Lower and Outer Cape Market Report 3/11/08

The best statistic to gauge how the market is currently performing is to look at "pending sales", so let's take a quick look at todays' numbers:

Brewster 14 pending sales Avg price: $456,664

Chatham 15 pending sales Avg. price:$1,159,287

Eastham: 16 pending sales Avg price $637,719

Harwich: 40 pending sales Avg price $619,792

Orleans 17 pending sales Avg price $819,988

Wellfleet 11 pending sales Avg price $719,118

These numbers hardly appear to offer an argument for any sort of a buying opportunity and might be slightly misleading for would be sellers, but let me give you a little context and see if you don't agree that now might be the time to "get off the sidelines" no matter which side of this you are on.

One of the most frequent responses I get, from prospective buyer clients lately, when I pass this information along as part of my regular market updates, is " Well, this information is better for you than me... it doesn't look like this area of the Cape has gotten its share of the bad market yet...but it will, and I will buy next year after prices come way down!" This line of thinking is probably faulty on a number of accounts...let me point out a few of the most important.

First, Time Magazine ran a piece last week titled, "Ignore the Headlines!" by Dan Kadlec, where he notes that Fed rate cuts always "lift the economy eventually." He also makes the case that buying a home today will beat waiting another year even if home prices drop an additional 10 percent. In the article, the author makes a case that is impossible to argue with.. To buy a $218,900 home at 5.5 percent is $994.31 a month. To buy next year at $197,010 at 6 percent will cost $994.94. The irony is that in the time Kadlec did his research and when the magazine came out, interest rates were already back over 6 percent, making his example all the more compelling. Does it make any sense to hold off six months to a year to save $.63 cents a month? And that's assuming that sellers, in this generally affluent market, will participate in reducing their properties an additional 10%..... Now, the figures the author used to illustrate his point are much lower than likely sales prices here, but the point still holds true.

Secondly, and along the same lines, as part of the stimulus package the feds recently rolled out, the conforming rate mortgage price limit was just raised considerably, allowing many of our properties to be bought without incurring much higher "jumbo" mortgage rates. For many properties here, buyers buying power jumped exponentially overnight. However , this "gift" is not permanent...this arrangement is set to expire in 2009. For prospective buyers, this offers an opportunity to buy much more house, for the same dollar, than you could a few weeks ago..if you are a prospective seller, well..., it means exactly the same thing to you in reverse.

Third, and this is where I can offer only anecdotal information, this is the "land of the discretionary seller". That is to say that this area of the Cape is, in general, a very affluent area and the real estate market does not necessarily have to default back to any affordability index based on local median incomes in times of economic slowdown.

Most owners here have their properties on the market because they feel like market conditions are such that they can get a "fair" price for their property that would be consistent with market pricing of the last few years...given the prospect of having to significantly discount their properties to move them, they will either be content to just let them sit on the market, possibly with a modest reduction here and there or refuse to sell the property altogether and either rent the property seasonally or simply pull it from the market and wait things out.

A large part of our historically high inventory levels, often used by market watchers as a sign of current or pending weakness, have been at essentially the same levels for a number of years..as you can see above, pricing has not nose dived in response.

What you should see in the data listed above is, in general, the "smart money" identifying and buying the properties where there is a pressing need, whether financial or otherwise to sell. There are opportunities here for buyers to find relative bargains...but, you must know the market to be able to recognize these pockets of “vulnerability”

For a daily email update of the best values in these markets, contact us at caperealestate@hotmail.com

The Listing Agent - Preliminary Marketing of Your Home

The "Real" Role of a Listing Agent

When you bought your home, you probably used the services of a real estate agent. You found that agent through a referral from a friend or family member, or through some sort of advertising or marketing. The agent helped you in many ways and eventually you found the house of your dreams, made an offer, closed the deal, and moved in.

For whatever reason, now it is time to sell your home and you need a real estate agent again. Many home sellers, especially those selling their first home, tend to think all agents are similar to the one that helped them buy their home.

Although real estate agents can (and do) work with both buyers and sellers, most tend to concentrate more on one than the other. They specialize. When you bought your home, you probably worked with a "selling agent" – an agent that works mostly with buyers. Because of the nature of real estate advertising and marketing, the public’s main image of the real estate profession is that of the selling agent (buyer's agent).

As a result, many homeowners expect their listing agent to do the same things that a selling agent does – find someone to buy their home. After all, they do the things you would expect if they were searching for buyers. A sign goes up in the front yard. Ads are placed in the local newspaper and real estate magazines. Your agent holds an open house on the weekend. Your house is proudly displayed on the Internet.

