May 2007 Market Statistics for Greater Hartford

Here are the statistics released by the Greater Hartford Association of Realtors for single family home sales in Greater Hartford.  As you’ll see, there are both good and bad indicators for the real estate market.

Signs of a Weak Real Estate Market

• The number of closed sales in the single family residential market is down
  • over 22% compared to this month last year and over 10% YTD compared to last year
• Average days on market is up
  • Homes are spending 6 more days on the market compared to last year, YTD
  • Homes are spending 8 more days on the market compared to May of 2006
• Inventory is up
  • 12% more homes are on the market in May 2007 than in May 2006

Signs of a Strong Real Estate Market

• Pending sales are higher, not enough to soak up the extra inventory but people are still buying homes
  • YTD, there are .51% more pending home sales than last year
  • When compared to the month of May last year, there is a greater than 1% increase in the number of pending sales
• Median sales prices are still notching upwards
  • YTD, the median sales price is $254,700, up from the same period in 2006
  • In May, the median home sales price was $257,000, up from May of last year

 

Public Opinion About Real Estate Industry

The Consumer Federation of America recently released data collected by the Opinion Research Corporation for AARP regarding consumer opinions of real estate agents, brokers and the real estate industry. The study revealed some interesting things, namely that consumers don’t understand the real estate industry and its practices well-enough and what they do understand, they don’t like.  Neither reflects well on the industry.

The average consumer doesn’t understand the real estate industry. For example:

Only 36% of all respondents said they know “a lot” or “a fair amount” about “real estate agents and brokers and their consumer services. And in fact, only a minority knew that the local multiple listing service is the most complete source of information about homes for sale (34%), that one’s broker may not represent one’s financial interests, that commissions can be negotiated (26%), and that state real estate commissions regulate the industry (30%). In fact, 41% thought that commissions are set by the industry or its agents, while 13% believed they are set by state law.

Even among those that had used the services of a real estate agent in the last five years,

… far fewer understood that the local MLS is the most complete information source about homes for sale (44%) that one’s broker may not represent one’s financial interests, that commissions can be negotiated (31%), and that state commissions regulate the industry (38%).

The reality is that commissions are set by individual brokers and their agents. Commissions are 100% negotiable, both by sellers and buyers. In fact, it is illegal for brokers and agents to “set” standard commissions among brokerages. Many agents and brokers are very uncomfortable even discussing commissions with other agents or brokers.

The part of the survey I find the most interesting is regarding specific industry practices. While…

…over two-thirds of respondents (68%) and nearly three-quarters of those who had recently worked with a broker (73%) viewed agents and brokers, and “their consumer practices,” favorably. And even higher percentages viewed their own agent or broker favorably — 84% for respondents who had recently utilized their services.

Many of those surveyed had issues with some common industry practices…

Agents and brokers require home buyers to sign exclusive agreements with them in order to gain access to local multiple listing services. Yet, 63% of all respondents, and 70% of those who had recently worked with a broker, believe that buyers should not have to sign such an exclusive agreement to gain access to these listing services. They believe they should gain access, for example, simply by paying a reasonable fee.

 Many sellers and buyers do not receive timely disclosures from agents and brokers about representation and compensation. But larger majorities of all consumers (73%), and those who have recently worked with brokers (82%), support these disclosures “during the first substantial contact” or “when the consumer agrees to services.”

Five to six percent is a common real estate commission for the sale of a house. But well over half — 59% of everyone and 63% of those who recently worked with brokers — think a 5-6% commission on a $300,000 home sale is too high.

Despite the fact that realtors in a number of states have tried to limit competition by passing minimum service laws, three-fifths (60%) of consumers disapprove of these laws. And despite the fact that most brokers serving on state commissions continue to practice, most consumers disapprove (55%) of the potential conflicts created. Slightly less than half of consumers and those who have recently worked with brokers (42% and 47%) disapprove of state laws prohibiting agent rebates to buyers.

How Much Really, Really, Really Bad Tenants Cost

The results are in – the terrible tenants who recently vacated my in laws’ house have cost them over $4,400.

  

Here are the expenses they’ve incurred that are directly attributable to damage done by the tenants:

 $1,600 – Cat urine odor removal, includes labor.  When the guys who clean up smelly houses for a living have to leave the house because it smells really bad, you know you have a problem.

$1,200 – Dumpsters for trash left in house and in yard, including over 100 empty cat food containers, two dog houses, a swing set, a riding lawn mower, etc.

$1,000 – Paint, new doors, new subflooring, hardware and other miscellaneous supplies.

