Hill Slowinski • Real Estate: Blog

(Reprinted from The KCM Blog, October 2011.  Disclaimer: This blog covers the national housing market as a whole. Please check with a local real estate professional to discover how the following information will impact your region. – The KCM Crew.)

Hill's Comment:  While the recent S&P/Case-Shiller Index data reflect an overall slight increase in Washington area house prices, this goes against the nationwide trends, in which residential real estate prices dropped more than forecast in the year ended September.  Prices rose and sales volume is highest in price ranges that meet the broadest market, the lower ranges.  Upper bracket properties prices are not increasing.  There are far fewer qualified buyers for higher priced inventory, and these homes are in fact attractive because buyers are getting great value for much lower cost (i.e., more house for their money).  Prices offered are declining or these homes are lanquishing on the market.  Many experts believe pressure inevitably will continue to mount and will drive all home prices lower in the Washigton market in the future.

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Many sellers want to wait until the spring before putting their home on (or back on) the market. This might be for any of several reasons:

• They don’t want to be inconvenienced during the holiday season.
• They believe that they will see more potential buyers and as a result will get a higher price.
• In the northern part of the country, they might not want people walking through the snow and then into their house.
• All of the above

In a normal real estate market, this may make sense. However, this market has been anything but normal. This spring will also see some abnormalities. The biggest difference will be the direction prices will take.

In years past, the spring market would favor the seller because increased demand would outpace any increase in supply: the number of houses coming onto the market would not be as great as the number of buyers newly entering the market. In most situations, when demand is greater than supply, prices increase.

The reason this spring will be different is that the supply of homes coming to the market will be dramatically impacted by foreclosure properties being released by the banks. Many believe this increase in inventory will far outweigh buyer demand. In situations where supply is greater than demand, prices decrease.

Will This Actually Happen?
RealtyTrac, in their latest foreclosure report, explained:

U.S. foreclosure activity has been mired down  since October of last year, when the robo-signing controversy sparked a flurry  of investigations into lender foreclosure procedures and paperwork. While foreclosure activity in  September and the third quarter continued to register well below levels from a  year ago, there is evidence that this temporary downward trend is about to  change direction, with foreclosure activity slowly beginning to ramp back up.

This will impact prices.

What Do Experts Believe the Impact Will Be?
Here are the pricing projections by several major entities:

• Zillow believes we will not see a bottom in prices until the first quarter of 2012.
• Standard & Poors thinks prices will drop %5 in the next few months.
• JP Morgan Chase believes prices will depreciate 6 to 7% over the next six months.
•  Barclays says prices will fall 7% by the end of the first quarter of 2012.

Bottom Line
You may pay a hefty price for the convenience of not having your property on the market right now.

Low Inventory, Stable Prices, and Feeling the Worst Is Behind Us

Market Summary

The Washington, DC real estate market had an exceptional first half of 2010 with combined sales of single-family homes, condominiums, and cooperatives up 36% at the end of the second quarter.  That pace did not continue and the increase dwindled to 3% by the end of December.

The single-family market ended the year in much stronger position than the condo/co-op market with an 11% increase sales and just over 4 months worth of inventory.  Condo/co-op sales ended with a 6% loss and over 6 months of inventory.  Nevertheless, property values still managed to rise for both homes and condo-co-op units. 

Overall, this was still the third consecutive year of positive sales growth, made more remarkable by the negative factors faced in the market place. 

Single Family Homes

At the end of 2010, year-to-date sales of single-family homes were up 11% over the same point in 2009.  The largest year-over-year increases came in the $700,000 to $900,000 range (up 27%) and the $1 million to $1.5 million range (up 33%), and single-family gains were seen across almost all price categories.  Only the $600,000 to $700,000 and the $900,000 to $1 million ranges registered small losses -- 3% and 2% respectively. 

At the end of 2010, there was 4.03 months supply of single-family inventory available.  Inventory of homes was remarkably stable throughout the year, varying between a low of 2.31 months and a high of 4.26 months.  Only homes priced over $1.25 million saw a substantially higher inventory, 10 months worth, but that is not unusual for that price range.  The number of available homes typically drops at the end of the year, and a majority of these homes is likely to come back on the market in the first quarter of 2011.

