CAAR Blog

May 30, 2008

What “Affordable� Looks Like

Filed under: Affordable Again, Real Estate — Dave Phillips @ 4:18 pm

(preview of next week’s Real Estate Weekly cover story)

It is easy to talk about the 1,200+ homes on the market that are generally considered “affordable� (priced under $250,000) and conclude that we have turned the corner on the affordable housing crisis we faced just 18 months ago. Indeed, this is a great time to buy if you are a first-timer or if you are simply looking for an affordable home. Prices have come down and good financing is still available for those who have decent credit. That’s an easy reality for everyone to understand, but there is more to the story than numbers. What does the inventory of “affordable homes� look like in the Charlottesville area and where are these homes located?

Where to Find Affordable
There is an age-old saying in real estate that it’s all about “location, location, location.� Where a home is located – the school district, county or city, waterfront, mountain view, etc. – is probably the most important factor in determining the price of a property. This is true for million dollar homes or affordable condos. The “better� the location, the more expensive the property. A home on Rugby Road is worth considerably more than the exact same home in Rust Hollow. Typically, homes closer or more convenient to the community core (where jobs and services are located) are more expensive. To be more exact, the land that the home sits on is more expensive. Land in Rust Hollow is much more affordable than land on Rugby Road.

There are affordable housing options in the core areas, but they are different than those found in outlying areas (more about that later). For instance, there are over 120 homes on the market within the Charlottesville city limits that are priced at $250,000 or below. That is not only an adequate inventory, but it could be argued that we have a surplus of affordable homes for sale in the city. If you expand your definition of “close to the core,� and look for affordable homes within 10 miles of U.Va., there are 401 currently on the market. At 20 miles, you have 635 affordable homes on the market. Clearly we have plenty of affordable homes on the market for first-timers and others who want to purchase an affordable home.

If living near the core area is not an issue, you have many more options. Two-thirds of the 1,200+ affordable homes on the market are more than 10 miles away from U.Va. Waynesboro and Louisa have emerged as affordable havens over the past few years and Greene and Fluvanna have offered a good supply of affordable properties for many years. Land costs are generally much less in these outlying counties, so buyers tend to get more house for their money in these areas. The chart below will show the historic trend of what each county offers on a price per square foot basis.

Price Pre Sq. Ft. of Homes Sold in First Quarter 2008
County
 2002
 2003
 2004
 2005
 2006
 2007
 2008
Albemarle
 117
 124
 140
 155
 173
 174
 177
Charlottesville
 104
 117
 139
 172
 186
 186
 194
Fluvanna
 85
 99
 100
 121
 141
 135
 137
Greene
 97
 97
 115
 133
 148
 157
 146
Louisa
 83
 108
 106
 122
 147
 142
 149
Nelson
 115
 129
 155
 193
 232
 206
 199
Area Average*
 106
 119
 131
 150
 169
 166
 165
Central Valley**
           131
 121

*includes sales outside the counties listed
**Homes in the Staunton/Waynesboro area
 

Condo or Detached
Buying a home is more about lifestyle than anything else. Do you want to live in the country and wake up to roosters, or do you want to be able to walk to the Downtown Mall? Another lifestyle decision you can make is to live in a condominium or in a single family detached house. If you want to live in a detached affordable home, your selection is more limited, but still more than adequate. There are 135 detached homes for sale within 10 miles of U.Va. with a price tag at $250,000 or below. Within the city limits, there are 57 affordable detached homes for sale. Not bad.

If you are interested in a condo lifestyle (can you say, “No grass to mow�), there are a plethora of homes on the market close to the core. There are 66 attached affordable homes on the market within the city limits and 266 within 10 miles of U.Va. So, maybe you can’t afford a home on Rugby Road, but you also don’t need to move to Rust Hollow to find an affordable home (detached or condo) if you want to be in or near the core area. Of course, Rust Hollow offers its own benefits and you will not find a condo for sale there. In fact, you will be hard pressed to find a condo for sale outside of Charlottesville and Albemarle (except at Wintergreen).

Condo living offers a lifestyle choice, but it is also the real estate market’s answer to affordable housing. As mentioned earlier, land costs near the core have driven property values up, and condos represent a more cost-effective use of land. Evidently, there is no market demand for country condos, because there are very few condos located outside of the core. But maybe someday we will have the Country Condos at Rust Hollow. Sounds like a delightful combination of two lifestyle choices to me.

New Affordable Homes
Now that we have defined the two main lifestyle choices affordable homebuyers need to make, let’s look into the effect a home’s age has on the equation. It could be argued that buying an older home is a lifestyle choice as well, but since these are affordable homes and not an antebellum plantation, we will disregard the lifestyle issue.

