lexington news

Welcome to the “Post-Housing Slump Era” (Almost)

by John Rice

I’ve been saying that Lexington is in the “Post-housing slump era” for most of this year.  Yeah, prices have stabilized and buyer’s don’t seem afraid to buy like they did in the past, but I do see one segment of the market that still may have a rough time.  It’s the upscale neighborhoods that are more than 20 years old and aren’t in the absolute best school district in town.  The decline hasn’t stopped, so it shouldn’t be news to anybody except those who currently have their houses on the market and aren’t getting any showings.

I’m thinking of one of my favorite neighborhoods in all of Lexington in particular.  I’ve shown dozens of houses in this area over the past year or so priced from $325k to over $500k.  Most of them are still on the market.  Even after the values dropped significantly over the past few years, this area still is taking a hit.  What gives?

For starters, these houses are all big and most are very outdated.  When you go into a $150k house that is 20 years old, the main thing that looks terribly outdated is all the brass door knobs.  In that price range, there wasn’t a big budget to pimp it out with all that 1991 offered.  When the upscale house was built in that same year, the budget afforded pickled cabinets, gold faucets, and mauve toilets.  The ones from the 1980’s could be the set from Knot’s Landing!  Do you know what it costs to renovate 4000 square feet?    On top of that, most of these lots are big.  Few people these days (at least in Lexington Ky) want to mess with maintaining a big yard.  Everybody I have shown houses to in this area all walk away in awe of the house and neighborhood, but I can tell they are doing math in their head trying to figure out how much they’ll have to spend for updating and upkeeping…..needless to say, all my clients have picked different neighborhood!!

About the only older upscale neighborhoods where I am not seeing this are those in the Rosa Parks Elementary district.  Buyers there seem to be willing to overlook a lot just to get the schools.  I’ve shown a lot of houses in this part of town too, and see a lot of outdated houses.  Unless they are grossly overpriced, have a super steep driveway or are on a main road, they all sell quicker than the rest of the neighborhoods of similar age.

I’ve been watching a house in one of my favorite neighborhoods for about a year now.  It is the only house I have ever been in that double wowed me.  It needs everything but the kitchen updated……a new roof, all new HVAC, and windows too.  I think the current price is just under $400k.  I think it will have to get down to $360k before anybody is willing to take on all that work.

 

When the market comes back

by John Rice

When the market comes back……….People will finally be able to sell their house, we’ll see surgeons leaving their practices because real estate is more lucrative, sellers will no longer be under water on their mortgages.  Yep, it’s gonna be great again……when the market comes back.

Only problem is that the market we are currently in (at least locally) matches up to what historically has been considered normal.  About the only time in local real estate history that doesn’t match up to today is the heyday of 1998 to 2006, especially 2003 t0 2006.

Check this out.  Here are the January 1st through September 7th (today’s date) sales numbers for residential real estate deals in Lexington:

1997-2236 sales

1998-2911 sales

1999-2898 sales

2000-2811 sales

2001-2989 sales

2002-3133 sales

2003-3568 sales

2004-3746 sales

2005-3723 sales

2006-3469 sales

2007-3106 sales

2008-2538 sales

2009-2290 sales

2010-2395 sales

2011-2117 sales

Wish I could easily get the numbers prior to 1997, but they aren’t available online.  I was here prior to that though…I remember when it started to heat up back in 1998.  There was an article in the paper about a local realtor who needed foot surgery but was putting it off since the market was soooooooo hot.  1997 to 1998 was the largest jump in sales for two consecutive years.  Prior to that, the market was…..well, just normal.

And that’s why I really think that the market IS back, just back to normal.

