Home Marketing Tips Plus Timely Information on Factors Affecting the Sarasota and Manatee County Real Estate Market

Weighing Changes in the Median Sales Price

Every time you read an article on home prices, it seems that not only are prices moving at different pace from the previous article but in the opposite direction. An article it today's Sarasota Herald Tribune starts with the headline Home Sale Prices Up 8 Percent. Yet at the end of last month, S&P/Case-Shiller released their monthly indices of home prices and prices were down in 19 of 20 markets including both Florida markets followed (Tampa and Miami) as well as the 2 National composite indices. Admittedly, the Herald Tribune article was talking about Sarasota-Bradenton which is not Tampa or Miami but it is difficult to believe such a ditch could exist between Sarasota-Bradenton and the rest of the country.

In the Herald Tribune article, the price change figures were based on changes in the median price (which was properly and adequately disclosed). However, if you didn't read the article closely enough or think carefully about what the median price meant, it would be easy to assume that the value of your home, for instance, had increased 8% from a year ago. This would be a horribly flawed assumption.

Median Defined

The median is the midpoint of a group of ranked numbers. To get the median selling price for the quarter, you would rank all of the sales prices from high to low and the midpoint of this ranking would be the median.  For example, if there were 5 sales as follows: 100k,150k,200k,250k,500k - the median would be 200k. If the last sale was 5,000k rather than 500k the median would still be 200k because it would still be the midpoint. The median is a better measure for things like price because it reflects more closely what most people paid, rather than the average.

The downside of Median Price

The trouble with the using the changes in median price to evaluate changes in the market is that the mix can change from period to period. As I have followed changes in the median price through the My Florida Regional MLS over the past few years, the biggest cause for fluctions in Sarasota seems to be the huge swats of foreclosure sales in the south part of the county (around Port Charolotte). I am far from being considered an expert in the Port Charlotte market but every quarter dozens of what appear to be fairly new homes sell for under $100,000 as bank owned homes.

In the first quarter of 2010, home sales in that Port Charlotte zip code (34286) accounted for 5.9% of all Sarasota-Bradenton sales. In the first quarter of 2009, they accounted for 6.6%. The relative decrease in the mix of these lower priced sales was enough to push up the median price 8%.

To really see the affect mix can have on the median price, just drill down to the zip code level. If you look at areas like downtown Sarasota or Longboat Key, areas where the mix can really play havoc with the median price (think on beach vs off beach mix, comparatively few sales, etc), you get really wild swings. On Longboat, the median single family sale price was $617,500 in the first quater of 2009. For the first quater of 2010, the median sale price was $812,500.  If you sold your Longboat Key home during the first quater of last year, don't go jump off of a bridge thinking you missed a 33% price move. This change in the median price was caused substantially by a change in mix - more larger waterfront homes selling at great prices this year compared to smaller off water homes selling the previous year.

Foreclosures and Short Sales Nearly Dominate Market

By lender controlled I mean either owned out right because the lender obtained the property through a foreclosure proceeding or controlled by the lender because the lender must approve the sale price (i.e. a short sale). The data from the chart below is from the My Florida Regional MLS.

 

Bank controlled sales accounted for 44% of all unit sales for the most recent 12 month period. These were split  evenly between short sales and bank owned sales (roughly 22% for each category).  

 

 This charts  shows the impact that foreclosures and short sales have had on the market. Either because of pricing, perceived value, or both, bank controlled inventory has siphoned off buyers from conventional sellers causing absorption rates on conventional inventory to remain high.

The charts for Manatee County are virtually identical.

Ouch! Case-Shiller Numbers Down in all Markets Except San Diego

The Case Shiller numbers for February were released. All but one market showed declining home prices, some fairly sizable. Only San Diego markets showed a gain.

Prices dropped 1.2% in the Tampa market during February after giving up .5% in January. The index broke a 28 consecutive month run of decreases in June 2009. August and September also showed modest gains in the index. But in October 2009, the index resumed its downward spiral, giving up all the gains from it made and more. The index is now back deep to April 2003 prices.  Sarasota and Manatee Counties are not part of the Tampa market, but if the prices here mirror Tampa, then anyone who bought their home on or after April 2003 will likely be selling for a loss.

The only other Florida market tracked, Miami, is behaving about the same way. While the Miami index has not given up all the gains it made during the late summer rally last year, the index is still back to March 2003 levels. Miami was down .5% in February. 

The 20 market composite index dropped .9% in February. This index is back to its August 2003 level.

 

If there was any rhyme or reason to the February numbers, it was that the Midwest was bad. Of the 5 worst performing markets, 4 were in the Midwest.  Minneapolis dropped 2.2%, Cleveland dropped 2.1%, Chicago was down 2%, and Detroit lost 1.8%. Portland (-2.4%) was the worst performing market and the only top 5 worst performer to not be in the Midwest.

 

Help for Sarasota Home Sellers - Internet Usage and the Home Buyer

This is part 3 of a 3 part article to help Sarasota Home Sellers (or any seller really) find a buyer for their home.

