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Thread summary:

Crystal Coast Homes & Properties, coastal North Carolina, sold inventory, inventory decline, active inventory, US mortgage market, Fannie and Freddie Mac, mortgage metrics, conservative loan programs

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Old 11-02-2008, 03:13 PM
 
Location: Morehead City, NC
1,676 posts, read 5,362,471 times
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Great News!

Yes-I’m talking great real estate news!

By: Bill Hitchcock

I thought it would be interesting to compare each month’s sales to it’s corresponding month from the year before. What I discovered was that as of October 30, three months this year have had the same amount of sales as in 2007. (OK-I fudged a little bit. August 2007 sold 117 homes and in 2008 it was 116)

How significant is this?? Very significant!!. Sales have been on the decline along the Crystal Coast ever since the spike year of 2005. This is the first time that any month, let alone 3 months have not been in decline when compared to the same month the year prior. This is highly significant!




The only way the Crystal Coast real estate market has been able to chip away at the glut of inventory has been to reduce the amount of new inventory coming on the market. Trust me-That isn’t the real estate broker’s doings for they still have a “list and sell, list and sell” mentality. It is the market place righting itself.

Fortunately in 2008 every month has seen a decline of new inventory coming on the market



Probably by now some of you are wondering if I really am a real estate broker with all of the above “stuff” I have been writing about. But the reality of the situation is inventory has been at historic highs, sales at historic lows and new on market have outpaced sales by 3 to 1.



Now, finally in 2008 we have had positive sales and new inventory on market have waned greatly. These two aspects created something I haven’t seen in years and is the very thing we have desperately needed-A decline in over-all inventory.



This past September (and for the very first time!) showed over-all inventory less than the year before. A-Men! In fact, right now at this very moment we have almost exactly the same amount of inventory on market as we did the first day of the year! Say it again: A-Men!



Are we out of the woods yet? No. Are the signs of improvement a fluke, some unaccountable phenom? No to that too. As my father use to say, “It takes a long time to turn a battleship around in the water” Which was a strange thing for him to say because he was in the Air Force-But the point he was making is clear. It takes time for things to turn around. Especially big things like real estate markets.


In my opinion (and I stress, “opinion”) we will see strong signs of improvement at the end of 1rst. Qtr. of 2009 and blossoming during the 2nd Qtr. Just be forewarned-Winter time along the coast of NC is slow. It always has been and it always will be. But don’t let the normal ebb of the area fool you into thinking that improvements are not underway.



Bill Hitchcock
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Old 11-05-2008, 09:52 PM
 
Location: Up above the world so high!
45,269 posts, read 88,634,106 times
Reputation: 39870
Quote:
Originally Posted by Bill Hitchcock View Post
Great News!

Yes-I’m talking great real estate news!

By: Bill Hitchcock

I thought it would be interesting to compare each month’s sales to it’s corresponding month from the year before. What I discovered was that as of October 30, three months this year have had the same amount of sales as in 2007. (OK-I fudged a little bit. August 2007 sold 117 homes and in 2008 it was 116)

How significant is this?? Very significant!!. Sales have been on the decline along the Crystal Coast ever since the spike year of 2005. This is the first time that any month, let alone 3 months have not been in decline when compared to the same month the year prior. This is highly significant!




The only way the Crystal Coast real estate market has been able to chip away at the glut of inventory has been to reduce the amount of new inventory coming on the market. Trust me-That isn’t the real estate broker’s doings for they still have a “list and sell, list and sell” mentality. It is the market place righting itself.

Fortunately in 2008 every month has seen a decline of new inventory coming on the market



Probably by now some of you are wondering if I really am a real estate broker with all of the above “stuff” I have been writing about. But the reality of the situation is inventory has been at historic highs, sales at historic lows and new on market have outpaced sales by 3 to 1.



Now, finally in 2008 we have had positive sales and new inventory on market have waned greatly. These two aspects created something I haven’t seen in years and is the very thing we have desperately needed-A decline in over-all inventory.



This past September (and for the very first time!) showed over-all inventory less than the year before. A-Men! In fact, right now at this very moment we have almost exactly the same amount of inventory on market as we did the first day of the year! Say it again: A-Men!



Are we out of the woods yet? No. Are the signs of improvement a fluke, some unaccountable phenom? No to that too. As my father use to say, “It takes a long time to turn a battleship around in the water” Which was a strange thing for him to say because he was in the Air Force-But the point he was making is clear. It takes time for things to turn around. Especially big things like real estate markets.


