Mass Housing Market Ends Worst Year in Decade

Here's a report without the usual "spin" or "happy face" customarily displayed by those in our industry that refuse to face/disclose the facts.

The following was reported in the Boston Globe's Business section on January 26th, written by Kimberly Blanton:

Massachusetts house prices tumbled 5.4 percent in December, in a sour endnote to the worst year for the state's housing market in a decade.

Amid new evidence the state is still struggling to emerge from the housing downturn, economists said it is likely prices for single-family houses will continue to decline this year. Single-family sales for 2006 were 41,593, which was the lowest total since 1996, according to the Massachusetts Association of Realtors, which released its monthly market report yesterday.

"We're working through the correction," said Larissa Duzhansky, an economist with Global Insight, a Lexington economics and consulting firm. She predicted, "We're going to see home prices going down in 2007."

The backdrop for Massachusetts' woes was the biggest one-year drop in home sales nationwide since 1989, 8.4 percent.

The Northeast and the West Coast were hit particularly hard, the realtors association said. That offset higher sales in housing markets in the South and Midwest, fueling speculation that the housing market may be dampening economic growth.

For single-family houses, last month's price drop was the steepest since last summer, and the pattern of double-digit monthly sales declines each month continued. December's sales dropped 16.6 percent from a year earlier, to 2,980. The report is for sales closed last month and reflects purchase-and-sale agreements signed in October or November.

Jim Gibbons, an agent for Remax Landmark in Stoughton, said "It's going to be the same story this year -- big inventories, big selection". Your house has to be the best house out there in the best condition and priced aggressively, or it's going to sit."

The state realtor association said the supply of houses is now at 10.3 months, two months more than a year ago.

Gibbons said the current situation -- a flood of houses for sale -- is unique because there are so many types of sellers in the market. In addition to those who want to trade up, there are investors trying to dump properties purchased three or four years ago at higher prices, homeowners unable to meet rising payments on adjustable-rate mortgages or threatened with foreclosure, and empty-nesters eager to downsize.

"We've never had that at the same time," he said.

Price - The Real Question?

When you sell your home, who sets the price and at what level? How can you be sure the price is not too low…or too high?

First, as the homeowner, you set the price on your own house. The agent you choose will provide useful information to help you decide on a price, however the final decision will be yours.

To make a valid price decision, three types of accurate information are needed, all of which can be provided by your agent. They are:

1. Recent sales prices of similar homes already sold,
2. Prices of similar homes currently being offered For Sale, and
3. Prices of similar houses which have been taken off the market because they didn't sell (expired listings.)

Each set of prices should play an important role in the price decision on your home. The first, homes already sold, is most important because it tells what buyers have been willing to pay for similar homes.

The second, homes For Sale now, gives you a targeted price range. These are the homes with which yours will be competing.

Finally, homes off the market tell you what buyers are NOT willing to pay for a home like yours.

Compare the condition and amenities offered by your home with those already sold and currently For Sale. The highest price for your home, one acceptable to buyers, will very likely be midway between the two.

The price you set will either help or hinder the sale of your home. As a Realtor® I have the detailed, current information on the market in your area, along with years of experience and knowledge. I will work with you to set the best price to attract buyers, and change your "For Sale" house to "Sold."

Single-Family Home Sales, Prices Drop in December

Massachusetts single-family housing sales had their worst December since 1991, and the median sale price fell 8.1 percent to $310,000 in December 2006, the lowest monthly figure since March 2004, according to a report by the Warren Group, a Boston provider of real estate data and the publisher of Banker & Tradesman.

December single family-home sales fell 8.4 percent from December 2005 to 4,037, the lowest level for the month since 1991. For all of 2006, single-family home sales dropped 14.4 percent to 54,203, the lowest since 1995, and down 20 percent from the peak in 2004. The Median sales price droped 5.8 percent to $325,000 in 2006; the first annual drop since 1993.

In other area news that has attributed to the above conditions...

Land use restrictions in metro Boston among the most stringent in U.S.

A new study examining land use regulations in more than 2,600 communities across the U.S. found that Boston and its immediate suburbs impose some of the most restrictive rules on residential construction in the nation. The study, conducted by the University of Pennsylvania's Wharton School of Business, ranked Boston and 40 nearby cities and towns as second only to the Providence, R.I. area among 47 metropolitan markets in terms of severity of regulation placed on housing development.

This heavy regulation is contributing to the region's high housing prices and helping to limit the local housing supply, which in turn is prompting young professionals and working-class families to leave the state in increasingly larger numbers, according to the study's authors. These findings come as little surprise to local REALTORS® and help to validate the public policy efforts undertaken by the Greater Boston Real Estate Board, in recent years to support legislation aimed at expediting permitting processes and reducing the amount of zoning and land-use controls placed on residential and commercial development in the Commonwealth.

The Boston area's high ranking is attributable in part to minimum lot size requirements that are much larger here than in communities in the South and Midwest, as well as the prominent role local elected officials, neighbors and community groups are often given in reviewing residential projects and zoning proposals. In many Bay State communities, it's not uncommon for municipal zoning departments, boards of health and other elected officials to impose excessive regulatory controls on residential development to limit growth, reduce housing density, or preserve open space, the report found.

Limited Service Brokerage = Limited Value

How does limited service representation affect a property's time on the market and selling price? Research sponsored by the Texas Real Estate Center revealed that limited service representation can indeed have significant impacts.

