Lucas News and Real Estate Report Issue 1
Near Record Home Sales Anticipated In 2006
National Scene - The housing market for 2005 is headed for a fifth consecutive annual record, and sales activity in 2006 is expected to be the second best year in history, according to the National Association of Realtors® (NAR).
David Lereah, NAR's chief economist, said that market conditions are still favorable for housing. "The slowdown amounts to a tapping of the brakes on a hot market," said Lereah. "Home sales are coming down from the mountain peak, but they will level-out at a high plateau -- a plateau that is higher than previous peaks in the housing cycle. This transition to a more normal and balanced market is a good thing."
The
Despite lagging consumer confidence, the economic fundamentals are good. Continuing strong population growth, fueled in part by immigration and new household formation by boomer children, is keeping housing demand at peak levels. And housing inventories, while rising, remain out of balance with that demand. On a national basis, inventories were at a 4.7-month supply, up from a 3.8-month supply at the beginning of 2005, but still below the five- to six-month supply that is associated with balanced market conditions.
Existing-home sales, expected to rise 4.7 percent to 7.10 million in 2005, are likely to decline 3.7 percent in 2006 to 6.84 million. New-home sales, projected to increase 7.0 percent to 1.29 million in 2005, are forecast to drop 4.8 percent to 1.23 million in 2006 -- also the second best on record.
The easing housing shortage will soften price appreciation as supply and demand move into better balance. NAR is forecasting national median price appreciation of 5.3 percent in 2006, down from 12.4 percent in 2005.
Rising interest rates—led by the Federal Reserve’s policy of keeping inflation in check with quarter-point increases in its overnight rate for banks—will also help slow sales and appreciation. NAR expects the rate on a 30-year fixed rate mortgage to average 6.5 percent in 2006, about one percentage point higher than in 2003 and 2004, but not much above the expected average for 2005 of 5.9 percent—all extremely low by historical standards.
Local scene - The Kyrene Corridor witnessed a remarkable year in 2005 as median housing prices appreciated by over 50%.
The inventory of homes for sale locally got as low as 20 homes, representing a 90% drop from what is normally seen in a balanced market.
2005 saw the fewest number of homes sold in the area in the past five years with 1152 homes changing hands. This is down from a high of 1417 in 2004. This is a reflection of the strong demand for the area coupled with fewer homeowners moving.
Our biggest challenge locally is affordability as fewer buyers can afford to live in the area. The median sales price in the Kyrene Corridor in 2005 was $296,000.
Currently there are 175 homes for sale in the Kyrene Corridor as we come into 2006 in a more balanced market.
Look for the average market time to rise from its low of 22 days in 2005 back up to normal levels of 45 to 60 days.
We are optimistic about the local market. While there is a chance of a slight short-term downturn in pricing, we believe the Kyrene Corridor as well as the
The Other Buyers
When placing a house on the market, the seller must remember early and often that there are going to be three "buyers" who must be satisfied with the eventual price of the property. The buyer, appraiser and underwriter must all agree with the price of the house before it can go to settlement.
The Appraiser: Despite what others may say, this is the most important visitor you're going to have come by your house. If you have to "wow" the buyer to write a contract, then you better "mesmerize" the appraiser. This is the person who is going to take a first stab and confirming that the seller and buyer have come up with a realistic price for the property.
With a contract price of $351,990 you want an appraisal of $351,990 or higher. If the appraisal is high, it has no bearing on the contract. If the price comes too far below, and the buyer doesn't have enough down payment funds to cover the difference, then the buyer and seller will have to renegotiate who is going to take the financial hit to make the loan work. Is the seller coming down in price, the buyer up in price or are they going to split the difference?
The Underwriter: Finally, you have to satisfy the person in the back office, the underwriter of the mortgage. Underwriters are determining risk factors for the lending company or group of investors. If they underestimate the risk of default on a loan and the buyer defaults on the mortgage in the future, their investors lose or they must sell the loan at a loss. Because of this, while they are not on the street watching housing prices increase, if their analysis demonstrates that the house may not be worth what the contract is asking, they can halt the loan process and the negotiations must begin anew.
Many people are not aware of what their credit score is, how they can hurt or help that score, and how it can be used against them. In a recent poll, half of the consumers did not understand that credit scores measure credit risk.
Lenders have used credit scores for years to determine whether to grant you a loan and at what interest rate. But now credit scores are also being used by insurance companies, cell phone providers, utilities, landlords, and even prospective employers. That’s a reason to make managing your credit score a priority.