Average and median prices of single-family homes rose slightly in 2010 compared to double-digit declines in 2009.  The average home price was up 2% while the median was up 3%.  With low inventories to start 2011, consistent sales numbers should provide stability or similar increases throughout 2011.

Condominiums and Cooperatives

Sales of condominium/cooperative units dropped overall by 6% by the end of 2010.  Only the highest and lowest price ranges saw double-digit increases for the year, with sales of units priced under $150,000 up 55% and units over $1 million up by 46% for 2010 over 2009.

Inventory of available condominium and co-op units fell 20% in December to the lowest point of the year.  Inventory is up 4% at the end of 2010 over 2009 with the largest increase in the $200,000 to $300,000 range while the number of units on the market between $700,000 and $1 million fell 27%.  An increase in the more affordable $200,000-300,000 range is considered a positive trend.

At the end of 2010, there was 6.37 months of condo/co-op inventory, which establishes a market that is more in balance than being a buyer's or seller's market.  The spring saw this number dip as low at 3.13 months.

Outlook

There are several local and national issues that this area will have to overcome in 2011 to continue its upward movement in sales and prices - the potential downsizing in federal employees, lack of available credit for some buyers,  reforms in Fannie Mae and Freddie Mac, and threats to the Mortgage Interest Deduction. 

Surprisingly, average and median sales prices ended the year both up by 4% in 2010 over 2009.  On paper, the condo/co-op market was spared the drop in prices that was seen on the single-family side in 2009, but the lackluster end to 2010 might be an indicator of falling condo/co-op prices to come -- at least in the first half of 2011. 

If some of these numbers seem disappointing, it is only because of the expectations that come with being in a very robust market like Washington, DC.  The most recent statistics from the National Association of Realtors^® show a decline in sales of 28% nationwide, 9.5 months of inventory and the prediction from many experts of worse conditions in 2011.

The fact is that in the Washington, DC market, we have started 2011 with low inventory, stable prices, and the feeling on the street that the worst is behind us. 

Adapted from "DC Housing Report" by Fred Kendrick; Data from the Greater Capital Area Association of REALTORS®

"Happy Valentine's Day!"

Clients are asking, "Should I put my house on the market now, or should I wait?" and "Should I buy now, or should I wait?"  What about Thanksgiving, the Holiday season, or New Year's?  What about buyer interest and showings and open houses? Why not wait?

It's November.  Prices have stabilized.  Inventories have come down in many areas.  Interest rates are at historic lows.  Financing has become more readily available.  Sellers planning to also buy can get more house for their money now than before.  Sellers who price not only competitively but also compellingly are successfully setting the stage for buyers to make very respectable offers.  Buyers who hesitate guessing prices will continue to fluctuate or fall may forego any perceived savings through potential increases in mortgage rates. Sellers are seeing more buyers preparing to act and ready to go. 

Even during the holidays, business does not stop and buyers continue to look.  If the house is not on the market, it is invisible to buyers.  The question should be "Why wait?"  Why delay plans and dreams when the environment is so good?  Focus on what is important to them to achieve or why they are trying to accomplish it.  If a strategy is to buy at the bottom of the market, there is no way to ‘know' the bottom - except to have passed it and to see the upswing.

How do Realtors help clients decide?  What should clients think about?  What is their motivation to act now and not wait until Spring?  Answer: "Happy Valentine's Day!"

To be able to say, "Happy Valentine's Day!" in their new house or at settlement, they have to move ahead now.  That becomes their motivation.  THAT can be their goal.

Know that many factors are working in their favor.   As we learn more about our clients and their expectations, dreams, and desires, we as their Realtors will be better prepared to help them.  If they act now to buy or to sell, come February 14, they may also be able to say, "Happy Valentine's Day!"*

-- Hill Slowinski

*Thanks to John Dodd!

Potomac Village Convenience!

10209 Gary Road, Potomac, Maryland  20854

Offered for:  $849,000  MRIS #MC7428778

This very well-cared for home is conveniently located in a close-in an established Potomac Village neighborhood which also includes several large upper-bracket properties.  It is a beautifully refinished four-bedroom, two full bath and one-half bath split-level home on five levels. The large lot (27,000 sq. ft.) has an open rear lawn area which backs to a wooded lot for added privacy and room to expand!

