A Very Good Year? By Whose Opinion?

I'm sure that by now you have all read the big headline in the St. Petersburg Times business section for Friday, December 29, 2006. Just in case you missed it, it read "Home sales dip; prices hold". The subheadline read: "Overall, it was a very good year for the bay area. Really. It just can't compare with 2005."

Well, if it can't compare with 2005 since that was such a banner year, let's compare 2006 with 2004 and pretend like 2005 never happened.

Now, to be fair, the Times used data that reported on the entire Tampa Bay area. I don't have data like that, so I'm going to use data for Pinellas County only. I obtained this data from the Pinellas Realtor Organization, so it's probably pretty darn accurte.

In November 2006 in Pinellas County there were 586 sales of single family homes. In November 2004 there were 1,007. A decrease in single family sales of 42%.

In November 2006 in Pinellas County there were 263 condo sales. In November 2004 there were 502 sales. A decrease in condo sales of 48%.

So, forgetting 2005, sales volume is way, way, way off as compared to 2004. And I'll tell you something else: sales valume was way, way, way off compared to 2003, 2002, and 2001. If you want the numbers, just e-mail me and I'll see that you get them.

Let's compare median prices now.

The single family median price for November 2006 was $216,000. The median price for November 2004 was $218,000. A decrease of only about 1%.

The median price for condos in November 2006 was $155,900. The median price in November 2004 was $150,000. So the median price for condos went up about 3%.

I'll tell you something else, prices for single family homes and condos have gone up continually since 2001 if you don't count 2005. In 2005, median prices skyrocketed and dropped in 2006. But in this article, we're pretending that 2005 didn't happen, remember?

So, to summarize, sales volume is down but prices are steady -- just like the St. Petersburg Times story reported.

I guess my point is this: By whose standards was 2006 a "very good year"? When sales volume is down by about 45 percentage points and prices remain relatively steady, that does not make for a good year. Think about it this way ... If prices are the same and volume is cut in half, gross revenue is down by about half. If gross revenue is halved, everybody associated with real estate must try to make a living on about half the normal amount of money for the industry.

How is that "a very good year for the bay area. Really." And remember, I'm skipping the "banner year" of 2005 and making the comparison with 2004. If I'd used 2005, the numbers would likely have looked much worse for 2006.

I really don't understand how the St. Petersburg Times can write "Overall, 2006 was one of the best years for home sales on record, though the market looks tepid against the boom-to-end-all-booms in 2005." What year are they comparing 2006 to? 1929? 1942? 1991? Compared to those years, 2006 may have been a pretty good year. But statistics prove that 2006 was the worst year in Pinellas County for sales volume since 2001.

I think the writers at the St. Petersburg Times have been spending too much time talking to the public relations people at the real estate organizations who are trying to put a positive spin on a bad situation.

For more information on real estate in the Tampa Bay area, go to my website at www.TheStPeteRealEstateSite.com.

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Selling Strategy: A New Way To Look At Price Reductions

The Sarasota Herald-Tribune recently reported that the median selling price fell from $340,700 to $277,900 in their area during the year ended in October.

Here in Pinellas County, the median single family home price has gone from $268,000 to $216,000 in the year ending November, 2006, according to Pinellas Realtor Organization data.

I'm willing to bet you that median prices are falling all across the state. Call it a hunch.

The point of this is that in order for the median to be falling like that, sellers must be cutting their prices in order to get properties sold.

I want to give sellers some advice: don't be too quick to cut your prices.

At some point, sellers may need to negotiate a lower price. But to unilaterally cut the price thinking that it will increase the number of showings and help you find a buyer is not really accurate. In fact, it's kind of a slippery slope. Once you start sliding down the price-cutting slope, it gets a lot easier to cut that price again and again and again.

Before resorting to price reductions to entice buyers, I recommend that sellers make certain they have taken the following actions:

1. Price the property at its true and current market value as soon as it goes on the market. Have a real estate agent or appraiser determine the most likely price range for your property, and then stay within that price range with your asking price and in all your negotiations with potential buyers.

