Market Update: For Buyers & Sellers

This week, let us take time to discuss the consumers in this crazy real estate market we’re in.

Buyers: The market is riddled with opportunity. Are there some over-priced listings out there? Of course and in this market they are easy to identify. There are more properties priced to sell, however. Don’t let analysis paralysis stop you from moving forward on a property you like. This term describes buyers who are paralyzed in moving forward by using price per square foot, comparable sales and waiting for the next statistic to be added. These tools are ideal and should be used to make an offer on your dream property on the cape not to remain on the sidelines and lose out. The media also adds to this phenomenon. A buyer may be ready to make an educated well thought offer and then the media reports that prices are falling even more. Thus, the buyer suspends the process. This is common place these days. If you find a property you like, have your realtor provide the statistical data for you to make an effective offer. If the seller does not respond in kind, then move on. There are plenty out there.

Sellers: Every offer in this market is a good offer and should be treated as such. If a buyer presents an offer and is pre-qualified, work the transaction until it is abundantly clear, there is no hope. You have nothing to lose. Buyers today are looking at comparable sales, percentage of list to sell price and price per square foot. This is real data they are using to make an offer. Seller responses of “try again” or “a smaller unit may be better for you” or “I’m not bidding against myself” should be left for private closed door conversations. Keep this in mind: buyers in this market are looking for opportunity. If they are taking the time, are pre-approved by a bank, which is no small feat these days, do you really want to send them to another property to see if that seller will engage in negotiations? If so, you may want to remove your unit from the market and lessen the amount of inventory. Tossing an active buyer aside in this market, before negotiating to see where they will go, is akin to draining the bathtub before even taking a bath and in the end, if you employ this strategy, that’s just what you may do. 

Stock Market: The Sky Did Fall

Record losses, depreciation and short sales. Sound like the real estate market? Well, it actually describes last week's activity in the stock market. Chicken Little went running and yes, the sky did fall.

Many of us were impacted last week by the extreme volatility in the stock market. Reported losses didn't have anyone jumping out of windows as they did in 1929, but examining your investment portfolio may be worth your while, if you haven't already. Now money market accounts, traditionally viewed as safe investment tools, are in question. Money managers are mixed in their opinions about where to invest. 

As a realtor, in my opinion, the one sound investment is real estate. Yes, we've seen losses in the current market and no one knows when it will turn around. However, the current conditions present many opportunities for buyers. The fact is that prices are low. Will they adjust any further? Some say yes, some no...the reality is no one knows and no one can claim to.

If you remember the most important aspect to real estate investment...location, location, location, you'll be a winner. If you find a property you deem to be a good investment, buy it and expect to hold it for awhile. That’s just the reality of this market. But having a tangible investment, especially in a resort town like Provincetown, Truro and Wellfleet, you can expect some appreciation in the coming years. Also, there is the potential to generate extra income through rentals, if you choose that route.

If a bank is willing to finance a purchase then you know the property is worth it. Consider how the mortgage industry has completely become stricter in its qualifying. If you are a cash buyer....you are king and queen once again.

De-Lead or Disregard?

This week The Closing Table answers a question from a listener in Somerville who wrote in to the blog.

Mike, We own a two family house and live in one of the apartments. Our tenant is a single woman who has rented for the past three years with no problems. For the past year she has had her boyfriend staying with her and is now pregnant. He plans to move in next month. Our house is old and may contain lead paint. We like her but can’t afford to de-lead. What do you suggest?

Thanks for the question and a good one at that. In Massachusetts, you need to be very careful when it comes to evicting tenants because of potential lead paint issues.

Its hard for me to tell you how to evict her when that may not be in your best interest. 

De-leading apartments do not cost as much as you may think. If you have a tenant who pays rent and keeps the place clean, they are helping to preserve your property value. You may want to explore de-leading. Also, when her boyfriend officially moves in, talk to her about increasing the monthly rent to cover your additional expenses.

There is a chance she may not even stay once the baby is born. If she is a tenant at will which means month to month, talk to her about her plans.

When owning and living in a two family home in Massachusetts, the owner has more liberty when it comes to who can live in the rental unit. She may end up being the life tenant that landlords always look for. There is a way to make this situation a winning one for you whether she stays or not.

In my opinion, explore the potential for her to stay in your house. You may make more money, avoid vacancy loss and have great tenants. 

Fannie, Freddie and Forclosures

It appears the Federal Government will be taking over Fannie Mae and Freddie Mac. What’s happening to these two pillars of the mortgage industry is indicative of the real estate market as a whole. Too many consumers who could not afford homes, bought them in the early 2000’s which created this mess.

Although Fannie and Freddie did not purchase the high risk adjustable rate mortgage products, the overall impact of the sour real estate market is now impacting them.

Foreclosure rates are still on the rise as well, meaning that more loans are going bad.

We’ll keep our eyes on the federal bail out plan, which now, will include running Fannie and Freddie.

The only potential upside to a federally operated Fannie and Freddie, is perhaps the lowering of interest rates.

If interest rates drop below 6%, buying activity could be generated. However, sellers will have to keep their homes priced according to market conditions.

No one has a crystal ball and can predict when we’ll be out of this slow cycle. Some say another year and perhaps all of 2009.

One thing is for sure, the breaking of Freddie Mac and Fannie Mae is not a good thing. We’ll see how this impacts the industry in the coming weeks.

Season's End

It's Labor Day week and with it comes an end to the fast paced energy that our short season brings us here on the outer cape.

The resort town lifestyle resembles the real estate market performance, in a way. Amuse me if you will and let me explain.

The mad rush of buying, selling, refinancing and exponential appreciation from 2001-early 2005 fueled what can only be described as a frenzied real estate market, not unlike our summer from Memorial Day through Labor Day.

With the summer season officially over, we now enter fall, a quieter time, yet still a little busy with tourists. However, after New Years… we all know, its like hitting a brick wall of silence and isolation. Dinner parties and the occasional holiday weekend may pop up… but let’s face it, its pretty dead. That’s where we are right now in the real estate market. It’s the winter. We have seen pockets of activity and some large commercial transactions, but overall, we are not immune to the national trend.

Some experts are saying the market is starting to turn around. Others say it will still be another 9 months to one year.

With prices low, interest rates hovering in the mid 6’s, new federal and state laws created to stimulate the housing market, hopefully, we’ll see a new season begin shortly for real estate.

Even though we are most likely skidding along the bottom, until homebuyers truly believe this is where we are and start buying, activity will remain sluggish.

How far away is Memorial Day for real estate? No one really knows. Stay tuned.