For the last several years, we’ve looked at market data and tried to grasp onto something that could help lead housing out of the doldrums.  A few years ago, many hoped the homebuyer’s tax credit would lead to a recovery.  Wrong.  That actually hurt more than it helped by artificially pumping up sales (and prices) for a short stint.  Over the last 18 months, others thought historically low interest rates would serve as a boost to buyers.  And while the interest rates have clearly not hurt the market, they haven’t been enough to turn the Virginia real estate market (specifically Charlottesville and Blacksburg) around.

Interest rates are at historical lows.  Inventory levels are unbelievably high so buyers have plenty of options.  There are some positive signs in the economy with improved unemployment and a bit of stabilization.  And prices are down from their 2007 (0r 2008, depending on where you live) peaks.

So, what’s it going to take to lead housing back?  What about rental prices?

Think we’re crazy?  Here’s our take on it…

Intrinsically, we believe that most people want to own a home.  Yes, there are hassles – fixing leaky faucets, replacing rotting soffits, installing new hot water heaters – that can be expensive.   But people want to have a home that’s theirs.  A place where they can paint a pink bedroom if they want, where they can create a man cave in the basement, or where they can decorate and hang pictures without having to worry about their landlord.  There’s just something about owning your own home that makes us happy…and proud.

But that sense of pride hasn’t changed.  People still want to own their own home.  The problem we’ve run into recently is the financial fear that buyers have.  First of all, buyers are scared of declining home prices.  No homebuyer wants to live in the fear that they are in the hole within 3 months of purchasing their dream home. In addition, if I had a dollar for every time I heard ‘it’s cheaper to rent’ over the last 8 years, I’d be typing this from a beach in Hawaii.  But, we completely understand that thought process.  And we’ve actually told plenty of potential buyers they should NOT buy.

For a while, rental rates did nothing…actually, there was a brief period during 2007 and 2008 where rental rates actually began to drop.  Those rental decreases were a direct result of Americans tightening their wallets and if they could find a way to save $50 or $100 per month by chopping their rent.  We had numerous instances where tenants were calling their landlords and trying to negotiate their rents down in the middle of their lease – it was a definite trend in Charlottesville.

But things changed.  As more potential buyers jumped out of the buyer pool and into the renter pool, demand increased and rental inventory decreased.  And, voila, rental rates started to rise.  In some pockets of our region, rental rates have increased 10-15% in the past 18 months.  Homes that were renting for $1200/month have popped to $1400/month or more.  The NAR claims that, nationally, rental rates increased 3% year-over-year in Q3.  So, either way you look at it, rental rates are on the rise.

As rental rates continue to creep upwards, the rent vs. buy decision for prospective purchasers will become more and more interesting.  And at some point, more and more purchasers will decide they don’t want to keep paying their rising rent bill and instead want to buy a home of their own.  In addition, investors are definitely beginning to see the trend of rising rental rates and high occupancy rates…and they are jumping at deals where they can see quick cash flow.

While inventory levels, buyer demand, and consumer confidence are still the leading indicators of a housing recovery, let’s be sure not to forget rental prices.  It will be interesting to watch rents in 2012 and how they affect purchasing decisions.

Or maybe we should say he bought the winery and vineyard formerly known as Kluge.  You can bet the Kluge name will last about as long as Mike Tyson would on The Apprentice. Donald Trump, the master of self-promotion and branding, will surely stick a T-R-U-M-P in front of ‘Winery and Vineyard.’  Don’t think so?  See Trump Ice, Trump Tower, Trump Golf, and Trump Chocolate. (I could go on…but you get the picture.)

So what does this mean for the Charlottesville real estate and Albemarle County real estate market, economy, and life in general?  Here’s our analysis…

1. This will be a boost to the local economy.  Trump’s name and marketing prowess will bring thousands of new visitors to Central Virginia each year. Central Virginia’s growing wine business has been gaining respect for years now…but now this will add a little bit of ‘glitz’ to the region’s wineries and vineyards.  I’m not sure how Trump Wine will rate as compared with King Family or Pollak, but the Trump name will bring more airtime to our local vineyards.

2. We’ve been hearing for months that the ‘smart money’ is getting back into real estate.  Big cities like New York, DC, and LA are seeing high-end cash buyers jumping back into real estate with both feet.  Will Trump’s move spur on more buyers to move off the sidelines?  Maybe.  Inventory levels for ‘regular’ properties (i.e. those properties priced well under $6 million) in Charlottesville and Albemarle are still high, but we’ve been seeing inventory levels slowly drop over the last 6 months.  Let’s hope Trump’s track record in wise real estate decisions continues…it could be good for property owners throughout Central Virginia.

3. The Apprentice in Charlottesville?  Maybe.  The Donald’s Apprentice finales always seem to pit the final two contestants in a battle to see who’s better at coordinating and planning a big fundraiser/gala/golf tourney/etc.  I can envision Trump Vineyards as the scene of a mega event…and organized by his next apprentice.

4. A new battle for the biggest Charlottesville celebrity.  Trump will have some tough competition with John Grisham, Sissy Spacek, Howie Long, and Dave Matthews.  In the end, I’d bet our penchance for ‘local’ will win.

5. A helipad?  Bet on it.

6. www.nestrealtygroup.com/WillTrumpBuyThisHome?  My bet is no, but I’ve been wrong before.  I do know this: if Trump buys it, he’s not paying list price.

