Cumberland County Sales and Median Prices Up

In reviewing the latest stats from MREIS (Maine Real Estate Information System), it's encouraging to note what has happened in Cumberland County over the past "rolling quarter" (June through August).  Comparing those three months for 2007 vs. the same time period in 2006, Cumberland County has experienced a 4.65% increase in the number of homes sold (947 in 2006 and 991 this year).  The median sales price for this time frame increased 3.6% this year over last (from $250,000 to $259,000).

The only other counties to post significant gains were Penobscot and Piscatiquis, with Lincoln and York making some modest gains.  All the other Maine counties are down on both counts (number of sales and median sales price).

We all need to watch this trend data diligently as the local real estate market continues its current ride.

David Whitten, Watching the Data

Maine Median Home Sales Price Up 4.84%

MREIS, the Maine Real Estate Information System, is reporting today that the median home sales price for existing homes jumped 4.84% for February 2007 compared to the same month in 2006.  The new median for existing homes in Maine is $193,950; half of homes sold for more and half of homes sold for less.

The volume of homes that changed hands in February 2007 was down just slightly from the year before - 1.13% fewer homes sales were recorded (compared to a 3.4% decrease nationally) and the national median sales price was down 1.5% to $211,100.

Interestingly, the Northeast region of the country posted a 3.4% gain in volume of sold homes during this same period.

David Whitten, Watching the Maine Real Estate Market

Pending Home Sales - Largest Gain in 3 Years

The National Association of Realtors (NAR) has announced that pending home sales for December 2006 have jumped 4.9%.  What is this and why is it important?

Well, "pending home sales" refers to the number of homes "under contract" but not "closed" (i.e. the deal isn't quite done yet).  The increase is significant because it's the largest monthly gain in nearly three years.  The pending sales volume is still below that of December 2005 but the gain over the previous month illustrated by December 2006 means that the market continues its move in a positive direction.

Incidentally, the pending home sales figures were highest for the Northeast US region (8.1% increase) followed by more modest gains in the West, South and Midwest.

Maine Real Estate: 2006 Numbers

Residential Real Estate in Maine in 2006 was comprised of $7.4 billion in total sales.  The breakdown on this is:

• Single-family homes 88%
• Condominiums 10.4%
• Mobile Homes 1.6%

Beyond residential sales, Maine also witnessed $459 million in multi-family volume, $588 million in land sales, and $262 million in commercial property movement last year.

Even though 2006 has been considered "softer" than previous years, volumes are still quite healthy and, according to the Maine Real Estate Information System, median residential sale prices continue to move slightly higher.

Positive News in the Real Estate World

We get some great weekly updates from our friends over at Downeast Mortgage Company.  They are keeping their eyes on some key economic indicators that relate not only to the mortgage field, but to housing in general. 

This week we learn that "Housing was the number one economic newsmaker last week, and the news was generally positive. New-home sales finished 2006 on a positive note, rising a second straight month in December, while new-home inventories fell, a sign that homebuilders are getting supply under control. Meanwhile, sales of previously owned homes eased 0.8% to an annual rate of 6.22 million in December after rising the two previous months."

David Whitten, Watching the Markets

Fed: Declines to be Mild

According to a new report published by the Federal Reserve board on their web site last week, average US housing prices may fall "a little," but not significantly enough to be a "bursting" of the real estate bubble.

This prediction of a mild drop is purportedly based on the Fed's analysis of housing futures and options as well as derivatives of housing-related company shares.  It also seems to be leaning heavily on the expectations of "housing market participants" such as those companies heavily vested in the housing market.

According to the Wall Street Journal, "The paper's conclusions seem in line with the thinking of Fed officials that the sector will slow substantially through the rest of 2006 and into 2007 but is unlikely to derail the economic expansion".

This is consistent with our opinion that, barring unforeseen circumstances, real estate activity in Maine will continue along at a relatively healthy pace, albeit at a much cooler one than the overheated few years leading up to 2006.  Buying a property on speculation of double-digit inflation over the next two years is not realistic in most of the current market.

Not Yet Worried About a Downturn

Last week, our friends over at Mainebiz polled the readers of their new daily email update on how they felt about recent home sales figures.  More than 60% of respondents said they were not worried and that "The recent sales drop means price appreciation may plateau, but not drop significantly."  The remaining repondents said "Yes -- Sluggish sales will lead to falling home prices."

Time will tell....

David Whitten
Watching the Real Estate Market Market

Maine Real Estate & Global Warming?

This interesting item at the Seacoast Online warns that much of Maine's coastal property could be in jeopardy (including the Bush family's Walkers Point compound) if sea levels continue to rise due to global warming!

The Natural Resources Council of Maine has actually issued maps showing what what be under water in two different scenarios...a rise of 3 feet and a rise of 20 feet.  Either way if their predictions come to pass, Maine stands to lose thousands of acres of property.

