admit though that I often don’t understand how the voters distinguish between the different performances. I suppose you have to really be into movies to appreciate the subtle differences. Awards handed to Realtors on the other hand are much simpler as they are usually based on production volume statistics such as most sales. Just imagine if the Academy Awards were based on production volumes. John Wayne would have won the majority of Best Actor awards during his heyday as he was one of the most productive actors in movie history with 142 leading roles. But alas, the Academy Awards criteria for recognizing excellence is somewhat more complicated, so the Duke ended up with only one Oscar toward the end of his career. If Realtors’ work was as transparent for all to see as actors’ work is, the results might be interesting. And it certainly would be helpful to future buyers and sellers of real estate.

Well, I’ve really strayed from what I wanted to write about in this column. I actually did want to talk about awards, but not Realtor awards. I thought it would be interesting to give some awards to some of our local neighborhoods. So I asked my broker (who is also my husband) to do some statistical analysis on sales of single family residences in various neighborhoods in and around the Conroe and Lake Conroe area. I should note that this is not a complete list as the number of neighborhoods are simply too many and my broker has limited patience to satisfy my curiosity. But he did try to pick up many of the more popular neighborhoods and a mix of older and newer neighborhoods. And to get a meaningful sample, he selected data over the last 24 months and only included neighborhoods with at least 10 sales during that period.

There’s no opening song and dance number, so let’s get right to the awards. First up is the Mayflower Moving Van Award for the neighborhood with the most sales. By a landslide, it was Walden with 377 sales. April Sound and Bentwater get an honorable mention with around 200 sales each. Closer to Conroe, River Plantation and Graystone Hills came in neck and neck with 95 and 93 sales, respectively.

The Lamborghini Award is for the neighborhood in which homes sold the quickest. Pass the envelope please. The award goes to Panorama whose 58 sales had a median time on the market of only 52 days, a far cry from the worst in this category at 248 days. It shall go unnamed, but I will hand out the Yugo Award in a private ceremony.

The Porcelain Award is for the neighborhood whose sales reflect the highest median number of bathrooms. And we have a 4 way tie. Graystone Hills, Crighton Woods, Crighton Ridge and Bentwater all tied with 3 ½ baths. Now that’s a lot of porcelain.
The Yao Ming Award is for the largest home in our sample and goes to Crighton Ridge whose median sold home was 3,940 SF. It just barely overshadowed its cousin Crighton Woods by 36 SF. And as no surprise, it also won the Donald Trump Award for most expensive median home.

Finally, the Horizon Award is for the newest median home sold and is awarded to both Graystone Hills and Crighton Woods where the median home sold was built in 2008. The Heritage Award is for the oldest home sold and goes to Tanglewood whose median home sold was built in 1965.

This was all sort of silly and isn’t very meaningful. But with an abundance of real estate articles about market conditions, I just felt a need to do something different and perhaps get a chuckle or two. But what I personally gained from all this is that the Conroe and Lake Conroe area has a wide diversity of homes for sale. And like actors and Realtors, neighborhoods are all unique and have their own personality. We truly are very fortunate to live in such a wonderful and diverse area.