In my opinion (and I stress, “opinion”) we will see strong signs of improvement at the end of 1rst. Qtr. of 2009 and blossoming during the 2nd Qtr. Just be forewarned-Winter time along the coast of NC is slow. It always has been and it always will be. But don’t let the normal ebb of the area fool you into thinking that improvements are not underway.



Bill Hitchcock
Bill, I thoroughly enjoy all your pleasant posts This one is a nice shot in the arm - let's hope your end of the 1st quarter prediction comes true!!!
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Old 11-06-2008, 07:26 AM
 
Location: Morehead City, NC
1,676 posts, read 5,362,471 times
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lovesmountains,
Pray!!!!!!
Actually-When it becomes known that currently almost 99% of all of Freddie Mac's & Fannie Mae's loans are current-Then it becomes obvious that lending and therefore home buying/selling is a perception problem more than anything else.
I don't know if this breaks any CD rules-But here is a link to my personal blog that explains in greater detail: http://www.billhitchcock.net
My blog is a personal site-Not a commercial venture.

Watch the perception miraculously change now that Nov. 4 is over.
By the way-I "loves mountains" too. I was born in Oak Ridge, Tennessee and spent every second I could in the mountains as a kid.
Bill
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Old 11-06-2008, 08:51 AM
 
22,769 posts, read 26,252,516 times
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Quote:
Originally Posted by Bill Hitchcock View Post
Actually-When it becomes known that currently almost 99% of all of Freddie Mac's & Fannie Mae's loans are current-Then it becomes obvious that lending and therefore home buying/selling is a perception problem more than anything else.
I don't know if this breaks any CD rules-But here is a link to my personal blog that explains in greater detail: http://www.billhitchcock.net
Bill,

I have to play devil's advocate here and disagree with you. I'm a buyer, so of course I have a dog in this hunt, just as you do.

The information from Fannie/Freddie is from June 30, 2008, and an awful lot has changed since then. I'd be interested to see what the delinquency rates are as of Oct. 30th. Also, weren't Fannie and Freddie typically buying more conservative loans than the private sector? My understanding is that Fannie and Freddie would represent the least risky half of the U.S. mortgage market.

And aren't foreclosures just one small part of the housing problems? We still have a credit shortage, a global recession, and a wipeout of American households' equity in stocks and real property. I know that nobody has a crystal ball, but I don't understand your position that this is mostly a perception problem.

Last edited by le roi; 11-06-2008 at 08:59 AM..
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Old 11-06-2008, 01:32 PM
 
Location: Morehead City, NC
1,676 posts, read 5,362,471 times
Reputation: 1245
Rubber_factory,
Very good post!
The info posted at my blog from Freddie & Fannie is from their, "Mortgage Metrics" report. It is a quarterly report. The current report was released Oct. 23 and covers the 2nd Qtr.
The 2nd Qtr. findings parallel the 1rst. Qtr. findings where 98.3% of the loans were current.

"weren't Fannie and Freddie typically buying more conservative loans than the private sector? "
Quite the opposite. In fact Freddie and Fannie have been the ones to blame for "loosening" the loan requirements. It's why so many loans were able to be given to so many unqualified borrowers-Hince the housing boom.
Keep in mind that Freddie & Fannie are secondary lenders-They do not make loans to consumers. They set the lending requirements for the primary lender to follow. Freddie & Fannie then in turn buy these loans, bundle and sell them as mortgage backed securities.

Sales are down and prices are steep decline There's a headline for you! Nothing but negative, right? It is if you are a seller. The news media invariably gives real estate news from the sellers perspective. But if its bad for the seller-It's fantastic for the buyer!
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Old 11-06-2008, 02:40 PM
 
22,769 posts, read 26,252,516 times
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Quote:
Originally Posted by Bill Hitchcock View Post
Rubber_factory,
Very good post!
The info posted at my blog from Freddie & Fannie is from their, "Mortgage Metrics" report. It is a quarterly report. The current report was released Oct. 23 and covers the 2nd Qtr.
The 2nd Qtr. findings parallel the 1rst. Qtr. findings where 98.3% of the loans were current.