            This home is less than ½ mile of Potomac Village, with shops, drug stores, banks, restaurants, markets, and other businesses, and access to the nearby C&O Canal National Park along the Potomac River.  The home was built in 1956 and has many updates and upgrades and a recently added large sunroom.

            The first floor features gleaming hardwood floors, an open living room with large front bay window and wood-burning fireplace, dining room, and sunroom overlooking the huge rear yard. The newer kitchen features a tiled floor, updated GE appliances, including a new stove and microwave, newer dishwasher, and refrigerator. The spacious sunroom and the kitchen both provide access to the flagstone garden patio, deep rear lawn, and garden areas.

            The next level features three spacious bedrooms, all with newly refinished hardwood floors and generous closets.  All rooms have ceiling fans for added comfort. The third level up has a very large bedroom with sunny east facing dormer windows and storage space.  The top level is a large floored attic storage area.

         The lower level features a utility/laundry area efficiently fitted with a full-size washer and dryer, a half bath, and a finished recreation room with newer carpeting, paneling, shelving, access to the back yard, and deep one-car garage with more storage space.  The finished basement one level below is paneled and has a new wood floor and wood-burning fireplace. 

            Renovations and updating made in recent years include new paint throughout, new chimney lining in all three flues, new stove, new microwave, new water treatment system.  The hardwood flooring throughout the house has been refinished to its natural tones.  

Price - For a Listing and for a Contract of Sale. 

Sellers and buyers both rely on their agent's expertise and research to help them understand today's market and what are reasonable price expectations.  A wrong price can kill a listing or a deal. This single factor is so important. An agent who tries to "buy" a listing by providing or acceding to a seller's unreasonably high price expectations is not helping his client. Pricing high can negatively impact the house's real value, and can damage the agent's standing in the community. 

I spend hours on research and data analysis to correctly propose a price range that can work.  For sellers, it has to be the best range I can honestly present.  My purpose is to reach a list price we can expect to best attract buyers and which will result in the greatest amount of proceeds.  I invest this time up front for my seller's benefit in order to save weeks or months of dissatisfaction with an unrealistically priced home languishing on the market.

For my buyers, understanding comparable sales will help them appreciate and confirm that they are making a good deal,  The goal is to get closest to a sale price that reflects the value of the home to my buyer and that the seller will (or should) accept.

One reference point is in statistical market data on comparable properties 1) that have sold within the recent past, 2) that have not sold in the recent past, and 3) that either are actively on the market or 4) are under contract.  

The value these reports provide individually is different:

• The "Sold" list shows similar homes that were recently on the market that sold the length of time they were on the market, and their price.  This provides a sense of what values are for similar homes.
• The "Expired" list shows the same data on similar homes that were on the market but which did not sell, at least not at the prices at which their owners were attempting to sell them.  The market perceived those homes not to have the value to support the price.  The listing ran its course and expired.
• The "Active" and "Under Contract" list reveals the properties a house will have to compete with for a buyer, and the prices at which they are being marketed.  This is competition for a seller.  The report shows comparable houses now for sale and for how long.
• The Under Contract report shows houses priced correctly went under contract to a buyer.  These homes "found their market."

Another value reference is obtained through a professional home appraisal, similar to an appraisal a lender will obtain in determining how much to lend a buyer.  A professional home appraiser will produce a thorough, detailed, and certified home appraisal.  Armed with a current appraisal (less than 90 days old), a seller can be confident that a buyer's offer is realistic and is close to that amount will meet with the buyer's mortgage lender's approval.

Working thoughtfully through these detailed and systematic steps benefits my sellers and buyers by setting realistic expectations and giving the most accurate ‘value' information for consideration, and we are prepared to negotiate the best contract.

Prices, Inventories Provide Reasons for Optimism

Market Summary

Fueled by the expiration of the Federal Homebuyer Tax Credit, a strong spring market boosted combined year-to-date sales of single-family homes, condominiums, and cooperatives to a 36% increase over 2009 at the end of the second quarter. 

The inventory of available homes and units began its typical seasonal decline, falling 3% from May to June and is now 7% below June of last year.  We are now statistically closer to a buyer's market than to market equilibrium or a seller's market.

