As summer is drawing to a close (don't cry, just think "Badger Foortball"!), it is a great time to look at how the market did in the past quarter. Home sales once again improved over the same quarter in 2009, and while median home prices fell from the prior year, it was not the drastic cut that we saw between 2008 and 2009.
Q1
Q2
Q3
Q4
Year End
2005
1307
2682
2540
1175
7704
2006
1154
2424
2078
1248
6904
2007
1246
2417
1999
1098
6760
2008
925
1885
1665
877
5352
2009
713
1712
1868
1143
5432
2010
847
2199
Median Price
Q1
Q2
Q3
Q4
Year End
2005
$205,000
$206,950
$213,000
$218,000
$210,000
2006
$212,500
$209,900
$215,000
$220,000
$214,000
2007
$214,900
$212,500
$222,000
$223,873
$217,900
2008
$209,000
$214,900
$217,000
$218,000
$215,000
2009
$202,500
$201,500
$207,250
$190,500
$200,700
2010
$200,000
$200,000
n/a
n/a
n/a
So what does this really mean? Does it mean that homes will continue to sell at the rate that they are? Not necessarily. The First Time Home Buyer Tax Credit encouraged the majority of first time buyers to make their offers and close on their homes prior to June 30, 2010. While there are still first time buyers in the market who missed the tax credit deadline for whatever reason, the increase in home sales seen in 2009 between Q2 and Q3 (once again, bumped by the original tax credit bill) will most likely not be seen this year.
The good news in this equation is the decline in unemployment in Wisconsin. Hitting 7.9% recently, down from over 10% just as of January 2010, we will hopefully see increased consumer confidence. It's not just about people having jobs, it's about people feeling comfortable enough with the economy to make a move. You wouldn't believe how many people tell me, "Well, I would love to sell my home and buy a larger/smaller/more modern/more central/less central home.......but I just can't imagine making a move at a time like this!"
An interesting theory out there is that the relocation buyers from last year may be ready to purchase a home this year. Many Relocation departments suffered last year, because even though qualified buyers were moving in to the city, they had homes to sell in their previous cities, and most often opted to rent for a year - some companies were especially encouraging their new employees to rent for a year and really get to know the local market. If this theory does pan out, we could see a bump in the medium to higher-priced real estate market (like my listing at www.45cambridge.restainohomes.com ;) ).
If you have any questions or would like more information about a specific market or neighborhood, please send me an e-mail at heidit@restainohomes.com !
Foreclosures: An Overview of the Wisconsin Process
Act I: The owner misses a payment.
When an owner misses a mortgage payment, the bank issues a Notice of Default. This is not publicly filed, and it tells the owner that they missed a payment (or more than one) and to please please please pay them.
Act II: The Foreclosure is filed.
If the owner then continues to fail to make payments, the bank will go forward with a Foreclosure Filing - this is public and in fact can be searched on CCAP. The owner is served and has 20 days to "answer" the filing, or basically admit to everything written in the filing.
Act III: Lis Pendens is filed.
This is a written notice to creditors that foreclosure is being filed. It doesn't mean much to the owner or really the bank for that matter - it's just required by the State of Wisconsin.
Act IV: Judgment.
A judge decides that the owner is in foreclosure and this signals the end of the foreclosure process, and the beginning of the Redemption Period.
Intermission: The Redemption Period.
During this period of time, the owners are allowed to try to pay back the loan in full to prevent foreclosure - this nearly never happens. So how long does this period of time last? Many people will tell you that you have a year - in most cases, this is not true. State law says that the Redemption Period is one year long, unless the bank waives their right to a deficiency (the money owed the bank from the original loan after the home is sold if there isn't enough to cover it). If they do waive that right - and the banks always do - then the time period is shortened to six months. Why would a bank bother to wait an extra six months for a debt that the owner would most likely not be able to repay? Banks can also decrease the time period to two months if they claim abandonment of the property - that is, the owner either moved out completely or is renting the home.
Act V: The Sheriff Sale.
If the Redemption Period ends without a sale of the property (usually a short sale) or some other agreement, the property goes to auction. I'm sure you've probably seen the commercials - "Get this property for only $20,000!!!" Does that actually happen? Ummm.....no. Generally, the bank sets the minimum bid at what they are owed on the property and "buy back" the property if there are no higher bidders. If there are higher bidders, they are required to put 10% down immediately upon winning the auction. If not, the bank buys the property and is free to market it.
The Finale: The Sale of the REO
Here's a little political correctness for you: the real estate industry prefers to call foreclosures "REOs" instead (Real Estate Owned). Is there a difference? Not really, it just sounds better on a listing description. Once the bank gets the property, they hire a Realtor and put the property on the market. From there, the sale goes forward like a regular listing, except for some more paperwork to go with the offer to purchase.
If you are interested in buying a REO, there are a few things to think about when making your offer:
If you think you may be going into foreclosure, speak with an attorney immediately to discuss your options.
Back in the day, buyers used to go to Open Houses or call agents from newspaper ads or signs advertising homes to find their new place. That agent would then write up the offer, present it to the seller, and a deal would be struck. Done and done.