 

We've already established the Internet's importance in finding a home, but its use and opportunities as an advertising method are actually greater than they appear. According to the NAR Study, 87% of home buyers used the internet to search for a home. Of this group, 77% drove by a house that interested them and 63% actually walked through a home they saw on line. No other form of advertising is going to get results like this.
When asked about the value of the internet, home buyers sited the following benefits as very useful:

• Photos                                   86%
• Detailed property information      84%
• Virtual tours                            68%

 

When you consider alternative marketing avenues, nothing else provides an opportunity to provide this information to prospects. To get the photos and information provided by the web into a newspaper ad or a direct mail piece would be prohibitively expensive. Even then, the quality of the photos could not compare to the web.

In terms of website preferences, buyers showed a more diffused set of preferences and most used more than just one site.  Those websites included:

• MLS websites (presumably those sponsored by local Realtor boards)   60%
• Realtor.com (the NAR website which is essentially the national MLS database)48%
• Websites belonging to a real estate company   46%
• Websites belonging to an agent   43%
• For Sale by Owner site   19%
• Newspaper site   11%
• Other sites with listings (Trulia, Zillow, etc)     25%

 

Each week, I prepare a report for each of my customers (Sellers). The report shows website hits for 4 websites, MLS agent views, MLS agent emails sent that included the customers listing, showings, sign calls, etc. My experience has been that Realtor.com gets 10 times the hits as any other website. There could be many reasons for this.

My theory is that prospects use Realtor.com until they become somewhat more knowledgeable about the area and then switch to a website with more local flavor. Many local area websites, mine included, allow for a much more granular search than is afforded by Realtor.com. For example, my site not only allows users to search by neighborhood, but provides links to specific neighborhoods or buildings. If you want to see what is for sale in Seaplace on Longboat Key for example, you just click that link on my site and all MLS listings are displayed.

The bottom line is that there is not one place called the internet. You need to have your home on a variety aof sites to achieve maximum exposure.

Home Seller Alert - How Home Buyers Find Homes (part 2)

This post is part 2 in a multi part piece on how home buyers find homes.

All of the data from the discussions below comes from the 2008 study by the National Association of Realtors, Profile of Home Buyers and Sellers.  I will refer to this as the Study in the subsequent discussion.

Where Homebuyers Found the Home They Purchased

The actual survey question posed to home buyers in the Study was "For the home you purchased in 2008, how did you first learn that the home was on the market?" The results were:
Real Estate Agent                               34%
Internet                                            32%
Yard sign                                           15%
Friend, relative or otherwise knew seller    9%
Home builder                                        7%
Newspaper Ad                                      3%

This survey questions shows the impact that the internet has had on the industry. The Study reports historical results to the 2001 study. In 2001, real estate agent accounted for 48% of the responses. Print advertising was 9%. Knew the seller was 12% and internet was just 8%.

The responses also show that even though most home buyers use a real estate agent to purchase a home, agents don't always find the home. In fact, most don't. The internet has empowered buyers to find their own home. This suggests that marketing to both agents and buyers makes the most sense. Or in consumer marketing parlance, you should use a mix of trade (agent/broker) and consumer (home buyer) advertising.

I am going to recasts the numbers above looking at just consumer avenues for people searching for a resale (not new construction home). This will show the prominence of each method available in the typical home selling situation (ie a homeowner trying to sell their home). The consumer methods available to such a person are Internet, yard sign, friend/relative, and newspaper. Here are the percentages recast for just those categories:

Internet                             54%
Yard sign                            25%
Friend, relative, knew seller    15%
Newspaper ad                       5%

Looking at these numbers, where would you spend your ad dollars on consumer advertising?  The only real "opportunities" to spend money come down to either "Internet" or "newspaper". While a sign is important, you can only spend so much on a yard sign and you don't gain much of an advantage after you put the words "For Sale" and a phone number on the sign. Similarly, finding an acquaintance to buy the home just requires shoe leather. After you have called all your friends and relatives or maybe mailed a post card to the neighborhood, there isn't much left to do. Internet advertising out performs newspaper by a margin over nearly 11 to 1. Or said anther way, you are 11 times more likely to sell your home if you take the $100 for a weekend classified ad and put it into a Google pay-per-click ad campaign.

Back to the question from my previous post, "Should all marketing dollars be spent on marketing to real estate agents since 83% of buyers use an agent?" The answer is no, because most buyers (66% in this case) actually find the home that they eventually purchase on their own. The next obvious questions is "Why do I need a real estate agent if most home buyers find homes on their own?" More on this later.

Real Estate News Worth Reading

April 6   Dollar parity keeps Canadian buyers in U.S. real estate

Great article from the Toronto Real Estate News Blog on how the rise of the Canadian $ vs the US$ could spur Florida home sales.

April 12 Jury's out on what will happen after tax credit for homebuyers expires

Article from the Denver Post on what might happen in the housing market after the expiration of the home buyer tax credit program

April 9 Don’t Bet the Farm on the Housing Recovery

Article by Robert Shiller (of  S&P/Case-Shiller Home Indicies fame) in the NYTimes.