So if you're planning to buy that perfect vacation home to hand down to your grand-children and great-grand-children, you might have to take global warming into account.  Who knew?

Maine Real Estate Data for 2006

Yesterday's Boston Globe and Portland Press Herald both reported on year-to-date Maine real estate data which reflects trends we've been talking about on this blog...a once-hot market has been cooling down or leveling off to a more "normal" or balanced market.  Here are some key data points to note:

• The average sale price for homes sold in Maine in the first 6 months of 2006 is about 3% higher than the same period for 2005.
• The number of homes sales during this time frame is up 1.5% over 2005 (flat in Cumberland County and down 6% in York County while up 20% in Aroostook!).
• The median sale price for homes in Maine so far this year is $194,500.

A 3% increase is far better than the decreases that other parts of the country are seeing, but it exemplifies the cooling compared to the 15% and 12% increases we saw in 2002 and 2003 respectively.  We continue to see strong movement in buyers moving from rental to first-homes as well as buyers deciding to make the move to Maine from other states.  But sellers should adjust their expectations and make sure they professionally stage and market their properties to ensure results.

David Whitten

Watching the Market in Maine

Whitten Properties in the Portland Press Herald Today

In real estate sales, all the home's a stage By TOM BELL, Portland Press Herald Writer © 2006 Blethen Maine Newspapers Inc.

It took years for Tom Cannon to build up his collection: tribal masks from Nepal, a straw hat from Vietnam, a batik print from Senegal, a South Pacific imp, a 3-foot statue of the Hindu god Shiva.

All of these he displayed in his cozy West End condominium, which has been on the market since last fall and remains unsold after more than 50 showings.

Enter Paula Jalbert, who was hired by his broker to "stage" the condo.

Jalbert was blunt. The Hindu god, the imp, the hat, the masks - they had to go, she told the 48-year-old bachelor.

She also banished the Oriental rugs, which made the rooms darker, personal photographs and any painting that seemed eclectic or abstract. But Cannon kept an arty watercolor of a half-nude woman on the living room wall.

That painting, a disapproving Jalbert explained when she returned on her second visit, would distract people and keep them from seeing the entire room.

"Oh my god, there are nudes!" she said, mimicking the inner voice of a prospective buyer.

Jalbert is a home stager - someone who rearranges a house to make it more marketable. For an empty house, she brings in furniture and table settings to help buyers imagine it as their own home.

Home staging, which first became popular on the West Coast, has only recently moved to the East Coast. In Massachusetts and Connecticut, some real estate companies have in-house stagers who are sent out to redecorate a home as soon as it is listed.

Although Maine Realtors typically advise sellers on how to showcase their homes, Jalbert is among the first in Portland to make staging a business.

Her biggest challenge, she said, is explaining to people what she does for a living.

"In San Francisco, it's not, 'What is staging?' it's 'Who's your stager?' It's a given," she said. "Here in Maine, it's always tougher to market here. It takes two years for trends in the West to get to Maine."

The principles of staging are simple. A home for sale is nothing more than merchandise that needs to be displayed to its best advantage, like any retail item, said Jalbert, who owned a trendy Old Port home goods shop, Motifs, before she became a real estate broker more than three years ago.

She began offering her staging services a year and half ago. These days, she spends about half her time selling houses as a broker and the other half staging them for other brokers.

Any house on the market should be clean and uncluttered, she said. The decor should be mainstream so it appeals to the widest possible audience.

She says homes sell faster if the owner's personality is sucked out.

"A seller's decor dominates the space so much the buyer can't imagine themselves in the space," she said. "You've got to neutralize the place and depersonalize it. You've got to get your taste out of there."

In some cases, she recommends that rooms be repainted if the colors are odd, like a foyer she saw recently that was painted forest green. She said real estate agents have a hard time giving their clients the same advice because they don't want to upset them and lose a client.

"I'm the bad cop," she said. "The Realtors don't want to insult potential sellers and say, 'This wallpaper has to go.' "

She charges a flat fee of $200 for "staging consultation," which includes one walk-through inspection and a to-do list. She charges $65 an hour for additional staging services, such as bringing in furniture and decorating a home.

"She has the ability to empty a space out and not make it feel empty," said broker David Whitten, who recently hired Jalbert to stage all his properties as a service to his sellers. He said Jalbert also has the ability to sell her ideas to people so that they come to embrace them.

At a time when buyers have a lot of options because so many homes are on the market, it's crucial that homes are staged well, Whitten said.

"The market is such that you have to do every last possible thing you can do," he said. "The more you can do right upfront the better."

Cannon said Jalbert's makeover of his condo was not an easy process for him. He agreed that some of the artwork needed to go, such as his painting of the Tolkein characters Bilbo Baggins and Gandalf sitting in a Hobbit house.

