To begin with let’s take a look at the number of days on the market.

Although there was a small up-tick compared to last month there is a decided decline from one year ago.  It is not unusual to see small fluctuations from month-to-month and that is why it is important to look at the longer term–year-over-year.  When properties are on the market a shorter time it is an indication that the market is moving faster, houses are selling more quickly and the overall inventory may begin to decrease.

The next factor for us to consider is the number of units sold in a given month.

This graph shows a dramatic increase this November (83 units)  over one year ago (39 units).  In many markets the increase in sales in November has been credited to the First-Time Homebuyer Tax Credit, however, in Bellevue where the median price for homes sold this month was $579,0000 it’s a pretty good guess that not many of these were “First-Time Homebuyeers.”  So, once again this is a very encouraging sign for the Bellevue, WA real estate market.

Speaking of median price here is what that graph looks like.

Prices have stabilized over the last six months.  It will be interesting to watch this to see if prices start to move up again after a long period of decline or remaining flat.

The total volume sold when compared to the number of units sold gives us an indication of the type of homes sold.

Again, comparing November 2009 to November 2008 demonstrates how much better the market is getting.  The last four months shows a more stable patter with a slight increase in volume.  It will be interesting to see what happens in December of this year since there was a decided drop from November to December 2008.

The final graph contains a lot of information.  It shows what happens when houses are priced too high and remain on the market too long.

What I find interesting is that not once in the last year has the average sold price met the average list price.  A few years ago it was not unusual to see the sold price exceed the list price.  This means the ratio would be in excess of 100% rather than the 90 to 95% range.  As always, it is important to listen to what the market is saying about value.  If you are a seller price it at market value and adjust quickly if you are too high.  If you are a buyer, be willing to pay market value and be satisfied to get a good deal.  If the house is a “screaming deal” there probably is something wrong with the house, title or financing.

All of this is very good news and gives us a lot to look forward in the coming year.

Within the real estate community this process is often called a CMA which may stand for Comparative Market Analysis or Competitive Market Analysis.  If you are not familiar with the lingo this may just sound like gibberish and many times what a person is told about the market value of a home is gibberish.

But there is a process, when followed, that can lead to a value conclusion that can be supported on the merits of the information that is available.  And, therefore, I like to call my analysis process a Maximum Home Value Analysis.

It’s really a simple process that starts with the largest geographical area that influences the property value.  For example, it might be a county, a part of a county or even parts of several counties.  I then conduct a search on the Multiple Listing Service and look at the statistics for the number of properties on the market, the contingent properties, the pending properties, the expired property listings and the properties that sold in the last six months.  I do not specify price ranges, number of bedrooms or any other factors at this point.  These are broken down into market segments that represent a range of prices, for example $300,000 to $350,000.  Because market activity varies based on the marketing segments  I always look at the segment that is most closely aligned with the property I am evaluating.

First of all, I find the number of active properties in the segment I am studying.  Let’s say it is 60 properties.  Next, I want to determine how many properties were priced well enough to at least get an offer so I find the number of contingent properties in this category.  For our purposes here let’s say it is 5.  Next I look at all the pending categories and again, for our purposes, let’s say it is 25 properties.  Finally we determine the number sold in the last 6 months, for example, 30 properties.  Add the contingents, pendings and sold and we get 60 properties were price well enough to get an offer (Of course, we don’t know the final price of the contingencies or pendings until they actually close but this gets us close enough for our purposes.)

Because this analysis covers six months I divide the total number from above, 60, by 6 months which gives us a result of 10 properties a month in this category being sold.  Finally, we take the number of actives in our example of 60 properties and divide it by 10 to get a result of 6 months supply of houses on the market.

I consider anything from 1-4 months supply on the market as a seller’s market.  Anything from 9-12 a buyer’s market and from 5-8 a balanced market where we have about the right supply of available properties for the number of buyers that are looking.  In this fictitious example we would be in an almost “perfect” market condition.

It’s important to perform this analysis for each market segment in order to determine how fast the market is moving for a particular price range.

The next step in my analysis is to narrow the study down to the specific area that influences the subject property.  I look at actives, pendings, contingencies, expireds and solds in all price ranges and then perform the same analysis explained above.  It is surprising to notice that the market activity can change dramatically when you look at a smaller area.

Finally, I conduct the same analysis on the smaller area and include the features of the house like number of bedrooms, number of baths, size of house, etc.  This continues the process of determining the “speed of the market” which, in turn, allows us to determine how aggressive the pricing can be.  If the number of months supply of houses is low the pricing can be a little more aggressive.  If there are many months of supply on the market then the pricing has to be much more realistic.

