Perrysburg Blog

The sky is a little brighter this week.

The sun has been shining more in Perrysburg.

And there are lots more accepted offers and buyer offer writing action in play.

Even though things could change.

And even though national indices are split – with sales down and values up.

It’s a confusing market.

But . . . “all real estate is local”.

So here is my take on the recent spate of action in the 43551:

Affordability

• Affordability is at its highest level in the past several decades.
• Many Perrysburg homes now cost 30-40% less than they did 6 or 7 years ago.

Pent-Up Demand

• Many of today’s buyers need to buy because their families have grown, they just moved here, they got a promotion or a raise, and other valid reasons.
• Sellers who hung on during our real estate decline have paid down debt (including mortgage debt), saved their money, and are now ready to move up.

Low Interest Rates

• Interest rates for 30-year fixed-rate mortgages remain below 4% and rates for 15-year mortgages are even less.
• Buyers are realizing that these rates are certain to rise if our national economy regains it footing.

Buyers Believe There’s Little Downside

• Buyers who were previously afraid they would lose money if they bought a home are now realizing that the risk is reduced and that they have waited long enough.
• Prices in the Perrysburg real estate market have stabilized in most segments of the market.
• The grim bloodletting in the suburbs is almost over – with values rationalized and the flight to safety of steadier values in the periphery of Toledo increasing values.

Cheaper To Own Than Rent

• It used to be cheaper to rent than own a home, but that has changed.
• Rents are soaring and now exceed the cost of home ownership in many instances.
• Given a choice, most renters would rather own their own home than pay off their landlord’s mortgage with their rent payments.

It’s that time – the time for Q1 numbers for Perrysburg.

And they are interesting.    The Blade called – asking me if Toledo real estate is picking up.   I don’t see it – but Perrysburg sellers do.  They are raising their prices.

And Perrysburg buyers are buying more houses (closed sales were down March 2012 vs. March 2011 but there are many more “sale pending” deals in the pipeline.

These are MLS only numbers for single family sales – I am not putting in condos, duplexes, etc.

Upshot:  Fewer houses closed in Q1 2012 vs. 2011

Fewer houses on the market.

More houses sales pending.

Median price in Perrysburg for Q1 2012 $189k.   For $87/sq. foot.

(Just click on the images below for full size legible versions . . . )

There’s lots of buzz out there about the improving residential market.

Good stories here.  And here.

I maintain that well priced, clean and neat houses in Perrysburg that are, let me repeat, well priced – can receive multiple offers.

But the value has to be there.

And the condition has to be right.

In the City of Toledo?  A whole different scenario is playing out.   And it’s multiple offers on mortgage-less houses or REO assets.

Regular well priced listings over $100k are sell-able but not “hot” like the prototypical Perrysburg hot listing above.

The caveat I want to point out is that this is happening in effectively a 0% interest market. 

The cost of money is almost free today.

Laughable.

What will happen when that changes and rates “zoom” up to a more normal 5 or 6 or 7%?

What will happen when capital gains taxes are raised next year by our president (hint: property values will decline in the minds of investors and then real prices will fall).

What will happen when . . . . well you get the idea.

The Case-Shiller numbers from Metro Detroit are at a current level of 70.04, down from 70.95 last month and up from 67.49 one year ago. This is a change of -2.13% from last month and +2.50% from one year ago.

Is that the REAL bottom?  Is that a REAL improvement?

The Libertarian/Free Market counter argument is found HERE for your edification.

This blog is about real estate in Perrysburg  – a hyper-local look at our little tiny market.   And since “all real estate is local” it’s appropriate to note that prices in Perrysburg are firming up while the metro Toledo area, our neighbor to the north, and much of the country are in serious trouble.

It’s too early (still 2011) to do a 2011 recap . . . or a 2011 statistical look at the numbers in the 43551 – you can be sure that those will be coming soon to this space.

But I was thinking about what was hard to do in Perrysburg real estate in 2011.  

So, I will try to “put lipstick on a pig” and share my problems with you in a positive and affirming manner!  

1. Getting or giving an accurate “quick sale value” was very hard to do in 2011.  In Perrysburg.  In Toledo.  The market was shifting and that made the guessing game of providing quick sale numbers very hard (you don’t want to know and you don’t ever want to need a “quick sale valuation” for your house!)

2. Real estate team management was hard.  My team?  Shifted.  One long time assistant retired.  One decided to, rather sensibly, take care of newborn twin boys!  And one just vanished!  New hires and new licensed team additions have made my team larger than ever.