Reflections on the Housing Market

As I’m cleaning up the mess in the kitchen that my husband’s left for me after one of his cooking endeavors, I’m wondering why he isn’t more careful while preparing meals. I’m very grateful that he has taken over much of the cooking chores over the last few years and I truly enjoy his tasty meals, but he just isn’t focused on minimizing the aftermath. Then it dawns on me that since we have an agreement that I will clean up after he cooks, he simply has no incentive to be less messy. And that brings my thoughts to our protracted recovery from the housing collapse of several years ago. Homebuyer friendly government policies combined with a mortgage lending process that increasingly disconnected loan underwriting from loan risk, many mortgage loans were approved in a manner like my husband cooks. Loan originators and underwriters did a very good job at getting loans approved but became more and more removed from the consequences of those loans defaulting since the financial risks were offloaded to someone else.
But what’s done is done. Our government has taken actions to tighten up the mortgage lending process and to increase regulation in the financial markets. Attempts have been made to ensure that appraisals are more objectively prepared and credit hurdles have been raised. While these new regulations may prevent a future housing crisis, only time will tell what the impact will be on future growth in the housing market. At the same time our government has also tried, with limited success, to ease the housing market’s transition to these new standards by providing distressed homeowners assistance in keeping their homes, 1st time buyers’ tax credits on the purchase of a home, and long time existing homeowners tax credits in buying a different home.
All of this has come at a significant cost. Bailouts of financial institutions and subsidizing the housing industry through tax credits have been very costly and have increased our national debt. At the same time, loss of confidence in our economic future has eroded the wealth of our fellow citizens as interest on savings is at an all time low and the stock market has yet to come close to regaining lost ground.
As I review my own business over the last couple of years, I’m reminded how the above events have affected the nature of my work. For example, more of my buyers have been investors in rental properties, and I’ve had an increase in clients either trying to lease out their properties or looking for properties to lease. I suppose it is only logical that massive foreclosures combined with tightened lending practices would result in a number of owner occupied properties turning into lessee occupied properties.
Analysis of historic HAR MLS statistical data for Montgomery County tells me that my experience is echoed throughout our market. As I look over the statistics, I notice that 4 years ago, about 1 in 5 closed real estate transactions on single family residences and condos was a lease contract while 4 in 5 were sales contracts. Most currently, about 1 in 3 closed transactions are leases. The significant change is due to lease transactions increasing almost 20% and sale transactions decreasing over 25%.
Of course, everyone wonders when the real estate market will recover, if ever. Unfortunately no one knows, as there are just too many moving parts. But we do know that in Montgomery County, we have a fairly good economic environment and a great quality of life, so I remain cautiously optimistic. Meanwhile, if anyone can think of a way to make my husband a tidier chef, please let me know. Perhaps more regulation?

Temporary Leases Can Help Sync Up a Real Estate Transaction

If only buying a home could be as seamless as buying a car. A car buyer can walk into a dealership, trade-in an old car for a new car and never be concerned about being without transportation at any point during the process. The home buying process, however, has a few more moving parts. And syncing up a buyer’s move-in date with a seller’s move-out date can be one of the more challenging aspects of the process.

It is not unusual for a home buyer to be required to move out of their existing home before the transaction on their new home is finalized. This situation should be avoided if at all possible by extending a lease on a rent home, or delaying a closing on an existing home. But what happens if a buyer has a firm move-out date and their new home simply can’t close on time? One alternative would be for the buyer to place most of their belongings in storage and then rent temporary housing until their new home closes. Of course that adds to the costs of moving and can be inconvenient, to say the least. A more desirable alternative, if available, would be for the buyer to negotiate a short-term lease with the home seller to bridge the gap. That would eliminate the need to store belongings, and enables the buyers to promptly move into the home they are planning to move into anyway.

The Texas Real Estate Commission offers a contract form for these situations that is titled a Buyer’s Temporary Residential Lease. This contract addresses rent, pets, utilities, maintenance and deposits much like any other residential lease. This alternative can be a win-win for the buyer and seller. However, this typically will work only when the seller’s home is already vacant. And even then, some sellers’ are not willing to use this tool because of concern that the buyer loses incentive to keep pushing for a timely closing of their loan and resolution of any other issues related to the closing. The sellers may also be concerned that something could happen to prevent the buyer from closing at all or that they may change their mind about buying the home. Then the sellers may be faced with going through the eviction process and then get the property ready to sell again. But when the sellers are comfortable with the buyers, a Buyer’s Temporary Residential Lease is something that may be considered.

Another situation that occurs from time to time is when the seller does not wish to move until after their home closes. For example, a seller may be nervous about a buyer’s ability to close, and prefers not to take the risk involved with moving out of their home before the transaction is finalized. They simply want to have a done deal, and then vacate after all the risk is removed. Again, the Texas Real Estate Commission has a contract form for this situation. It is titled a Seller’s Temporary Residential Lease. Its substance is very much the same as the Buyer’s Temporary Residential Lease. This arrangement is very friendly to the seller, but the buyer may be less enthusiastic due to a concern about the property’s condition when they finally get the keys. Just prior to a home’s closing, there is usually a walk-through by the buyer to determine that the property is in the agreed upon condition. With a seller’s temporary lease in place, the buyer is doing their walk-through before the property is vacated. And obviously, a visual inspection is less effective when the house still contains furniture, wall decorations and rugs.

In most cases, experienced Realtors can avoid the need for temporary leases through their efforts in coordinating the buying and selling process. But on those occasions when the buyer’s and seller’s timing just can’t be synced up, Realtors have these tools to ensure the process keeps moving forward. At the end of the day, the real estate buying and selling process can have the appearance of being seamless, as long as experienced Realtors are in the sewing room.