This is the first stage in the process of the Maximum Home Value Analysis.  In the next blog post I will continue the discussion of how you can analyze the value to determine the correct price for any market.

It was an area where I rented a house many years ago, so I was familiar with the age of the neighborhood – late 1960s, split levels, tri-levels and the like. Though many of the original homes remain, many have had facelifts to update their facades, others have at least had a new coat of paint in the past few years and still others had been torn down and replaced with smaller versions of McMansions. I was hopeful that this bargain house would be a diamond in the rough and that I might have stumbled upon a real treasure. Well…the operative word turned out to be rough.

I pulled up in front of the house. It sat on a corner of an arterial, typically a drawback, but in this case, seemingly not too noisy. The mature landscaping could use some attention, but had potential. To the left of the garage was a half-rotted lean-to. Easily fixed by a tear-down.

The front entry was dirty and dusty and had the predictable cobwebs. Golden 1960s plexiglass flanked either side of the painted, Mediterranean carved door. A damp, musty wave greeted my as I pushed the door open. The slate entry floor was in excellent condition with a workable design. Potential, I mused. To my right, a massive brick fireplace in the sunken living room. But, of course, the carpet was heavily stained. The walls were dingy, the windows filthy. On to the dining room, with equally stained carpet and a frilly-shaded brass chandelier. The deep blue shag in the room off the dining room was…the master? Its master bath, with it’s chipped enamel sink and broken pink tiles was in desperate need of a complete overhaul.

What might the most important room for selling a home – the kitchen – hold? Promising…a large brick fireplace. I imagined making s’mores cozily inside on a rainy winter night. But everything else – the slab walnut laminate cabinets, the original range hood, and worn out counters. Well, this too begged for a complete remodel.

Other rooms in the house were no better. The room count and square footage were good. The location very convenient for commuting and shopping. And with $150,000 for remodeling, this will be a great home.

But I had to ask myself, “Where did all the money go? If the bank originally loaned $478,000 on this home in 2006, with who knows how much down, was that just the sale price? The bank bought it back for $549,000 and it can be assumed, that was for less than was owed. What happened to all the money? If they borrowed to rehab the house, where did the money go? It sure wasn’t put into the house. If they paid $478,000+ for the house, they certainly overpaid, even in a hot market. And if they borrowed to buy a new Mercedes SUV or a vacation, the bank sure got the raw end of that deal.

So here we are with the banks holding a lot of distressed assets that have potential, but a whole lot of baggage attached to them. And we seem to have a shortage of buyers who have not only the vision to see the potential a home has, but not the resources to bring it to fruition. It’s going to take some time for this to get sorted out. In the meantime, buyers should keep watching for and moving on those great deals.

Waiting for congress to decide whether to extend the Tax Credit feels a little like Waiting for Godot. Every day we receive snippets of information about whether congress will approve the extension and, indeed, perhaps even expand it. The most common wisdom right now seems to be that the First-Time Homebuyer Credit will be extended to April 30, 2010. That’s good but, unfortunately, it’s during the winter months when sales are typically slower anyway. It would be nice to have it extended through the summer selling season. Who knows, when we get there if the economy has not improved maybe they will extend it again. Let’s take what we can get when it’s available.

Another encouraging possibility is that a new provision will be added which will give up to a $6,500 tax credit to homeowner’s who have lived in their house for at least five years. If this is you and you’ve been thinking about moving, this might be the time to get into the market and take advantage of these great house prices and loan rates. Of course, you still have to sell your house but the combination first-time homebuyer credit and move-up buyer credit might just be what you need to make the change.

I do see some encouraging signs in our market. My previous post discusses the Bellevue, Washington statistics for October 2009. It’s a year-over-year comparison of sales activity and when you look at what is happening over the past year the charts are moving in the right direction.

If you are thinking about putting your house on the market I think this is a good time. We know that the market slows down during the holidays, however, a lot of people have been sitting on the sidelines waiting to see what is going to happen. They are starting to look and, more importantly, buy. So, get your house in good condition and price it right.

If you are a buyer start your process by talking to a lender to get pre-approved and start looking at houses in your price range to become informed about the market. By the time you’ve done these things we will know what is going to happen with the tax credit.

Tip revealed the true attribution of the quote In his 1987 autobiography, Man of the House.

