Chad & Sara Huebener

By Chad Huebener

The other day, a woman I was talking to was wondering why homes are selling for so little in her neighborhood these days. She stated that since there were no foreclosures in her neighborhood, she did not think her neighborhood was affected by the falling home prices that tend to follow in their wake. She was getting sticker-shock when she saw the sale prices in her neighborhood, and she was surprised to learn that foreclosures DO affect her neighborhood.

While I have long ago grown accustomed to the look on people's faces when they realize how far our housing prices have fallen, her question was particularly interesting because it highlighted a consumer thought process that up until that point never dawned on me existed.

Her thought process made sense. After all, I can understand how homeowners mentally segregate their neighborhoods from other neighborhoods in terms of value. I do it myself. Houses built by the same builder in the same neighbhorhood tend to carry very comparable values.

Similarly, rarely does a home built by the same builder in the same neighborhood during the same time period with the same or similar floor plans on comparable sized lots see significantly different sale prices. There might be some value discrepancies based on location within the neighborhood, condition, or other factors, but overall, it just doesn't work that way. So it only makes sense that the home values in a neighborhood with this degree of uniformity are affected by foreclosures and short sales within that neighborhood.

So what about a neighborhood where NO foreclosures exist? It's prices would not be impacted by foreclosures and short sales, right?

The answer to this is simple .... All a buyer needs to do is shop around. Let's say that the non-foreclosure neighborhood holds its prices steady, while other neighborhoods experience foreclosures and see pricing declines. If the buyer can purchase a relatively similar home in another, nearby neighborhood where foreclosures have brought down home prices, then the buyer will tend to purchase the significantly lower priced home nearby. And when a few buyers begin doing this, and sellers in the neighborhood without any foreclosures start realizing that homes are not selling at the listed price because buyers are choosing to purchase elsewhere, then sellers (in the neighborhood without any foreclosures) will begin to drop their prices to compete with the neighborhoods that do have foreclosures.

Those sellers who do not price their home in alignment with market conditions often discover all too late that their house will not sell for list price. By the time they lower the price, the market times that have accrued are telling buyers there might be something "wrong" with the property, even if there is not. And a lower offer price will reflect that buyer belief.

Foreclosures and short sales are an unfortunate reality in our market. And it drives home one of my earlier contentions that the seller who puts his house on the market simply because "he wants to" is now, for the most part, a thing of the past. The financial flexibility simply does not exist for many.

The good news is that sales are up, inventory is down, and houses are moving more quickly than they were even this past spring. Lower inventories equate to less competition for sellers. And lower market times equate to higher offer prices. Day by day, bit by bit, we work toward market recovery. In the meantime, overpricing homes (i.e. not pricing them in line with the true market conditions) is unrealistic and hurts neighbhorhood values because when that late offer finally materializes after numerous price reductions, it is almost a guarantee that that offer will be a low one. And all the other homes in the market will be affected in some way.

By Sara Huebener

It's no big secret that we are in a real estate market like no other. We've all been raised with the core belief that homeownership is the American Dream, and the way to build long-term wealth. In recent years, the American Dream turned into the American Nightmare for many, as people who bought homes (particularly between 2004 and 2007) saw their home values plummet in a matter of months. And the higher the priced home, the harder the fall.

Years ago, people moved for a variety of reasons....job transfers, lifestyle needs, school district preferences, and also, the now-seemingly luxurious reason of "because they just wanted to". And while employers are still moving employees, and people still need to upsize because of children or downsize because of retirement, we are simply not seeing very many people moving "just because". Those that can (and who bought during 2004 and 2007) are uncommon, and lucky to have the ability to do so.

That said, an interesting trend is developing in West Savage. Now that we are seeing heightened activity in West Savage and homes are starting to move again, some people who don't know if they can get what they need from the sale of their homes are increasingly beginning to test the market....in private. West Savage has a number of homes actively on the market without For Sale signs in the yards. While we certainly have seen these "secret sellers" in other markets, it is increasingly prevalent now. Most likely, by not using a sign, neighbors won't know if a house fails to sell for the desired price, and the house can be easily pulled from the market without any social ramifications.

West Savage has at least five homes listed right now that have no For Sale signs in the yards, as sellers work to get their homes sold without knowledge of the neighbors. Given what has happened to our market and the shrinking choices offered to many people in terms of financial flexibility, we say this level of privacy is A-Ok, and we respect their privacy while still keeping their homes in mind for showing to prospective buyers in the area.