As a rule of thumb, new homes cost more than older homes. There are a variety of reasons for this rule, but there are offsetting positives and negatives between new and previously lived-in homes. For instance, you may think more efficient heating and cooling systems are worth the extra money, or you may enjoy the mature tree cover of an older home and are willing to disregard the lack of central A.C. There are no right or wrong answers in the new or old decision. It comes down to your personal preferences and tastes.

There are some limitations created by the higher costs of new homes. Currently on the market, there is only one newly built, detached affordable home in Charlottesville or Albemarle. Land costs and development requirements make it almost impossible to build a detached home in the core market for $250,000 or below. The only way to build new affordable homes in these high-cost areas is to build condos and townhomes. There are new homes on the market in the affordable range in Staunton/Waynesboro (20), Louisa (19), Buckingham (18), Fluvanna (15), and Greene (10). So, if a new home is your preference, you will likely need to locate away from the core.

That leaves affordable homebuyers with several choices. You have over 1,200 properties to consider in the Charlottesville area. Will you buy one of the 381 affordable condos on the market, or one of the 910 detached homes priced at $250,000 or below? Will it be an older home or a condo close to the core area, or would you prefer a newer home in an outlying area? The good news is that you have lots of choices. The bad news is that you will not be buying a brand new home on Rugby Road for under $250,000. Whatever choice you make, your life and your net worth will become richer.

Yes It IS a Good Time to Buy!!!

Filed under: Affordable Again, Real Estate — Dave Phillips @ 2:52 pm

 Price Reduced

By Judy Savage, CAAR President

Affordable Again homes are open the next two weekends, May 31st and June * 1  and workshops are available to potential buyers at the Omni hotel in the next few weeks too. Why is CAAR supporting this Affordable Again program?  Yes, I have gotten emails from several intellectuals who claim the entire program is self serving and that we shouldn’t be encouraging first time buyers to enter what appears to be a declining market.  Their argument is that these buyers are naïve and we a preying on their stupidity.  I beg to differ.  Now, is a great time to buy a home, especially if you are a first time buyer.   I haven’t seen so many homes available under $250K in many years.  Our partners at Piedmont Housing Alliance (PHA) and the Regional Housing Committee have thousands of dollars of down payment assistance to help consumers buy homes.  Yes, of course there are income limitations but you would be surprised who might qualify.  CAAR has a Workforce Housing Fund that helps teachers, nurses, firefighters and police officers with down payment assistance to help them live in the areas in which they serve. 

Today, Sellers are much more negotiable and are usually willing to assist buyers with closing costs and other incentives to help purchase their homes.  Interest rates are still low. Do you know how much your house payment would go up on a $200.000 mortgage if the rates go up 1%?  Your monthly payment could go up $131!  So, you are worried that the house you are looking  at could actually go down another $10,000 by next year…hum….well if the interest rates go up 1% and the house went down $10 grand more your principal and interest payment would not change at all! 

Did you also know that the Federal Reserves say that homeowners have more net worth than renters, by about 46%.  Did you also know that, on average, home prices double every ten years?  So think about it…You buy a house and you invest $25,000 of your money or in down payment assistance from PHA, in ten years that house you paid $225k for is now worth $425K to $450K.  Your profit is $250,000.  Your house doubled in value but YOUR investment  of $25,000 is now worth anywhere between $200,000 and $250,000.  Could you get that kind of return at the stock market?  In addition to that, your Uncle Sam gave you a tax deduction each year on the interest you paid and on the real estate taxes. 

Every real estate market is different so don’t pay attention to the national news.  Charlottesville has a sound economy and with expansion at the University and the influx of people coming to NGIC next year, inventories are bound to be reduced and prices will then again begin to rise.  Real estate is a long term investment and it builds security for you and your family.  Homeowners help build communities and become more involved in the volunteer activities and political and charitable events.  Home is where the heart is.  For more information on homeownership visit www.housingmarketfacts.com and for more information on our Affordable Again campaign visit www.affordableagain.com  

May 27, 2008

Is Print Advertising Dead? Don’t Bury Publications Just Yet

Filed under: Real Estate — Chris Allerton @ 11:31 am

Those of us who were awake for high school English class may remember the often-misquoted words of Mark Twain: “The report of my death is an exaggeration.� The same can be said of print advertising, based on the result of several surveys.
 

