THE STATE OF REAL ESTATE
 February 2008
THE STATE OF REAL ESTATE
Hello buyers, sellers and everyone interested in the real estate market, from Murrell Weissinger! I am a 24/7 realtor working from the Watson Realty Corp.'s St. Augustine Beach Office.
For more than a year and a half the real estate market has been disappointing especially for those who expected to 'flip' profitably. There was a moment, mid-summer, '06, when there was hardly any sales volume- except for the developers who cut prices to move their newly completed homes. Presently, following the lending rate cuts by the Federal Reserve Board, there has been a very slight upturn in volume, but sales have usually occurred when owners have accepted lower prices. The co-ordinated efforts to manage the sub-prime crisis as well as $50 billion to assist bank lending, should further assist the mortgage market, and eventually filter down positively to both buyers and sellers. In addition, there are efforts to limit the impact of resetting mortgages without giving a 'freebee' to predatory lenders. For those in danger of foreclosure there is now a short 'breathing space' to give lenders and owners an opportunity to work together to avoid immediate foreclosure. The plan to boost the economy by 'giving' taxpayers a 'present' will result in a short term injection fairly soon. It might help- 'it shouldn't hurt'! Meanwhile, the ratio of new listings to closings is about 5:1; so that the inventory of unsold offerings still continues to grow. The willingness of the Fed to protect liquidity; however, is encouraging, and may give buyers more confidence to come into the market. For those owners whose 'teaser' mortgage rates are about to reset at much higher interest, the 'refi' market should be an attractive alternative now. On the plus side, recent arrangements to monetize triple A rated mortgages under the auspices of the Federal Reserve should improve the major banks' ability to lend, and show a clear way out of the 'mortgage morass'! Bill Watson, Chairman and founder of Watson Realty Corp, believes 2008 will be a good year to buy.
I spend a considerable part of my sales revenue on multi-faceted advertising. Sometimes this leads potential customers to misunderstand advertising's capabilities. The same 'sensible' person who gives a stockbroker a market order to sell shares in GM, and, who would never imagine that the 'right' advertising could sell those shares for more than the market price, quite often believes that, in real estate, market forces can be overcome by advertising. Wrong! The skill of advertising is to point out and describe well-priced property to the appropriate buyers. Naturally, the higher the price the higher the commission, but my job is to advise customers which is the best price they can obtain under current market conditions.
Reluctant and tardy price reductions that merely follow a falling market down, are, in the end, very expensive. They mean that maintenance, taxes and interest go on piling up, while the capital which could have been invested from the sale produces no income. I am currently advising motivated sellers to pre-empt the market by pricing at or slightly below it.
To illustrate the point let us imagine a house that my calculations and 'gut' feeling indicate a selling price of, approximately, $535,000. Taxes, maintenance, community fees, insurance etc are $15,000. There is a mortgage of $400,000 at 6.5% with interest payments of $26,000. Total minimum outgoings are $41,000 this means a monthly 'out-of-pocket' of $3,417. At this 'theoretical' moment cash buys US Government 30 year bonds for a 5% return. So, if the house were to sell promptly at the listed price of $535,000, the owner would receive close to $500,000 net and have $100,000 to invest at 5%, ($417 per month). Each month that the house remains unsold the owner will pay out $3,417 and not receive $417, or total cash loss of $3,834 monthly.
In this example the owner wants to 'try' a listing price of $625,000. After 3 months of no 'luck', it is reduced to $600,000. 3 months later it goes to $575,000. Then, finally to $550,000 where purchase offers emerge, and after a month it closes at my 'guestimate'. The owner, who could have sold it some 10 months earlier at the same closing price has, between payouts and lost income, now only $61,660 from the sale; almost 40% less than if the property had been aggressively priced in the beginning!
And here, at the end of Feb are the latest Florida Real Estate Statistics: existing home sales -28%,(condos -30%) median home price $208,500 (condos $190,200),consumer confidence 74.
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