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Archive for Wednesday, March 11, 2009

Hope for housing market

Would-be buyers taking the plunge

Joel Sauer and his wife, Brooke, are preparing to close on their first house: a three-bedroom, two-bath home at 312 Glenview, pictured in background. The decision to make the purchase in a down economy was made easier by the federal stimulus program’s $8,000 tax credit for buyers like the Sauers.

Joel Sauer and his wife, Brooke, are preparing to close on their first house: a three-bedroom, two-bath home at 312 Glenview, pictured in background. The decision to make the purchase in a down economy was made easier by the federal stimulus program’s $8,000 tax credit for buyers like the Sauers.

March 11, 2009

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McGrew leaders assess market

Mike McGrew, chief executive officer of McGrew Real Estate, says that "bottom of real values" is approaching for Lawrence real estate.





Sliding sales

Number of homes sold in Lawrence per year and change from year earlier, according to numbers from the Multiple Listing Service compiled by McGrew Real Estate:

2008: 1,066, down 25.5 percent 2007: 1,431, down 7 percent 2006: 1,538, down 9.6 percent 2005: 1,702, down 1.4 percent 2004: 1,726, down 1.3 percent

Home sales in Lawrence are down 25 percent from the previous year, sale revenues are off even more and home prices fell last year for the first time in memory.

But the sky is not — repeat, not — falling.

When President Barack Obama signed a $275 billion housing stimulus program last month, he just might have nudged the first of many welcome dominoes waiting to fall in Lawrence’s residential lineup.

That’s because people like Joel and Brooke Sauer are in the market once again, generating hope that optimism will re-emerge, sales will pick up and that pent-up inventory up the line — all the way from entry-level homes to high-priced residences — will be reduced.

“With the economy the way it is, everybody’s afraid to move on anything like this,” admitted Joel Sauer, who drives a forklift at Hallmark Cards Inc. “There’s always the fear: What if one of us gets laid off? There’s always questions.”

But the stimulus program, approved last month, will provide a one-time, $8,000 nonrefundable tax credit to first-time and other qualifying homebuyers like the Sauers — people who don’t need to sell a home to buy one, and therefore can help inject activity back into a market that’s been sagging for months, even the past several years.

“When we found out we wouldn’t have to pay this credit back, that helped cement our decision,” he said, preparing to close on their $137,500 purchase later this month. “When it’s just free money in your hand, you can use that to fix up anything in the house, or just have a little savings account.”

The stimulus program is injecting a dose of guarded optimism into the market for buyers, sellers and Realtors alike, just as the spring sales season approaches.

Randy Barnes, president of the Lawrence Board of Realtors, said that the stimulus likely would help persuade at least some qualifying buyers — people who haven’t had a mortgage for at least the past three years — to consider purchasing a home.

“It isn’t going to hurt,” said Barnes, a Realtor for Realty Executives Hedges Real Estate.

Realtors are hoping for something to help turn things around this year. Among the findings included in a Lawrence housing market report for 2008, released this week by McGrew Real Estate:

• Realtors moved 1,066 Lawrence residential properties during 2008, about 25 percent below the previous year’s 1,431.

• The total value of sales slid to $208.8 million, down 27 percent — or nearly $80 million — from the total for the previous 12 months.

• The average price paid, $195,858, dipped 3 percent from the $201,452 average for 2007.

Price declines were accelerating as the end of the year approached, said Dennis Snodgrass, McGrew’s president and managing broker. That means sellers need to be as cognizant as ever about ensuring that their listings are priced “realistically,” given market conditions.

“In the past, as long as you were priced somewhere in the ballpark, you would sell,” Snodgrass said. “You can’t do that today. You have to be priced sharp, and you have to have your house in great condition.”

Becky Mondi, a Realtor for Re/Max and a director for the Lawrence Board of Realtors, said she already had seen the tax-credit spur transactions. Now it’s a matter of keeping the momentum going.

“The stimulus program has certainly brought the buyers out,” Mondi said. “What I’m seeing is that the entry-level buyer is opening the door for that seller to move up, and then it starts a chain reaction.

“There is activity in the market, and I’m starting to see sporadic activity in more moderate to upper-level markets.”

Comments

Michael Capra 5 years, 12 months ago

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KS 5 years, 12 months ago

The sky is falling, the sky is falling!