"She had me take that down right away," he said. "For the rest of it, I was resistant and pretended I didn't hear the first time."

Eventually, though, he gave in. On Wednesday, while he was at work, she redecorated his condo.

She moved the furniture around so there was "more balance" in the room. She brought in some colorful accessory pillows for the couch. For the dining room table, she placed some candles and created an intimate table setting. She brought more candles for the bathroom, as well as new towels and potted plants.

When he came home, Cannon said, the condo seemed brighter, larger and more feminine.

"It doesn't feel as much like my house anymore," he said. "It seems like something to sell, and now it's time to do it."

The Pitfalls of Overpricing

As the market continues to shift, it has become critical for brokers to price their clients' properties correctly at the outset of the marketing campaign.

Seller client expectations and market realities are more often then ever quite disparate.  Put plainly: In a cooling market, sellers generally want more than the market will pay.  This can lead to real estate agents offering to take a listing at the sellers’ preferred price for an agreed period of time, even if that price is far above the true value range for the property.  This time period is sometimes a week but often more.  Usually the seller will agree in advance to a series of price reductions to eventually get an asking price in line with what the listing agent thinks the home will sell for.  This strategy is not uncommon, but not without potential pitfalls.

This strategy can be dangerous to the amount of the sellers’ net proceeds from the sale.  Here’s why:  With plenty of homes for sale, buyers and their agents have no urgency to buy and have plenty of time to consider many properties before submitting an offer on one that meets their needs and has a good value proposition.  An overpriced “new” listing will attract some buyers and may even draw brisk activity for a week or two.  But then the activity will taper off to a trickle as only the newest buyers to the market come by for a look.  The other buyers have long since moved on to look at homes priced correctly and to look at homes that have been around for a while but are now “Price Reduced”.  These price reduced homes usually eventually sell but often after 90 to 120 days on the market.  Those sellers have made two or three extra house payments and are likely selling for less than they would have if the home had been priced correctly and marketed properly in the first thirty days. 

Agents who list at inflated prices have some important responsibilities to their sellers here.  The agent that agrees to list an overpriced home needs to let the sellers know that ninety days after listing the property, buyers that do come to the table will most likely assume that there is a problem with the property and will have no incentive to offer the seller the asking price (unless the price reduction has been very dramatic!).  The agent needs to inform the seller that this strategy will likely result in lower net proceeds from the sale and added expense to the seller from having to maintain the home, pay the taxes and pay the interest on the mortgage.

A good selling strategy for this market is one that prices the home near the top of the true value range and supports that price with a marketing strategy that shows the home’s value.  Professional staging, virtual tours, quality photographs, strategic open houses, broker direct marketing, consumer direct marketing, direct mail campaigns, and web based marketing all work together to present the property to the widest audience of potentially interested buyers and help to sell the property near the top of the true value range in a timely manner.

The bottom line:  Price it right and market it well.  To overprice is to risk having a property on the market far longer than will benefit anyone.

David Whitten

Slowing...Slowing...Normal

Last week the National Association of Realtors revised its 2006 homes sales forecast downward.  Concurrently, it called on the Federal Reserve to cease interest rate hikes "because parts of the housing market are vulnerable." (Reuters news service report 6/6/2006).

Specific predictions from NAR included a 6.8% drop in existing home sales in 2006 vs. the record high of 2005.  Likewise, sales of newly-built homes are expected to be 13.4% less than 2005.  These are significant numbers, but still nothing to panic about.  After all, strong numbers in the wake of an overheated market are still strong numbers.  Or, as the Reuters story points out, "the U.S. housing market has been steadily cooling down after a five-year run that shattered sales and construction records. The market began to slow last year as mortgage rates started to climb. While the market is expected to keep easing off its record levels throughout the year, 2006 is still expected by many economists to be the third best year for housing ever."

Impact for Maine?  As reported in my earlier posts, Maine continues to post increased activity in 2006 vs. the same time period for 2005, bucking the trend for much of the northeast part of the US.  Will the market feel "cooler?"  Yes.  But it will also be a more normal or "balanced" real estate market in which the "leverage" in most real estate transactions won't be so skewed in either the buyers' or sellers' direction.

David Whitten
Watching the Market 

Region Down, Maine Up

The National Association of Realtors recently put out their first quarter numbers.  It's true that people have been talking about a "softening" real estate market in the Northeast and, sure enough, NAR reports that the first quarter of 2006 was down 2.9% compared to the same period in 2005 (number of units sold).  However, Maine bucks this trend by being up 4.6% in terms of units sold over the first quarter of 2005.  What does this mean?

This means that even though there is more residential "inventory" on the market and the average "time on market" is longer than before, it is still a brisk market here in Maine (indeed, more volume compared to last year!).  This supports our underlying view that the market has really normalized or become more balanced compared to the red-hot sellers' market of a couple of years ago.

