Muncie, IN

As we come to the end of 2011 I want to look forward to 2012 and make some predictions about the real estate market in Muncie and Delaware Co, IN. 2011 was a very difficult year and when the final tallies are in, we're probably going to see unit sales down about 10% from 2010 and average sale prices about equal to 2010.The good news is that most of the problems were in the first half of the year and that 5 of the last six months have been better than their 2010 counterparts.

Looking ahead, I think 2012 will remain relatively flat with some improvements in the second half. There are more optomistic predictions beginning to appear in the media, but many of those predictions are based on improvements from very dismal prior years. If you look at the formerly "hotmarkets" like CA, NV and FL, many areas lost 50% or more of their previous values so it's not to hard to show improvements. In Muncie and Del. Co. our average sale price only dropped about 10% from 2006 levels and has been increasing over the past 6 months.

Market conditions are excellent, with low interest rates and attractive prices favoring buyers and low inventories favoring sellers. Our biggest problem remains the lack of confidence generated by all the negative financial news and especially by the lack of policy direction from Washington. Added to that is the uncertainty resulting from an presidential election year. Locally, we have a new and untried city administration and a governor election coming up. When faced with uncertainty people put off major financial decisions like home purchases.

On balance, I think our unit sales will rise in 2012 to somewhere in the 900 range, up from just over 800 this year.

Interest rates will rise slightly as the national economy improves, but will still remain below 5%.

Average sale prices will rise 8-10% as a result of low inventory and increased buyer activity.

New construction will remain slow but should improve from the very low levels of the past few years.

Best wishes to everone for a prosperous 2012.

The following article was posted by CNBC on Yahoo Finance last Fri. Those of you who read me regularly know that I usually ignore national market information because all real estate is local. This time, however, our Muncie-Delaware Co. market data seems to be reflecting many of the characteristics of the predicted recovery. Our unit sales have exceeded those for the same period in 2010 for the past 5 months. Average sale prices are also up.

Here's the article. "After half a decade of withering sales and slumping prices, there are strong and diverse signs that the single-family housing market is poised for a rebound.In some metropolitan areas, the market has bottomed, with both sales and prices on the rise and foreclosures on the decline. This contrarian - and largely overlooked - thesis flies in the face of the persistent gloom that has nagged the industry since 2007, when the subprime crisis flared.

Industry analysts and players cite a number of reasons - some traditional (employment), others unique to the post-credit bubble era (foreclosures) Â - for the long-awaited sea change. An analysis of industry and government data also support the forecast. "It has become increasingly apparent to us that the pieces for a housing rebound next year are beginning to fall into place," declared Barclays Capital analyst Stephen Kim in a recent note to investors.

Proponents admit that the nascent rebound could easily be derailed, but stress that after years of government efforts to support sales and prices as well as the volatile impact of foreclosures, the market has regained a measure of normalcy. "With the exception of really hard-hit markets, the vast majority is ready to turn around," adds Jerry Howard, president and CEO of the National Association of Home Builders, NAHB. "The Washington, D.C., area is not only ripe for recovery, they need to start building units."

The iShares Dow Jones US Home Construction Index Fund (NYSE Arca: itb), for example, is up some 38 percent, while the S&P 500 is up about 21 percent.

Nevertheless, skeptics overwhelmingly outnumber the optimists, given the false-starts of previous years, the economy's sub-par performance, a new wave of distressed properties and the capacity for the European debt crisis to spook business, consumers and investors. "I think it's premature," says Richard Smith, CEO of Realogy, the nation's largest real estate company, whose brands include Century 21, Coldwell Banker and Sotheby's International. "We see little indications here and there. Transaction volume is improving. Prices are still under pressure. This isn't going to be one of those spiked robust recoveries." Smith is echoing the conventional industry calculus: that price increases follow sales growth amid consistently strengthening demand.

There's been little conventional, however, about this housing slump, which is one reason it's had so many false bottoms. Among its many firsts - housing starts fell through 1 million annual units, foreclosures topped 2 million in three consecutive years, and home prices declined on a national basis.

The catalysts to recovery are mostly the same: for potential buyers, residential rents have now risen enough to consider buying; existing-home inventory is the lowest in five years, while that of new homes is at a 40-year low; affordability is at a record high; delinquencies have peaked; consumer confidence is on the rise ; and job growth is accelerating.

For investors, with a continuation of the gold rally in question, real estate is beginning to look like a viable inflation hedge alternative, while rising rents mean greater profits.

That thinking may help explain why the iShares Dow Jones US Home Construction Index Fund (NYSE Arca: itb), a broad barometer for the housing market, is up some 38 percent from the stock market's October bottom, while the S&P 500 is up about 21 percent.