Chicken Little

The_Voice_of_Reason 5 years, 12 months ago

458... I'm confused by your post. Beware of Larry Northrop or Larry Northrop beware? Threat or statement please... I'm just wondering???

TheYetiSpeaks 5 years, 12 months ago

"But the stimulus program, approved last month, will provide a one-time, $8,000 nonrefundable tax credit to first-time and other qualifying homebuyers"

Not unless you are buying an 800,000 dollar house. As part of the last minute changes to the bill its only 10 percent of the total house cost. I have not seen any media outlets report this right. Look closer.

LTownBaby 5 years, 12 months ago

Wow yetti, you obviously didn't use your calculator on that one!

yankeevet 5 years, 12 months ago

I have an approved loan; however; its not easy too buy a house in this town; the houses do not appraise for the amount the seller is asking; so there is no deals. The sellers do not seem to understand that property values have declined; and according to the appraisals there property is not worth what they are asking; so therfore; no deal; and their property just sits.............

Moderateguy 5 years, 12 months ago

Pardon me, but wasn't people buying houses they normally couldn't afford the main reason we're in this mess in the first place? (Then, there is the whole re-distribution of wealth issue.) Good luck with your house purchases, we're no where near the bottom yet...

bangaranggerg 5 years, 12 months ago

TheYetiSpeaks brings an interesting point to light here, many people, whether they own a home or not, are surprisingly bad at math.

cnorwoodus 5 years, 12 months ago

"Wow yetti, you obviously didn't use your calculator on that one!"

Now that is funny!

beawolf 5 years, 12 months ago

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fdalpd 5 years, 12 months ago

Yetti...seriously? Math most certainly isn't your strong suit. You, also, obviously don't watch/read much news. Not only was the 10% or $8,000 not a late addition to the bill, it has been widely reported on all news outlets.

Also, the tax credit is refundable not non-refundable.

craigers 5 years, 12 months ago

fdalpd, thanks for stating that. If it was non-refundable then the homebuyers mentioned would only get the amount of tax they paid in back up to the $8,000. The first time home buyer credit will not stimulate the economy like the total primary resident home-buyer credit would have. Oh well, I guess the real estate inventory will stay stagnant.

darthvedder 5 years, 12 months ago

Wait. Doesn't this article contradict the half a dozen 'the real estate market in Lawrence is immune/as healthy as ever' pieces we've seen over the past year or two?

jafs 5 years, 12 months ago

Arumer,

Maybe, but there are a myriad of other forces at work. For example, it's much harder to get a loan. It's very possible that the price of the house isn't inflated by that amount.

We'll see.

fdalpd 5 years, 12 months ago

Craigers...I believe this refundable credit has a better shot at spurring the lower-end market (like the couple in the story) more. Since it is a refundable tax-credit, similar to child credits or earned income, it can reduce one's tax liability below -0-. If a person amends the 2008 return to claim this tax credit they will receive $8000 (or 10%, but who's buying a $79,999.99 house) on top of what they've alread received as a refund regardless if they have already zeroed out their tax liability. If one owes to the IRS then obviously they won't receive the entire $8000.

Now one could argue it is more of a subsidy then a tax credit, but nonetheless I think it will help buyers. Yes, it could be a greater benefit if it were aimed to all primary homebuyers, but most believe the stimulus package was big enough.

jafs 5 years, 12 months ago

And, I would generally agree that the market should correct, but there seems to be a problem with that idea.

Housing sales have been way down in Lawrence, and yet asking prices don't seem to be dropping much, even though there are many houses on the market.

Why is that? One would think that with supply high and demand dropping that prices would drop until demand increased.

fdalpd 5 years, 12 months ago

I've been casually surveying the market looking to buy here in Lawrence since before the tax credit was passed, and I haven't noticed an increase in values.

Arumer may eventually be proved true, but I don't think we are there yet.

jafs 5 years, 12 months ago

Right - if houses aren't selling at current prices, then they won't be increased to offset the tax break since they still wouldn't sell.

Perhaps they'll sell at current prices with the tax break included though.

