Scott Wurtzbacher’s Blog

This week our listings saw an average of 1.1 showings each.  It has been a slow week but that can be expected considering the Fourth of July weekend which kicks off tomorrow.  Next week should pick up as vacationers return to the daily grind.

There’s been a lot of talk lately about the rise of mortgage interest rates.  There is no doubt that they have increased over the past few months and could continue to do so.  Rising rates should most definitely be a concern to anyone considering a purchase in the next few years. 

Historically over the past 9 years, rates have fluctuated within a range of 4.81% as a low to 8.52% as a high for the Freddie Mac 30 Year Fixed.  The high point was back in May of 2000 and the low was just three months ago in April 2009.  Currently, Freddie Mac shows that the average rate in June was 5.42%.  The current rate is the highest its been in all of 2009, but compare that rate to the past nine years.

The Freddie Mac rate fell below the current 5.42% only twice in the past nine years and did not hold that level:  December 2008 saw 5.29%, March 2004 saw 5.45%.  Every other month back to January 2000 saw interest rates higher than we have today.

Rates are an absolutely critical factor in a recovering real estate market.  That they are so low today is somewhat obvious since our economy is in the worst shape the past nine years have seen.  But when you stand back and look from 50,000 feet, there have been few opportunities to lock at such a low number.

Rates are very low right now, but they are clearly on the rise.  A 1% rise in interest rates for every $100,000 means an increase in monthly payment of about $85.  If they rise too quickly, a great deal could quickly become marginal.  The market is ripe and rates are great.  I’ve said it before and I’ll say it again this week.  Its a great time to buy!

This week our listings saw an average 1.7 showings each as traffic remains consistent with the past several weeks.  As we head into another of summer’s holiday weeks, I expect showing activity to slow down for a short period of time.  However, the market still seems to be showing signs of improvement as many predicted it would in the second half of this year.

Here’s my assessment of the current situation:  The window of opportunity for buying opened wide earlier this spring, but in recent weeks it has slowly begun to close.  There are a number of reasons why I believe this theory.  First, interest rates bottomed out about 60-90 days ago when you could lock a 30 year mortgage in the low 4% range.  There’s no argument that rates like that are rare and make a good deal, great.  Unfortunately, rates are on the rise and it doesn’t look like they’ll be going back.  Second, home sales are starting to increase again and along with the sales comes a gain in seller confidence.  Confident sellers leads to fewer fire sales which were a great opportunity for buyers.  Both of these factors seemed to have bottomed around the same time.  Looking back over a short period of time, I believe that those who bought made offers about two to three months ago are most likely to be the big winners in this recesssion.

This does not mean that if you are still on the fence, you are too late to the party.  But it does mean that as rates continue upward along with seller confidence, so will those prices.  The window is closing, but it is likely to take awhile.  Nonetheless, its still a buyers market and the time is right.

This week our listings saw an average of 1.5 showings each.  Looking back over last year’s blogs, showing traffic for this time of year is about consistent with last year.  That’s important because back then, perception of the market was a whole lot better than it is now.  This time last year we were getting ready to head into disaster and now we are heading out of it.  I prefer knowing that the worst is over.

This week I will publish my monthly E-newsletter showing the market data for the Charlotte area.  The data for May 2009 shows very clear signs that the Charlotte market is stabilizing.  Here’s a sneak peak:

• Homes sales are down 40% over last year, but are up 14% over the prior month.
• Average sales price is down 14% over last year, but up 12% over the prior month.
• Average time on market is up 24% from last year, but down 6% from last month.
• Pending home sales are down 15% from last year, but up 9% from last month.
• Housing supply is up 44% from last year and up 5% from last month.

When comparing to last year, the numbers still looking bleak.  However, they aren’t quite as bad as they have been year over year.  For example, when considering the pending home sales numbers from the same month last year, the figure was down 35% in March, 19% in April, and now 14% in May.  Clearly the bleeding is slowing.