But first, just what is a credit score? Fair Issac Corp., the company that created the most widely used credit score formula called FICO, uses 22 pieces of data collected from three credit bureaus (Equifax, Experian, and TransUnion) to calculate a credit score. The lowest score is 300 while the highest is 850.
Fair Isaac calculates a FICO score based on the data provided be each credit bureau. It’s not uncommon to see a 50 point differential between ratings. The reason: Bureaus collect data at different times of the month, or one bureau may have inaccurate information.
The higher the score the lower the risk you are to a creditor - and less interest you will pay. Only 13% of the population has a score of 800 or above. The average is 723. There is no single cut-off for loans, and it varies from industry to industry. But generally borrowers with scores above 740 receive the best rates.
The final number is a composite that comes from individual ratings in five categories:
• payment history (35% of the rating)
• length of credit history (15% of the rating)
• new credit (10% of the rating)
• types of credit used (10% of the rating)
• debt (30% of the rating)
Your score will affect the rate you are given by lenders. There is no single cut off for loans, and it varies from industry to industry. But generally borrowers above 740 receive the best rates.
To see how a change in your FICO score affects how much you will pay, consider this example (table). On a $350,000, 30 year fixed mortgage, you will pay 6.24% in interest, or $2153 a month if your score between 720 and 850. If your score drops to between 620 and 674, your interest rate jumps to 8.05%, and your monthly cost rises to $2581 - or $428 more. You will pay an additional $154,131 over the life of the loan.
Negative factors that bring down your score remain on your credit report for seven years, but lenders typically look back only in the past two years when making credit decisions. One 30 day late won’t kill you, but if they start adding up then you’re in trouble as it signifies a trend.
Tips to keep your score in good shape:
• Pay all of your bills on time. This is probably the most important factor in FICO calculations. If you are consistently 30 days overdue, your score can drop by as much as 100 points, depending on how long the account has open and how long ago the payment took place. If you are looking to buy a home then it is imperative that you avoid being late on your current mortgage payment.
• Think twice about closing accounts. Lenders are looking for consumers with long credit histories that have been well managed. But because of the increase in identity theft, you don’t want to many accounts that you don’t use. Be judicious about the accounts you have.
• Minimize credit card applications. Don’t apply for unnecessary credit.
• Keep balances low. The FICO score evaluates your total balances in relation to your available credit.
It is a good idea to look at your credit report from time to time to make sure that everything is in good standing. It is not uncommon to find incorrect information on your report that could adversely affect your score.
The Fair and Accurate Credit Transactions Act of 2003 entitles you to a free credit report from each major credit bureau once a year. You can order them at annualcreditreports.com. It is smart to request a report from a different agency every four months so you stagger the reports over a year. The most detailed explanation of credit scores can be found at myfico.om.
Lucas News and Real Estate Report Issue 2
Full Service Marketing - Sellers need more exposure in buyer’s market
The inventory of homes for sale has increased 900% in the Valley from this time last year. Locally, the Kyrene Corridor has witnessed the same dramatic increase. There are currently over 32,000 homes for sale in the Valley and 238 in the Kyrene Corridor.
Home Sellers can’t expect to put up a for sale sign and have 5 offers in 3 hours like last year. We are in a buyer’s market. Sellers are now competing with many similar properties. To compete, home sellers need more exposure. More exposure means more showings which translates into higher demand for your home and ultimately a higher sales price. The way to get exposure is to hire a full service Realtor who will aggressively market your home.
According to the 2005 Home Buyer Survey from the National Association of Realtors, when asked where they first learned about the home they purchased, 36 percent of buyers identified their Realtor. A big surprise was that 24 percent of buyers identified the Internet, up strongly from 15 percent in 2004. Yard signs came in at 15 percent and print media was next with 6 percent of the votes.
ERA Lucas Realty Group makes a habit of studying current market and behavioral trends of buyer and sellers and developing pro-active market appropriate strategies. As you can see from the survey, Realtors still have the biggest impact on a home buyer’s final decision. Because of this fact, we place our homes for sale in the Multiple Listing Service (with 360° virtual tours and multiple photos) . This exposes them to over 60,000 Realtors and their prospective buyers. This is still the most productive marketing activity any Realtor can take to sell a home.
As a result of the growing trend of home buyers using the Internet to facilitate their home search, we continue to shift more and more advertising dollars to Internet marketing so that it is now our top marketing expense.
We take 360° virtual tours and multiple photos on every home because this is what home buyers want to see. Then we go the next step and pay for premium placement of these homes (with multiple photos and virtual tour) on many web sites including Google.com, AOL.com, Realtor.com, ERA.com and of course our web site LucasRealtyGroup.com.