We'll see.

fdalpd 5 years, 12 months ago

There are a lot of houses on the market, but a lot of them are pure trash. Look at the MLS in the "starter home" price range ($140,000 - $160,000), you will receive a sizable search result. Then go through there and take out what I would call investment properties or heavily deferred maintenance properties. RE Investment has dropped, and you will see these houses stay on the market. The true family homes are actually moving again.

fdalpd 5 years, 12 months ago

It is definitly a "wait and see" situation. However, Lawrence is unique. Once Lawrence real estate climate takes a turn for the better, that doesn't necessarily mean the rest of the region will follow suit.

jdk5270 5 years, 12 months ago

In some cases sellers are unable to lower their price. Take for instance a seller that had bought in 2005 and financed 95% of the purchase price. The value of the home has not increased since then, and their principal balance would not have decreased significantly.

Take a $200,000 purchase in 2005 with 5% down.

In 2008 that buyer would owe approx $181,141

If they listed their home for $200,000 after 6% commission, they would net $188,000 less their sellers closing costs of lets say $1,500, and the tax credit to the buyer of approx $1,200 That would leave them with $4,159.

Remember they put $10,000 down plus closing costs etc. Lets assume with down payment, closing costs, prepaid items etc. they came to closing with approx $15,000

That is a loss of a little over $10,000 if they get what they paid for the home.

Now consider that same transaction where the seller put 0% down when they bought in 2005. Ouch!

feeble 5 years, 12 months ago

There are a number of properties, in the greater Kansas City area, including Lawrence, which are greatly overpriced.

I have seen a number of homes that need significant work (i.e. cracked foundations, major roof repair, serious drainage issues) that are being listed at over $160,000. The cost of immediate and basic repairs to these properties will easily raise the actual cost over 200,000, well out of range for the first time buyer.

That 8,000 will be quickly consumed by "simple" things, such as winterizing a home.

It is worth noting that new home prices decline 9% regionally in Q4 of 2008. We should continue to expect large declines in price for older homes or starter homes. The Midwest/Kansas City market seems to be under the impression that this shouldn't apply to the local market.

justthefacts 5 years, 12 months ago

Here my advice for anyone thinking about buying any kind of property (for the first time, or again); DO NOT BUY ANYTHING ON CREDIT unless you know (for sure) that you can pay it off. That means not spending 1/3 of your salary on a mortgage payment, even if the bank(s) will loan you that amount. Agreeing to pay 10% of your income on a mortgage is far wiser, and that's only if your job is pretty darn secure. I may not be a genius or a financial genius - but I come from a long line of people who (a) haven't gone bankrupt (yet); (b) own a lot of real property and (c) don't owe anyone money!

LivedinLawrence4Life 5 years, 12 months ago

458casul is Mike Capra from Vito's Plumbing. Look at the history of his comments and you will see a pattern.

LiberalDude 5 years, 12 months ago

With the $8000 tax credit, low prices, and low interest rates, this is a great time to buy a home for first time buyers.

Tony Kisner 5 years, 12 months ago

Yeti - 10% of $800,000 house is $80,000. 10% of $80,000 house = $8,000.

beawolf 5 years, 12 months ago

ArumerZwarteHoop (Anonymous) says: "the next 3-10 years housing prices will decline, we will be looking at 18% interest rates and tougher loan requirements."

I swear you make this stuff up. You do not have a clue as to what the housing market in Lawrence or what interest rates will be like next year much less 10 years from now.

ArumerZwarteHoop (Anonymous) says: "These policies are intentionally designed to prop up housing costs at the expense of the consumer."

Again you lie. These tax incentives will affect only a small portion of home buyers. The market will not be affected. The tax incentive will bring some buyers off the sidelines and into the market but only as the economy recovers will the market follow.

Michael Capra 5 years, 12 months ago

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Michael Capra 5 years, 11 months ago

larry northrop realty execuyives//hedges ethics they have none.after I had done a deal on some realestate this guy steps in and screws me out of 4000.00 and his boss brain hedges let him do this. so what I am telling you the public is beware of the guys they will do anything it takes to make a buck and dont care who they screw to get the money..is this who you want to sell your realestate,,,not...

Michael Capra 5 years, 11 months ago

sorry for the spelling its brian hedges and realtyexecutives dont want anyone to forget

Michael Capra 5 years, 11 months ago

and I would like to thank Mcgrew real estate at least there honest and up front thanks mike

flyin_squirrel 5 years, 11 months ago

I personally prefer McGrew real estate....

TheYetiSpeaks 5 years, 11 months ago

LOL...What was I smoking that morning? My numbers were all jumbled.

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