"weren't Fannie and Freddie typically buying more conservative loans than the private sector? "
Quite the opposite. In fact Freddie and Fannie have been the ones to blame for "loosening" the loan requirements. It's why so many loans were able to be given to so many unqualified borrowers-Hince the housing boom.
Keep in mind that Freddie & Fannie are secondary lenders-They do not make loans to consumers. They set the lending requirements for the primary lender to follow. Freddie & Fannie then in turn buy these loans, bundle and sell them as mortgage backed securities.
Well, I certainly agree that Fannie & Freddie loosened their requirements on what they'd purchase. No argument there. My understanding is that Fannie & Freddie's loosening had an effect on the entire secondary mortage market - that is, Fannie began to squeeze their private competitors out of the market, causing the private firms to gobble up whatever scraps they could get (i.e. risky subprimes). This is why Fannie and Freddie have lower delinquency rates than the mortgage market as a whole. (Or, at least, that's what I read)

Quote:
Sales are down and prices are steep decline There's a headline for you! Nothing but negative, right? It is if you are a seller. The news media invariably gives real estate news from the sellers perspective. But if its bad for the seller-It's fantastic for the buyer!
I don't know, Bill, it doesn't feel fantastic. I'm one of the fence-sitting renters, qualified and actively looking to buy. From what I've seen, most sellers and agents think that a 5% haircut off the 2004-2007 comps is a fair price. A surprisingly large portion of them think that 5-10% annual appreciation, bubble and all, is a fair price.

For people who really need to sell, sure, I agree that prices are falling to meet demand. There's a house near mine, in downtown ILM, 3br historic-style, built around 2000, that sold for $275k a few years ago. It has been sitting for a long time, and is still sitting there at $130k. That's the sort of property that shows you what the real demand is around here. I'm not saying that I expect sellers to drop 50%, but I'm just saying that these little 2% dinks and drops aren't going to get anything moving for a very long time; we really had some insanity going on here during the bubble. From 01 to 06, prices went up nearly 50%, but incomes went nowhere.

If I find a house with a competitive list price, then negotiate it down another 10 or 15%, that's really the only price you'd see me buying at. I think paying anything more is catching the falling knife. That's just my psychology as a buyer

Last edited by le roi; 11-06-2008 at 03:29 PM..
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Old 11-07-2008, 06:03 AM
 
Location: Morehead City, NC
1,676 posts, read 5,362,471 times
Reputation: 1245
rubber_factory,
You are quite obviously an intelligent and perceptive person.

Value: How are you determining it?

A universal "yardstick" does not exist when it comes to real estate. All to often folks try to make determining the value of real estate a math equation where all components are of same value.
I wish it were that simple.
Real estate is not a constant-It is a variable. And generally speaking-The shorter the time period the greater the variables.
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Old 11-07-2008, 08:57 AM
 
22,769 posts, read 26,252,516 times
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Quote:
Originally Posted by Bill Hitchcock View Post
Value: How are you determining it?

A universal "yardstick" does not exist when it comes to real estate. All to often folks try to make determining the value of real estate a math equation where all components are of same value.
I wish it were that simple.
Real estate is not a constant-It is a variable. And generally speaking-The shorter the time period the greater the variables.
Bill,
Thanks for the compliment. I've invested a lot of time in trying to figure out how real estate works.

I'm not sure how sellers set their asking prices. I guess it is how much their personal circumstances will allow them sell for, plus the price of comps in their neighborhood. In my view, I can't allow their personal situation to affect my price, nor do I trust comps prior to Oct 08, when the world realized the U.S. had trillions in "fake" assets and global credit markets froze.

So, I suppose that I form a subjective value based on lots of factors.

I consider the price:income ratio for the whole area, and try to figure out what sort of "coastal premium" that is priced into the area. The national historical ratio is 2.7. Price:Incomes for 2007: Wilmington was 5.8, Charleston was 5.6, Savannah was 3.9, State of NC was 3.2. I think Charleston is a far more desirable location than Wilmington, so this raises a red flag. Also, just anecdotally, I know that nobody makes any money here in Wilmington, and that these price ratios are contingent upon high-rolling Californians, Floridians, and New Yorkers unloading their equity in our market.

I consider the price:rent ratio for the area. If a home can generate positive cash flow for an investor, I imagine that it would sell at that price. Right now, rents here are not only cheap, but a quick glance on craigslist shows a crazy amount of rental vacancies, and intense price competition. This raises a red flag for several reasons - it is a disincentive for FTHB's to buy, it represents a shadow inventory of unsold homes, and it weakens the price fundamentals for investors.