If you are thinking about buying or selling a home, give me a call. I have the experience and knowledge to get the job done to your satisfaction.

A Self-Sufficient Lifestyle Can Be A Rewarding Experience

Last year, my husband was given his grandfather’s financial journal from the 1930’s. At that time, his grandfather had a small farm near Brenham and owned a few cows, sheep, hogs, and chickens, grew cotton and tended to a vegetable garden. The journal was a heart breaking account of how difficult life was during our nation’s worst economic times. Work was hard, money was scarce and possessions were few. What is surprising though is that my mother-in-law has very fond memories of growing up during these times. But with life centered around church, family and friends, the most important building blocks of a happy childhood were intact.

As hard as life was for my husband’s grandparents, they still fared much better than many non-farming folks during that era. That was primarily because of their self-sufficient lifestyle. They may have been poor, but they always had food on the table. A self-sufficient lifestyle is a way of life that is still around today. In fact, I recently listed a property whose owners have embraced this concept. With a barn, chicken coops, multiple fruit trees, a small vineyard, smoke house and cold storage, this property has many of the elements needed for a self-sufficient lifestyle.

A self sufficient lifestyle can describe many different aspects. From planting a small garden to living off the electrical grid, the concept of self-sufficiency has many variations. It seems that more and more people these days are interested in having property that will allow them to pursue one or more elements of a self-sufficient lifestyle. Some are interested in water conservation techniques such as cisterns and drought tolerant landscaping. Some are interested in reducing their carbon footprint through power conservation equipment like solar panels and wind mills. Some are interested in producing their own food thru organic gardening or raising poultry and livestock. And some are interested in all of the above.

But before you purchase a home with the vision of gathering free range eggs in the backyard, you better do some homework. When shopping for a property that will allow various elements of self sufficient living, the first thing to check out is if the property has any deed restrictions against the desired activity. Of course if the property is unrestricted, most anything goes. But if it is restricted, a buyer should read the deed restrictions carefully to determine what is allowed.

Once you’ve determined that you are not prohibited from a certain activity, then check out the property’s physical characteristics. For example, if you’re interested in gardening, make sure you have sufficient sun exposure in the areas that are available for the garden. If you’re interested in solar panels, make sure the desired location of the panels has adequate sun exposure. If you’re interested in power conservation, make sure existing living spaces have good insulation, windows are double paned and appliances are energy star rated. If you’re interested in water conservation, steer away from properties with thirsty landscaping.

Whether you’re interested in saving money, enjoying the outdoors or establishing a hedge against uncertain economic times, a self-sufficient lifestyle can be a rewarding experience for individuals and their families. If you’re interested in making this type of lifestyle change, give me a call. I can help find a property that will work for you.

Timing the Sale of a Home

Late last year, I was contacted by a client who wanted to sell their home. Since they wished to synchronize the sale of their home with the end of the school year, they were wondering when the best time to put their home on the market was. They were rightly concerned about setting the optimum time to introduce their home onto the market as a quick sale would force them out of their home too early and a sluggish sale would disrupt their relocation plans. In many cases, the seller’s personal circumstances necessitates an immediate listing. But when a specific relocation time frame is known well in advance, certain factors should be considered when selecting the right time to list a home. Here are some of the factors that I look at when working with my clients:

Historical Days on Market (DOM) – We all know that historical data is not always an accurate predictor of future results. But it can help define some general expectations. Since January, 2007 the median time from a home’s initial listing date to its closing date in Montgomery County has been 71 days. But within this group of over 20,000 homes sold, DOM’s have ranged from 1 day to several years. The DOM can vary significantly according to market conditions, season, price point, and location. For example, the median DOM for Montgomery County in 2007 was 61 days, but due to deteriorating market conditions, the median DOM had increased by almost 50% to 90 days in 2009. Results in 2010 indicate a slight improvement over 2009, but not yet to 2007 levels. Seasonality also affects the length of time a home stays on the market. Historically, the largest number of closings occur in May through August and, as expected, many of the homes closed during these months have been on the market the least amount of time. Price point is another factor as more expensive homes typically take longer. Finally, location is an important factor. While the impact of location varies considerably among neighborhoods, homes sold in the southwestern part of the county generally have the shortest DOM’s.

