Myers Park 2009 Real Estate Year in Review
Friends,
It was a tough year for real estate in Myers Park, as it was everywhere else. I reckon we were due for a correction, after watching values (Dollar-per-square-foot) rise 25% between 2004 and 2007. In May 2007 the market started sliding, beginning with unit sales and then with the values of those unit sales.
The end of 2009 showed some promise, as the average closed price in the Carolina MLS rose 1% in November for the first time in 2 years. The average closed price was up again in December, a 6% increase. The average closed price was up 6% in January 2010 - three months in a row the average closed price was up. I would call that a trend or, as I prefer to call it, The Turn. But that story will be told - or not - in next year's review.
In one year, from 2008 to 2009, unit sales dropped 36%, from 124 single family homes to 79. Condo sales dropped 30%, from 63 units to 44. Look at the history of sales for the past 7 years below.
Prices rise and fall
The average closed price of a single family home in Myers Park rose steadily from 2003 to 2008, then dropped in 2009. This largely mirrors the rise in home size/square footage (later graph) over years. In other words, the average closed price rose because the average size grew. In 2009 the average size of a single family home SOLD/closed in Myers Park continued to rise but the average closed price dropped, leading to a drop in values, or, the average dollar-per-square-foot. I think it might be a while before we see any real traction in appreciation. But 2010 will be a dramatic improvement over 2009.
Home size increases for 6 straight years
The average size of a home SOLD/closed in Myers Park rose steadily from 2003 through 2009 as folks bought and/or built bigger homes, often on streets where new homes dwarfed bungalows and cottages. It will be interesting to see, as the market comes back over the next few years, if this trend continues. There will always be some demand for large homes but I think we are going to see people scaling back on their plans and building smaller homes with better design flex spaces for guests/family who come to town to visit.
Condo/townhome square footage didn't move much over the same period.
Everybody's favorite number
Everybody wants to know how much a house costs, dollar-per-square-foot. It is the one piece of information everybody can understand - like buying candy by the pound or gas by the gallon. Unfortunately, in a Buyers' market real estate becomes "commoditized" and people don't want to pay premiums. In other words, if everybody is only talking about dollar-per-square-foot, people with premium homes on the market will suffer and those with less than average homes will benefit, as everybody's value is pulled towards the middle.
The average dollar-per-square-foot for a single family home SOLD/closed in Myers Park fell pretty hard in 2009, down 17% in one year, from $283 to $234. Condos and townhomes fell even harder, down 23% in one year, from $259 to $200.
Condos and townhomes are having a hard time in part due to more stringent lending guidelines requiring homeowners associations to be solvent and hold a certain percentage of dues in reserve. Consequently, some purchasers of condos and townhomes are finding it difficult to find financing.
Seller price concessions
Looking at the graph below you can see that 2006 was the best time to sell your home, when Sellers came off their asking prices only 2.5% on average. Ah, the good old days! Then see how Sellers had to "deal" on price increasingly as the market fell from 2006 through 2009, culminating in 2009 when Sellers had to come off their (last published) asking price 10% on average. We are already seeing some improvement in this metric in early 2010.
Interestingly, although the number of condo/townhome sales fell and the average dollar-per-square-foot of a condo/townhome SOLD/closed in 2009 fell precipitously, the average Seller only came off his asking price 4%.
Days on the market
These graphs are evidence of the pain Myers Park Sellers experienced in 2009 as it took longer and longer to get a home/condo/townhome sold. It has been proved over and over again that the longer it takes to sell your home the less of your asking price you will realize. Look at the jump in the average number of days on the market from 2008 to 2009: it took 60% longer in 2009 to get your home SOLD than it took in 2008. The condos that SOLD took 47% longer to get there.
Distressed sales
9 of the 79 home sales were distressed sales - either short sales, foreclosures, pre-foreclosures, bankruptcy or bank-owned homes. Surprisingly, I could find only two distressed sales in the 44 condos/townhomes that SOLD/closed.
I believe we will continue to sell distressed sales in Myers Park throughout 2010. When people get in financial trouble the last thing they want to do is sell their home, upsetting the family and going through the grueling process of selling and moving. And because of that, they often wait too long to put their home on the market. By the time they do put the house on the market and go through months of looking for a Buyer, many are at the end of their financial rope and have to either sell short (getting the bank to agree to take less than the amount owed on the mortgage) or lose the house to foreclosure.