Prices are down slightly for single-family homes and up slightly for condos and co-ops.  This actually is the opposite of what is happening in the national market, with home sales and effective inventories in better shape for homes than for condos/co-ops.  The slowdown in May probably delayed an expected increase in prices perhaps to 2011, but some neighborhoods are already starting to see prices move up a bit - certainly not to 2005 levels - but up slightly from 2009 prices.

Single Family Homes

At the end of the second quarter of 2010, sales of single-family homes were 38% ahead last year with the highest second quarter total since 2005.  Year-to-date settlements were up 61% for homes priced under $300,000.  Sales of homes priced between $400,000 and $500,000 were up by 50% and homes over $1,250,000 were up 44%.  All price categories showed volume gains over 2009.

The inventory of available homes fell 2% from May to June, even while the number of new listings increased by 16% over June of last year.  This is the first time the end-of month inventory fell since February, and it usually drops further in July and August as fewer homeowners brave what is thought to be (sometimes incorrectly) a slower summer market. 

With a decline in inventory and increase in sale, the effective inventory fell slightly to 3.31 months, an indication of the strength of the single-family market in the District.  Homes between $600,000 and $900,000 have an even lower number of 1.92 months, with buyers in this price range often competing for well-priced properties.  At the end of the second quarter, average single-family home prices were down 2%.  Median prices were down by 4%. 

Condominiums and Cooperatives

The condo/co-op market has been on a roller coaster ride since April sales reached a three-year high.  In May, buyers pulled back and in June rebounded with a 41% increase in pending sales.  The end of the second quarter found sales 11% ahead of the same point last year.  Units under $150,000 were up by 78%, units between $900,000 and $1,000,000 up by 40%, and units between $1,250,000 and $1,500,000 up 50%.

At the end of June, there was 4.77 months of condo/co-op inventory.  With the swing in sales totals over the last three months, the effective inventory has also varied widely as well -- from the low for the year of 3.13 months in April to the high of 6.96 months reached the next month in May.  June's 4.77 months is higher than the 3.77 months of a year ago.  Units between $400,000 and $600,000 have an effective inventory of just over 3 months, while units over $1,000,000 are at 8.67 months.

Average condominium and cooperative prices are up by 1% over 2009 year-end, while median prices are up 3%. 

Outlook

Sales fell sharply in May, as buyers interested only in the tax credit left the market, but recovered in June as inventories fell and buyers cautiously reentered the process.  While the up-and-down nature of the second quarter is cause for concern, there are reasons for optimism in the summer and fall markets.

After Labor Day inventories can start to build rapidly, and it is important to end the summer at a low enough level that the September increase is manageable in the fall market.  With low inventories in certain neighborhoods, sellers sometimes miss opportunities that are more attractive in summer months by waiting to list in a more competitive fall market.

With a 38% year-to-date increase in sales over 2009, it might be surprising to see prices fail to keep up with the market's recovery, but the last market rebound that occurred in the mid-1990s also saw price increases trail a bump in sales by more than a year.  The flux in the condo market since April is a cause of concern, but with prices holding firm and inventories falling, the prospects for a good summer market are bright.

Data from the Greater Capital Area Association of REALTORS and adapted from the DC Housing Report, by Fred Kendrick

Maryland and Virginia Among Highest for Technology, Business Friendliness

CNN Money.com and CNBC.com just released their 2010 lists - Top Earning Towns, Best 100 Small Cities to Live,and CNBC for Top States for Business- and The Washington Post announced the area's education level.

Bethesda, MD has the highest median family income in the US, according to CNN Money.com.  Ellicott City/Columbia, Maryland is named by a CNN survey as #2 Best Small City to Live in the country, up from #8 in 2008, with its  grand homes, a lovely 18th-century downtown, lots of restaurants, wide range of housing, tons of parkland, and a major music venue.  It's also an economic powerhouse with a jobless rate at just 5.2%.

Also named by CNN as high on the list were Gaithersburg, MD (# 25), Centerville, VA (#30), Rockville, MD (#31), and Alexandria, VA (#41).