2. Rely on "maximum marketing" to find you a ready, willing and able buyer. In a slow market like we have today, you need a maximum marketing effort. Leave no stone unturned in your advertising program. Make use of the internet, direct mail, MLS, open houses, newspaper and magazine advertising, flyers and everything else you can find that will help to bring the message of your property to potential buyers. If your current real estate agent is not doing enough marketing, find an agent who will.

3. Use incentives as a last resort. Only if the marketing program is failing to produce a buyer should you start "fooling around" with incentives. If you have to employ incentives, make sure you are offering the incentive to the right group of people. For homeowners wishing to sell, I suggest the first incentives be directed toward the potential buyer rather than to real estate agents. If you're a developer, I suggest you direct incentives toward both buyers and real estate agents.

If you have not had any acceptable offers within a few months and you have pretty much exhausted your marketing ideas, you might at that point want to reduce your price below your original price range. By that time, the market has spoken and they have said that for some reason they are not interested in your property at that price.

But before you drop the price, you might want to try one more idea: offer to buy down the buyer's mortgage.

A mortgage buy-down requires that the seller make a one-time cash contribution to the mortgage company. For that cash, the mortgage company reduces the mortgage interest rate, and this reduces the monthly payment on the property. This reduction of the monthly payment brings many more potential buyers into the market for your property because it has now become more affordable. In effect, you have made the property more affordable without reducing the asking price. By making it more affordable, you increase the number of potential buyers. By increasing the universe of potential buyers, you may find that one buyer out there who is ready to buy immediately.

Not all mortgage companies permit buy-downs. Of those that do, there are several different plans and options available. You will have to check with the buyer's mortgage company to see what they might be willing to do.

In effect, a buy-down permits you to sell the property at a higher price less the contribution made for the buy-down. This approach often enables sellers to cut their potential losses on a sale while giving them a wider range of marketing options and increasing the universe of potential buyers. A buy-down is often a better and less costly approach than a price reduction for those very reasons.

For more information on real estate in the Tampa Bay area, visit my website at www.TheStPeteRealEstateSite.com.

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November Sales Report: The Election Hasn't Mattered

In October, a couple of friends and I were enjoying lunch in a St. Petersburg restaurant. They were all real estate agents of long standing in the local area. They were all smiles. I asked why, given that the real estate market has not been good for the last eighteen months or so. They said that the election was just a week or so away, and that the real estate business would improve after the election. They agreed that it always improved after an election. So, they were all smiles and looking forward to a big month in November.

Sorry boys. It didn't happen.

November was terrible.

As usual, let me start out with the absorption rate. As you know, the absorption rate is actually the inventory turn. It is calculated by dividing the number of units sold during the month by the total number of listings in the MLS.

During November, the absorption rate for single family homes was 5.7%. This is 1.5% less than October, 2006 and the worst month since January 2003, which is as far back as I have records from the Pinellas Realtor Organization (PRO). The condo absorption rate was even more dismal. During November, it was a meager 4.0%; this is also the worst since January 2003 and is 1.7% less than October, 2006 which was also a really, really, really bad month for condo sales.

At the end of November, there were 16,759 properties for sale in the local Multiple Listing Service (MLS). By comparison, in June 2005 when the real estate slowdown actually started, there were only 3,795 properties listed for sale in MLS. Way back in January 2001 there were only 3,641 properties in MLS. I don't think there is a street anywhere in Pinellas County that does not have a "For Sale" sign in it -- and remember, these are just the properties listed with real estate agents and do not include unrepresented sellers (FSBO's) or properties where the seller would like to sell but has withdrawn or not yet entered the market. There is, I think, even more property for sale in Pinellas than is being reported by the MLS. I suspect there are a lot of very frustrated sellers.

So, out of those properties, how many managed to get sold in November? A total of 849. That explains the low absorption rate, doesn't it? In October, 1,034 properties were sold and that was a bad month.

Let's look at some specifics for single family homes and condos.