But this is only "surface" marketing. More important activity occurs behind the scenes. After the "for sale" sign goes up and flyers are printed, your agent’s main job is to market your home to other agents, not to homebuyers.

copyright 2000 by Terry Light and RealEstate ABC, revised 2002

The Listing Agent - Marketing Your Home to Other Agents The Multiple Listing Service Even before the sign is up and the brochures are ready, your agent should list your property with the local MLS (Multiple Listing Service). The MLS is a database of all the homes listed by local real estate agents who are members of the service, which is practically all of the local agents. Important information about your property is listed here, from general data such as square footage and number of rooms, to such details as whether you have central air conditioning or hard wood flooring. There should also be a photo, and a short verbal description of what makes your house "special." Agents search the database for homes that fit the price range and needs of their clients. They pay special attention to homes that have been recently placed on the market, which is one reason you get a lot of attention when your house is first listed. Many agents will want to preview the home before they show it to their clients. The main point about having your house listed in the MLS is that you expand your sales force by the number of local MLS members. Instead of having just one agent working for you, now you may have hundreds or more, depending on the size of your community. The listing agent’s main job to make sure that the other MLS members know about your house. This is accomplished through listing your house in the Multiple Listing Service, broker previews and advertising targeted toward other agents, not homebuyers. copyright 2000 by Terry Light and RealEstate ABC, revised 2002

Are Open Houses a Waste of Time?

Desperate measures
Nationwide, home sales are expected to drop this year, and sellers in many markets are already dropping their prices. That may prompt more sellers to compel their listing agents to turn to open houses as a last-ditch effort to secure a buyer at last years pricing.

In a buyer's market, if you are a seller you want to try everything. Though this may feel good because something “proactive” is being done to get the house sold, you need to be thoughtful about how various actions will be perceived by buyers and their agents. We do quite a bit of work as buyers agents and one of our favorite tactics to identify the most vulnerable properties, is to watch for the properties that run open houses week after week, month after month...we know that the agents know they don't work, so, there must be a very anxious seller in the background demanding that they be held.....
I love open houses, but not because they move my properties. The real reason most agents hold them is because they bring more business….other business. Prospective home buyers often walk through my open houses, find the property is not suitable for them, then ask what other listings I have....the "dirty little secret" of our industry is that open houses have always been better for agents than sellers!

The proliferation of Internet listings and other online real estate information is quickly making open houses more of a "long shot" option, rather than a requirement for selling a home. In 1995, just 2% of home buyers used the Internet to look for a home, according to the National Association of Realtors. Last year, 87% of home buyers started their shopping online. ..In the markets where open houses statistically work best, only 2% to 4% of listings sell from open houses.
Agents, sellers question effectiveness
For the most part, after the initial two or three open houses, I don't like to hold open houses for my listings unless sellers press the issue. Statistically, most sales will come primarily from my contacts with other agents and from the multiple listing service. Many agents now refuse to hold open houses, considering them a waste of time, and a security threat. And many sellers now prefer to open their doors to serious buyers only.
Open and shut
Consumer sentiment about open houses has waxed and waned over the years, along with the ups and downs of the real estate market. In 1995, 41% of buyers surveyed relied on open houses to buy their home, according to data from the NAR. By 2000, it had dropped to 28%. Beginning in 2003, however, as the market started to heat up again that number began rising. By 2005, the last year for which data is available, 51% of all sellers were using open houses, though not all agreed they were effective. Some 45% of sellers found open houses only "somewhat useful" and another 12% didn't consider them useful at all, according to the NAR. "Many sellers are just a little bit leery of having an open house," says Pat Vredevoogd, agent and broker-owner of AJS Realty in Grand Rapids, Mich., and incoming NAR president. Some, she says, are worried about letting complete strangers roam freely through their house, with access to electronics, jewelry, prescription drugs and personal information. Others just don't want their neighbors and a host of other so-called "looky-loos" wasting their time just for a look at their décor. And many agents won't do them for security reasons, as a number of their fellow Realtors have been attacked and some even killed, as they sat in an empty house alone and vulnerable. Vredevoogd, herself, isn't keen on them. While they have proved helpful over the years on some of her more expensive listings, most didn't produce a sale. "Over the past year, maybe two or three of the 50 houses I sold were from an open house," she says. "Personally, I think it's a waste of time. It's one of those things that has gone by the wayside." Before jumping into an open house, Vredevoogd counsels her clients to put the house up on the local MLS and other Web sites, with a lot of pictures and perhaps a virtual tour, if the home has a lot of nice features. She sends out a barrage of e-mails to other agents and makes a lot of calls. If the house isn't getting a lot of interest, only then will she go through with an open house.
When open houses still make sense
Open houses are effective in the very beginning of the marketing period as they serve two very useful functions: 1) They allow brokers/ agents who were working on MLS tour day to preview your home for clients without having to set up a private showing. 2) At the start of the marketing period, when the home is new to market and interest may be high, open houses can contribute to the sense that the property is very ”active” and may create a desirable sense of urgency on the part of prospective buyers and their agents.