It’s over……We’ve hit the bottom

by John Rice

I think it has finally happened.  We’ve hit bottom.  All the top analysts have been predicting it for quite some time.  I remember in 2006, they said we would see a recovery in 2008….then 2009….then 2010.  I don’t know what criteria they use for making their predictions, but here is what I base mine on, well, at least for Lexington:

  • Remember the glory days of real estate when everybody was wanting to flip houses?  Heck, several of my friends who know nothing about real estate were wanting to do it back then.  It was just on everybody’s mind.  Rapid appreciation was the motivation.  I am sure they are glad they didn’t!  Well, now everybody is talking about wanting to buy real estate as rental property.  It is on everybody’s mind, and low prices are the motivation. Just as the average Joe or Jane wanting to flip houses was an indication of the frenzied peak, I think the same people wanting to buy now shows we have hit the bottom. 
  • Buyer’s these days still want a bargain, but there isn’t the fear of buying like there was even last year at this time.  I think part of this is the change in attitude about real estate.  Nobody is viewing it as a quick money-making investment anymore.  People seem to view their home as just their home and a way to build equity by paying down principle over time. 
  • The market doesn’t have anything artificially stimulating it.  The tax credits are over.  We all know now what the market is like without any lipstick or botox.
  • I’ve seen a couple of houses sell for waaaaaaay more than they were worth.  I just had a deal where another buyer paid my client $5000 to walk-away from their contract…..on top of that, the buyer’s back up contact was for just over $20k MORE than my buyer was paying!

Despite all this, I don’t think we’ll start seeing appreciation or a return to a high volume of sales.  I think we’ll stay near the bottom for a while.  I’ll even go as far as saying that some newer neighborhoods may see a little more depreciation as the dust settles.   In the past, appreciation across the board made up for things like aging systems and the normal cycles of decline that a neighborhood goes through.  A flat market means that a seller isn’t going to be able to put 5-6 years of wear and tear on a house and get exactly what he paid for it.  I think it is more like mileage on a car-the less usable life you pass on to the next guy the lower the value.

It’s over, but you still need to make wise decisions!

 

Location, Location, Location is so Yesterday

by John Rice

I’ve got about an hour before I need to go show a listing of mine and then get with a client to go see a couple of houses, but I wanted to let you know what is going on with real estate in Lexington ky!

I’ve closed 3 deals, have 5 pending, have several buyers looking, and have a bunch of active listings.  I think I’ve got a pretty good idea about where things are at the moment,  having worked with both buyers and sellers a lot.   Glad I love my car since I’ve put over 5000 miles on it in the past 3 months…all local too!

Soooo, what is going on?  Well, I think we are at the tail end of denial and about to start accepting that the market has changed a lot in the past 8 months since the tax credits expired.  I don’t just mean fewer sales.  We all know that has happened.  What I mean is that there has been a major shift in buyer mentality.  If you’ve read my past blogs from this winter, you remember me saying (okay….complaining!) about the crazy buyers out there making ridiculous offers on houses who never actually bought anything.  Now that the weather has warmed up a little, the “Real” buyers are coming out.

These buyers are much more conservative and cautious than they were last year at this time.  We all know that buyers are expecting more and more.  They have come to expect staging and a good presentation.   Now they expect that AND a low price.  I guess that is the big change that we all need to adapt to.  You can no longer make a house look good and expect it to sell mid-range in the comparable sales.  Now, pretty much every buyer expects the bottom of that range as the max they will go.  I mean, I can’t blame them.  I would do the same thing right now if I were buying and you would too.  I think a lot of that is just because they want to have a little margin if prices drop any more than they have.  “Location, Location, Location” use to be the big thing in a buyer’s mind, but yep, it is now second chair to price.

All this leads me to something else that has been on my mind, which is how we as agents need to keep responding to what and how the market wants their real estate done.  It is hard to believe that a long time ago having more than one picture of the outside of the house was cutting edge.  Then agents thought that getting you to see yourself in the house was what it took.  Maybe it did back then, but when I see an agent write something like “Enjoy playing board games or reading the morning paper with your family around the table in this great eat in kitchen,” I know that the agent hasn’t grown past 1995.    I think it is time to start talking about money in the marketing remarks.  It is what is on everybody’s mind right now.  If the house is a good deal for the size, location, or condition, we need to tell that to the buyers……in fact, I am going to go make those changes right now on my listings….see ya later!

How NOT to Spend a Homeless Week with Your Stuff in Storage AND Lose Money

by John Rice

Want to know what really causes most nightmares and drama in a real estate deal these days?  Sure, negotiating a contract can be rough.  Getting past the inspection can be a chore too…..but both parties usually seem to work through it or part ways.   What REALLY gets people worked up is when you can’t close on time, and that is usually due to the loan officer.

