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The price on 359 Sunset Drive in Pine Mountain has been reduced to $199,000.  Based on my competitive market analysis in September, my seller and I had priced the house at $220,000.  Last month, we reduced the price to $210,000.  due to reduced market activity we have again reduced the price to $199,000. 

This price gives a price per square foot value of $83.  This represents a good value for a four bedroom house in good condition near Callaway Gardens.  Please inform your friends and relatives.

I haven't seen this yet, but we may be seeing more of this in the future.

When I sold real estate in Denver back in the 80's, the market was very similar to the way it is now.  There were three factors in collusion that brought the real estate market down about 35% in a few short years.  The first, and most important, factor was that the price of oil plummeted down below $20/barrel, and the Denver economy was dependent on the oil business.  This was how I got into the real estate business in the first place--I could not get a job as a geologist.  This story deserves its own blog posting--let me know if you want to read it.  The second factor was that the stock market crashed in Oct. 1987.  The third factor was the downfall of many savings and loans.

Many people found themselves in the position of being "upside-down" on their loans, i.e, owing more on their loans than their house was worth.  I personally had sellers who brought checks of up to $6000 to pay off their loans and/or pay my commission to sell their houses.  I had heard of sellers paying up to $20,000 (using other Realtors) to do this. 

Why would they do such a thing?  Back then, people were concerned about their credit and would do almost anything to avoid backruptcy.  If they had the money to get out from under a loan they would do it.  It is my opinion that walking away from your debts seems to be more acceptable today.  If you personally can't pay your mortgage and are defaulting on your loan, please accept my apologies--I  don't know your personal circumstances.  All I'm doing here in comparing attitudes IN GENERAL now to what I experienced in the 80's.

Then, as well as now, people continued to buy and sell property.  I made a living in real estate then as I am doing now.  Deals get made and life goes on...

I do most of my business in Harris County, Georgia.  (For those readers around the country, and world, Harris County is the next county north of the Columbus, GA metro area, and we are about 70 miles southwest of Atlanta.)  The word in the real estate community is that houses are selling in Columbus, but not here, especially in the $100K or less price range.  This rumor has not overly concerned me, because we have almost nothing under $100 K, except for raw land or mobile homes.

A comparison of  September 2007 and September 2008 home sales in Muscogee County (Columbus) and Harris County show how different these two markets are as follows:

	Muscogee	Harris
Total Homes Sold	down 3%	down 44%
New Listings	up 89%	up 59 %
Average Sold Price	up 3%	down 11%
Days on the Market	up 4%	down 15%

The total number of homes sold was only slightly down while ours was WAY down.  Look at the percentage gains in new listings!  Almost twice as many homes went on the market in Columbus compared to last year in September.

The average sold price is Columbus is slightly up, which shoots in the foot the hypothesis that it's the under $100k market that is moving there. 

I was surprised to find the the days on the market in Harris was slightly lower this Sept. vs last September.  As many of you who read my quarterly newsletters have realized--I tend to take a longer view--I publish my market reports using intervals no shorter that 3 months.

I did think that this was interesting, though, as a quick look at two areas that are so close, but have such different dynamics.

My thanks to lender Rudy Clark for forwarding this newspaper article from the New York Times to me.  I think it sums up succinctly what was the precipitating factor for the failure of Fannie Mae/ Freddie Mac, and the bank failures we are seeing now.  Please notice that this article was published in 1999.  It took us 9 years to get to where we are now.  The fault does not lie solely with the banks and Wall Street.  It lies mainly with the government that we are trusting to get us out of this mess.  Read on:

By STEVEN A. HOLMES
Published: September 30, 1999 
    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

    Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. 

    In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans. 

    ''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.'' 

    Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market. 

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

    ''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' 

    Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

    Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

    Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

    Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent. In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

    Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

    In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

Published Sept. 30 1999 in the New York Times

I am seeing more buyers using FHA loans to purchase houses.  In the past, most buyers in this area used Fannie Mae/Freddie Mac insured conventional loans.  These loans were easier to get ( one of the reasons we have the problems that we do today) and you could get them on all kinds of property.  The processing times for loans was less--you could get a conventional loan approved in 3 weeks, whereas FHA loans could take up to 6 weeks.