 

 

 

 

How Homebuyers Find Homes (part 1)

If you are thinking about selling a home, knowing how home buyers find homes is important information. It should define your marketing plan. 

All of the data from the discussions below comes from the 2008 study by the National Association of Realtors, Profile of Home Buyers and Sellers.  I will refer to this as the Study in the subsequent discussion.

Method of Home Purchase

The best way to explain "method" in this sense is to look at the Study results:
Purchased through an Agent/Broker            83%
Purchased from a builder                            8%
Directly from an owner buyer did not know     3%
Directly from an owner buyer did know          2%
Foreclosure/Trustee sale                            3%
Other                                                     1%

For 2008, 83% of home buyers purchased their home with the help of a real estate agent or broker. For resales (i.e. not new construction and not a foreclosure sale), 93% of buyers used an agent/broker.

Smart marketers know that sometimes to you don't market to the user but to the decision maker. Baby food companies market baby food to parents, not babies.  Similarly, pharmaceutical companies spend most of their ad budgets marketing to physicians who prescribe the medicine to the user. If you look at this first group of statistics on home buyers, you might think that real estate is one these exceptions. Why bother with marketing your home to buyers when so many use a gate keeper? Should all of the marketing be aimed at agents/brokers? Read my next post before you decide.

Marking Time - Case-Shiller Home Price Indices Move Very Little, Again

The S&P/Case-Shiller Home Price Indices for January 2010 were release last month. The chart for the Miami, Tampa, and 20 market composite indices is posted on my website. All 3 indices suffered slight declines - the 4th consecutive for Miami and the national composite and 5th in a row for Tampa. Thankfully all of the changes this month and for the last 4 or 5 cummulatively have been relatively minor. We've been basically flat during this period.

Prices for all 3 indices are now back to mid 2003 levels. If you bought or refinanced after the first quarter of 2003, your are most likely part of the 21% of homeowners underwater in their mortgage.

Zillow Reports that 21% of Homeowners are Underwater

Zillow reported last month that 21% of homeowners have mortgage balances in excess of their market values. This was widely cited as another spike in the coffin of the real estate market. I suppose it's true that homeowners in this position are more prone to foreclosure and loan default than homeowners with positive equity. If you get into financial difficulty, you can't sell your house to get out of trouble without paying out cash at closing (which you presumably don't have if you are having financial difficulties). Refinancing is creates the same problem - you can't refinance your home for the existing mortgage amount because the home will not appraise for the loan amount.

However, the foreclosure rate is tiny - only .1 of 1% of all homes nationally faced foreclosure in 2009. If they all came from this underwater group, then only .5% of the group gets foreclosed every year. I think the negative effects of foreclosures are more than offset by something even more powerful.

I think a larger impact and certainly a more positive one is that this underwater situation will keep a huge chunk of the national real estate supply off the market for years. Clearly, most of the people in this group are capable of making their mortgage payments and have no intention of losing their home to foreclosure. But many will be unable or unwilling to sell their home due to the large cash requirement to do so.

The impact will likely be the long-term removal of homes from the market and stable prices. It is already happening (the inventory removal anyway). The huge drop in inventory since 2007 is mostly due to people taking homes off the market.

Sarasota Condo Sales Poised For a Break Out?

If you look at the 6 month rolling chart for Sarasota condo sales, you will notice that the peaks in the charts are all in the late summer (July or August).  This trend is caused by the way the chart is constructed and by our seasonal traffic pattern. The six months ended in July, includes all of the sales made during our winter (tourist) season and is usually about 40% larger than the sales in the second half of the year.

 

 

 

But look at the overall pattern of the chart. First look at the July 2007 peak. The sales during this period were inflated by the closing (sales) of a couple of large downtown buildings. Although all of the sales closed and were booked in the first half of 2007, they represented contracts that were signed over the past couple of years. The sales do not represent true demand during that 6 month period.  These closings inflated the period's sales by over 250 units.

Without these closings, sales at the 2007 peak would have been closer to 600 units, below the subsequent peak in July 2008 (which was 692). The most recent peak in July 2009 was 832 unit sales (Again, these are rolling 6 month figures, so the sales figures quoted are for the 6 months ended on July 31st.) This gives us 3 seasons of progressively higher demand.

But the most exciting part of the chart is the activity after July 2009. Instead of falling off during the trough period of July through December, sales have remained steady. In fact, the trough month is January and sales in this perid are usually about 70% of the previous peak. For January 2009, the rolling 6 month sales figure is about the same as the previous peak (823 in January vs 832 in July). If we move up the usual 40% from here, the 6 month sales figure at the 2010 peak could break 1200 units (back to 2005 levels). If inventory levels stay the same (and they have been flat or decreasing every month since June 2007) the condo absorption rate could drop to under a year.

Another good piece of news is that these condo sales have not been driven by foreclosures. Bank owned sales for the past 6 months have only accounted for 71 of the 823 sales or about 8.5%. So, if there is a wave of foreclosures in condo inventory, they should all be devoured in short order given the short absorption period for foreclosures (See my post on Foreclosure Overhang for more info on this.)