Was Chicken Little Right?

IS the sky falling? Considering the fact that Nobel Prize winning-economists, Congress, and the Cabinet don't seem to know, I'm not going to dare to opine. However, I do have some observations about our local real estate market - lovely Richmond, Virginia, my hometown - which I am listing below in no particular order.

1. I've said this before, but it continues to be true: It is a great time to be a first-time buyer, if you have good credit and some cash to put down. There are some amazing values out there. And there are great loan programs through the Federal Housing Authority ("FHA") for those with less-than-stellar credit and limited cash to put down. But DO NOT SPEND BEYOND YOUR MEANS. For Lord's sake, people, that's what got us into this mess. "Keeping up with the Joneses," as my Nanny would say. Buy a nice, clean, simple home that you can afford.

2. If you DON'T have great credit and/or money to put down, you should probably hunker down, continue renting, and see if you can repair your credit score and save some cash for a down payment. Your first steps should be to get your free annual credit report from www.annualcreditreport.com and see where you are. If there are outstanding collection accounts, get them paid off. Pay all your other bills on time. Pay down your credit cards, and don't open any more. All of these actions could get your credit score up in six (6) months to a year.

3. For investors: The days of 100% financing on acquisition and renovation, with an 85% LTV based on the after-renovated value, are over. O-V-E-R. You will have to have cash and strong credit, and additional assets to use as collateral. You will need to put in at least 15%, if not 20%, of the acquisition amount up front. Banks will require much more skin in the game, and you'll pay more for the money. Stop crying for the good old days, they are gone, gone, GONE. You can still do deals, you will just have to useyour own money, not ONLY other people's money ("OPM"). Novel idea, huh?

4. Sellers need to take a deep breath and evaluate their situations. If you don't have to sell, maybe you shouldn't be in the market right now. If you'd like to sell, but don't have to, there is probably no harm in testing the market to see what happens. But be patient. I'm telling lots of my sellers that what they may "lose" on the selling side from the market highs a few years ago, they will more than make up on the buying side, because there are so many amazing deals. For the sellers who have to sell, try to be calm, listen to your agent, and price your house right. If it comes on the market in pristine condition and priced appropriately, it WILL sell. Don't get greedy, just get it done. And bury a St. Joseph's statue in the yard, it can't hurt.

5. Too many buyers are looking for a steal, not a deal. Be reasonable. Many properties are priced appropriately for the market, as well as for the condition of the property. Look at the comparables before you make an offer. And don't make my seller an offer that is 40% off the appropriate list price. This isn't the End of Summer Sale at Macy's, people.

6. Buyers, you don't know everything just because you checked out Zillow and you watch "Flip This House" religiously. In fact, I'd bet you don't even know what you don't know. My young professional, Generation X, first-time home buyer clients are the biggest offenders. Some, certainly not all, give me little-to-no credit as a professional. After all, I just sell houses, how hard is that? Well, trust me, it's harder than any of you think. I wouldn't jump in for YOU and try to perform surgery, or design a building, or trade stocks. I am a professional, I do my homework, I know my markets, I'd REALLY love it if you would let me do what I'm being paid to do, which is advise you through the entire process of buying or selling a home.

7. Speaking of Zillow, and Trulia, and all those other aggregators of national housing data, you make my life miserable. Truly. While Zillow might be the greatest tool since sliced bread in suburbia and SUBDIVISIONS, where there are limited numbers of floor plans, limited numbers of upgrade options, and the homes were all built at or around the same time, it is WOEFULLY inadequate in the historic neighborhoods where I do most of my work. In Wyndham, yes, you can take square footage multiplied times an average price per square foot and get a pretty good approximation of market value In historic urban sub-markets the tool is (in my not-so-humble-opinion) next to worthless. Case in point: In the Fan, a home that had not been updated in over 40 years, purchased from the estate of the owner-occupant, and converted from a triplex back single family was valued on Zillow in the mid-$500,000s (right about where it sold as a "shell"). That home sold after a COMPLETE gut renovation, including all new roof, HVAC, copper plumbing, designer kitchen and baths, not to mention the critical Fan tanglibles that are difficult to find in a single property - off-street parking, large yard, storage basement, etc. - for $880,000. The "Zestimate" was off by OVER $300,000. I just don't think Zillow is effective in these markets. But guess what? Most buyers sure do. See Item #6 above.

8. Things aren't good, but in certain pockets here in the Greater Richmond Metropolitan area there is strength in the market. The "green" movement and new urbanism, as well as high energy prices and downsizing Baby Boomers, mean close-in City neighborhoods are doing fairly well.

Let's try to view this as a market correction, and see the silver linings. Maybe Americans will re-trench from this recession and emerge with a re-emphasis on some of those good ole' Depression Era values of working hard, saving first, living within one's means, and viewing a house as a home as well as an investment. Maybe we'll reclaim urban cores, and not keep chewing up green spaces for ever more suburbs. Stay tuned....