3. Seeing people you sold a house to . . . . lose it to the bank.  Very, very hard.

4. Watch mold grow in great houses – very hard.  Sometimes the rules and regulations conspire to make a house sit in the shadow inventory of foreclosure-land.  And then bad things can happen.  It’s a dirty rotten shame.

5. Managing growth and the new market.   My team and I have never, ever sold more homes for more money.  And I have added several new lead systems.  Which has added a couple of thousand leads to manage.  Very hard.  

6. Telling buyer clients to be careful.  Just because rates are very, very low does not mean that you should spend all your income on that special house.  Not many people like to hear “no”.

7. Manage real estate deals.  Very, very hard.   Every part of every deal has changed in the past 4 years.  Financial rules.  Appraisal rules.  Valuation rules.  Stress levels are high.  Equity is low.  Jobs are under pressure if you are being transferred in or out.  When I have a “happy” closing – with neither the seller or the buyer under duress or stress or distress?  That’s actually notable today.

8. Telling the truth to sellers about the current and accurate value of their home.  Well . . . not hard.  But sometimes painful.  Or distressing.  But it has to be done.

9. Keeping up with the literature.   Never, ever been harder.  I maintain a few “professional designations” for my real estate career.  It’s a little inside industry inside real estate sales and management.  I have the ABR degree.  The CRP degree.  The CRS. The CDPE designation.  About 8 or 10 of them.  And they all take up biannual or triennial accreditation.  Plus my Ohio real estate broker’s license continuing education.  Plus the various real estate and sales and marketing books I love to read.  Too much in 2011.  For the first time ever I have not yet bought or even perused my favorite authors newest book – Seth Godin’s “We Are All Weird”

10. The iPad.  Love it.  Use it every day for real estate and reading (I did get tired of my dear wife hinting at me to “put that iPad down” . . . so I very cleverly bought her one!).  But it’s been a struggle to get forms and contract on it to work right.  Maybe my software engineer son can “make an app” for that in 2012.

You know I love numbers if you read this blog.   More numbers!   More stats!  More graphs!

And you might think that I therefore believe that you figure out the Perrysburg real estate market by reading the statistics reported by the media.

But, the numbers aren’t always the numbers and here’s why!

Sales Prices

• May include seller-paid buyer’s closing costs and/or bonus commissions paid to buyer agents that distort the true property value.
• On FHA loans that close today . . . almost ALWAYS includes 3.5% credits to the buyer.
• May include major repairs and or other credits on cash sales.
• Often use funky/wonky things like tax prorating methods to shove more cash to a buyer.

Average Prices

• Can be influenced substantially (higher or lower) according to the mix of properties sold during the time period.
• In a small sample size – one or two large sales can skew the numbers.

Days On Market

• Can be gamed by pulling the property off the market for 30 days, then re-listing.
• Can also be gamed by changing the address spelling (North First Street vs. N. First Street or N. 1st Street, for example).
• Often covered up by switching brokers.

So . . . the numbers you read are not always truthful.

But I still love analyzing and sharing them!

Here is a tabular report of the MSI – Month’s Supply of Inventory – for Perrysburg as of 30 days ago.

Seasonality is stronger than it was 5 years ago.

20% or so fewer houses active on the market vs. 2 years ago and WAY down over 5 years ago.

8 months or so of inventory?  Pretty balanced in my opinion – as I am hearing from more and more buyers who are NOT getting the house they bid on – which was unheard of last year.

The numbers are firming up . . .

The casino is hiring . . .

The sun is shining nice and warm in October . . .

And my team and I are selling lots of property . . .

So what do the numbers say?

Fewer Perrysburg houses on the market.

More houses in Perrysburg pending sale.

More houses in Perrysburg closed.

And fewer houses in Perrysburg failing to sell.

What’s not to like about these numbers as seen on this chart?  (you can click on it for a full size view . . . )

A recovery?  I think not.   Not until more and better things happen on the employment front.   We are seeing natural market forces balancing out a bloated inventory.   I am seeing cash investors moving in to buy good deals (I personally wrote 4 cash offers today, and negotiated a cash offer on a Perrysburg listing . . .).   I am seeing sellers who can’t afford to sell call the bank, or lease the house out and move to Florida or S. Carolina anyway.

No.   Not a recovery.   But something better than what we had last third quarter in 2010.

The market is cloudy.

Like our local weather.