What Zillow Can't Do

Zillow made a big splash this past winter as the online tool that "would change the real estate industry forever."  It allows users to enter an address and tap into property valuation data, historical sales data and--allegedly--create their own "comps" report (Zillow "Zestimates" are meant to replace an agent's Comparable Market Analysis report to some degree). 

I would argue that Zillow has made real estate more interesting, has given people more tools and data, and is an excellent distraction when you want to "zillow" the value of your boss'  or highschool sweetheart's home.

As with many much-heralded technology breakthroughs, the product doesn't yet match the promise.  Here's what Zillow can't do:

• It doesn't cover the whole country.  For example, there is no data for Maine homes yet.
• It actually doesn't get the data right.  According to this report, Zestimates are only within 10% of the right price 62% of the time!
• Zillow can't draw on years of real estate experience when helping buyers find the "right fit."
• Zillow absolutely cannot navigate the complicated offer/count-offer process with the skill of a professional broker.
• Zillow can't deliver a true Comparable Market Analysis (CMA) that gives buyers and sellers an understanding of price based on all factors.
• Zillow can't manage a real estate transaction from the contract date through the closing date - several weeks and many, many potential obstacles along the way.  Only really good real estate professionals make this seem smooth and easy for their clients.

At the end of the day, a complex real estate transaction is not the same as buying an airplane ticket or booking a hotel room.  Does Zillow have the potential to provide more useful information to create educated consumers?  Yes.  Will it revolutionize the industry?  I don't think so. 

Sell or Hold Investment Property?

Sell or Hold those investment properties?  This article from The Wall Street Journal's Real Estate Journal is very comprehensive.  Even if you've got positive cash flow you may still find its time to sell as other investment opportunities may return more.  If you've got neutral to negative cash flow then selling is probably already on your mind.  Careful analysis and good discussions with your Realtor and your financial advisor should help you make the best long term choices.

Expect Growing Condominium Demand in Maine

There are several reasons why condo demand will grow in the not-so-distant future.  Those reasons are really the same ones that have always been there, it's just that more people (read:  baby boomers) are about to act on those reasons. 

• As land costs increase, one way to obtain an affordable home is buy in a high-density area.  That has definitely happened in Portland as many single family homes evolved into apartments and have now been condo-ized.  We're also seeing a significant number of in-town Portland condo development projects these days - no doubt in anticipation of this coming demand.
• As people near retirement, condos and "condominium neighborhoods" become more attractive:  less maintenance, more community, less isolation.

These factors, combined with a growing dislike of long commutes and high fuel prices, means that the chances are 50/50 you'll trade your single family home for a condominium in the next few years according to some industry experts.  In many parts of the country it's not uncommon to have a 1 or 1.5 hour commute each way to work.  That has generally not been the case in Maine, but even a 30 or 45 minute commute in bad weather can be enough to cause rural residents to consider an in-town location.

Why Buyers Should Care About the Bond Market

For the first time in over five years, short-term interest rates have risen above long-term rates.  Why should you care?  Well, at the risk of causing your eyes to glaze over, this trend means that the resulting "inverted yield curve" could boost monthly payments on adjustable-rate mortgages (ARMs).

If this curve remains inverted, then a couple of things are likely to happen.  Demand for ARMs will soften and, more importantly, some borrowers would have difficulty obtaining this type of financing to make their property purchase.

The knock-on effect is that homes could sit on the market longer (though the bond market is by no means the only factor contributing to such a scenario) and sellers need to work carefully with their REALTORS to set sales prices accurately during this period of transition.

Selling in a Changing Market

It's not 2003 anymore (or 2004 for that matter).  Buyers have the time to be more discerning.  There is more "inventory" for them to choose from.  Interests rates have crept up a bit (though are still fabulous by historical standards).  And those "for sale" signs seem to be staying on front lawns longer than they used to.  What's a potential seller to do?

Well, here in Maine - and probably in lots of other places - people used to put their home selling plans on hold about this time of year until Spring starting poking its head up out of the melting snow.  But this year many are worried about waiting to put their places on the market...will interest rates keep going up?  Is the market slowing or cooling off?  Is the price I want or need going to be attractive to buyers in the Spring?

This sense of uncertainty or even desperation might be causing some sellers to rush to market before they are ready - and before their properties are really prepared for the selling process.  Desperation selling this winter could, in fact, diminish their potential returns.  Even though there is no crystal ball that will tell us where the market is going to be in 3 months we do know that marketing a property correctly is as important as it has ever been.  So, if you need 90 days to get your house in order by all means take the time.  And contact an agent with exceptional marketing strategies sooner than later.  You'll feel better now and be better prepared later when the time comes.