Prospect Market Watch Blog

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Statistics

Click here to view the National Association of Realtors’ Price Analysis for the Louisville Metro Region as of October 2007:  NAR Price Analysis

The median price of a home in the Louisville area has risen nearly 5 percent a year over the past two decades — better than inflation, and about the same as the national rate.

And even this year — in the midst of a national housing downturn — the metro area is on track for a median price increase of at least 1 percent, according to the Greater Louisville Association of Realtors.

But as the national housing slump deepens, properties are sitting on the market longer, making sellers nervous and prompting some to slash asking prices and throw in such incentives as free wide-screen televisions or refrigerators to close deals.

At the same time, local real-estate leaders are pushing the area’s positive numbers, even as they acknowledge the market is tough.

Joe Simms, who just stepped down as president of the local Realtors’ association, urged its members to carry with them at all times a copy of figures showing positive local trends — such as a 2 percent increase in overall home sales so far this year, and inventory levels below the national average.

In a recent letter, Simms advised agents to show the figures to any buyer who wants to make an offer 20 percent below the asking price — and to share the numbers with the media to “straighten them out.”

“When the market slows, then we have to do more selling,” Simms wrote, adding that agents could counter negative publicity by “telling the truth attractively.”

Better than many areas

Louisville’s market is better than that of many cities. Roughly one-third of the nation’s largest metro areas, including nearby places such as Cincinnati, Lexington and Memphis, saw home prices fall in the second quarter of 2007 from a year earlier, according to the National Association of Realtors.

The local real-estate market is approaching the status of the early 1980s, when potential home buyers were scared off by interest rates higher than 16 percent for 30-year fixed-rate mortgages.

Similar loans now are going for less than 7 percent said the local market is hurting just as badly from a combination of problems in the lending industry, such as adjustable rate mortgages and subprime loans made to borrowers with patchy credit.

More foreclosures

Those issues have contributed to a surge in foreclosures in recent months, prompting some of the nation’s biggest lenders to either shut their doors or borrow heavily to stay afloat. Jefferson County, for example, is on track for a record 3,125 foreclosure auctions this year, up from last year’s record of 2,710.

In response to those kinds of numbers, lending standards have been tightened for those with poor credit or low income.

Supply is rising

Meanwhile, the supply of homes on the market nationally continues to rise.

At the end of August, figures from the national Realtors’ group showed it would take 10 months to sell all the homes on the market, more than twice the inventory in late 2005, near the peak of a housing boom.

Louisville’s supply stood at 7.5 months in August, better than the national number but still about 10 weeks more than a year ago. Chuck Kavanaugh, executive vice president of the Home Builders Association of Louisville, said many of the group’s members saw the supply issue coming and cut back on projects.

Members of the Louisville home-builders group took out 30 percent fewer permits for new homes last year than in 2005, Kavanaugh said.

But permits so far this year are about even with 2006, and Kavanaugh predicted that construction next year could be up slightly. Even in a housing slowdown, it’s not uncommon for properties in some parts of the Louisville area to sell quickly, in some cases less than a week.

Generally, though, they are properties in a highly desirable location, with modern amenities, a reasonable asking price and no obvious problems.

“Only the best houses in the best locations are selling,” said David Yunker, an agent with Re/Max Properties East and a 22-year veteran of the local market. “If there’s anything slightly objectionable, they sit.”

Yunker defined “best locations” as those close to good schools and shopping. Numbers from the Realtors association also show that neighborhoods in and around downtown are doing well.

The association figures show, in fact, that while sales of homes priced between $50,000 and $160,000 are down this year, sales are up for homes priced at $160,000 and above.

Semonin President Brad DeVries said he had “no earthly idea” where the Louisville real-estate market is heading, but he predicted it will follow the same steady course it has charted in recent years, with no dramatic price gains but no huge drops, either.

“It’s nothing to jump up and down and scream about,” said DeVries, who oversees 800 agents. “Louisville is just a very consistent market. You can almost set your watch by it.”

I can’t count the number of times I get asked in a day about my predictions for the Spring 2007 market. Keep in mind that I work in a bit of a bubble; that bubble being the US Highway 42 corridor. That being said, I certainly have my finger on the pulse of the entire east Louisville market.