Now with the new tighter lending restrictions on conventional loans, FHA loans are looking better and better.  The FHA also raised the loan limits--in Harris and Muscogee Counties the loan limit on a single family home is $27,050.  Following are some of the changes due to the Housing Recovery Act:

1.  A refundable tax credit for first-time home buyers that works like an interest-fee loan of up to $7500 (to be paid back over 15 years).

2.  Couples using the standard deduction have an additional $1000 deduction for property taxes.  (Single buyers have a $500 deduction)

3.  Sellers can now pay up to 6% of the loan amount in points and other concessions.

4.  The entire down payment can be a gift from a relative or a non-profit.

5.  Your down payment can be as low as 3% of the purchase price (until Oct. 1, when it will be 3.5%)

Let me know if you need any more details on these loans.

New and existing home sales moved in opposite directions in April. New home sales posted a rare 3.3% increase in April to a seasonally-adjusted 526,000 homes, up from a revised March figure of 509,000. This is the first time since October 2007 in which seasonally-adjusted annualized sales have posted a monthly increase. Sales for the previous three months, however, were revised lower by 30,000 units. At the current sales pace, there are 10.6 months of new homes supply on the market. The number of new homes for sale continued to decline as builders continue to scale back production. New home inventory declined to 454,000 which is the lowest it has been since May 2005. In April, median new home prices rebounded from its lowest levels since September 2006 in March to $246,100 in April. It was also the first time since November that median new home prices recorded a year-over-year gain.

Annualized sales of total existing homes declined 1.0% in April to 4.89 million units. Sales of existing homes are down 17.5% from the 5.93 million units in April 2007. Median existing home prices in April increased for the second straight month to $202,300 from a revised $200,100 in March. The number of existing homes for sale increased jumped 10.5% to 4.552 million units in April. At the current sales pace, there are 11.2 months of existing homes supply on the market. Existing home affordability declined slightly in March due to the increase in median existing home prices.

National average mortgage rates increased to 6.08% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on May 29th. This is the highest rates have been since mid-March. In the week ending May 23rd, the MBA’s seasonally-adjusted Purchase Index increased slightly to 352.7 from 352.5 in the previous week. The latest figure reflects a 0.06 percent increase from last week but a 17.40 percent drop from the same period last year.

I know that most of you will be spending time with your mothers today.  Perhaps you've ordered flowers, sent a card, or plan to call her sometime today.  Why not do something special for her and CLEAN HER GUTTERS.

The main enemy of a house is moisture.  That's why its so important that we keep our roofs in good repair.  We also need to keep excess moisture away from the foundations of our houses, which is why we have gutters and downspouts.

During the fall and winter alot of organic debris collects in them, and often dams them up so that water runs over them and down the sides of the house.  This will lead to big trouble in the long term.  Every year someone needs to get up on a ladder and make sure that the gutters are clear of old leaves, dead squirrels, etc.  One year we had a clog in one of our downspouts.  It was a huge clot of sprouted privet seeds. 

I know you don't want your Mother up on a ladder cleaning out the gutters.  Give her a gift she'll really appreciate and offer to do it for her. 

I can't take credit for this great idea.  My sister does this for my mother every year.  I'm just making dinner.

    Definition of a buyer's market--more people want to sell than want to buy.  Yes, we're in a buyers' market.  Everyone knows this--we're told this via every medium on the planet.  I see the deal of a lifetime come across my desk (computer screen) every week. 

    Some of my friends and clients want to make a move but are uncomfortable doing so in the present environment.  I tell them that they should buy now if they actually need a place to live.  Also, if they are thinking of trading up--in other words, if they want a bigger or more expensive house, now is the time to make that move.  Even if they had to sell their existing house, the amount that they would theoretically lose would be more than compensated for by the amount that they would save on the more expensive house.

    So what am I buying?

    I am looking for properties to buy and rent for the foreseeable future, and will look forward to selling them when the market turns. I am looking to find deals by paying all cash.  For an exceptional property I would put 20 percent down and get an investors loan.

Leigh

    We have a listing in our office that has been under contract seven (yes, 7) times and still has not changed ownership.  It is one our nicer listings--I'm not going to give any hints because I don't want you to know which one it is.  It has gone under contract very easily each time.  The problem is that the prospective buyers have not qualified for their loans.