By Sara Huebener

Some of the things we encounter in the real estate business never cease to amaze me. One of them is, of course, the nature of foreclosures and short sales. It just goes to show that these transactions are so unique, so independent of each other in terms of what is considered "standard", that each one is a learning experience.

I have been working with a buyer who needed to buy a home (quickly) before the homebuyer tax credit expires), and so we have been feverously searching for a home in her price range in school district 719. Many are short sales, and since short sales take so much time to get done (as in months), she did not have the time to close on one and qualify for the tax credit. So we focused primarily on traditional sales and foreclosures.

All that said, one home struck her fancy. It was neat, clean, spacious and updated. It was also in her school district and price range. It was almost too good to be true. I told her what I have been seeing in recent months - the extensive buyer pool that this home caters to, paired with a race to the tax credit deadline, would surely drive the price on this house up beyond her reach.

Regardless, we took a shot at it and submitted our offer at just a few dollars above list price (and the top of our budget).

Surprisingly, in a pool of a dozen offers, our offer was one of two that the bank decided to review. Oddly, the bank did not want to see a higher offer price. (??) This is so different from any other foreclosure transaction we have ever done. Instead, the bank wanted the pre-approval letter worded in a very specific manner, and wanted strong earnest money down. I was stunned. The bank had turned down ten other offers higher than ours, and chose our offer because of how we worded our preapproval letter. In the end, the bank selected our offer. Currently we are waiting on signatures and preparing ourselves to jump through the many hoops we know are coming down the pike, to get her family into this great house.

I am bewildered with the rationale of the bank, as this home would surely appraise for at least $20,000 more than our offer price. But I am also pleased that my buyer has found what she needs - a home in her child's school district, for a price she can afford and a condition next to new.

Telling a buyer that she "got her house" when we thought the odds were impossible is one of the greatest joys of this job, especially when I can make that call on Labor Day weekend. And a reminder of how absolutely random and inconsistent foreclosure transactions can be is always educational.

By Sara Huebener

Buyers who are looking to take advantage of the $8,000 tax credit need to really start moving on home searches if they have any hopes of fulfilling this objective. Properties must be closed no later than November 30, 2009 in order to take advantage of the tax credit. When one takes into account the time it takes to get pre-approved for, search for, offer on, negotiate, inspect, and arrange financing and title work on a property, 125 days is not a lot of time.

If the buyer is looking in the $150,000 or lower price range, this market has become a seller's market and offers must be highly competitive in order to stand any chance of being accepted.

If a buyer wants to write an offer on a short sale, the timelines short sales require to complete are almost already at the point of being nearly impossible to get closed by November 30.

The clock is ticking.... if you know of someone who needs to get into a house before November 30, please have them contact us ASAP at 952-212-3597.

By Sara Huebener

For our West Savage neighborhoods, August has marked the most notable changes of the entire year in terms of inventory and sales. These drastic changes are likely attributed to increased consumer confidence and a need to get families relocated prior to the start of a new school year.

West Savage has seen a 37.5% drop in total inventory in the past month. This is a tremendous decrease in competition for sellers in our local marketplace. The steepest declines in inventory have occurred in The Pointe neighborhood, which usually sees an average of 12 active listings at any given time, and now has only five. Following The Pointe in terms of inventory declines is the Woodhill neighborhood, which has seen a 40% drop in inventory, as two of its five active listings have sold in the past month. (One has no sign in the yard.) Hamilton HIlls has also seen significant changes in inventory. Furthermore, new listings in West Savage are down 60%.

Pending sales in West Savage have nearly tripled since last month, and sold listings have quadrupled. Whereas zero sales closed on paper during the time period covered by our last issue, four properties have closed on paper in the last 45 days. Expired and cancelled listings remain constant from last month.

In summary, the steep drop in inventory, sharp rise in pending activity, and increase in closed sales are a breath of fresh air for our local marketplace compared to what we were reporting in March and April of this year. In recent months, our marketplace typically sees an average of two listings sell from a pool of 28 active listings. Using that as a benchmark and comparing it to this month's report, homeowners in West Savage finally have something to smile about!

Our West Savage absorption rate has dropped to 5.64%. That means if zero new homes come on the market, it will take 5.64 months to sell our existing inventory. This is the lowest absorption rate we have seen in well over a year!