“This was the only race I ever lost in my life, but in the process, I learned two extremely valuable lessons. During the campaign, my father had left me to my own devices, but when it was over, he pointed out that I had taken my own neighborhood for granted. He was right: I had received a tremendous vote in the other sections of the city, but I hadn’t worked hard enough in my own backyard. ‘Let me tell you something I learned years ago,’ he said. ‘All politics is local.’” (This quote taken from Daniel Grays Geekbooks.com)

So it is with real estate. The national media constantly provides us national statistics of how the market is doing. And, local media often picks it up and repeats it. However, as in politics, “All Real Estate is Local.” And, by local, I mean right down to the neighborhood you are interested in. The statistics I’m about to share with you are for the “local Bellevue market.” This will give you a good idea of what is happening in the city of Bellevue, WA. However, the demographics and real estate in Bellevue vary widely from neighborhood to neighborhood and to get a clearer picture of what is happening in your neighborhood in Bellevue it’s important to look at the statistics for that neighborhood.

This information is readily available. If you would like to know what is happening in your neighborhood send me an email at glenellis@glenellis.com. I’m happy to demonstrate what is going on right where you live.

Now, let’s take a look at this month’s statistics.

We always start with the average number of days properties have been on the market. It’s important to keep in mind that this is an average of all “Sold” properties. There are other properties that have been on the market for longer times that have not sold. And, some properties sell very quickly when they are in great condition and priced right. By the way, the range for this month was as few as 21 days and as many as 134 days.

All of these charts show the year-over-year activity for each category. When we compare all of the October 2009 charts with October of 2008 we can see continual improvement in the Bellevue market. Here is the chart for Average Number of Days on the Market in Bellevue, WA for October 2009.

Total Days on Market for sold homes in Bellevue, WA in October 2009

The total number of units sold in Bellevue in October 2009 was 81 in comparison to one year ago when 61 units sold. We are seeing the effects of the normal yearly market cycle where real estate activity typically slows down from October through February although, in this case, more units sold in October than September. This is an important trend to watch.

Total Units Sold in Bellevue, WA in October 2009

The total volume is closely tied to the total number of units sold and the chart this month looks like this. Once again the trend is upward and we should all find this encouraging. Unless, of course, you are thinking about buying in which case it might make sense to move soon rather than wait for prices to start going up again.

Total Sold Volume in Bellevue, WA in October 2009

Median sales price is a good way to keep track of price trends. Here’s what it looks like this month. The median sales price for the last several months has leveled off and is remaining fairly stable. Year-over-year October of 2009 was $580,000 compared to October 2008 at $540,000.

Median Sales Price for residential real estate in Bellevue, WA in October 2009

The final chart has a lot of information embedded into it. In fact, it may be a bit difficult to understand. Nonetheless, I believe it is one of the most important charts if you are a seller. Even though prices and days on the market may go up and down, one thing remains constant in all markets and in all economies. The closer you come to market value when you first list your home the faster it will sell and the more you will get for it. The longer your home stays on the market the more “shop-worn” it becomes and like any product that has been “on the shelf” for too long it starts to look old, boring and not very interesting. The moral then is: Make your home look great and price it right.

I am always willing to talk with you about how to prepare your home for market and what the market is telling us about the market value for your home. This is often called a “CMA.” CMA stands for Comparable Market Analysis or Competitive Market Analysis. I call the market study I do the “Maximum Home Value Examination.” Give me a call and we can talk about it.

Escrow closings are taking from 45-60 days now under normal conditions. With the influx of buyers due to the $8,000 tax credit and the holidays it would be very difficult to start looking for a house, get an offer accepted and get it closed by November 30th, 2009.

I took some buyers out this weekend. We had already done some looking and they had done a great job of preparing for the search by getting pre-approved, responding quickly to the listings I sent them and going out on there own and driving around to see where they wanted to live and what they could get for the money. We found a house, made an offer and had it mutually agreed upon within 24 hours. The inspection is scheduled for tomorrow, the appraisal has been ordered and the lender is putting the pieces together.

We all know that if we don’t stay focused on this it’s not going to close on time. None of us wants that to happen so we are all working diligently to make it happen.

So, you missed out on the deadline for the tax credit? Don’t despair. This is still a great time for anyone to buy a house who is ready to buy a house. House prices are still low. They may drop some more but there are some signs that prices are leveling off and we may have hit the bottom. Time will tell. And, we can never really know if we are at the bottom until we look back in a few months. Then we can say, “Yes, that was the bottom.”

And, don’t forget. Interest rates are still extremely low. No one can say how long they will stay low either so this is a great time to buy. In addition, sellers are more willing to make concessions in order to get their houses sold.

The tax credit may be extended but that is another uncertainty. I suggest, if this is the right time to buy a house and you are really ready then start the process. Get educated about the market, where you want to live, what’s available and how much you can afford. You might very well find a great deal that would be as good or even better than the $8,000 tax credit.

So, don’t miss this great opportunity to buy a house even if you missed the $8,000 tax credit.