Limited service representation and discount brokerages in single-family residential markets have been widely scrutinized by the real estate industry. The Internet portal Yahoo! moved from the sixth most visited real estate website to second (behind realtor.com) through its series of partnerships with limited service and discount brokerages. Some of these brokerages offer consumers menu-based pricing, with fees for specific services, such as listing the property on a MLS system, rather than an across-the-board fee for full representation. Others advertise sharply lower commissions while still promising to provide consumers with all of the traditional services.

Limited Service Research Results

Most of the study results were statistically significant, indicating valid relationships exist between limited service representation and marketing performance (time to sale and sales price). The empirical results show that limited service listings sold for 1.7 percent less than typical exclusive-right-to-sell listings and took 17.1 percent longer to sell. Given that the typical discount offered by limited service brokers is approximately 2 percent, there does not appear to be any net gain to sellers using limited service representation.

For example, if the limited service broker charges a total 4 percent commission, then the commission plus the 1.7 percent lower price is approximately equivalent to a 6 percent commission from the seller's perspective. This would indicate that limited service brokerage offers no dollar advantages to the seller over typical brokerage when using the exclusive right to sell contract.

If "time on market" is taken into consideration as well, then limited service brokerages could actually COST the seller depending on the fixed costs of carrying the property on the market (mortgage, maintenance, etc.).

But what about agent experience?

Other research has shown that agents with limited service brokerages, either no service or menu-based-pricing, tend to be less experienced than those with traditional brokerages. The Texas Real Estate Center study revealed Sellers using listing agents with less than two years of experience received 1.1 percent less for a house compared with sellers who used agents with two to five years of experience, and the marketing time was 1.9 percent longer. While 1.1 percent may not seem to be a large amount, it represented more than $1,900 for the average property in the study. If the listing agent had more than five years of experience, the seller received 0.8 percent more than sellers who used agents with two to five years of experience, and the property sold 1.5 percent faster.

Source: Texas Real Estate Center and fellow CyberStar Christina Whipple, Alamo, Texas

Outgrowing Your Home?

Has the time come to make some tough decisions? If you've outgrown your present home, there are two questions to ask yourself: Should I add on to my present home, giving me the needed extra room or amenities, and allowing me to stay where I am? Or should I sell and purchase another home that already has the features and size I want?

If you are happy with your present location and surroundings, consider building an addition. This has obvious advantages and one not-so-obvious disadvantage – "over-improvement."

Over-improving your home means two things:

1. That you have spent more money for the improvements than you would get in return if the house were sold, and
   
2. That by making the improvements, your home now has substantially more space, rooms, or amenities than similar homes in your neighborhood.

If you "over-improve," the ultimate value of your home may be held down by the smaller homes with fewer amenities. In other words, by improving in ways that are not consistent with the other homes in the neighborhood, the sale price of your home could ultimately be restricted when you do sell.

One way to make your "move or improve" decision is to ask your Realtor® to suggest a fair sale price, both with and without the improvements. Your agent's knowledge of the neighborhood and the local real estate market is invaluable, and can help you identify other factors to help you make a wise decision.

10 Rules for Home Selling Success

Selling your home? Here are some simple but effective ideas for a successful showing:

1. Leave the house during each showing. Buyers will not be comfortable bringing up objections with you around; let your Realtor® handle the showing and point out your home's best features.
2. Turn on every light in the house. Your home will appear roomy, bright and cheerful.
3. Let the sunshine in - open all drapes, curtains, and blinds. This allows the buyer to view your home in the best light.
4. Turn off the television. Buyer prospects should be encouraged to keep their attention focused on your home.
5. Turn on the stereo. An "easy listening" station with the volume turned low creates a peaceful, serene atmosphere.
6. Open all the closet doors. Rooms appear larger, more spacious and inviting.
7. Keep pets outdoors. Eliminate the distraction of pets – pro or con - and keep the buyer looking at your home.
8. Lower or raise the thermostat. During the summer show off the efficiency of the air conditioning. During the winter, let your home be warm and cozy.
9. Keep it clean and fresh. Enlist family members to keep the beds made and the dishes washed. "You never get a second chance to make a good first impression!"
10. Make needed repairs. Before your first showing, make sure everything works. Remember, "an ounce of prevention…."

Try to see your home through the eyes of a buyer and you'll be on your way to selling success. You'll find even more tips and suggestions here on my website.

Here's to your successful showing!

The Wheel of Fortune

When it comes to buying a home, how will you choose a real estate agent? A spin of the wheel of fortune is one common method – making phone calls to many different real estate companies that advertise in the newspaper or that you find online. Each time you dial a number, you get a different agent.

That may seem logical since each company has different homes for sale. But it also raises a question: "Do I need to work with many different companies and agents to see all the homes in which I have an interest?" Fortunately, the answer to that is a resounding "NO!"

Once you've decided to buy a home, your first step should be to carefully select a single real estate agent. That agent will be able to show you most, if not all, of the homes currently "For Sale" in your area, no matter which real estate company has them listed.

By taking the time to select an agent who will listen to your housing needs, and then actively work with you to fill them, you can eliminate many hours of fruitless searching. Working with only one agent allows you time to discuss financing, desired locations, home styles, schools, shopping, and the other factors that are important to you.

The more information you share with your agent, the sooner he or she can get a clear picture of the right home. The result will be a delightful choice of homes that could suit you and your family for years to come.