Coming into this Spring market we have some left over inventory from the 4th quarter 2006. Those sellers will most certainly need to look carefully at how their current pricing will position themselves against any new inventory. New inventory always garners more buyer attention.

Several areas of the market have been unusually inactive.  Take Sutherland for example, as I write this (3/2/07) there are only two homes available.

Let’s look at a micro market that has done as well or better than any part of the Greater Louisville area, that being the 40059 zip code. For 2006, 370 units were sold. Currently there are 244 units available. I suspect the inventory will grow by another third at least as the Spring market heats up. That means we should have in the next 45 days, inventory between 325 and 350 units or almost what we sold all of last year. This means buyers have many good choices and sellers need to be competitive. Remember that Real Estate is not only local but “micro local”.  Sutherland inventory has never been tighter. All Sutherland sellers will be successful this spring.  My advice to sellers is to get aggressive with pricing if you want to be a successful seller this spring.

One of the other bright spots in the Louisville market is the new home market from $1M to $2M. Never before have buyer’s been able to buy a new, already built house at this price point . Neighborhoods like Spring Farm  (that have entry level product starting at $1,175,000) and the new Harrods Glen development off Wolf Pen Branch will do very well in the next few years.

Remember that all of the 2006 sales in the 40059 zip code are posted at my site.

Educating and preparing sellers for current market conditions is a big part of my job. Because I am involved with homes sales on a daily basis, and my clients engage in this process only a few times in a lifetime (or at least infrequently), I am in a unique position to prepare a seller for a given market. While there are no absolutes in this business and each transaction is unique, there are basic principles that trend for long periods of time. It’s the mistakes that cause a seller to net less money  that I want to focus on.

1. Let go of the emotion. This is a business transaction – nothing more and nothing less. It’s something sellers struggle with understandably but has no place in the home sale process. Emotionally letting go of your home as it hits the market will increase your bottom line. You need to be (emotionally) ready to move when your home hits the market.

2. The 1st buyer who makes you an offer is almost always the best buyer for you to work with. Time and time again, I see sellers let the 1st, 2nd and sometimes 3rd buyer pass in hopes that a better offer is just down the road. Most subsequent offers reduce the seller’s bottom line. Why is that? Because of time. One of the 1st things a buyer will ask (if they don’t already know) is “how long has the property been on the market?” I am not talking about a multiple offer situation here, sometimes months go by between offers.

3. Never be insulted by a buyer’s offer. (Remember that emotion thing I was talking about)?  Many buyers will make an offer substatially lower than what they will ultimately pay. Be proud that they chose your home over all others. Work it out.

4. Today’s home buyers engage home inspectors once a successful negotiation has taken place. This is generally where sellers allow emotion to take over and lose objectivity. If the buyer does not void the contract as a result of the home inspection, your bottom line depends on working out an agreement with that buyer. If the 1st deal crashes over inspection issues, you can bet the next offer will net you less money.

5. Overpricing is clearly the number one mistake that sellers make. While there is not one price for any home, with the help of a competent Realtor and appraiser, a price that will cause a buyer to write an offer can be determined.

6. Not preparing the home to compete successfully in the marketplace is a big mistake. Dated fixtures, worn carpet, personal clutter, unkept landscape……. getting the house in order will decrease your market time and increase your bottom line. Walk through your home thinking and seeing your home through the eyes of a buyer. Just because you have lived with certain conditions doesn’t mean a buyer is willing to. Get rid of the attitude that if it was good enough for me………

While there are many more common mistakes sellers make that decrease their bottom line, these are the most frequent and easily avoided.

I welcome your comments. If you have questions about the saleability of your home and how it might compete in today’s market, just give me a call or email.

David Yunker, Realtor

502-419-0994

Let’s talk Real Estate. I have been thinking about starting this BLOG for a long time. Finally here it is. As those of you who know me understand, I eat sleep and breathe my business. Bringing you (and me) to a level of understanding about current, past and future trends is the purpose of this BLOG. I will be posting relevant sales statistics on the Prospect and surrounding markets. Don’t forget that you can search all the homes currently for sale in Prospect (40059) from my website www.yunkerhomes.com under the “Prospect Quick Search” tab.