So what do you think?  Let us know your thoughts on your predictions on how this affects Charlottesville…

Concerns were growing (for good reason) that many homebuyers would not have their homes close in time to qualify for the initial deadline of June 30th.  The backlog with lenders and underwriters has been a cause of much concern in Charlottesville and throughout the country.

The Inman article estimates that 1/3 of homebuyers shooting to earn the tax credit were being told by their lenders that they wouldn’t close in time.

This is welcome news for homebuyers as well as lenders, attorneys, and Realtors who have been scrambling to push closings through within the next 2 weeks. Besides the potential for an increase in fraudulent claims, I see this as a great move.  (Note: We’ve heard through the grapevine that the government is performing massive amounts of audits to try to catch fraudulent claims.)

If you do qualify for the homebuyers tax credit, here’s a link to IRS Form 5405 that will help guide you through the process of applying for your credit.

UPDATE, from Inman:

CLARIFICATION: While the Senate voted to accept the amendment that would extend the closing deadline for the tax credit, the Senate has not yet voted on the amended bill itself, which deals with a range of issues from extending unemployment benefits to Medicare funding. According to Politico, Democrats have trimmed $60 billion in spending from the bill in the hopes of passing it this week.

- Have no house to sell / No home sale contingency – this could be your single best advantage in this market.

- Prepare to be flexible on closing date – offer 15-120 day close – meet the sellers’ needs where you can, if you’re not giving them their price.

- Be prepared to take a shot at more than one house. Believe it or not, houses are selling, occasionally with multiple offers!

- Offer an aggressive yet fair price based on real comp data and be prepared to back up your offer.- Back up offer with real data or a real explanation (don’t just look at the list price and knock of 20%)

- Have a generous good faith deposit/strong pre-approval to assure the sellers you are viable and in earnest.

- This is a great time to re-assess some of the older inventory and get a great deal on a house that might need some TLC/decorative love/attention.  Too many buyers have decided they now want to “have it all” and are passing up on homes with good space and good bones because they seem stale.

- Hire a knowledgeable Buyer’s Agent who knows the market.

]]> http://www.nestrealty.com/nest_report/prepping-to-buy-a-house-in-charlottesville/feed/ 1 http://www.nestrealty.com/nest_report/there-are-buyers-in-the-charlottesville-real-estate-world/ http://www.nestrealty.com/nest_report/there-are-buyers-in-the-charlottesville-real-estate-world/#comments Thu, 02 Apr 2009 04:33:05 +0000 Jonathan Kauffmann http://www.nestrealty.com/nest_report/?p=252 Thanks to a Twitter tip from one of our savvy Nest agents, Amy Webb, I’ve been spending some time today looking at a trend that I knew existed…but hadn’t been able to quantify. 

Here’s the theory: There are buyers in the Charlottesville real estate market.  They are just being very selective and are going after properties that are…

 1. Priced right          2. Show like a model home          3. In a good location. 

We’ve been saying for months that you have to price your home right in order to sell it.  And while there will always be instances of homes selling at obscenely high prices, it’s becoming less and less likely in Charlottesville and Albemarle County. 

While it is absolutely true that there is a huge supply of homes for sale in Central Virginia, there is still a lot of inventory that is not priced correctly based on it’s condition and location.  I refer to this inventory as ‘junk inventory’ – it’s there and listed for sale in the Charlottesville MLS…but it’s not going to sell at it’s current price. 

So, I’ll get to the point: homes are selling…and quickly…if they are well priced. 

Anecdotal proof: I am aware of 4 (yes, 4!) multiple offer situations in the past 7 days.

Real proof: Take a look at the 17 properties that have gone ‘under contract’ in the Charlottesville MLS this week so far. 

Here are the Days on Market: 85, 17, 18, 9, 18, 119, 4, 11, 200, 38, 15, 5, 27, 151, 7, 8, 53. 

- That is an average DOM of 46 days…not bad. 

- 10 of the 17 were on the market for less than 20 days.

- The one that was on the market for 119 days had a $40k price reduction 2 weeks ago

- If you take out the three with the longest DOM (119, 200, 151), then the average DOM was just 23.

So, if you are thinking about selling your home: clean it up, make sure it looks like a model home, and price it right.

Here’s the question I have for both the NAR and the auto industry: how do you know? 

Do you know my situation?  Do you know how much money I have in the bank?  Do you know how long I plan to be in this house?  What if I can’t find the right house in the right neighborhood for what I feel is the right price?

What if I think I may lose my job, have no savings, and plan to move in 6 months anyway?  Is it still a good time to buy?

I know.  I’m being sarcastic here. But the point is that the decision whether to buy (or sell) a home is based on the individual…not the market.  There are some positive, high-level market conditions that may make it more intriguing to buy a home (see low interest rates and high inventories), but it’s impossible to make a blanket statement like that.

I find it ironic that NAR runs ad campaigns that claim ‘real estate is local and every market is different’, but they also preach broad statements like ‘it’s a great time to buy.’   Hmmm…

Here’s my advice. Look at your individual situation: what part of the country you live in, how much money you have to put down, how long you think you’ll be in the house, etc.  If you feel comfortable with your financial situation and you find a house that you love and that you can afford, then go for it.  In that case, it really could be a good time to buy.   

I’m obviously an advocate of homeownership…or else I wouldn’t do what I do.  However, real estate is individual.  Not national. 

(As a side note, I think it’s ironic that both the NAR and auto industry chose the same ad campaign.  Realtors and car salesman are consistently ranked near the bottom respected professions.  More on this in the coming weeks…)