If I Knew Then What I Know Now...

"If I could turn back time...You walked out that door I swore that I didn't care
But I lost everything darling then and there..."  Well like Cher, you can't turn back the hands of time, but you haven't really lost everything. Equity is only money, and if you think about it, equity isn't money either; more like ink in the shape of numbers on paper. Oh, sure we had clung to those numbers. Like a King in his counting house we counted out our money. "Saving" was easy. Just wait a few months and change the numbers on the spread sheet by a few percentage points.

Since 1989 I've talked to people who say this about real estate: "If I knew then what I know now...." Some years they'd be buyers, some years they'd be sellers, and some years were right to be a renter. We probably did know more than we admit, we just didn't believe what we were seeing and hearing. Today we have a chance to redeem ourselves using a new found trust in the evidence. Before you enter the real estate market as a home seller, know this: HOMES SELL IN LESS THAN 60 DAYS WHEN  PROPERLY PRICED.

I'm telling you today what you need to know to avoid the implications of taking an action without being aware of what's happening. You can look in any neighborhood in Dane County and find the evidence to support this statement: Price according to sales in the last six months and you will negotiate an offer in 60 days or less. Price according to what you wish for and you will stay on the market until you adjust to the price supported by recent sales. Plan on this: a home properly priced will sell for 95-97% of the asking price in less than 60 days. Miss the price and you may take more than six months to get 89-94% of your first price...after a long time trying.

Give or take a few days and percents, I will bet you a Krispy Kreme glazed doughnut that the numbers for January through June will be consistent in any market area in Dane County.

McFarland over $299,900:

• Avg First Price: $386,117
• Avg Last Price: $378,783
• Avg Sold Price: $362,083
• Sale price as Percent of last asking Price: 96%.  Sale price as percent of first price: 94%
• Cumulative days on the market on average: 163 Days.
• Average Days on the market after last price change: 53

Blackhawk Neighborhood, Middleton Schools:

• Avg First Price: $724,900
• Avg Last Price: $609,780
• Avg Sold Price: $584,374
• Sale price as Percent of last asking Price: 95%.  Sale price as percent of first price: 87%
• Cumulative days on the market on average: 289 Days.
• Average Days on the market after last price change: 50

Apparently the people in Blackhawk and McFarland who negotiate accepted offers have one difference--Blackhawk owners are more patient; they held on for nearly eight months and the McFarland owners got down to their proper price in half that time.

If you follow this concept of pricing where the evidence supports and not at what you hope for, you will get where you want to be with a lot less time invested. In fact, you will also be able to say "I'm glad I knew what I knew when I needed to know what I know now." You don't have to hire me to use this strategy, but I do like my Krispy Kreme HOT NOW.

Best wishes--no luck involved, this is just math.

By Necessity We're All Learning to Rebuild a Better Real Estate Community

"Necessity is the mother of invention." Maybe Plato said it first, but we're living it today. Difficult situations have inspired us to apply solutions which are sometimes smart, sometimes ingenious, at times unique and creative.  Usually these solutions are not all together new, and sometimes they are neither smart nor effective. But, we are living and learning and moving forward regardless of the results of the lever pulling behind the curtain of Oz.

A new consumer of real estate and real estate services is emerging. Ambiguity is flushed out by inquisitive consumers, service providers, and underwriters. Owners are demanding better evidence of a buyer's ability to consummate a purchase and buyers are taking more time to consider the implications of a contract before committing. That's wise, because the lenders and sellers are holding buyers accountable right up to closing.

The service is changing too. As Realtors and mortgage lenders who can't make a profit in their business leave the industry, they make room for enthusiastic business minded people who come in with their expectations in check. Real estate firms have adjusted their training/coaching to develop talented people to be effective Realtors in the new economy. These new licensees know no other market. They aren't burdened by the "old ideas" and start fresh learning the basic principles of highly effective business models.  Maybe by the end of this year we will see that 20+% of the licensees terminate their membership in the National Association of Realtors in the last 24 months. That's good for the consumer. No industry is capable of providing exceptional service with people who are one foot out the door.... or further. The mortgage lenders who didn't give up their day jobs are out and the skilled, responsible people are again dominating our market. These are not times for order takers. Smart people who solve challenges, without creating them, are in charge.

Everyone in the process, buyers, sellers, lenders, Realtors, title companies,.. everyone, has learned and trimmed of the fat of recklessness; and the process is healthy. Back to what it was? Definitely not. Will it get back to what it once was? Hopefully not. Those of us who have been in real estate for 15, 20 and 30 years owe it to the community to rebuild a better real estate community before we leave. 