Pricing of the Home – Perhaps the most important factor affecting the length of time on the market is the pricing of the home. Setting a realistic price cannot be stressed enough. If priced too low, a home will sell the quickest, but the seller could be leaving money on the table. If priced too high, a home sells the slowest and could even eventually sell for a lower amount than if originally priced more reasonably. Local market conditions, features of a property and condition of home should all be taken into consideration when pricing a home. Unlike a commodity where the fair market value is readily assessed, all homes are unique and should be carefully analyzed to maximize its value.

Listing Product – A home’s listing should be entered into MLS and a Realtor’s personal website. It should be comprised of accurate quantitative data along with a descriptive narrative of the virtues of the home. Accompanying pictures should be well framed and vivid. Print advertising and signage should be well placed and have a professional appearance.

Listing Process – An effective listing is a process, not an event. Once a listing is initiated, data continues to develop that might warrant a change in pricing, home presentation or marketing strategy. Feedback from showings, changes in competitive listings and general economic data can dictate a change in course. Realtors should continually monitor a listing’s pulse and keep the seller well informed at all times. A listing should never be viewed by the Realtor solely as a tool to attract buyers for their business. Its overriding focus should always be to attract a buyer for the listing.

When a specific closing date is targeted, work closely with your Realtor in timing the introduction of your home onto the market. There are many factors that determine how long it will take to sell a home, but having a full-time, local, experienced Realtor will maximize your chances of meeting your objectives.

I have been a local Realtor in Montgomery County since 2000 and am the owner of HomesPlus Real Estate Services. My office is located between Conroe and Montgomery at 19755 Hwy 105W. I can be reached at 936-537-1656 or emailed at Claudia@ClaudiaHohlt.com.

Exactly Who is Your Realtor Working For?

Recently I was contacted by someone from out of state who was in the process of relocating to Montgomery County. After spending some time understanding their objectives, I explained to them how real estate agency works in Texas and e-mailed them an “Information About Brokerage Services” pamphlet and a “Buyer’s Representation Agreement” for their review and signature. After a couple of days, they replied that they appreciated the information but would proceed with their home search without formal representation. So we amicably parted ways. Such is the nature of being a Realtor.

Realtors are often called Real Estate Agents. As you probably know, an agent is someone who is representing someone else in a particular activity or event. There are all kinds of agents; insurance agents, talent agents, press agents and secret agents to name just a few. The one thing all agents have in common is that they are acting on behalf of someone else, i.e. the principal. This relationship creates a fiduciary responsibility on the realtor. In other words, the interests of the principal come before the interests of the realtor, or any other person.

So is your Realtor always your agent? Not necessarily. In Texas real estate law, there is a concept called sub-agency. That means, unless an agreement is in place between the realtor and potential buyer, an agent showing a home is, by default, a sub-agent of the listing agent. In other words, the Realtor helping you find a home could technically be working for the seller, even if they are not the listing agent.

So how do you get someone to work on your behalf when you are the buyer? That is very easy to do. You enter into an agreement, typically a Buyer’s Representation Agreement, with your Realtor. This agreement enables the Realtor to put your interests first, not the seller’s. If you do not want to obligate yourself long-term to a certain agent, the Buyer’s Representation Agreement can be set for any time period, for specific houses, or for a specific area.

I should note that the Buyer’s Representation Agreement protects the agent as well. There are few experienced agents who have not been taken advantage of by a buyer with a hidden agenda. It is not unusual to spend an inordinate amount of time and travel with an unrepresented buyer, only to find out that they intend Aunt Suzy from Amarillo to write the contract and collect the commission once the right home is found. Once a Realtor has spent some time as a volunteer chauffeur and tour guide, the mutual benefit of a Buyer’s Rep Agreements becomes apparent.

What if you approach a listing agent to show you a home that they have listed? Agents can work for both parties as an intermediary. With written consent by all parties involved, an agent can essentially be the listing agent and the buyer’s agent. The agent cannot disclose confidential information of either party and must treat all parties honestly and fairly.

For anyone looking for additional information, this is all spelled out in a publication of the Texas Real Estate Commission titled Information About Brokerage Services (IABS). The IABS pamphlet should be presented to both buyers and sellers as soon as a relationship exists to ensure that there is no confusion about who’s working for whom.

Challenges Surrounding Contingency Contracts

I was watching one of the Winter Olympics speed skating relay races on TV last month. I was quite impressed by the level of teamwork and coordination as the athletes passed the baton from one skater to the next. Earlier this year, I was involved in the real estate equivalent of a relay race, i.e. a home sale contingent on another sale that was contingent on still another sale.