$600 – Bathroom fixtures and lights.

Except for the cat urine odor removal, the cost is only for material, not labor.  The labor is being provided by family.  Also, this figure does not include lawyers fees or eviction costs since the tenants left on their own.

Also not included in figures above are items that were probably going to be replaced anyway, including:

$4,000 -New wood floors to replace the destroyed carpet and new tile in the bathroom and kitchen – also just for materials.

$4,000 – Kitchen cabinets, countertops and fixtures – materials only.

$800 – Exterior doors – materials only.

Had my inlaws not intended to replace these items anyway, these would also have been included in the total damage. 

For more pictures, go to Really, Really, Really Bad Tenants and Even More Really, Really, Really Bad Tenants.

Up, up and away?

Mortgage rates are climbing.

CHFA’s rate jumped to 6.125% yesterday - not bad but it hurts if you started looking for a house in the early spring when the rate was 5.375% and housing still costs the same, and maybe a little more.

Conventional mortgage rates average about 6.74% for a 30-year fixed rate loan.

As far as the future of mortgage rates…

According to one article I read on CNN/Money,

Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), expects mortgage rates to top out near 7 percent by the end of the year.

And according to Kiplinger’s,

…expect the Fed to hold short-term interest rates steady. Although inflation is higher than Fed officials would prefer, they know that a rate hike now would send the housing market into a deeper slump and threaten the already weak economic expansion.

In fact, the recent spike in long-term interest rates — which are determined by the bond market, not by the Fed — will penalize the housing sector by cranking up mortgage rates and thereby sapping demand. Homeowners with floating rate mortgages and home equity lines of credit will also have to grapple with higher interest payments.

About $650 billion worth of floating rate loans will be reset from their low introductory rates to market mortgage rates between now and the end of next year. Market rates have risen about a half a percentage point just since mid-May, with the popular 30-year fixed mortgage currently at around 6.74%, a two-year high.

 When I bought my first home (way back in 1999? I think), my rate was about 7%.  That was when the rates were falling.  But, housing costs have increased significantly since then.  The house I bought in 1999 for $150,000 at 7% would sell for $280,000 now – with no updates and the real estate taxes have more than doubled.  Amazing.

Real Estate Commissions’ Effect on Housing Prices

I’ve found a few more articles on the relationship of real estate commissions to housing prices.  Folks, your house is probably your biggest asset.  If something is driving up the cost of your ability to own this asset, you need to know all about it.

In How Counterfeit Buyer Agents Inflated the Housing Bubble, Bill Wendel muses about how “traditional” agents posing as buyers agents may actually contribute to higher prices paid by the average home buyer.  

Mark Nadel’s resarch paper for the Cornell Real Estate Review about real estate brokerage commissions.   It’s long but worth the read.  Here are some buyer-related excerpts:

Residential real estate brokers and salespersons (agents of brokers) have long quoted their fees as a straight percentage of a home’s sale price. This traditional formula, however, ill serves the interests of both home buyers and sellers, and is a primary reason why such fees may be inflated by $30 billion annually.

According to the FTC’s report, Competition in the Real Estate Brokerage Industry,  real estate brokerage commissions have dropped over the last ten years in percentage points (from 6.1% total in 1991 to 5.02% in 2005). BUT, the actual median commission has risen (from $9,389 in 1991 in 2006 dollars to $11,549 in 2005, again in 2006 dollars). 

Regarding how buyer agents are paid:

The practice of remunerating the buyer’s broker from seller’s proceeds can harm consumers in three ways:

Agents May Fail to Show Buyers Some Attractive Options. Leaving the payment of buyer brokers to sellers or their brokers can lead agents with buyers to withhold options from buyers, despite fiduciary duties, if 1) the co-op fee offered to the buyer’s broker for a home is too low, 2) the seller appears to expect free assistance from the buyer’s broker, or 3) the agent wants to discourage price competition.

Most home buyers appear unaware that, like most salespeople, agents aiding buyers areapt to make a greater effort to sell those listings that offer them the highest fee. Recognizing this, many discount brokers representing sellers offer to pay buyer brokers the going rate in the market, limiting discounting to reductions in their own share of the commission.

Buyers could attempt to correct for the pressures leading agents to fail to show them attractive options by offering to make up the difference between the fee a seller offered and the going rate; yet most buyers appear unaware of the current fee mechanism.

This does happen – not to my clients, though.  My buyer clients see FSBOs, I contact home owners who don’t have a house on the market if it might suit my buyers and I will show clients properties with commissions far below what I am normally paid. 