In their 2007 Profile of Home Buyers and Sellers (not available on the Web that I’m aware of), the National Association of REALTORS® reports that 31% of all homebuyers used a “home book or magazine� in their home search. Surprisingly, the largest percentage that used a “home book or magazine� was those 18-24 years old. Overall, 50% used a “print newspaper advertisement� as a source of information, and the number one source was actually a tie between real estate agent and the Internet, both cited by 84% of survey participants.
 

According to a recent survey by the Pew Internet and American Life Project, “When asked about the things they did to get going with their housing search, respondents cast their nets widely. They were equally likely to say they used the Internet, newspaper ads, or a real estate agent.� The percentages break down like this: Internet 49%, newspaper 49%, real estate agent 47%. Of those who used the Internet, 42% said it had no impact at all on their housing decision, 36% said it had a minor impact, and 15% said “their online searches produced poor or misleading information.�
 

The study concludes, “For real estate, people do not use online resources to circumvent traditional means of finding a place to live, but they do use the Internet to conduct their search more efficiently.�
 

This information squares with data gathered through a broad survey commissioned by The Real Estate Weekly in 2006. It showed that 75% of those who had looked for a property in the previous 2 years searched on the Internet. But, the survey also showed that 37% of all respondents read The Real Estate Weekly. And of those who said they read the Weekly, 86% said they read it to get an idea of the market and 45% used to look for a property.
 

Realty Times conducted another survey on the subject this past October. In reporting on the results, Realty Times said its readers had declared “they’re spending more, not less money on advertising, they don’t like the results they get from the Internet, and they say that print advertising is dead.�
 

This premature obituary for print advertising isn’t surprising; it’s a commonly held belief among many. Realty Times also reported the following: “many [readers] report that sellers still demand to see local newspaper ads for their homes.â€? I hear the same thing anecdotally in my conversations with media and real estate professionals. If that’s the case–that print advertising is placed primarily to placate buyers, despite the fact that more people search for real estate on the Internet–why not send sellers a Web link to their property listing? Could it be that sellers, as former buyers, know that print advertising is still an important source of real estate information?
 

In the final analysis, many people still want something that they can hold, leaf through, take anywhere, mark up, cut up, and put aside for future reference and that doesn’t crash, break when dropped, or require electricity or batteries. Though not the dominant advertising entities they once were, newspapers and other publications are still vibrant sources of real estate market information for a large percentage of the home-searching public.
 

So, save your condolences for those things that have truly passed away—vinyl records, cheap gasoline, black and white television, AMC cars—and pick up a copy of your favorite real estate publication. To paraphrase Mark Twain, the report of their death is an exaggeration.
Â

May 21, 2008

National News

Filed under: Real Estate — Dave Phillips @ 12:26 pm

Stimulus Package
capitalNAR-backed legislation to stimulate the economy through an expanded use of FHA mortgage insurance, a new tax credit for home buyers, and reform of FHA and the secondary mortgage market companies’ oversight has passed the Senate Finance Committee, positioning the bill for consideration on that chamber’s floor. The House passed its version of the bill earlier. Should the legislation pass the Senate, the two versions will have to be reconciled. Among the differences: the Senate tax credit is for $7,000 and applies to foreclosed property purchases (for principal residence only, not investment), and the House version is for $7,500 and applies to all properties (as principal residence) but buyers must be first-timers.
 

Declining Markets Reversal to Help Stressed Areas
Fannie Mae will no longer require borrowers to put up an extra 5 percent down payment when purchasing homes in areas deemed “declining markets,” the country’s largest secondary mortgage market company said last week. Fannie Mae had been hearing concerns from REALTORS® and others for months that the policy was bad for housing because it discouraged consumers from buying in markets hardest-hit by foreclosures. NAR met several times this spring with Fannie Mae officials and sent letters reflecting members’ unease with the policy. “We heard the concerns of NAR and we reviewed and determined that changes in our policy were needed,” Gwen MuseEvans, Fannie Mae vice president for credit policy and controls, said in a statement. Under the policy change, borrowers can get loans up to 95 percent loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90 percent to give lenders a 5-percentage-point cushion to protect against possible price declines in the future. The new policy takes effect June 1, and Freddie Mac has said it also is scrapping its policy.

May 13, 2008

To Z or Not To Z:

Filed under: Real Estate — Dave Phillips @ 9:55 pm

That is the question.  Shakespear

Whether ‘tis noble in the mind to suffer

The slings and arrows of outrageous fortune,

Or take arms against a sea of troubles,

And by not opposing them?  To die:to sleep;

No more; and by a sleep to say we end.