One of the most common elements found in real estate sales contracts is the “Addendum for Sale of Other Property by Buyer”. Essentially, this makes a buyer’s purchase of a home contingent on the sale of their existing home. So, if the buyer’s home doesn’t close, he/she is not obligated to go forward on the purchase of the new home. For most buyers other than first-time home buyers, this provision is needed since they either don’t financially qualify to own two homes at the same time, or just don’t want the financial burden of owning two homes at the same time.

In my recent experience, my client had a sales contract with a buyer in place on their existing home and a contingent contract in place on a home they wished to purchase. The seller of that home had a contingent contract in place on another home owned by someone that was moving out of the country. Through much effort by three separate Realtors, all three homes were scheduled to close on the same day in a domino fashion. Moving vans were scheduled at each of the homes and everyone was excited about moving. Unfortunately, there was a last minute, unexpected glitch in the first one of these transactions, and four families, three Realtors, three title company closers and three loan officers were on pins and needles until late in the day when the glitch was finally resolved.

Because of the increased uncertainty involved in contracts contingent upon the sale of another home, they are not the most favored among home sellers. But sometimes, they are the best alternative available. When a seller is considering the acceptance of a contingent contract, it is important to ask the buyer’s agent about the likelihood of the buyer realizing a timely sale of their home. The best evidence of that would be if the buyer already had a contract in place on their existing home, but at a minimum, their home should be listed, actively marketed and appropriately priced.

After a contingent contract is executed, there are a few additional things that a home seller should do. First, the “Addendum for Sale of Other Property by Buyer” should be written in a manner that requires the buyer to remove their contingency within a few days if the seller wishes to accept another offer. So if a stronger offer comes in, the buyer has to remove their contingency or opt out of the contract. And to facilitate the receipt of a stronger offer, the status of the listing in MLS should indicate that the home can continue to be shown to other prospective buyers.

For homeowners facing a job transfer or wishing to trade up or down to a different home, a contingent offer is usually a necessity. Just be careful that you don’t skate in this relay race on thin ice. Count on the help of a seasoned real estate professional who can ease the stress and increase the odds of success.

If you are in need of a Realtor, please give me a call. I have been a Realtor in Montgomery County since 2000. I've earned a GRI designation, and have been certified by HAR as a Top Production Realtor® in 2007, 2008 and 2009. My office is located between Conroe and Montgomery at 19755 Hwy 105W. I can be reached at 936-537-1656 or emailed at Claudia@ClaudiaHohlt.com.

Hard Facts on the Housing Market

I have a confession to make. I am married to somewhat of a data geek. He can spend hours slicing and dicing data. Yes, on the surface it may appear he has a boring hobby but, since he is licensed as both a Real Estate Broker and Certified Public Accountant, most of his number crunching exercises are interesting to me as they are very analytical and are related to local real estate market conditions.

Recently he downloaded statistical detail of the last 3 years of Montgomery County home sales from the local multiple listing service database. He then compared 2009 results to the prior two years to determine how market conditions have changed. There was no “Eureka!” moment since we all know we’re in a bearish housing market. But looking at the hard evidence really drove home how Montgomery County has been affected by our nation’s housing woes. Fortunately, our home prices have held up fairly well, but the demand for housing has fallen dramatically.

In looking at the data, the first thing that stood out was that the number of homes sold in Montgomery County took a drastic decline after 2007. 2008 declined by 21% and 2009 piled on another 6% decline. The two year slide translated to about 2,000 fewer homes sold in 2009 versus 2007. All areas of the county had similar experience. And although the average home price was fairly stable at a positive .5%, the increase was a result of the average home size increasing 2.6% combined with the price per square foot declining 2.1%. So, on an apples and apples basis, home prices have modestly declined. Furthermore, the average length of time on the market increased from 99 days in 2007 to 140 days in 2009. Interestingly, these results have taken place at almost every price point. The one exception is in higher end homes where prices have been discounted more deeply and homes have taken even longer to sell.

An area that really hits to the heart of our current economic recession is new construction. In isolating the data related solely to new home sales, we see that sales have fallen off even more dramatically. The Woodlands area, which consistently generates almost 60% of the new homes sales in Montgomery County, had 36% fewer sales in 2009 than in 2007. The Lake Conroe area, which generates about 20% of new home sales, had 48% fewer sales. For all of Montgomery County, new home sales dropped off an average of 38% which accounted for 632 fewer new homes sold in 2009 versus 2007. Based on the 2009 average new home price of $282,311, this drop off in new home sales translates to and estimated 178 million fewer dollars spent in Montgomery County on new homes compared to 2007. That represents a lot of lost construction jobs and lost sales of construction materials to our local economy. Those lost dollars ripple throughout our community and affect everyone.