Single Family Homes. In November there were 10,262 single family homes listed for sale in the MLS. That's just a slight increase over the 10,225 from October. Only 586 homes were sold in November; in October there were 738 sold homes. So, things are getting worse. On top of that, the median price is dropping. In November the median was $216,000, down from the $220,000 of the previous month. Pretty sorry.

Condominiums. Condominiums really took it on the chin in November. At the end of the month there were 6,497 condos on the market in the MLS. Only 263 condos were sold. The median price for condos continues to fall. In November the median price was down to $155,900 as compared to $159,900 for October, a $4,000 drop in the median in one month.

So, what does all this mean?

Well, if you're a buyer you have a lot to select from and you should be able to drive a pretty hard bargain in your negotiations with sellers. Interest rates are low and, once you get over the sticker shock associated with taxes and insurance premiums, this is a doggone good time to buy -- maybe the best time in years. So, I advise buyers to get out there and make offers.

If you're a seller the market is definately not in your favor. About all you can do is stay in the market, be patient, be willing to negotiate every offer and maintain an active advertising and marketing program. If your agent isn't doing much advertising, maybe it's time to find one who will. Remember, there are buyers out there. But if they don't know about your property they won't buy it. So, keep it in the market and keep advertising.

I'd like to know something. In fact, I've got a couple of questions that maybe somebody can answer.

1. I keep hearing that 2006 is supposed to be the 3rd best year in history for real estate. You can't prove it by me or by the many people I know in this business. Perhaps this is just PR hype. Where are all the sales coming from that make this such a stand-up year? They sure can not be the sales figures from Florida.

2. I don't understand why developers keep building condos in downtown St. Pete, Clearwater, Tampa and the Beaches. And I don't understand why companies keep financing these construction projects. Condo sales are so far off they are almost non-existent. Or is this just a "if you build it they will come" kind of strategy for long-term growth? Somebody please explain this to me.

3. Why do people keep looking for a "market correction" that will restore sales figures to real estate? In order to have a market correction, you have to have a problem that marketing will solve such as a problem with supply-and-demand. Real estate does not have a true supply-and-demand problem, we have a problem with Florida property taxes and property insurance which is driving buyers out of the market (and maybe out of the state) and creating an artificial supply-and-demand problem. Forget a marketing solution, this needs to be a political solution and elected officials at all levels of government must take the lead. So, my question is this -- when will politicians and lobbyists solve the tax and insurance problems? Or, is it beyond their ability to address this issue?

Sorry about that last item. I try not to get involved in politics with this blogsite, but I really think a lot of the real estate problems rest with taxes and insurance, and that means I have to get a little into the political arena. Can't be helped, but I apologize to you.

4. When will sellers finally admit that in order to sell a property, they have to bring the prices down? It doesn't matter if the seller bought it two years ago at the top of the market, put lots of money into the remodeling, and now needs to cash out. Buyers don't care about sellers financial problems. If you want to sell something today, get real about its actual value not about your ROI. Buyers will not pay more than the perceived value of the property no matter what you think as a seller. If you think I'm wrong about this, go back to the top of this article and re-read the sections dealing with the absorption rate, number of listings and number of sales. I repeat, sellers need to get realistic about pricing.

Anyway, that's about it for November. Pretty bad. Maybe things will pick up after the first of the year.

For more information about real estate in Tampa Bay, visit my website at www.TheStPeteRealEstateSite.com.

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Something Else You Should Know About Zillow.com

The other day I reported that Zillow.com has a new service in which properties listed for sale could get on their website. I thought this was a nice way to promote properties for sale on the internet, and gave Zillow a tip of the hat for offering such a marketing service. I thought of it as kind of a national MLS system that anybody could use, including real estate agents.

Well, come to find out there's a fly in the buttermilk.

It appears that if you place a property on this Zillow.com website, you also have to accept their valuation of the property. They do this in a section called "Valuation Information" and give the property a "Zestimate" which may be considerably different than the asking price.

As I and others have written before, Zillow property valuations are questionable and can be misleading. To me, they are nothing more than a place to get a real rough look at the value of a property. Real rough. I think Zillow pricing estimates are little more than seat-of-the-pants guesses at property value. As I have said before, if you want an accurate valuation, call in the services of an appraiser or a professional real estate agent.