 I started this post with what I thought was a cute title, but then I looked at the actual Shakespeare soliloquy and saw that it was quite appropriate to this post.  The “Z� in the title is for Zillow – the latest in a long list of challengers to Realtor.com for supremacy in Internet traffic for real estate eyeballs.  There are other relatively new sites – Trulia, etc. – but Zillow seems to have captured the imagination of both the public and REALTORS®.  Maybe it’s the cute name or the even cuter play on words with “Zestimates,� but the one site everyone seems to remember is Zillow.  It has almost become a cliché term for Internet listing aggregators.  Not bad for a site that has only been around for a year and a half.But this post is not about Zillow; rather I wanted to explore the question of whether it make sense for local MLS systems to send their listing data to Zillow (or any other aggregator).  A recent New York Times article provides a good framework of the discussion, but leaves out most of the “slings and arrows� that need to be considered before we willy nilly send MLS data to any site that wants it.  Before you draw any conclusions as to my opinion on sending listing data to Zillow, let me say I could argue either “To Z, or Not To Z.�  This post will focus a bit more on the slings and arrows, but Times article does a good job of making the other side of the argument.  Frankly, I am undecided on this question and I encourage you to approach this discussion with an open mind.

We recently had this discussion in the Technology Group of the Charlottesville Area Association of REALTORS® (CAAR).  There were strong opinions stated on both sides of the debate.  Advocates for sending data to aggregators used many of the points made in the Times article, but opponents took a very different slant.  The naysayers were not worried about sharing their listings with the public or commingling with for sale by owner listings; rather they were concerned about Internet market dilution with so many sites doing the same thing. 

First, it may help to know a little background about CAAR.  We have had our listings online for the public to view since the early 90’s.  We were one of the first to see the value of letting the public have access to the data.  Second, because we have been on the Internet so long (and because we have a great MLS Vendor in Solid Earth), we have a very good public search engine that is fed directly from live MLS data.  When the public goes to www.caar.com, they are, in fact, searching the exact data that CAAR members access.  Although we are a small market, we get thousands of unique visitors each week. 

So the counter argument, or the Not To Z, is that sending the data to every aggregator site in order for the listings to get more exposure is superfluous.  The public already has the best possible access to the data – live and accurate – so why spread it around to sites that may or may not keep it up-to-date and accurate.  In addition, every site we send it to would create a new site that members needed to keep up with by either paying fees or filling out profiles.  Do Realtors have enough free time to keep up with several aggregator sites, maintain their Blog and their IDX site, and still have time to actually meet with clients? 

Again, I am only offering the Not To Z perspective in this post because the Times presented the other side.  We have not decided what course to take with our local data.  Part of me wants to say to the Z’s of the world, “if you want it, make us an offer.�  That’s what REALTOR.com did.  They paid us several thousands of dollars in cash and stocks to get our listings.  What is REALTOR.com or any other aggregator providing us, or the public, that is not already accessible and more accurate on CAAR.com? 

More Questions Than Answers

Filed under: Real Estate — Chris Allerton @ 1:38 pm

–Posted by Chris Allerton, Director of Publications for the CAAR Real Estate Weekly

My brother is a doctor, and although his specialty is radiation oncology, people like me are always asking him all sorts of medical questions, few of which relate to his area of expertise: Should I be worried about this rash? What does that latest medical study really mean? Will you look at this mole?

Likewise, when people learn that I work for the CAAR Real Estate Weekly, they invariably ask me questions, only some of which I am qualified to answer. Most center on the same theme: “So, what do you think the real estate market will do?� Having a greater knowledge of publishing than real estate, I answer this question by explaining how The Real Estate Weekly can be used as a lens through which to view the real estate market.

I have a nifty Real Estate Weekly page count chart that tracks the weekly page totals from 1999 to the present. To me, it looks somewhat like an EKG reading. There are peaks and valleys that remain relatively consistent year to year, regardless of the actual number of pages.

Charting the page counts shows that each calendar year starts with the doldrums of winter, rises through the peak spring selling season, and with the exception of the fall Parade of Homes, reaches it’s pinnacle around this time of year. After the late September-early October Parade of Homes issues, there is a sharp drop off through the end of December. This Real Estate Weekly page count cycle roughly follows the traditional real estate sales cycle, with spring as its peak.

So what does the 2008 page count “EKGâ€? tell us? Well, our “patient” is doing well, though not as well as in 2004-2007. For 2008, the Real Estate Weekly’s page count is tracking pretty consistently with those of 2003, averaging 83 pages per week so far. (By contrast, in 2006 at the peak of the market, we averaged 126 pages per week.) And although our “patientâ€? hasn’t flatlined, the peaks and valleys are less pronounced than in recent years. Perhaps “stableâ€? is the right way to characterize the condition of the Weekly—and perhaps the market itself.