Builders/new construction
Builders of new homes really got clobbered this year, and many have gone out of business. Only 13 of the 157 homes currently For Sale in Myers Park are new construction. And of those 13 two are distressed sales, two are offering to take homes in trade, one is offering owner financing, and one says "no reasonable offer refused". I think it will be a couple years before we see much in the way of builder speculative building. For one thing, there is too much inventory to try to spec build. For another thing, builders would be hard-pressed to find a lender to front them the money to build a spec, even if the builder wanted to. So, for the present, builders are laying low, doing renovation and remodeling work, and waiting for the market to come back. As you might imagine, a number of them are getting out of the business altogether.
Mortgage financing
Up until the "slowdown" (which began in May, 2007) mortgage lenders would only lend to people who could fog a mirror (that's a joke). Mortgage money was "awarded" to people who should never have received it, often with little or no money down. Now, lenders have gone in the opposite direction, making even the most qualified borrowers jump through hoops that didn't exist a couple years ago.
The lack of attractive Jumbo money (anything above $417,000) has contributed to the slowdown in the high-end of the market. Jumbo rates are still about 3/4% higher than conforming rates but, more to the point, lenders are requiring borrowers to put down at least 20% and often 25%, which is not very appealing to many, given just a couple years ago they could put 10% down (or nothing at all!). Hopefully, Jumbo money will improve throughout the year, but helping Jumbo borrowers does not seem to be on the radar of lenders or the government.
Summary
This is easy: 2009 was terrible!
But we survived, mostly. Our homes were worth less and, sadly, some lost their homes. The number of home sales went sharply down. The number of days it took the average Seller to get his home Under Contract went way up. Sellers had to come off their asking prices 10% on average (and that was 10% off their final price, often after they had already reduced their prices a time or two (or three). And the most painful part of all - what Buyers were willing to pay (dollar-per-square-foot) went down 17% in one year. I think most of us would like to shake the 2009 dust off our shoes and not look back. But a look back is instructional and will put the coming year into context for us.
I believe we are in The Turn. It's going to be a slow turn (akin to turning an oil tanker?), but it will turn. How long will it take us to get back to 2006-2007 values? Your guess is good as mine, but I would say a few years, at least. And quite possibly more. But that's okay - as long as the numbers are going in the right direction we will be fine. And the right direction is any direction other than down!
Already this year (as of February 20), 17 homes have SOLD/closed (compared with 4 a year ago) And, so far in February, 18 homes have gone Under Contract. The average days on the market for those 18 homes was 89, a dramatic improvement from the average of 130 of last year. I think this reflects the meeting of more Sellers getting realistic on their asking prices with Buyers who have been waiting for them to do so to act.
By the end of February we will have had 3 excellent months in a row. It's a trend, folks. And it mirrors the numbers in the Carolina MLS as a whole (Charlotte M.S.A.), which report that unit sales are up in the past 3 months and, more importantly, the average closed price of a home in the Carolina MLS rose in November (1%), December (6%), and January (6%).
Unsolicited advice to Sellers and Buyers
Sellers: We are not out of this thing yet. Although there are more and more positive economic indicators about the national and local economy, it is a mixed bag so far. Sales are up so far this year, but that is compared to a year ago when we weren't sure what was going to happen with Wachovia and Bank of America. There are still fewer Buyers than Sellers (a Buyers' market) and Buyers still very much have a bargain mentality, so continue to expect low offers.
Are things going to be better for Sellers later this year? I hope and think so, but recent past history has showed us that there are so many local, national, and international variables that the future is still unpredictable. If you get an offer that is in the realm of "reasonable", make it work and get out. If you don't have to sell right now, I would strongly suggest you wait until you do.
If you do have to sell now, remember what I have always said: you must look sharp and clean. Homes that have not been remodeled or renovated will have a hard time holding to price as Buyers in this market, generally speaking, are not looking for projects. Along with sharp and clean, I would strongly recommend that you consult with a professional stager. Think long and hard about what you are going to do to make your home stand out from the pack. And, most importantly, price your home aggressively (dont' be greedy). You will be glad you did as you are driving away with your furniture on the truck, waving to the poor suckers who didn't take my advice and still have a For Sale sign in their yard!
Buyers: The market is turning around. It is turning slowly, but it is turning nonetheless. So expect to see more resistance from Sellers, especially if the unit sales and values numbers continue to improve. Their are still bargains to be had out there as there are still some Sellers who must sell due to financial hardship. But, it seems to me, if you are looking for your own personal home, looking for one to steal makes no sense. Look for the right home on the right street with the right schools (etc.) for you and your family, and then negotiate in good faith to get the best deal you can.
I can help
Please let me know how I can be of service when you decide to put your home on the market. See www.MyersParkHomes.com and www.RobertDulin.com for more information.
Robert