To round out our marketing plan and expose our homes to as many of the categories mentioned in the survey, we place a high quality, custom for sale sign in the yards of our homes for sale. Additionally we utilize print media such as this magazine, Wrangler News, and Homes and Land Magazine.
We feel like our full service marketing mirrors where buyers are going to search for homes, and as result we net our sellers 1.5% more than the average Valley Realtor while selling our homes in half the time.
Warner Ranch Garage Sale on March 25th
We sponsor this popular event and supply ads and signage. Call Brenda at 480-603-3310 for more details or to register.
Babysitter Classes
These ERA Lucas sponsored classes
are back once again. Call Brenda at
480-603-3310 for details or to register.
Online Home Valuation
Fun? Yes. Accurate? No.
More and more sites are popping up on the web that offer to provide automated home valuations. While fun to play around on, don’t take the results too seriously.
The latest site to offer valuations, Zillow.com, has been quoted as saying that its "estimates are typically on target, falling within 10 percent of the actual home-sale prices 62 percent of the time."
They get their results from tax records which are notoriously incorrect a large percentage of the time. For an accurate valuation contact a Jeff Lucas - he knows your neighborhood.
ERA Receives Award
ERA is the proud recipient of the 2005 J.D. Power Award for "Highest Overall Satisfaction For First Time Home Sellers Among National Full Service Real Estate Firms."
A Note From Jeff
I want to tell you about two of our most beneficial, yet often overlooked programs that we offer to home sellers. First is our Seller Security Plan or as it is often called our Guaranteed Sale Program.
“If We Don’t Sell Your Home, ERA Will Buy It!”
As we come into a buyers’ market, this program will give many home sellers peace of mind.
This program also allows us to market your home to buyers who need to sell their home first in order to buy. We can offer them a guarantee buyout and in effect open your home to 50% of the home buyer market that is usually unable to buy.
The other program I?would like to mention is our Easy Exit Selling Plan
It’s pretty simple. I’m confident that you will enjoy my services. I will market your home with the best resources available, allowing me and sell you home for the highest possible price in the shortest time possible. However, if so some reason you are unhappy with my services, you may cancel our agreement at anytime.
Contact me today about either of these unique offerings that assure my clients peace of mind.
Lucas News and Real Estate Report Issue 3
Home Sellers Must Rethink Strategy in Today’s Market
The inventory of homes for sale is rapidly rising, and it is having a dramatic affect on the real estate market. Home sellers are having to rethink their strategies in order to get their homes sold. The homes that are selling are “getting ahead of the market” in terms of pricing and condition.
The Kyrene Corridor currently has 381 homes for sale - up 100% from a year ago. In an average month only about 90 of these homes will sell - that means 75% of them will go unsold.
Valley wide there are over 44,000 homes available for sale and each month about 85% of them will go unsold.
The most important decision in the marketing of your home is made the moment you decide at what price to list your home. National studies show the longer your home is on the market the less it will sell for. It is best to start with your house priced correctly.
The other critical action that home sellers must take is preparing their home to be “market ready”. A home that shows exceptionally well helps arouse the prospective buyer’s emotional desire to buy more quickly at a higher price. First impressions count. That’s why neat, clean, “refreshed” homes get snatched up and others just sit on the market. Buyers will buy the perceived value of a home - the image and feeling that they get from experiencing the property. It’s often been said that buyers buy on emotion.
Of course, the first step is hiring a good Realtor® who can help you develop a successful strategy. We make a habit of tracking market trends so we can offer our clients the most up-to-date information on where to price their home for sale. We also help our sellers with suggestions on how to prepare their home for sale. Then we implement our “Full Service” marketing plan which will expose your home to as many potential buyers as possible.
Lucas News and Real Estate Report Issue 4
Is Your Home Market Ready?
Jeff Lucas is offering a free market readiness consultation which will include advice on what, if any, changes or improvements you should make to your home before offering it for sale.
As we have discussed in previous issues, the market for home sellers is currently very challenging. There are over 46,000 homes on the market with an average of 6,500 homes selling each month. That means if there weren’t anymore homes to come on the market, it would take 7 months to deplete the supply. Of course, more homes are going to come on the market, and some sellers will wait over a year or longer to sell their homes.
There is good news - you have control over one of the most important factors in determining whether your home sells this month or next year. The factor of course is making sure that your home is market ready.
What is market ready you ask? To start, it means making sure that your home is in tip top shape by cleaning it from top to bottom and removing unnecessary clutter.
But beyond that, you might need to look at improvements or changes that are a bit more involved.