But all is not gloom and doom. The most recent sales data supports a case for cautious optimism. New home sales as well as used home sales have increased in the last three month period when compared to the same three month period one year earlier. Although it is still well below the same three month period two years earlier, perhaps it means we’ve seen the bottom of the bear housing market and are beginning to climb our way back to better times.

While this may have been interesting info, what does it mean to potential home buyers and sellers? To home buyers, I would encourage you to consider the purchase of a home. With prices down, interest rates low, and tax credits still available, there may never be a better time to purchase a home than right now. If you’ve been thinking about selling your home, this may also be a good time. Inventory levels have come down and as buyers become more confident in the economy, demand for housing should increase. And to both potential buyers and sellers, I would recommend enlisting the help of an experienced, full-time, local realtor to help you with the process. Intimate knowledge of local market conditions has never been more important.

If you are interested in buying or selling a home, please give me a call. I have the knowledge and experience to maximize the value in your next real estate transaction.

The State of the Foreclosure Market in Montgomery County

If I asked a group of people to say the first word that comes to mind when they hear the word “foreclosure”, I would probably get lots of different responses. Many would say “travesty”. Some would say “opportunity”. Any lenders present might say “backstop”. It all depends on one’s perspective.

2009 was another year in which too many homes went into foreclosure. While foreclosed homes are sold to the highest bidder on the courthouse steps, most of them have first liens (i.e. mortgages) with a remaining balance that is more than what buyers are willing to bid. Since the first lien holder is usually willing to bid their lien amount, they typically end up as the highest bidder. So the ownership of most homes in foreclosure ultimately transfer from the individual homeowners to their lender.

After the foreclosure is finalized, the majority of those properties are then listed and eventually sold by Realtors. Almost 1,100 of the 5,500 single family residences sold by Realtors in Montgomery County in 2009 were the result of a home foreclosure. That’s a disturbing 1 out of 5 homes. While this is a consistent ratio with the last several years, it is up from the 1 out of 7 homes in 2006, which is still too many.

If we dig into the 2009 numbers a little deeper, we find that Northeast Montgomery County, including Conroe, had the worst foreclosure experience. One out of three of the homes sold by Realtors in this area were foreclosures. Southeast Montgomery County had similar experience with about 1 out of 4 homes sold being foreclosures. Southwest County and Northwest County had the same experience with 1 out of 6 homes being foreclosures.

These rates are mirrored across the country and are at the core of our economic recession. The U.S. government has taken steps to help. The Home Affordable Modification Program was implemented to help homeowners facing foreclosure by reducing mortgage payments to qualified applicants. To reduce the number of future foreclosures, the House of Representatives has passed new legislation called the Consumer Financial Protection Agency. It now lies in the hands of the Senate, so its future is uncertain. If it is passed into law, it is hoped that the final bill will not only protect the consumer but will also not cripple the mortgage and housing industries.

While it is somewhat reassuring to know that our government is concerned about the high number of foreclosures, one can’t help but feel sad about the many good families who are facing, or have already gone through, a foreclosure. In the best of circumstances, it will take a long time to become eligible again to own a home. In the worst of circumstances, a family may never own their own home again.

Having said all that, without the foreclosure process, few of us would be able to get loans to purchase homes. Our housing industry depends on mortgage lenders and the mortgage industry depends on foreclosure laws to mitigate their risk and provide an effective backstop on possible losses. And finally, the buyers of foreclosures are an integral part of the foreclosure process. For without them, the lender would have no way to monetize their collateral.

Many people have found good opportunities in the purchase of foreclosed properties. Many foreclosures are attractively priced and are being bought up by first-time homebuyers, buyers trading up from existing homes, people moving to our area, and investors. As this article is being submitted, there are 200 foreclosures on the Montgomery County real estate market ranging in price from less than $50K to over $1 million. They exist in virtually every neighborhood and price range.

If you no longer are able to pay your mortgage, work with your lender, financial advisor and Realtor to understand your options. The stakes are high, so it is wise to be proactive rather than reactive. And if you are interested in exploring the foreclosure market, contact an experienced, local Realtor. There may be just the property out there that you have been waiting for.

You can contact me at 936-537-1656 or at Claudia@ClaudiaHohlt.com.