    Although this listing beats all records in my memory for times under contract, I have seen difficult lending environments before.  In the 80's after the savings and loan failings, it was very hard to get loans, even if you wanted to get them at the then current interest rate of 10-11%.  Buyers felt heckled by loan underwriters as they were required to dig up old divorce decrees and financial statements from years past.  As soon as you supplied them with one document, they would be asking for another.  Many homes were sold with owner-carry terms with 2-5 year balloons.  You wondered--did the banks want to make loans or not?

    And now as in the 80's, banks are overreacting to bad news. Of course, we'll all make it through the current lending environment as well.  People with good credit and jobs can get loans.  It's just not as easy as it was last year. 

If you are trying to sell an investment property that you bought in the last year or two, and are not having any luck, then I'm in the same boat as you.

I have an investment philosophy that I should stay 100 percent invested at all times.  I had made some decent money in 2006, and had money sitting in a money market.  I could not find anything in my local area which fit my criteria.  (I'll tell you about my criteria in another blog). 

My sister in Atlanta had been scouting property in Atlanta for several years and found a cute little house in Decatur.  We thought it was an excellent property for either immediate resale or to fix up in the grand manner to sell.  Well, this was about 6 months before the sub-prime news came out.  We did some minor fixing up and landscaped the yard.  By the time we got it on the market it was too late.

We started out at $309,000, and nobody looked at the house.  We then reduced the price to $295,000, and nobody looked at the house.  The price came down to $285,000 and nobody looked at the house.  The price is now $275,000 and at least occassionally someone comes to look at the house.  Now, the question is, what is the price that will trigger buyers to make offers on the house?  This is the kind of question that keeps me up at night.

I know intellectually that this house was a good investment (at least at the time), but it makes me uneasy when there is no "action." 

You may have noticed the listing on Meadstone Drive in my listings line-up.  This is a large 143 acre tract.  It is now priced at $4460 an acre.  The fact that it has not sold quickly has astonished the sellers and all of our agents, including myself.  Obviously it is not due to lack of marketing. 

Many of us think that land at twice that price is a fair value for Harris County.  Is this a sign that the market has bottomed out, or are we looking at an era of dropping prices?

We are seeing builders paying $60,000 for one acre of land.  There are few 5-10 acre tracts of land available.  Those that are on the market are listed at WELL over $10,000 per acre.  I don't see prices dropping very much (see earlier blog about farmland prices nationwide).  I really do think the Meadstone property represents an excellent buying opportunity for an astute investor.  Stay tuned.

Well, its been such a long time since this happened that I forgot what it felt like.  I am the listing agent, and the property is in a fantastic location.  Now, we all know what the market is supposed to be like right now.  Buyers are encouraged to make low-ball offers (by the media--not my me).  Well, we had two buyers interested at the same time.

I was working with one set of buyers, and another agent was working with the others.  The other agent wrote an offer for her buyers and submitted it.  Meanwhile, I was showing the house to my buyers.  When the other folks learned that I was showing the house, they submitted a new, higher offer through their agent.  My people did submit an offer, but the seller decided to counter the other buyer's second offer.

What is so incredible about this is that the other agent's buyers have not even seen the inside of the house yet. 

Is this a fluke, or a sign that the market is turning?

Even though market activity has fallen off quite a bit, land prices per acre have not fallen in Harris County.  I am seeing prices holding at 2006 levels.  Sellers of land are often not in a big hurry to sell.  They have bought their land either for recreational purchases or for investment.  In other word, their purchase was discretionary.  Some of my sellers have said that if their property doesn't sell by a certain date they will pull it off the market until the market improves.

There was an interesting article in Barron's a couple of weeks ago about prices of farm land.  The gist of the article was that in the current real estate slump, prices of farm land have escalated in the last year.  One of the reasons for this is that the greater use of ethanol in gasoline has caused corn growing to be alot more economical than in previous years.

I realise that we don't grow corn in Harris County, but the prices for raw land in our area do seem to be holding.  Speculators who bought land in the past two years and who hoped to make windfall profits by subdividing the land and reselling are the ones who are hurting right now. 

Last year I listed and sold a house in a neighborhood close to the high school.  I had hoped to get about $5000 more for my seller than I did.  He was happy to be rid of the mortgage and of course the buyers were thrilled. 

Today I noticed a new listing on our local multilist.  A similar house is being offered for $15,000 less than what I sold the other house for last year.  This is an incredible steal.  A nice house, a good neighborhood, and an incredible price.  Wish I had a buyer for this!