Healthy Real Estate Markets and a Passion for Peace

When I am most at peace with the business of real estate, my approach to the circumstances of the day is guided by writings of people such as Thomas Merton and less by the ways of business gurus. For a few years I've kept my eyes open for Merton's Passion for Peace, Reflections on War and Nonviolence, copyright 1995.  Last week the book finally found me. It was out of place on a shelf (probably discarded by a person when something more intriguing found them) and I scooped it up. Compiled from Cold War year writings by Merton, the peace reflections are relevant to me for processing the conflicts of today in government, politics, my business, and my daily interactions. 

Memorial Day weekend is an appropriate time to dedicate myself to practicing principals of peace and looking for areas in my business where I will be aware to apply healthy actions. I can see that some of the changes are well underway in my life and I know those changes have made me a more useful person to the consumers who trust me. Areas I am paying attention to:

• Results: Sales by the numbers are detractors. To determine anything to be Good or Bad by the volume of business I do would be an indicator that my thinking is stinking. Fixation on results by the numbers leads to coercion.
• Coercion: Affordability Indexes are tools of coercion when applied to home ownership for me. I am not licensed to sell investments and when I reduce a home ownership idea as a financially viable alternative I have crossed into an area out of my expertise. A tool in the hands of an unqualified person may be a damaging weapon.
• Calculations: Plans and schemes to anticipate a person's reaction are tools to put me in charge of manipulating situations to my benefit. 
• Patience: Allowing people to make decisions on their own time, based on their own values, and accepting the decision keeps me at peace and puts peace into the lives of other people. 

I know I do not have a monopoly on peaceful business practices so when I say I consider this real estate economy to be healthy, it's not just from my perspective. The level of activity is allowing people room to think, time to rest, and opportunities to consider other's points of view. A frantic pace is not either just good or just bad, but a pace of patience and understanding is peaceful. 

Wishing you a peaceful Memorial Day, with gratitude to all who gave their lives so that I may live another day.

Blackhawk---Looking as Strong as it Once Was

There was a time when it seemed any home in Blackhawk had a buyer as soon as the house hit the market. For us Realtors who provided relocation services to Madison area employers, getting a home for your client was a race to the finish. All that seemed to change a few years ago when the prices peaked at the same time buyers vanished. In 2009-10 we were helping people rent Blackhawk homes. We saw the activity begin to pick up late last year and decisions to buy are turning into commitments this spring.

Fifteen homes will close between the middle of December and the end of July it appears. There have been six closings already and another nine homes have offers pending. That's a big load of the higher end inventory in Middleton and good news for people who have yet to put their home on the market. I don't think all of the buyers have made commitments by any means. (But be cautious--some of the buyers are committed to tremendous value and they aren't about to buy above the bottom price---).

The only thing stopping home owners from selling is--well, the home owner themselves. On average, owners are selling for 10% less than their initial asking price and they are patient. About 180 days (5 months) go by before the owners get their price in line with the expectations of the buyers. After that, the owners are negotitating acceptable offers in less than 50 days. Sales prices are 96% of last asking prices and that's pretty fine even in the sizzling market of 2005.

If you're moving from Blackhawk, be aware your buyer can not be fooled. They see everything from Fitchburg to Verona, to SW Madison, to west Dane, to Waunakee. They know the prices, the values, and they are inspired to get a price they can write home about. Buyers, are wise to know that owners in Blackhawk know what you know too--there is only one Blackhawk. Price of admission is still going to be a little more than you might have expected.

April Accepted Offer Numbers Will Be Up

April showers didn't stop home buyers from getting out and making offers. The activity was as brisk as the temperatures. I expect in July we will see that May and June were aggressive closing months. What happened in April has everything to do with people grasping reality instead of straws.

First time home buyers are reaping the benefits of resisting the 2010 tax temptation...I mean break. Instead of competing with other government subsidized consumers for over priced homes, those who waited have accepted offers on homes priced up to 40% below what they would have paid last spring. Owners are conceding to the facts of the market and letting go of hope for prices that can't be substantiated. Foreclosed homes are trickling on to the market in ones and twos at unusually low prices and the banks are creating competition which otherwise wouldn't exist with a strategy worth noting. In one neighborhood of homes built in 2004 and '05, one home came on the market at $183,000 and sold to the best offer at $200,000; a great price for a 4 bedroom 6 year old home. As soon as that one closed, the bank released another that had sold new for $220,000. The asking price of $174,000 drew at least six offers. I'm guessing that one will close around $195,000--I'll be curious to see.

In the higher price points owners are seeing plenty of qualified buyers coming to town. If we didn't know better we'd think the relocating buyers meet at the Dane County Airport and plan their strategy. Even multiple offers aren't driving prices to the upper limits and owners are placing value on such novel ideas as cash and terms and closing dates.