I had a closing yesterday.  All the parties were told we were closing at the end of last week, then the following Monday, then Wednesday, then finally, it happened Thursday.  The buyer had packed everything up and moved out of their apartment.  They had to pay to store their possessions.  They also couldn’t register their kids in Fayette County Public Schools until they had an address here.  Their kids didn’t go to school this week.  My clients, the sellers, moved out of their house a week early. I was even a little freaked since I didn’t know if something was wrong and they were just trying to buy time.  To make matters worse, the seller agreed to pay $3500 in the buyer’s closing costs, but the loan officer only used about $2900 of it.  My clients were happy though since the remaining money ended up in their pocket.

Now, I know most loan officers are caught in the middle.  They have to collect all the docs and info from the buyer and then present it in a way that looks pretty to the underwriters.  They often don’t have any real control over how long it takes the buyer to get them the docs any more than they have control over when an underwriter will get around to dealing with it.   But what they should be able to do is see a problem coming, have a back up plan, get an idea of how long it will take, and solve the problem.

Some of them are a bad combination of greedy and lazy.  I recently had a doctor client who was getting a special physician’s loan from an out-of-state company.  We were having the seller pay the closing costs.  I called the loan officer, who told me to ask for 3% of the loan amount.  I kind of made her mad  because I told her that wasn’t gonna fly with me.  She needed to sit down and calculate exactly what it was going to be…..especially since I knew the closing costs and pre-paid items would NOT have exceeded the almost $15k that the 3% would have been.  See, if we asked for 3%, she would have used it all.  She also didn’t want to give my client a Good Faith Estimate (GFE) until we agreed to that percentage since they now aren’t allowed to make big changes from the estimate.  Had we rolled with her plan, she would have had a big budget to work with.  She either would have built all that money into her fees or any excess would have ended up in the seller’s pocket.  I forgot the exact amount, but she ended up “Waiving” her origination fee….think it was $5-6k that my client saved.

I know a lot of people think the only difference between loan officers is what they charge.  Not true.  Sometimes the main difference is between one that gets the job done on time and with no drama versus one that pretty much ruins your life for several days right at the exact time you don’t want to deal with one more problem. 

Not trying to turn my blog into a commercial here, but I always ask my clients to entertain the idea of talking to a loan officer who has impressed me a lot.  Sometimes they do.  Sometimes they don’t.  Dude’s name is Kris Vanzant with Stockton Mortgage.  I met him a couple years ago when my old loan officer got out of the biz.  I gave him a shot and now after 20+ loans, I still think he is the best in town.  I used him myself when I refi’d my house.  I didn’t ask for any special deal nor did he offer me one.  I can’t be having people think I recommend him because I get something in return.  All I usually get is the same box of chocolate that he probably gives every other realtor at Christmas time.    He really knows how to solve problems and stick to a timeline.  On a few occasions, he’s done some complicated deals for my clients.  He always seems to have multiple back up plans and can quote lending guide lines that I bet most other Loan Officers don’t even know exist.  His brother, Jeff Vanzant, owns Clear Title and has done several closings for me.  Jeff first got on my radar when I started to notice that  he would always have the settlement statement correct and ready for review before the closing.  Most of the time, you either get it early and it is wrong, or you walk into the closing with nobody knowing what they owe, how much they are getting, if the termite inspection or home warranty actually made it onto the thing, etc.   A good closing is one where there are no errors to correct and no issues to resolve.  For Pete’s sake, all you’re really there to do is sign your name and either walk out with a check or keys to a house.  Now, I have to disclose that I have become friends with these guys.  That just happens when you work together so much.

So, my advice is to use a loan officer you know something about.  Ask your realtor, ask friends…..just don’t go with somebody you know nothing about, even if they entice you with a looooow price.  Remember the buyer for yesterday’s closing?  She lost about $600 in the closing cost fiasco, paid to store her stuff and lost vacation time from taking off work for all the days we didn’t close.   If you’re friends with her, I can tell ya, she isn’t going to recommend that person to anybody.