Finally, there's the intangible fatigue with bad news, and a desire to end the negative feedback loop. "We believe there is sizable housing demand that could be released into the market," says Lawrence Yun, chief economist of the National Association of Realtors, NAR. The NAR is forecasting existing home sales will rise 5 percent in both 2012 and 2013; prices will edge up 2 percent in each of those two years, then 4 percent in 2014. The NAHB is forecasting a 5.1-percent increase in new home sales and a 10-percent increase for new home starts in 2012. "

The election is now only 10 days away and it will be a critical election for Muncie, IN residents. Running for re-election is an experienced mayor with a strong track record of accomplishment. She has not only operated within a very challenging budget but will finish her term with reserve funds for next year. She has saved taxpayers $500,000 by not having to borrow money to cover operating expenses while awaiting property tax distributions.

She has also been effective in building international relationships and working with economic development people at all levels to bring new jobs to Muncie. Our parks have received long-delayed attention and have added greatly to our quality of life. Prairie Creek Park has become an income producer for the first time in history and will return a $90,000 surplus this year.

Contrast this with her opponent who has no municipal government experience and whose only accomplishment as an appointed State Senator was to participate in the Democrat walk-out that paralyzed the IN legislature last spring. In addition, he has strong ties to local public emploiyee unions who will be negotiating new labor contracts next year.

The races for City Council, especially the "At Large" contests, are equally important. Here again, the Democrat candidates have strong ties to our public employee unions and one candidate is married to a firefighter. This same candidate pledged civility and cooperation in a recent debate even though she orchestrated and led a rowdy demonstartion, complete with news cameras at one of the Mayor's neighborhood commmunication meetings. The demonstration, by the way, was to call attention to the lay off of her firefighter husband according to contractual proceedures necessitated by reduced tax income. If elected, this person will be voting on the new contract with the firemen's union next year.

Though property taxes are capped, elected officials can still pass Local Option Income Taxes to generate additional revenue. If the candidates with strong ties to public service unions are elected, I can't help but wonder how long it will be before this tax is adopted in Muncie.

What has all this got to do with real estate? Quality of life and especially cost of living are two major considerations in peoples' decisions on where they choose to live. The more people who choose Muncie, IN the more opportunites are generated for everyone and the more people there are to share the cost of providing quality public services. Our mayor and her staff have proven that these are their prime objectives. The opposition seems much more concerned with preserving and enhancing the lives their friends, families and political allies at the expense of the rest of the community.

It's probably too early to get excited, but the third quarter 2011 residential real estate results for Delaware Co. In are in and we may have turned the corner. Third quarter unit sales were up nearly 3% over the same quarter in 2010 and it was the first time in the past 4 quarters that units sold had exceeded the same period in the previous year.

Year to date is still behind due to very low activity in the first 2 quarters of this year. It does look like the rest of 2011 has a good chance to exceed the fourth quarter of 2010 and the improvement should carry on into 2012.

The number of reposessions has leveled off at around 25% of sales, down from over 33% at its highest level. Short Sales remain a non-factor, accounting for less than 3% of units sold.

Even better news is that average sale prices have improved by over 9% from the 3rd qtr. 2010 and over 2% year to date. Again, the YTD is not too exciting, but it's the first time a 3rd. qtr YTD price average has exceeded the previous year since 2005. In addition to increased sales of higher priced properties, our repos have been predonminately at the low end, so as the total number of those units has decreased, we have seen an increase in average sale prices. The list price to sale price ratio has improved slightly to just under 94%, very near our historical average.

Inventories of homes for sale decreased by over 2.6% in the 3rd qtr and that has carried through into the 4th qtr. The lower inventories come at a time of normally lower activity and so there should be less downward pressure on selling prices for the rest of the year.

Pending sales, a gage of future activity, were up slightly at the end of quarter. Average days on the market, the time from list to close, increased from 2010 but improved from the 2nd qtr. of 2011. It currently takes about 146 days to sell an average priced property.

Why do some houses sell more quickly? People often ask me that and here's a tale of two homes, across the street from each other in Muncie, IN. that I think shows two of the reasons. Both houses are well kept and updated, yet one sold for full list price in 35 days and the other, while it's now "pending" has been on the market 256 days.

This is the house that sold for full list. Its general appearance and especially the landscaping produces a terrific "curb appeal." Anyone looking at photos on-line or driving by the property can't help but be attracted. The flowers are abundant with tastefully matched colors. The window box of white Impatiens is eye-catching and the picket fence along the front walk gives a nice accent to the planting bed.

House #2 across the street is larger and has a 2 car garage. It has been completely updated inside and is in very good condition outside. So why has it taken so long to sell?

First, it was originally priced $30,000 higher than it was when it went "pending." After several reductions, it finally got down to where it should have been in the first place. Second, it has poor curb appeal. There are no flowers and nothing to add color or to draw a buyer's interest. I think it's likely that even if priced properly at the start, the lack of landscaping would still have made a big difference.

The National Assoc. of REALTORS and other groups do yearly studies on the return value of various home improvements. In nearly every survey, landscaping returns a higher percentage on investment than any other improvement project. Further, it's usually the least expensive. A few hundred dollars in flowers and shrubs would make all the difference for this property and it will be interesting to see the actual selling price once it's closed.

I think someone did a seminar on today's market titled "It's a price war and a beauty contest." I'd say Amen to that.