February 17, 2010

By Jed Smith, Managing Director, Quantitative Research, and George Ratiu, Research Economist

Each month a number of Realtors® respond to a questionnaire describing their experiences with current market conditions. The information is subsequently compiled and presented in the Realtors® Confidence Index Report. Of particular interest is the variety of additional comments that the respondents provide. These responses are generally brief, to the point, and highlight Realtor® views on the most important issues. Issues highlighted in the January 2010 survey responses are summarized below, and an illustrative selection of the approximately 1,000 comments follows.

Key Issues for REALTORS®

• Appraisals: Respondents reported that the appraisal process continues to be a problem, with out-of-the-area appraisers in some cases providing inaccurate appraisals and using inappropriate comps. The comps issue was highlighted in many cases.
• Distressed Property: The major issue identified in the comments focused on the length of time required to complete a transaction. There appeared to be consensus that in many cases the banks/financial institutions delayed the process unnecessarily and/or were not responsive to the customer.
• Mortgages: Obtaining a mortgage is reported to continue to be a problem, given tighter credit standards and a perception that some lenders are not customer responsive. Many Realtors® reported that financial institutions were just not customer responsive.
• First-Time Buyers: There appeared to be general agreement that the first-time buyer tax credit had been a help.
• Buyers Downsizing: For the first time we obtained a number of comments describing buyers’ desire to downsize their space demands in order to conserve energy and save money.
• Market Conditions: Realtors® reported that the bottom -half of the market, price-wise, has been active, while the upper end continues to be very slow . We appear to have several segmented markets: foreclosure/non-foreclosure, and lower price/higher price. A number of people noted that foreclosures had a negative price impact on non-foreclosures, and that non-foreclosures tended to sell more slowly due to less price discounting. According to respondents, while foreclosures are absorbed by the market relatively quickly, frequently in competitive bidding processes, the length of time to complete short sales continues to be excessive.
• Job Market: There seems to be agreement that the actual or perceived lack of jobs is having a major negative impact on the market

Representative Comments:

Appraisals

• Appraisal problems are not allowing any stabilization to occur and are driving declining values down even further.
• The Appraisal process is very difficult as far as comparable sales.
• Appraisals have become more difficult. My latest appraisal came in quite low because there were no ranch style homes that sold within 1 mile of the property. Comps used were in less desirable areas.
• Appraisers are using foreclosures and short sales for comparables.
• Many appraisers are selected from distant cities and do a miserable job selecting comps.
• Appraisals are keeping prices lower than need be.
• I do appraisals of residential homes. The new federal government regulations are now slowing the mortgage process and are having a negative impact on my business.
• We are selling houses, but they are not appraising—appraisers are from out of area and using REO’s for comps.

Distressed Property

• Aggressively priced short sales in good condition are commanding above asking and multiple offers.
• Short sales are impossible. Short sales usually take too long….odds are good that sale won’t close by 30 June for homebuyer credit.
• Short sales take too long—90 to 120 days.
• There really needs to be some sort of standardization in the handling of short sale and REO properties
• There is multi bidding going on for short sales in this area
• Short sales take forever.
• Short sales are a problem in this area.
• Foreclosed homes with financing help are the only activity we are seeing. Prices are under great pressure.
• Foreclosures are affecting the pricing, sending the appraisals lower based on sales of foreclosures.
• REO’s are priced so low that it causes a blind auction that I have been unable to compete with.
• We have many more foreclosure listings in the higher price ranges.

Mortgages

• Banks or lending institutions are almost impossible to deal with……..bunch of morons.
• Deals are taking longer to process through the Mortgage lenders because of added required documentation.
• Debt ratio just lowered 10 percent throwing out some who were previously qualified.
• FHA still seems to be the mortgage produce of choice. Even so, this prohibits moderate income buyers because of a lack of savings. Tighter credit underwriting requirements also make it harder for moderate income buyers to participate in the market.
• FHA transactions have become problematic due to appraisal and other property condition restrictions including objections to items contained in Homeowner Association deed restrictions and covenants.
• Higher end buyers are challenged to get non conforming loans
• It is extremely hard to get a buyer qualified. Even ones with decent credit are being declined for issues that may have happened 5-6 years ago—with strong credit since the issue.
• Banks are taking too long; waiting to hear back from a September cash offer.
• Major complaint of my buyers is that the banks are not responsive at all. I have had 3 deals fall apart because the banks were taking too long to make a loan decision.
• Getting a mortgage approved is a horrendous task.
• Stupid banks.
• The mortgage industry has gone to the extreme for documentation.

First Time Buyers

• The first-time home buyer credit has made a huge difference in increasing sales over the last year in our county by 4 percent. Prices are dropping to meet the price ranges of these first-time home buyers since they are the majority of the market….The $6,500 tax credit has had little effect since most buyers who are ready to sep up have a home to sell….
• A lot of people are listing this early this year to take advantage of the tax credits that are still in place.
• First time home buyer $8,000 has been, and continues to be, a strong motivator for purchasing in the $100-$250K range.
• There are first time homebuyers, but they can’t get loans due to changes in credit scores and/or lack of down payment.

Downsizing

• I believe that smaller sized homes will be the new trend.
• A large section of buyers in the market are moving down to smaller more affordable housing.
• Almost all of my buyer clients are asking about average monthly utility bills. That was not the case two years ago.
• Buyers seem to be more considerate of buying smaller homes for fear of upkeep including utility costs.
• Clients want to downsize due to the current economic conditions due to the fact it does not look like anything is improving.
• Green technology seems to be very popular with buyers of all ages.
• Homes are getting smaller. Energy costs are out of sight.
• McMansions are dead….

The Market

• Anything under $100,000 in good condition usually sells within a week and half the time has multiple bids.
• As you know, the homes over $300,000 are like zombies—very little movement.
• Buyers are putting in unrealistic low offers due to all the press about foreclosures and short sales—on regular properties.
• Buyers are unrealistic as to price and sellers won’t put their homes on the market for fear they won’t get what they want.
• Every townhouse or condo has multiple offers on it. It is a matter of price and availability. The number of months of inventory is very low, around 1.5 months.
• I have a well priced home that received 7 bids in about 3 weeks. It is all about pricing.
• The upper range of the market is suffering—the expensive market is sluggish.
• Homes over $900,000 are still in downward pricing.
• In the $250K and under range I have experienced multiple offers on properties that I have shown.
• It is about job stability. Once we have that, housing will improve.
• Jobs seem to be the key.
• Multiple offers the norm—there is a lack of inventory.
• Sellers still think they can get top dollar for their properties without regard to today’s numbers. They then let it sit on the market as a way of “getting their price” and then get testy regarding the market.
• Almost no hope for a traditional seller right now. They cannot compete with bank pricing.
• This is a split market based on price. Above $200 K, sales prices are almost comatose.
• The smaller, less expensive homes are selling quickly, possible multiple offers.
• Buyers all want to make low-ball offers on the more expensive homes.
• Due to the high unemployment rate it is very difficult for buyers to have any hopes of purchasing a home for 2-5 years.
• 11 percent unemployment and increasing gas prices are killing our market.

 

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

Comments? Questions? E-mail NAR Research.

NAR members, learn how you can add this commentary to your Web site, blog, or newsletter. Read more >