Zillow or a Listing Agent

"In the year since its launch, Zillow Inc. has made millions of Americans familiar with computer-generated estimates of home values, created a new online addiction and become a staple of dinner-party chatter. But just how accurate is it? A Wall Street Journal analysis of 1,000 recent home sales shows that Zillow's "Zestimates" often are very good, frequently within a few percentage points of the actual price paid. But when Zillow is bad, it can be terrible -- off the mark by more than 25% on one in 10 homes. In one case it was off by $2 million. Zillow, based in Seattle, operates a Web site that offers free estimates and other online tools for real-estate buyers and sellers. It draws revenue from online advertising. Fall City, Wash. Zillow estimate: $661,756 Sold for: $2,690,000 The Journal looked at transaction prices recorded for 1,000 recent home sales in seven states, using data from First American Real Estate Solutions, a data provider in Santa Ana, Calif., and compared those prices with Zillow estimates, which didn't yet reflect the sales. The median difference between the Zillow estimate and the actual price was 7.8%. (That was close to the 7.2% median "margin of error" reported by Zillow itself on all transactions involving homes whose value it has estimated.)The estimates were about equally split between ones that were too high and those below the mark. Zillow came within 5% of the price in a third of the transactions studied by The Journal. It was more than 25% off target on 11% of them. In 34 of the 1,000 transactions, Zillow was off by more than 50%. Zillow had estimated that a four-bedroom, 7,600-square-foot home in Fall City, Wash., was valued at $661,756. The home, built last year, sold in early January for $2.7 million. "If you don't visit the property, you're never going to know that it's in an exclusive, gated part of the neighborhood," says Maria Danieli, who represented the sellers. Ms. Danieli says Zillow may be fine for "cookie-cutter" neighborhoods but "they can't compute" the values of the luxury homes she sells. Zillow executives acknowledge that the estimates can be way off in some cases. The estimate "is a starting point" for people trying to figure out how much a home should cost, says Amy Bohutinsky, a spokeswoman for the company. "We don't recommend it as the final word." Sometimes the estimates take big lurches in brief periods as Zillow's computer analyzes the latest home-sales data, updated weekly. "My God!" said Jonathan Miller after he looked up his own house in Darien, Conn., on Zillow last week. "My value has dropped 25% in six months. There's no way -- that would be the market collapsing!" Zillow has the house pegged at $1,442,851, down from about $2.1 million last July. Mr. Miller, chief executive officer of Miller Samuel, an appraisal firm based in New York, watches his local market closely and figures his home is valued at around $1.9 million. El Cerrito, Calif. Zillow estimate: $544,361 Sold for: $80,000 Zillow can be quite accurate in some markets, Mr. Miller says, but he argues that the estimates are hit or miss. He suggests that Zillow should produce only an estimated price range rather than an exact figure: "When you go down to the $1 level, you're implying precision." Ms. Bohutinsky, the Zillow spokeswoman, notes that Zillow produces both a range and a precise estimate and says users like both. Zillow also missed the target for Josh Benton, a management consultant at Kurt Salmon Associates in Atlanta. He sold a home last fall for about 15% more than Zillow's estimate. Still, Mr. Benton says he found Zillow useful for getting a sense of the relative value of houses in a neighborhood. And he liked the site's aerial views of neighborhoods as a research aid. "Overall, it's an excellent site," he says. Zillow's estimates come from a proprietary computer program that takes into account sale prices for nearby homes that appear comparable, the size and other physical attributes of the home, its past sales history and tax-assessment data, says Stan Humphries, vice president of data and analytics. Zillow tends to work best for midrange homes in areas where there are a lot of comparable houses, he says. It is less accurate for low- and high-end homes because there are fewer of those and thus less data available from comparable sales, known as "comps." Values of rural homes are hard to gauge for the same reason. Partly for that reason, none of the Web sites can offer 100% coverage of U.S. homes; Zillow says it has estimates on about 57% of all homes. Even where there are numerous apparent "comps," computer programs like Zillow's can stumble when vital information is missing. Data fed into the computer, for instance, may not reflect the fact that a house has just been remodeled, destroyed by fire or put into foreclosure. Reported prices can be misleading, too. Sometimes homes are sold between family members for a token price, or sellers offer incentives to buyers, such as help with closing costs, that aren't reflected in the recorded price. Zillow isn't the only site offering such free estimates. Others include RealEstate.com, RealEstateABC.com and Reply.com. But Zillow's site gets more traffic than those rivals. All of these sites appear to have overestimated the value of a house on Olivant Street in a tough area of Pittsburgh that sold for $700 last year in an auction of foreclosed homes. As of early this month, Zillow estimated the value at about $33,000, RealEstate.com at $57,000, Reply.com at $69,000 and RealEstateABC.com at $86,000. Several nearby houses are abandoned or boarded up, blighting the block -- something computer models don't take into account. Northbrook, Ill. Zillow estimate: $450,565 Sold for: $970,000 Zillow lets users try to correct for things computers might miss. For instance, people can use Zillow's "my estimator" tool to account for the value of remodeling or to choose what they regard as the most relevant "comps," screening out those that aren't really similar homes. Real-estate agents and appraisers tend to sneer at Web site valuations and insist that consumers still need their local expertise to get a true idea of values. Masood Samereie, an agent at Century 21 Hartford Properties in San Francisco, says one of his clients last year lost his chance to buy an attractive home because, relying on Zillow, he made an unrealistically low offer." To receive a free opinion of value report for your home ,from an experienced real estate agent, please click here. We will factor into this report all the variables that the websites listed above can miss..there is no obligation and you will not be contacted after we send you the report unless you request it. All requests are confidential. Written by James R. Hagerty at bob.hagerty@wsj.com-- Alison Van Camp contributed to this article.

