LJWorld.com / There’s no place for home sales

Archive for Friday, February 29, 2008

Realtors, like Dorothy, yearn for comeback in market

February 29, 2008

McGrew Real Estate releases sales report

A report coming out this weekend looks at real estate sales from last year, and officials are hoping there won't be an equally frustrating sequel. Watch

Home sales fell by 8 percent last year in Lawrence, following up on an even larger 10 percent drop a year earlier.

No wonder leaders at Lawrence’s two largest real-estate agencies are looking forward to a turnaround this year.

After all, they figure, it can’t get much worse.

“We’re cautiously optimistic that the worst is behind us,” said Mike McGrew, chief executive officer of McGrew Real Estate. “The fact is, Lawrence has weathered lots of storms in the past, and we’re going to weather this one.”

McGrew Real Estate today will begin distribution of a report card of sorts for Lawrence’s real-estate market during 2007. Among its findings:

l The 1,431 sales recorded last year ranked as the lowest number in a decade, when 1,368 sales were completed in 1997. Sales had been on the rise for much of the decade, peaking at 1,749 in 2003 before dropping each year since.

l Sale prices continue to rise. The average price paid in 2007, McGrew said, was $201,452, up 5 percent from a year earlier.

Mark Buhler, broker and vice president for Stephens Real Estate, said that the downturn of recent years had realigned the mindsets of buyers and sellers.

Rarely are homes now listed at above-market prices, and prospective sellers now understand the value of making all necessary upgrades — whether it’s for new paint, carpets or anything else — before scheduling an open house.

“If you don’t, the market will absolutely ignore you,” Buhler said.

That said, homes continue to sell for anywhere from 96 percent to 98 percent of their list prices, Buhler said, an indication that sellers are being especially sensitive to market conditions.

Now, buyers, drawn by historically attractive mortgage interest rates, are coming back.

“Buyers have been told for the past two or three years: ‘Do not, do not buy a home. It’s awful,’ ” Buhler said. “But life goes on. People get married. People accumulate families. We’re seeing — in open houses and on the phones — that there are real people out there interested in housing. They understand that rates are very competitive, selection is there and (homes are) more keenly priced.”

He likened the activity to “The Wizard of Oz,” when Dorothy’s home lands after being carried away by a cyclone, and along comes a call to “come out, come out, wherever you are.”

“People are coming out now,” Buhler said. “They’re starting to come out, come out wherever they are.”

Discussion

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29 February 2008 at 2:35 a.m.

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Multidisciplinary (Anonymous) says…

I need to call my realtor tomorrow, or I will be bust!
29 February 2008 at 7:08 a.m.

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toefungus (Anonymous) says…

Sales are not the problem, prices are. The price of homes far outpaced the rise in wages the last 10 years. Prices need to come down about 15%.
29 February 2008 at 8:55 a.m.

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OnlyTheOne (Anonymous) says…

Are they trying to convince us or themselves?

Of course there are buyers out there but with a 10 month (or so ) inventory of homes available it's going to take a heck of a lot more buyers actually buying.
29 February 2008 at 11:02 a.m.

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Reality_Check (Anonymous) says…

10 months of inventory is nothing compared to some areas of the country.

The Law of Averages always wins: You can't have sales and prices outpace the historical average for several years, then think it will all correct in a year or two. This could take years of flat or no growth, or a couple years of serious declines. Regardless, it ain't over in 2008.

Historically, home prices track inflation, rents, and incomes. I'm willing to buy your house for its 2002 value, plus the rate of inflation since. You're just not willing to sell it for that reasonable price, because your place is “special.” Just like your kids and dog…everything you own/have is above average, even though you're very average yourself. Grow up.
29 February 2008 at 11:31 a.m.

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Logan5 (Anonymous) says…

“Sales are not the problem, prices are. The price of homes far outpaced the rise in wages the last 10 years. Prices need to come down about 15%.”

I wouldn't hold your breath. Talk about Stagflation, look at these numbers:

http://southflorida.bizjournals.com/albu…

Dennis Roberts, director of industry relations for the Associated General Contractors of New Mexico, says the costs of all raw materials are increasing because of high gas prices and an overall increase in services across all industries. He says between June 2005 and June 2006, the prices increased for asphalt by 71.4 percent, copper and brass by 81.5 percent, iron ore by 73.7 percent, plastic by 19.2 percent, and gypsum by 23.3 percent. Greater economic growth in foreign countries, including China and Japan, have led to competition to secure raw materials and that has kept supply prices high despite the lack of shortages.

The only way to decrease the price of these new homes is to reduce size, ammenities, and the cost of raw land.
29 February 2008 at 11:38 a.m.

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Logan5 (Anonymous) says…

http://www.nytimes.com/2007/10/26/busine…

Cement plants operate in much the same way as power plants. They cook the cement mixture in a giant kiln using pulverized coal or natural gas to fire it. Once carbon taxes go into effect, the price is really going to increase.
29 February 2008 at 11:59 a.m.

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JJE007 (Anonymous) says…

I'm pleased and happy to repeat the news that we have, in fact, caught and killed a large predator that supposedly injured some realtors. But, as you see, it's a beautiful day, the houses are open and people are having a wonderful time.

Lawrence, as you know, mean “high”!~)
29 February 2008 at 10:03 p.m.

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nedcolt (Anonymous) says…

If Home worth is dropping how about home taxes dropping
29 February 2008 at 10:14 p.m.

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Multidisciplinary (Anonymous) says…

They drop AFTER you sell. SInce they were over evaluating your house for years, when you finally sell in the realm of real value, the new buyer gets the fun of seeing the tax evalutation go to the purchase price.
The previous, sometimes elderly owner who has been being screwed for years doesn't get anything back.
3 March 2008 at 1:31 p.m.

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niles (Anonymous) says…

Housing is still about 15-30% overpriced in Lawrence. This problem is a result of loose credit, consumer financial illiteracy, and greedy speculation on part of McGrew, Lawrence Realty, other realtors, real-estate 'investors' and various builders.

Trusting your realtor to value houses ignores the fact that their incentives are aligned 180 degrees from yours. No amount of carefully-worded repudiation on their part changes this. The necessity of realtors supposes a barrier to market information. Such barriers vanished in about 1997. Now that the speculatory housing boom is over, the industry will be permanently down-sized. The only impediment to this is their efforts to manipulate law to necessitate their role(er, the 'brokers' role) in the legality of transactions.

A financially-savvy way to value housing costs in kansas would be to take a given home value in, say, Topeka, and multiply it by the ratio of median Lawrence household income to median Topeka income. After this, one would need to add 1 or 2 % above that to account for the fact that Topeka is full of bible-beaters and criminals whereas Lawrence only has Last Call, Dennis Steffes, and Doug Compton.

If you look at census data (http://quickfacts.census.gov/qfd/states/…) you can see that this ratio is about 13%. Therefore, the maximum sustainable demand valuation would be a premium of about 15% over a comparable Topeka home.

As a 500k Lawrence home would cost 300-350 in Topeka, there is still about a 15-30% premium. Subtract the sustainable 15% premium to arrive at the market-sustainable valuation above.

Given the illiquidity of real-estate, further exacerbated by market slowness, this adjustment will likely take place over the course of the next decade. It is quite possible that we may see no significant price drop in lieu of a stagnation in lawrence housing prices until inflation extinguishes the 15-30% premium.

We might shave another 1 or 2% off of that fall if Steffes and his cool rat-tail moved away.