The numbers actually look quite encouraging when comparing month over month.  Prices are up over last month, along with sales, and pending home sales.

From a Realtor’s standpoint, the worst of the market was from October of 2008 until about March of this year.  So right now we are comparing last year’s “pre-crash” numbers to this year’s “recovery period” numbers.  Assuming the market continues to stabilize and improve, as we start comparing this year’s improved numbers to last year’s bad month’s (i.e. Nov-March), we should really start to see some positive numbers.

However, keep in mind that once the numbers are showing a full recovery and quickly rising numbers that means that you may have already missed the boat.  In my humble opinion, the peak opportunity for buyers has already passed.  As interest rates continue to rise, sellers are gaining more confidence in their ability to sell.  If you are thinking about buying it is still an ideal time, but that window is closing.  The question is:  How long will it take to close?

This week our listings saw an average of 1.5 showings each.  With traffic still a bit slow for the season, we hope for quality not quantity. 

Last week I blogged about the media’s optimism around a market recovery.  Well, interest rates seem to have followed suit.  This past week mortgage interest rates rose to the highest level in six months.  It will be very interesting to see how this shift will affect the real estate market.

In general, buyers have begun to get off the fence and have started making offers.  There is still an expectation that the price has to be great, but nonetheless, at least they are trying.  That is quite an improvement from a few months ago when there was simply no activity.

Mortgage interest rate increases tend to react to wall street.  So this recent rise points to an overall recovering market.  But the question is how that will affect the housing market in the short term.  A 1/2 point rise in interest rates equates to another $42/month for every $100,000 borrowed.  This most certainly has an impact on affordability.

As the stock market slowly recovers, buyers will have more confidence in their ability to make monthly payments.  But rising interest rates mean that they might have to look at less house. 

While the rising rates could have a short term impact on prices, I for one would rather lock in the lower long term interest rate.  For those buyers out there looking to make a move, now would be a very good time to pull the trigger.

This week our listings saw an average of 1.5 showings each.  Traffic remains slow for the season but then this past weekend was a holiday.  As the end of May approaches, we are about halfway through what is typically the busiest time of the year for real estate. 

Last week one of my very best clients pointed me to some recent optimism in the media.  I’m very grateful to have such interactive supporters to help me keep this blog up to date with the most current information.  (Thanks Rob!)  He brought to my attention that The Charlotte Observer published a story predicting that perhaps our area has hit bottom, slightly ahead of the rest of the country.  The story was based on the Case Schiller Index that showed home prices in Charlotte increased 0.3% from February to March.

The article goes on to suggest that a one month change is not quite enough data to predict the future.  Although, I agree that we have hit a bottom, I also agree that the change is a bit too small over a short periold of time to give a clear indication.  As with any media story, it depends on the data one chooses to report. 

While the Case Schiller Index reported a small gain in Charlotte from February to March, my monthly E-Newsletter data actually showed a small loss.  My data is based on average sales prices for Mecklenburg County.  I think that the Case Schiller Index calcuation is a bit more complex and likely more accurate than simple averages.  To me, the more important predictor right now is the pending home sales figures which rose 25% from March to April.  (See last week’s blog).

This week our listings saw an average of 1.5 showings each.  But this slowdown in average number of showings over previous weeks certainly hasn’t translated into fewer sales. 

Our monthly E-Newsletter was published last week.  A quick look at the data shows a continued pattern of down numbers over the same period last year.  But a deeper look reveals some great news.  Pending home sales represent contracts on homes that have not yet closed.  Most contracts take 30-60 days to close, so pending home sales is a great predictor of the closings to come in the next few months.

Pending homes sales have increased 25% in Mecklenburg County since we reported the same indicator last month.  This could represent a huge surge in sales to come and if that pattern continues, we will be well on our way to an improving Charlotte real estate market.