Sounds like a pretty easy transaction, right? Well, in some ways it was. In other ways, it put the buyer at a disadvantage, because (and what many buyers didn't fully realize) the agent was only representing the seller. That is, the agent was fully on the side of the seller, and was always going to put the seller's interests ahead of the buyers.
And so the Buyer's Agent was born! This agent shows buyers homes, writes the offer, and most importantly, negotiates and works in the interests of the buyer.
Where do you meet Buyer's Agents? If you already know someone in Real Estate (like your humble blogger, yours truly), they can represent you! Just let them know that you are interested in buying a house and they will start the home buying process with you. Don't know an agent? Many people find their agents when they tour Open Houses. Little Real Estate inside secret: the reason agents do Open Houses for homes that they are not listing, is to use it as a prospecting tool. I'll be honest, I suck at doing that kind of prospecting, but many agents get the majority of their buyers that way!
Now, on to the very important Buyer Agency Agreement. This is a contract between the agent and the buyer saying that they are working together. This is the piece of paper that actually allows the agent to work on behalf of the buyer. Interestingly, if you are seeing homes with an agent - even if it is not her listing - and you haven't signed this agreement yet, she is obligated to still be working on behalf of the seller. It's technical stuff, and if you want to learn more about why, shoot me an e-mail.
So, when do you sign these contracts? Well, I like to look at it kind of like dating. You go on a first date and see if there is any chemistry. If there is, you go on a second date and delve a little deeper into what you are looking for. Things are still going well, so you decide to start a relationship. Working with a Buyers Agent, in my opinion, is a very similar process. You find out if you have chemistry because you should have a good working relationship with someone who is taking you through such an important decision. If you do, you commit to working with each other.
Like dating, you should also look for the basic common human courtesies. Does she call you back within a reasonable time? Does she listen to what you are saying? Does she seem like she knows what she is doing, or has she never been in a long-term relationship before? Well, that last analogy was kind of weak, but you get the picture!
Bottom line, signing a Buyers Agency Agreement definitely puts you at an advantage during your home search, but don't just go jumping into bed with the first agent that sends you a list of active properties!
Condo Financing and Why Condos May Become Exclusively 55+
So, that being said, you can imagine my surprise when one of my buyers recently told me he spent four hours researching condos on a Sunday (he's not a big football fan, obviously) and found them to be a poor investment. Poor investment? Really? Nationally, condos appreciate faster than single family homes, and buying a downtown condo is one of the safest investments you can make. However, he actually was right - with new lending regulations and Congress getting their regulatory wish list fulfilled daily, it will become increasingly more difficult to obtain financing for a mortgage on a condo.
AIG recently released a statement saying that they would no longer finance condo purchases in "declining zip codes." They published a list of hundreds of areas where they felt that the condo market was declining and therefore not worthy of their money (*cough* bailout, our money *cough*). Now, condo owners in Madison, before you start to panic, Madison, WI is not on their list, which is yet another indicator that Madison's real estate market is not dire as many other areas, such as Arizona.
Ok, so if you want a condo, don't call AIG about financing. Check. Who do you call? That depends. If you have the means to put 20% down, call any lender. If you don't, you may want to shop around. Fannie Mae and Freddie Mac recently put more financing restrictions in place to make it difficult to obtain financing on a condo if you do not have a large down payment. Both firms said that they will not offer Private Mortgage Insurance for condos in developments where less than 70% of units are sold (up from the previous 51%), for developments where 15% of unit owners are delinquent on association fees, or where 10% or more of the building is owned by investors (read: landlords for the renters who actually inhabit the units). What does this mean for lenders? It means that obtaining financing for buyers who have less than 20% to put down will be time consuming and expensive.
But let's look at this objectively. Fannie and Freddie are actually just protecting you from yourself. Buying a condo pre-construction can be a great way to get an amazing price, plus the added fun of being able to pick out light fixtures, flooring, cabinets, etc. However, you do run the risk of buying into a building where you are the only one who appreciates it. I myself nearly did just that - I seriously considered The Colony on Blair St. a year and a half ago when I was in the market. Had I done that, I would have moved into a 20% occupied building that would later implement a rent-to-own program for new residents.
Now, before you write off condos forever, here are a few things to think about. They are still going to be a wonderful option for empty nesters and seniors (who can most likely afford the 20% down payment) looking to downsize and decrease the amount of maintenance needed, and are still attractive housing for areas where there are not many other options (such as downtown Madison). Also, 30 year fixed rate mortgages are not the only kind of loan out there. I'm not recommending the exotic loans, such as 2-year ARMs, but you can get yourself settled into a nice 7-year ARM and refinance (or more likely if you are younger, move) before the interest rate terms fluctuate. And don't forget to consult your friendly Realtor (aka, me) about the developments you are interested in. We know the markets and will help steer you to a lovely home and a sound investment.
As a lifelong Madison resident, Heidi has an expansive knowledge of Madison neighborhoods and an affinity for matching people with their dream homes!
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