The fact that Real Estate Weekly page counts have returned to 2003 levels dovetails nicely with CAAR CEO Dave Phillips’ 2007 Year End Market Report, which indicated that the number of homes sold last year “returned to a sales level just above 2003.â€? Which of course, leaves us ultimately with more questions, such as: When will the market rebound? What will happen to property values? Is now a good time to buy? I’ll wisely leave those questions to the experts–REALTORS®.

But back to The Real Estate Weekly. My favorite question about the publication was posed to a former colleague at a cocktail party. “Oh, you work for The Real Estate Weekly. How often does that come out?� Now there’s a question I’m qualified to answer.

May 11, 2008

Updates On NAR Issues

Filed under: Real Estate — Dave Phillips @ 3:29 pm

This week all the elected and paid leaders of the REALTOR® DC Monumentorganization will be headed to Washington DC for organizational meetings and visits with Congress.  The agenda for the NAR Mid-Year Meeting features two items that I have written about in the past – the announced  Upgrade to REALTOR.com’s standard services and the project formerly known as “the gateway.�  Here are a couple of quick updates:

REALTOR.com Upgrade
Last week, REALTOR.com released a beta site (http://beta.realtor.com) and the following statement:


The new “Beta� REALTOR.com® website will continue to be enhanced over the next several months.  Early this summer, the new site will replace the current site and will include many new free benefits for your members. 
One important FREE benefit on the new REALTOR.com® site is the ability to display up to 4 photos on all basic listings.  Since we already receive multiple photos in the data that you currently provide to REALTOR.com®, there is no action required on your part to provide this new and exciting benefit for your members.  Property photos will continue to be updated as long as the listing remains on the market and is on REALTOR.com®. 
 

The Gateway…Real Estate Channel…or Library/Archive
The project that is so big and far reaching that NAR is having trouble finding a name to fit will be a major topic of discussion in DC.  For those who have not heard of this, the project originally used the working title “Gateway� and was basically a mash-up all property data in the country.  Then, just a little over a month ago, the name was changed to the “Real Estate Channel� and now it is being referred to as a library or archive of data.  More importantly, NAR has issued a white paper on the..ah…whatchamacallit program that clearly outlines the intent.  A few key points for those who do not wish to click thru to read the white paper: 1) it is NOT an MLS and there will be no offer of compensation or cooperation in the system; 2) there will be no public access to the data – members only; 3) NAR sees “this entity as broker controlled and MLS and Association-advised.�

I’ll be posting any updates to these issues while in DC if anything new comes about.

“Transparency� the New Buzz Word for Web 2.0

Filed under: Real Estate — Dave Phillips @ 2:45 pm

I have had trouble explaining what is meant by the new buzz word “transparency� and why it is critical in the new Web 2.0 environment.  Here is a link to an excellent article on what it means and how to achieve it.

 

Why Do We Link in the Web 2.0 World?

 

May 9, 2008

Podcast on FHA Loans

Filed under: Home Finance, Real Estate — Dave Phillips @ 4:51 am

FHANow that Subprime loans are gone, FHA is taking over.  VAR and NAR partnered recently to published an informative podcast on the topic.

May 6, 2008

What’s Going on With the Local Water Plan?

Filed under: Albemarle, Charlottesville, Politics, Real Estate — Dave Phillips @ 9:54 pm

Don’t believe everything you read on the new push to dredge the South Fork Reservoir instead of carrying forward with the community water supply plan approved last year. The coverage in the local media has been the results of a lot of spin by a few people who want to choke off our water supply to stop growth.

I went to a meeting tonight where a dredging consultant said it will take 8 million gallons of water a day to facilitate the dredging operation. You see, to dredge the reservoir, you have to use water to pipe the sludge away. We do not have 8 million extra gallons for dredging and we do not have anywhere to put the smelly sludge. Also, I saw pictures of the dredging equipment. Basically, you are looking at a small, noisy factory set up on the shore of our beautiful reservoir.

This attempt to stall the water plan will fail, but rest assured there will be many morederdging attempts to delay this much needed project. If you need evidence of that, just think of the numerous and costly delays to building the Meadowcreek Parkway (or any other road). The Parkway and the water plan are not just to handle the growth of the future; we need these projects to maintain the quality of life for those of us who live here. We have not built a significant road or new water infrastructure in 40 years. How long can we allow these delay tactics to keep us from moving forward?

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