Reduc(es) Buyers’ Incentive to Negotiate. By encouraging buyers to believe that it costs them nothing to use a broker, the current fee arrangement deters most buyers from negotiating over their agent’s broker’s fee. Hence, there is little pressure to reduce the fee paid to buyer brokers from half of the “going rate,” e.g., half of six percent. Thus, most MLS listings offer buyers’ brokers half the standard commission charged.

I don’t entirely believe that most agents give half the commission to the buyer’s agent.  In many of my classes through the local realtor associations, several instructors have encouraged an unequal sharing of the commission in favor of the listing agent who is always believed to incur the most expenses.  Um, have you seen my expenses for gas, selling agents, while I’m driving around my buyers to your listings???  And let’s not fool all those sellers into thinking that all the advertising you are doing in the paper with your pretty picture is actually working to sell their house.  Sorry..back to the reading material.

Unnecessary Fees (are) Allocated to Pay Buyer Brokers. Those who buy homes without a broker’s help usually ask sellers to reduce the sale price by the amount that would have been paid to the buyer’s broker. Sellers may desire to comply, but listing agreements usually give the listing broker the right to keep the full fee.

Translation – you think you’ll save money by going directly with the listing agent.  Maybe…but do you know how much the house you’re buying is really worth.  The list price is not the value – it’s what the seller thinks it’s worth and maybe the listing agent agrees but not always and not even most of the time.  A real buyer’s agent will actually show you the prices of homes that have sold in the area and will help you determine a price to pay for it.

 

Me V. The Chipmunks

I’m waging war against chipmunks – specifically, the group that has moved in underneath my front stairs and patio.  Here’s their front door, which happens to be a few feet away from my front door.

They probably wouldn’t bother me if they didn’t have so much attitude.  One had the nerve to climb up onto my steps and hang out watching the cars go by.  Another (or maybe the same one??) climbed onto my bird feeder and helped himself to some seed, all while I sat at my computer just three feet away.  If that one had a middle finger, I’m sure he would have been giving it to me.  They also annoy my dogs, taunting them through the glass of my front storm door.

I have bad luck with rodents.  Two years ago some squirrels moved into my attic and cost me thousands of dollars in repairs.  I don’t want to have to shell out any more dough for rodent damage – I’ve had enough.

So, for the past few weeks, I have been trapping the chipmunks in my yard.  One by one, I’m relocating them to Nevers Park about one mile from my home. 

Sometimes, the chipmunks outsmart me and manage to set off the trap and escape.  I heard the trap go and saw that it was empty. 

But mostly I win, catching three chipmunks so far.  Don’t feel sorry for them -  they get a nice going away present in the form of tasty raisins which I use to set the trap.  Mmmm.  At least they won’t go hungry.

Bye, bye little chipmunk. 

How Much Does It Cost? A Guide to Some Common and Not So Common Repairs

When showing clients a house that needs repairs or something replaced (95% of houses on the market), I’m often asked, “How much does it cost?”  Here’s a quick list based on my experience.  The actual amount may be more or less based on the circumstances.

Roof  The price for a 1400 sf roof can range from $3,000 – $5,000, depending on whether the roof has to be stripped or not.  The price would be for a typical raised ranch or cape style home using 30-year shingles.

Furnace Around $3,000 – $6,000 installed, depending on the type, model and what has to be removed in order to install it.

Replace Oil Tank If the oil storage tank (275 gallon) needs replacing, estimate about $1,000 to replace it.

Hot Water Heater Around $500 – $750 installed.

Central Air As long as central air is already installed, a new unit will cost around $2500 installed.

Radon Mitigation If higher than recommended levels of radon are found in the home, a radon mitigation system can generally be installed for about $1,000 – $1,500.   The mitigation system essentially takes naturally occuring radon gas and blows it outdoors.

Mold  Assuming the mold is not deadly (like most of the mold found), the cost to clean an area depends on the size and material the mold is found on.  A very common location for mold is the attic, above a bathroom ventilation fan not properly venting to the outside.  An area like this can cost around $250.

Asbestos Removal  I have most often seen asbestos in older homes used as pipe or ductwork insulation in the basement.  It is generally harmless as long as it’s not deteriorating or is going to be disturbed.  Most people choose to leave it alone because the cost to remove it can be high.  I had a client get an estimate of $3500 to remove asbestos from about 50 linear feet of ductwork. 

Carpenter Ants Carpenter ants are fairly common.  A typical treatment can run about $250-$350.

Wood Floor Refinishing Expect to pay about $500-$600 for 500 s.f., as long as there isn’t a significant amount of sanding to remove deep scratches or stains.