CNBC named Virginia as #2 overall of the top states for business, bumped out if its 2009 #1 slot by Texas this year. Maryland remained in its #27 position overall, same slot as 2009.  In individual categories, Maryland ranked #8 in Technology and Innovation, and Virginia #2 in Business Friendliness, same as in 2009.

In addition, the Washington DC area has the best-educated population in the nation, as reported in The Post.

See:  http://money.cnn.com/magazines/moneymag/bplive/2010/snapshots/PL2718116.html

See:  http://www.cnbc.com/id/37516043/

See:  http://bit.ly/9Wzfun

See:  http://www.washingtonpost.com/wp-dyn/content/article/2010/07/14/AR2010071405751.html

3420 Porter St., NW, Washington, DC 20016 - Available for the first time in 65 years.

• Offered for $1,350,000. 
• MRIS# DC7336115. 
• Open House 5/16, 1-4 PM

This classic 1913 Victorian is filled with character and charm and is located in the heart of Cleveland Park. It features large sun-filled rooms, high coffered ceiling, handsome stone fireplace, gleaming hardwood floors, freshly painted throughout, original architectural details, and terrific space and storage areas. Its four levels include six large bedrooms plus a second floor library with fireplace, separate garage, and private landscaped rear garden.

With its orientation on the hillside, this is one of the more admired homes in historic Cleveland Park. The majestic 1913 pebbledash Victorian retains its original details and a very open feeling starting with its romantic wide front porch overlooking Porter Street.

The home is generous and spacious with well-proportioned rooms. Flow is excellent for entertaining, from the gracious entrance foyer, through the living room with its fieldstone fireplace, to the dining room with coffered ceiling, which opens to the brick patio and exceptional private rear South garden.

Situated in the heart of Cleveland Park midway between Wisconsin and Connecticut Avenues, the home is near top public and private schools, very close to fine shops and restaurants, and in the best Cleveland Park location. Walk easily to restaurants, parks, libraries, theaters, schools, and shops.

This rarely available home offers its original woodwork, high ceilings, and central air conditioning.  It is deceptively spacious with almost 3,000 sq.ft. of living space, and it is offered in "As Is" condition.

CLICK HERE for more information. (Brochure, photos, YouTube Virtual Tour, and much more)

Positive Trend Reverses Declines Since 2004

New sales contracts in 2009 for residential properties were 21% ahead of 2008.   The number of properties on the market at the end of 2009 was 25% lower than the end of 2008 -- a five month supply. This is a market which most housing economists feel is in balance between buyers and sellers. 

Falling property values opened the door for a new group of homebuyers who had been priced out of the market for several years. Average and median sales prices of single family homes, still well below 2008 prices, are affected by the larger than usual percentage of home sales at lower to moderate prices, bringing the average and median down.  For condominiums/coops, where sales are about even, the reverse is true, thereby inflating those numbers.

Single-Family

Fueled by huge increases in the low end of the market, sales of single-family homes finished the year 23% ahead of 2008 in number of settlements and 28% ahead in number of total pending sales.  As a result, sales of homes priced below $200,000 were up an incredible 262% over last year.  Sales of homes between $200,000 and $300,000 had a 32% gain, while homes priced from $400,000 to $600,000 were up 16% over 2008. 

In 2009, 57% of  sales under $200,000 were foreclosures while only 9% of the homes sold over $200,000 were listed as foreclosures.

Sales of homes priced above $800,000 were down 9% for the year, with sales over $1.5 million down 12%.  In the upper brackets, in December pending sales of homes above $1.25 million were up 54% over 2008 and homes between $600,000 and $800,000 saw a 119% increase.  Overall, pending sales in December were up 27% from last year. 

The inventory of available homes at the beginning of 2010 is 28% below 2008 EOY inventory. The effective inventory was 4.3 months, well below the 2008 year-end number of 7.57 months.  Inventory has continued to fall to the point where some neighborhoods and price ranges are suffering from a lack of inventory.

The year ended with the average home price down 17% from 2008 and the median price down 18%. 

Condominiums and Cooperatives

Sales of condos and co-ops ended with a 9% gain over 2008.    Condo/co-op sales also had a large increase in the lower end of the market, with units priced below $150,000 up 66% from last year.   There were also advances in the upper end of the market as sales of units between $800,000 and $1,000,000 jumped 59% over last year, while sales of units over $1.5 million were up 20%.  There were also 13% increases in the $300,000 to $400,000 and the $500,000 to $600,000 ranges.