A healthy market means the local buyer isn't at a big disadvantage to the transferee and they have a chance to negotiate an offer without promising to take a bridge loan until their home sells. Offers subject to sale aren't as taboo today; in fact if you look at in a fishing analogy, an offer on your house subject to sale of another house is like having two lines in the water--if you get a fish on either line you have a chance to catch the one more you need for a limit.

Last spring the activity was 60% below $250,000. This year we'll see the market represented in a more healthy way with sales from top to bottom. April sales might still pale, but nothing is ever either just good or bad. How about we look at things as healthy or unhealthy? The health of the consumer continues to grow as everyone gains insight---knowledge of what is reality.

FHA Owns Bigger Share of Housing Debt, Now Charging Bigger Chunk of Mortgage Payment

Dan Green writes The Daily Mortgage Report and his post is of interest to me because FHA insured mortgages are the fuel for mortgage financing today. To increase their mandated reserves, beginning today the annual cost of a $200,000 mortgage is going up about $500.00. With the FHA the major game in town for mortgage financing, an increase in the cost of the mortgage is downward pressure on offers. Everytime I hear a real estate expert spin an isolated incident into a story about real estate prices rising, I wonder about two things: one, the author's motivation, and two, the author's awareness to reality.

As long as competition for mortgage business is restricted for the many, the opportunity for competition to move prices north will not happen. As long as the buyers are walking in and out of homes priced at huge discounts to unload bank owned property, the buyer will not be agreeing to higher prices/values of non-distressed properties----even if the buyer prefers the non-distressed property, the perception of value based on what they are seeing, is driving decision about price to offer.

Karen Rivedal writes Property Trax for Madison.com and Karen understands the importance of looking deeper and questioning the spin doctors. Karen's a follower of What's Happening in My Neighborhood??? blog, an offering on real estate results at a  hyper-local level, and this is she had to say last week: "And the data is arguably more practical, focused on things an average would-be buyer or seller in those areas would like to know...". There are some Buyer markets in Dane County, but there are some Seller markets too. Just as the spring market is getting a full head of steam, it is certain that the bigger economic picture is going to play a role in the real estate market velocity.

I believe this to be true: The first time buyer in 2011 is planning for this home to be home for longer than 3-5 years. They are inclined to be conservative in deciding on a price to pay. They are willing to have less space and determined to have a safe mortgage payment. Higher mortgage costs will take away from the aount they are willing to finance.

The evidence for prices to go north instead of south may exist, but I think it exist mostly in the imagination or the wishes of some people.

Reasonable Expectations Trump Magical Thinking; Change is Happening

Things don't change, we change. So wrote Henry David Thoreau in the mid 1800's. Apply that concept to Madison, WI 2011: "The real estate markets don't change, we change."  First to go is faith in Magical Thinking. "I want it to be, I will think it to be, and if I can see it in my mind, it will be for me."  OK, right.

The USA's history of victory always includes honest assessments of our positions and changing our sentiments. For example: Women's Suffrage, Civil Rights, the 1960's. Without exception, all challenges include an oppositional force of power influencing the population to put their hope in magical thinking. "If wishes were horses, the poor man would ride," my Dad said to me  more than enough times. Reasonable expectations will move us to higher and firmer ground in our real estate markets, and I see reasonable expectations taking hold across Dane County.

All over Dane County, home owners are starting the selling process with expectations of value unsupported by the evidence of recent sales. More than 160 days, over 5 months time, is spent holding on to  lofty expecations. It seems the mindset is something like this: "I know the real estate market is down all over the country and in Madison. My neighbor can't sell his house. But that's them, not me." The first quarter sales in Dane County, show the trend of reasonable expectations is taking over where magical thinking has failed to spur a wide recovery. Over and over again, the owners who adjust their expecations (price) to meet the demands of the buyer (value or tremendous value) are closing on the sale of their real estate and gettin on with their lives. After five months, the average seller is getting an accpetable offer in about 60 days or less. It's always either time or money.

McFarland home owners are getting 98% of their last asking price in 140 days, but they take 100 days before they let go of expectations or old information.
Rural NW and SW Dane homes over $299,000 recorded  14 sales in the first quarter. With sales prices showing 83% of initial asking price, should we conclude anything but missed expectations? These are patient people as they ride the market for six and a half months before conceding price. In the end they are getting 94% of their last asking price and those offers are accepted in about 2 1/2 months. The first asking price is an average of $552,000 and the selling price averages a $100,000 less. These sales are not distressed sales, however, we can conclude the owners may be a bit stressed by the end of the process.

People change and the more we let go of what once was, the sooner we enjoy what is.