This week our listings saw an average of two showings each.  The traffic is still slow considering the season, but the quality of the showings has improved.  The ratio of tire kickers to qualified, motivated buyers is improving based on the feedback we’ve seen.

This will certainly help:  A few days ago the Dept of Housing and Urban Development announced that the $8000.00 first time buyer tax credit can now be used at the closing table for downpayment assistance.  This has huge impacts for buyers that qualify for the credit but don’t have the cash to float the downpayment until their tax returns are amended.

Spread the word.  If you know someone that qualifies for the first time buyer credit, they can take advantage of an $8000 gift from the Federal Goverment right at the closing table.  Talk about a no-brainer!

Check out this article at Realtor.org for details!

This week our listings saw an average of 2.2 showings each.  This pattern is slower than we hoped for considering the spring season.  However, based on the feedback we’ve gotten, buyers seem to be a bit more prepared to pull the trigger than they had been during the winter months.

As the market slowly begins its recovery, many people are asking questions about the difficulty around obtaining financing.  The media has created a general consensus that banks still aren’t lending.  Though its true that financing has become more difficult to obtain, banks certainly are still lending.

From a Realtor’s point of view, there is no doubt that financing has become a lot more difficult.  There are two major factors that have affected my ability to close a real estate transaction with regards to financing.  1)  The lenders have significantly tightened their guidelines.  You’ve got to have good credit, money to put down, and a strong debt to income ratio.  Underwriters are taking a much harder look at these criteria within a credit file before issuing an approval.  2)  The record low interest rates have created a surge in refinance applications and the understaffed lending institutions are struggling to keep up with demand. 

These two factors combined are making it very difficult to close in 30 days which used to be considered normal.  Today it does not seem uncommon for underwriting to take twice that long with some lenders.

As a buyer, seller, or a real estate professional, the moral to this story is: have patience.  These turbulent times have created many changes in our industry.  There are lots of bugs to be worked out in what has become a new financial system.  As the systems become more routine, things will return to a more fluidl process.  But for now, patience truly is a virtue.

This past week our showings saw an average of 2.1 showings each.  Although our showing numbers were slow, activity was strong.  Buyers have seemingly been getting off the fence more consistently, especially in the first time buyer market segment.

There seems to be more activity and there are lots of signals that the market is beginning to improve.  However, a successful sale still requires focus and proactivity under the current market conditions.  Last week one of my clients decided to take such a step to bring them closer to their goal of selling their home; their action was in the form of a price reduction.

This particular listing is a gem, but in its first month on the market it saw almost no traffic.  Last week we reduced the price by about 5% and the result was exactly what the sellers had hoped.  We had three showings in three days following the reduction and the home was under contract by the end of the third day.

Many sellers take the position that a reduction in price is not a good idea because a buyer “can always make a lower offer.”  But experience along with data shows that simply is not true.  With high levels of inventory on the market, even minor price reductions can lead to increased traffic and ultimately an acceptable offer.

This week our listings saw an average of 2 showings each.  This is only a slight improvement over last week, but an improvement nonetheless.  The next few weeks will reveal whether or not the slowdown of the past three weeks was related to the market or simply just reflects shifted priorities around the spring break holidays.

Our office has definitely seen an increase in phone calls inquiring about listings just in the past couple days.  Additionally, well over a third of the past week’s showings occurred in the past two days.  I’m very hopeful for a good weekend of showings to come.

We certainly aren’t out of this slowed market, but I’m still optimistic that things have bottomed out.  The question that remains is how long will we linger here?

Today it was reported that the Federal Housing Finance Agency Index indicated a February increase in national home prices for the second straight month.  The index showed a decline of 6.5% over the last year.  I’m not surprised about the decline;  in Charlotte it was even deeper than it was nationally.  But the recent month over month national increase is encouraging to me.  Most of us have accepted the losses we’ve incurred during this recession.  But it will definitely be comforting to know for sure that the bleeding has stopped.