Media Begins To Suggest It's Time To Buy A Home
It's starting as just a trickle, but some media outlets are beginning to call a bottom and are encouraging readers to get off the sidelines.Unrelenting reporting of a recession continues to keep consumers fearful, (whether or not a recession actually occurs) keeping pent-up demand for housing "on the sidelines." Some members of the financial press, however, are beginning to suggest that a bottom is near, and that buyers should get out and start looking for bargains in homes. Time Magazine ran a piece this week titled, "Ignore the Headlines!" by Dan Kadlec, where he notes that Fed rate cuts always "lift the economy eventually." He also makes the case that buying a home today will beat waiting another year even if home prices drop an additional 10 percent. In the article, the author makes a case that is impossible to argue with.. To buy a $218,900 home at 5.5 percent is $994.31 a month. To buy next year at $197,010 at 6 percent will cost $994.94. The irony is that in the time Kadlec did his research and when the magazine came out, interest rates were already back over 6 percent, making his example all the more compelling. Does it make any sense to hold off six months to a year to save $.63 cents a month? And that's assuming that sellers, in this generally affluent market, will participate in reducing their properties 10%.....

The Federal Reserve has lowered short-term interest rates twice in the past week by a total of 1.25 percentage points. (They lowered the federal funds rate, not the prime lending rate, though that falls in lockstep with the former.) Many people are excited because they believe this will lead to lower rates on fixed-term mortgages, meaning the average person may be able to save big bucks by refinancing. Contrary to popular belief, the federal funds rate does not directly affect mortgage rates. According to Bankrate.com:

Mortgage rates have declined dramatically over the past several weeks. But the Federal Reserve’s latest rate cut does not guarantee that rates will keep dropping. In fact, mortgage rates often climb following a cut in the federal funds rate, and actually rose about 50 basis points after the Federal Reserve announced its emergency 75-basis-point cut Jan. 22.

the Fed cut rates by 0.75% last week, but mortgages climbed by 0.50%. Mortgage rates are affected by 10-year Treasury Bills.

Take a look at this graph from HSH Associates:

The green line represents the federal funds rate. The blue line represents the U.S. national average on 30-year fixed mortgages. Both lines trend downward, but otherwise seem unrelated. If anything, the mortgage rate appears to be a precursor to the federal funds rate. Again, it seems clear that the federal funds rate does not directly affect mortgage rates. Then what does? According to an HSH Associates article on the subject, the answer is complex. “Fixed mortgage rates, like other bonds, track US Treasury bonds quite well,” the authors write. However, they’re quick to add, “There is no specific ‘lockstep’ relationship between Treasuries of any term and fixed mortgage rates.” Jericho Hill , an economist, noted, “Thirty-year rates are largely affected by the supply and demand of funds available for long-term loans, and by the anticipated inflation rate. If the Fed’s moves lead to expectations of higher inflation, guess what that would do? Raise mortgage rates!” Now may or may not be a good time to refinance your home. But don’t count on a drop in the federal funds rate to yield a corresponding drop in mortgage interest rates.