On the one hand, Zillow is offering a nice marketing service which allows properties to be exposed to a wider geographic range of people than through local advertising or the local MLS. My problem with this new service is that some buyers might accept the Zillow value as being to-the-penny accurate and will think the seller is trying to take unfair advantage by overcharging for property that may be priced correctly. This immediately creates an adversarial relationship between buyer and seller before the negotiations even take place. In fact, some potential buyers may not even follow-up on acceptable properties becasue of the mistrust generated by the Zillow pricing estimate versus the asking price.

If I was a seller, I'd certainly think twice before I had Zillow dropping a valuation bomb on my efforts to get top dollar for my property.

For more information on what's happening in the real estate market in Tampa Bay, visit my website at www.TheStPeteRealEstateSite.com.

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Zillow.com To Post Property For Sale

Seems like I've written quite a lot about Zillow.com in recent weeks. For those who don't know about Zillow.com, they are a Seattle-based internet site that allows home sellers and buyers to get an estimated value of property. Most of Zillow.com's information comes from county records.

Now, Zillow.com will allow property sellers and real estate agents to post offers to sell . The service is free. Users will be able to include photos of the property, prepare descriptions and provide a commentary on the neighborhood where the property is located. Sellers can set their price and prospective buyers can contact the seller through an e-mail system. If the property is listed by a real estate agent, the agent's contact info can be included and/or they can link the listing to their personal web site.

I suppose that many people will use this service rather than retaining the services of a professional real estate agent. Frankly, Zillow.com's pricing estimates for home values have always been questionable and I have urged many times that for accurate pricing one needs the services of an appraiser or a professional real estate agent.

Now Zillow.com appears to want to compete with the local Multiple Listing Services by providing selling information. I guess my question is this: Will the selling information be accurate? Changes made to listings in the MLS system must follow rules in order to put revisions (such as property price, terms, availability etc.) into the system. Usually, MLS is pretty darn accurate all things considered. Zillow.com may not offer such safeguards to insure its accuracy since it is a free, voluntary service. If a seller changes his asking price, will he remember to change his info in Zillow.com the way real estate agents revise their MLS listings? Frankly, we may have to wait and see.

Understand this: there's nothing at all wrong with this offering from Zillow.com and it probably deserves everybody's support. Let's just hope the info is accurate.

For more information on what's happening in real estate, visit my website at www.TheStPeteRealEstateSite.com.

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Zillow.com To Post Property For Sale

Seems like I've written quite a lot about Zillow.com in recent weeks. For those who don't know about Zillow.com, they are a Seattle-based internet site that allows home sellers and buyers to get an estimated value of property. Most of Zillow.com's information comes from county records

Now, Zillow.com will allow property sellers and real estate agents to post offers to sell . The service is free. Users will be able to include photos of the property, prepare descriptions and provide a commentary on the neighborhood where the property is located. Sellers can set their price and prospective buyers can contact the seller through an e-mail system. If the property is listed by a real estate agent, the agent's contact info can be included and/or they can link the listing to their personal web site.

I suppose that many people will use this service rather than retaining the services of a professional real estate agent. Frankly, Zillow.com's pricing estimates for home values have always been questionable and I have urged many times that for accurate pricing one needs the services of an appraiser or a professional real estate agent.

Now Zillow.com appears to want to compete with the local Multiple Listing Services by providing selling information. I guess my question is this: Will the selling information be accurate? Changes made to listings in the MLS system must follow rules in order to put revisions (such as property price, terms, availability etc.) into the system. Usually, MLS is pretty darn accurate all things considered. Zillow.com may not offer such safeguards to insure its accuracy since it is a free, voluntary service. If a seller changes his asking price, will he remember to change his info in Zillow.com the way real estate agents revise their MLS listings? Frankly, we may have to wait and see.

Understand this: there's nothing at all wrong with this offering from Zillow.com and it probably deserves everybody's support. Let's just hope the info is accurate.

For more information on what's happening in real estate, visit my website at www.TheStPeteRealEstateSite.com.

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