Should you paint the walls, replace the flooring, do some relandscaping, update the kitchen, or change out some old fixtures? And if you do, what colors and concepts are popular with home buyers?
Do you need to make repairs to the leaking roof, cracked floor tiles, or out of date air conditioner?
Or do you even consider major improvements such as remodeling a bathroom, enclosing the den, or knocking down a wall?
All of these are great questions that you should not be answering without the help of an expert. Jeff can explain to you which improvements will give you the greatest return on your investment of time and money. He will also give you knowledgeable advice on which improvements help to sell homes and which ones don’t.
So save yourself some time and money up front and have Jeff give you his advice on how to make your home market ready. Call 480-598-8800 today for your free consultation.
Lucas Moves To New Location
We have moved our office location. We know that many of you have grown used to seeing us at our old office on the NW corner of Ray and Rural in the Fry’s shopping center. Fear not - we haven’t gone far. We are now conveniently located one mile due east of our previous location on the NW corner of Ray and McClintock in the Albertson’s shopping center.
Our phone numbers, web sites, faxes and emails are all still the same.
We are excited about this new office as it gives us more room to grow and serve our clients. Feel free to stop in and see us sometime as our door is always open.
Lucas News and Real Estate Report Issue 5
3rd Quarter Sales Data Update
The real estate market has temporarily crested. All three local zip codes show the median price of homes sold decreased in the 3rd quarter of 2006 after years of steady increases that reached an all time high in the 2nd quarter of this year.
The number of homes sold locally also dropped substantially as the buyer’s market continues it’s grip on the local housing market. The average time that it takes to sell a home is up with no sign of it letting up anytime soon.
These local trends are in synch with the Valley numbers. The median price of homes that sold in the Valley in September was $250,000. This number is down 6% from its high of $265,000 in June. The number of monthly homes that sold peaked in May at 7,591 and was 5,556 in September. The time it takes to sell a homes has increased steadiily from 48 days in January to 79 days in September. And there are currently over 47,000 homes for sale in the Valley. Up from 25,000 at the start of the year.
Are you thinking of buying or selling? Call us today so we can help you navigate the ever changing market. We watch, study and proactively anticipate market trends.Our Smart Home Buyer and Seller Programs are the most innovative and effective in the industry, and are specifically designed to save you time and money.
Lucas News and Real Estate Report Issue 6
It’s A Great Time To Buy A Home
After years of prices spiraling up, the housing market is ripe for home buyers looking to get a good deal.
Local home values have decreased 5-10% from their highs of 2005 and early 2006 as sellers and builders continue to negotiate lower prices.
The current market offers plenty of choices for buyers as the inventory of homes for sale nears a record high of 46,500.
Additionally, interest rates have dipped recently and are once again near record lows.
Buying a home is often viewed as an investment, as a way to make money. In fact, a home is a place for you to live and raise a family, but also where you can find appreciation over the long term, realize tax benefits and save by not paying rent.
If you look at a home as a way to make money in a short amount of time, then there is rarely a right time to buy. But if you are looking to buy a home and stay in it for five to seven years, then now is a great time to purchase.
How can you take advantage of this market? The first step that any savvy home buyer takes is to find a good Realtor to help them navigate the nuances of the home buying or building process.
In response to the growing demand for quality buyer representation, we have developed our exclusive Smart Home Buyer System. Here are the benefits:
• Our innovative Home Finder Service will keep you automatically updated via email when new homes come on the market that match your criteria. You’ll never miss out on your dream home.
• We can help you with any new build or resale home in the Valley. If you see a sign or a home that you are interested in, simply call us. We offer one stop shopping with a team of professionals who will ensure that you have a smooth transaction.
• We will represent you with the highest integrity, and find a home that best matches your needs.
• We won’t push you into buying. Instead we offer trusted and knowledgeable advice. If you are ever unhappy with our service, then fire us, it’s that simple.
• In fact, we are so confident that you will be happy with our services that we offer our Guaranteed Buy Program - “You Will Love Your New House, Or We Will Re-Sell It For Free!” (Offer valid for one year after COE)
• We know and study the market. We can help you determine what price to offer to ensure that you don’t overpay for your new home.
• We can inform you which builders are slashing prices and offering incentives. Be sure to contact us before you go to a new home community, or you will miss out on the opportunity to be represented.
• If you need to sell your current home in order to qualify for your new home, then our Guaranteed Sell Program will give you peace of mind - “We Will Sell Your House, Or ERA Will Buy It!”®
• Don’t forget, we are generally paid by the seller or builder so you receive all of these great benefits free of charge. For more information, contact us today at 480-598-8800.