I also consider how much the seller bought the house for, and what sort of annual appreciation rate he's expecting. 4% is the national historical average. 6% is tolerable, and is in line with Wilmington's healthy GDP growth. However, sellers here aren't shy about asking 10% or higher.

I've noticed that many realtors aren't the sharpest knives in the drawer, yet collectively they have a tremendous impact on an area's home prices. Many of them are no older than me, and it's strange how so many of them got into the "biz" around 2005. I have yet to see realtor present some analysis about what has happened to prices since 1970, or 1980, or even 1990. I keep hearing this logic: since prices are lower than they were in 2005, therefore they are a good deal. I just don't buy it. I think a much longer-term view is needed to understand what's happening. (The Catch 22: Realtors have all the good data! They just show it to you on their terms, in little snippets.) No offense meant, though, I think realtors are useful and I know there are good ones out there.

Anyway, I could keep rambling on, but I believe a case could be made for further price declines. I think we are interconnected with the bubble markets of Florida and California, but we don't have the foreclosures to 'pop' our bubble like they did, so it will be a slow delfation.

Last edited by le roi; 11-07-2008 at 09:28 AM..
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Old 11-07-2008, 09:34 AM
 
Location: Morehead City, NC
1,676 posts, read 5,362,471 times
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Bravo!!

"I'm not sure how sellers set their asking prices. I guess it is how much their personal circumstances will allow them sell for, plus the price of comps in their neighborhood. In my view, I can't allow their personal situation to affect my price, nor do I trust comps prior to Oct 08,....."

and

"They want me to think that since prices are lower than they were in 2005, therefore they are a good deal. I just don't buy it. I think a much longer view is needed to understand what's happening."

Very good post (again)!!

Keep this in mind-By definition an appraisal is an estimate of value at a specific point in time. With that "specfic point in time" being today and the "estimate" being an educated guess.

The question then is how educated and experienced is the "guesser"

There is a tremendous amount of work involved in determing the present day value of a property. The traditional real estate broker method of gettings comps is antiquated and insufficient-Especially in a market like we have been experiencing for the past several years.

But I do want to bring something back up-be careful of "universal yardsticks" when trying to determine value and if something is a good deal or not.

Let me give you an example. I produce a nightly television program called Crystal Coast Real Estate Television" We interviewd the head of the county tax assessors office for the show and explained how they determine value.
In a nutshell-They lay a grid over the county with over 700 little squares. All properties within a little square are given the same value. In esscence-All square footages for all homes within a particular square would be given the same dollar value.
Big mistake here because a 30 year old mobile home could be beside a multi-million dollar home.

So please-Be careful of any universal yardstick when it comes to real estate.
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Old 11-07-2008, 10:52 AM
 
Location: Up above the world so high!
45,269 posts, read 88,634,106 times
Reputation: 39870
Quote:
Originally Posted by Bill Hitchcock View Post
Bravo!!

"I'm not sure how sellers set their asking prices. I guess it is how much their personal circumstances will allow them sell for, plus the price of comps in their neighborhood. In my view, I can't allow their personal situation to affect my price, nor do I trust comps prior to Oct 08,....."

and

"They want me to think that since prices are lower than they were in 2005, therefore they are a good deal. I just don't buy it. I think a much longer view is needed to understand what's happening."

Very good post (again)!!

Keep this in mind-By definition an appraisal is an estimate of value at a specific point in time. With that "specfic point in time" being today and the "estimate" being an educated guess.

The question then is how educated and experienced is the "guesser"

There is a tremendous amount of work involved in determing the present day value of a property. The traditional real estate broker method of gettings comps is antiquated and insufficient-Especially in a market like we have been experiencing for the past several years.

But I do want to bring something back up-be careful of "universal yardsticks" when trying to determine value and if something is a good deal or not.

Let me give you an example. I produce a nightly television program called Crystal Coast Real Estate Television" We interviewd the head of the county tax assessors office for the show and explained how they determine value.
In a nutshell-They lay a grid over the county with over 700 little squares. All properties within a little square are given the same value. In esscence-All square footages for all homes within a particular square would be given the same dollar value.
Big mistake here because a 30 year old mobile home could be beside a multi-million dollar home.

So please-Be careful of any universal yardstick when it comes to real estate.
Extremely helpful dialogue you two

I think you do a great service here with all the info you provide Bill
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