The year ended on a mixed note for condominium and cooperative sales in December.  The year ended with 6.26 months of inventory, down from the 9.57 months at the end of 2008.

The total inventory of available units ended the year at the lowest point in four years, 22% below the same point last year.  This indicates new condos introduced to the market over the last few years has finally been absorbed, and with very few new condo projects scheduled to come on the market in the next year, the signs are good for a strong 2010 in the DC condo market. 

2010 Outlook

The gains for moderate priced homes were possible because of increased affordability and the availability of financing under the FHA and Fannie Mae/Freddie Mac up to $729,750.  Conversely, sales of homes above this limit were affected by the lack of available financing and strict down payment and credit score guidelines.  

Looking ahead to the single-family market in 2010, low inventories and increased sales (hopefully combined with increased availability of credit) should bring a moderate increase to home prices for the first time in two years.  It is more likely that prices for both homes and condos/co-ops have declined by at least several percentage points this year but that this decline is close to bottoming out.

 Price trends always trail those of unit sales by up to a year; so with sales starting to increase it is likely that prices will follow sometime by the middle of next year.  But gains for both sales and prices are most likely to be in line with the moderate recovery projected for the overall economy.  

_________________________________________
 

Third Quarter Results Show Prices Stabilizing, Confidence Building 

Led by a surge in single-family sales, new contracts for all residential properties jumped a very impressive 38% from last September.  Nine months into 2009, combined sales are 13% ahead of those at this point in 2008 and the gap between the top of the market in 2004 and now has narrowed to 28%.

There was a slight (2.4%) increase in the number of properties on the market at the end of this September from the same point last year; but with the increase in sales, the effective inventory of homes and units on the market today is down to 3.7 months (higher for condos and co-ops than for single family homes) as compared to 4.9 months in September of 2008.

The average sales price of single family homes, condominiums and cooperatives declined slightly from mid-year but the decline was small enough (in the 2.5% range) to suggest that we may be approaching the bottom.

Single Family Homes

There was a sudden sharp upturn - up 40% from last September -- in the number of new single family contracts in September.  Year-to-date, new contracts were up 21% from a year ago with these gains largely coming from homes priced under $800,000 (over 80%). Home sales are lagging above $800,000 and particularly those over $1,250,000.

Rather surprisingly, fewer new listings came on the market this September than a year ago and with stronger sales the inventory is down nearly 19% from this time in 2008. Some potential sale homes may have been diverted to the rental market for a year or two  (See recent articles at: HillSlowinskiRealEstate.com and HillSlowinski.com).  This has left only a 3.4 months supply of homes currently for sale, which is lower than it has been for years.

Average sale prices are presently off 16% from the end of last year but they are down only 1% from mid year. Median prices are down a similar amount from 2008 but they were actually up a fraction from the end of the second quarter in June.

Condominiums and Cooperatives

New contracts on condominiums and cooperatives rose 35% over September of 2008.  The largest increases over last year were in the $200,000 to $300,000 range (up 48%) and the $500,000 to $800,000 range (up 52%). 

Through nine months of 2009, contract activity on condos and co-ops is up 5% from the same point last year.  Most price categories show slight losses or gains from 2008. The most activity for the year has been in the $300,000 to $400,000 range (28% of the market) and that range is ahead of 2008 by 12%.

The inventory of available units at the end-of-September is 13% lower than at the same point last year.  The effective inventory actually went up slightly to 4.17 months.  The average price of a condo/co-op in the District is even with 2008 prices at this point, while the median price is down 1%. 

Summary

All of this strongly suggests that the decline in single family home prices is nearing an end, but it will take months, probably into next year, before we begin to see even small gains.  With sales apparently on the upswing we can anticipate seeing prices stabilize by late this year or early 2010 but price increases are likely to be modest, at best, after that.  Sales were stronger than any other month this year and all the way back to June of 2005.  Favorable interest rates and concerns that the first-time buyer subsidy may not be renewed certainly contributed to this, but the strength of this upturn certainly indicates at least some improvement in consumer confidence about our local housing market.