It seems like just yesterday it was sunny and bright and warm.   Then . . . BOOM . . .  Fall arrived.

What clouds do I see in the local market?

1. Fixed mortgage rates are low.   And addictive.  I wonder what will happen if rates return to a more “normal” 6 or 7%?   Low rates are a boon to buyers today.   Addictive.  Great tasting.  And will be a curse to sellers in the future.

2. FHA problems.   Loan limits are moving down tomorrow.  And that’s not a big deal here – but the future of the FHA program is now suddenly important to Perrysburg.   A majority of deals in and around Toledo are now FHA funded.   Take FHA away and the bottom will fall out of the market.

3. Appraisal problems.   One of my jobs now is managing appraisal issues.  Up front.  And after the debris of a wrecked deal.   The mortgage implosion has caused the REO explosion.   The shrapnel?   It flies over at supersonic speed and hurts your sale or purchase.

4. The Bifurcated Market.   There are really two markets now.  One for the wealthy.  One for everyone else.   I am certainly not interested in “social justice”.  But a healthy market has movement.  People moving up.  People moving laterally.  People aspiring to invest and save and gain.   Somehow in a diminished, “soft” America with an increasing stratification of incomes and assets we are losing that.

5. More delinquent mortgages in the 43551.   Big news – more and more nice houses in Perrysburg are going to be foreclosed.    I have never in my 23 year career been working on more distressed, big, nice houses in Perrysburg than right now.   And – it’s happening all over America.

6. Rentals.   There is a shortage of them right now in Perrysburg.  Markets hate imbalances.  So – if this continues you may see more rentals being developed here.  More houses being converted to rentals.  And higher rents (good if you are a landlord, bad if you are a renter).

7. Falling incomes.   Which is not something we are used to here.   We are used to wage increases.   Inflation.  Increasing prices. But wage drops?   Effects here are hard to predict.  This could, if it continues, lead to lower property values.  Lower prices for all assets.   And downward pressure on rents and taxes.  More market uncertainty.

8. Boomerang Kids.   What?  What is that??  Kids, done with college *(hopefully not with a degree in Ancient English Poetry or Integrative Social Work for Aleutians!) who are bereft of job opportunities.   Lots of my clients in Perrysburg have had to welcome their progeny back.   So if they are selling or need to sell or buying and need to buy – those extra bedrooms that were empty and contained old PHS trophies and Saturday Night Fever posters . . . are being used again.

These are some clouds on the real estate horizon in Perrysburg.   What clouds do you see?

1000 words.

1 picture.

Want to get values up?

Want to slow foreclosures?

Want to get the economy fixed?

It’s really simple!  Just fix this picture: (also note that for the past 20 years Wood County and Perrysburg have almost ALWAYS HAD LOWER and therefore BETTER unemployment numbers than other major counties.  Something big has switched and or changed . . . .)

Why buy?

Why buy in Perrysburg?

Realtors were taught to say that houses were/are/will be “investments”.

There was the “Perrysburg Premium” you paid to live here.

And the guaranteed 2 to 3% annual house appreciation in the 43551.

The guaranteed appreciation is gone.  The near “risk free” nature of Perrysburg property is gone.

You want real estate that is an investment?  We need to examine/measure the actual cash flow.

You want real estate that is guaranteed to go up every year?  I can’t help you.

This just ran in the WSJ:

At the risk of heaping more misery on the struggling residential property market, an analysis of home-price and ownership data for the last 30 years in California—the Golden State with notoriously golden property prices—indicates that the average single family house has never been a particularly stellar investment.

In a society increasingly concerned with providing for retirement security and housing affordability, this finding has large implications. It means that we have put excessive emphasis on owner-occupied housing for social objectives, mistakenly relied on homebuilding for economic stimulus, and fostered misconceptions about homeownership and financial independence. We’ve diverted capital from more productive investments and misallocated scarce public resources.

Between 1980 and 2010, the value of a median-price, single-family house in California rose by an average of 3.6% per year—to $296,820 from $99,550, according to data from the California Association of Realtors, Freddie Mac and the U.S. Census. Even if that house was sold at the most recent market peak in 2007, the average annual price growth was just 6.61%.

So a dollar used to purchase a median-price, single-family California home in 1980 would have grown to $5.63 in 2007, and to $2.98 in 2010. The same dollar invested in the Dow Jones Industrial Index would have been worth $14.41 in 2007, and $11.49 in 2010.

Of note, at least to me, are the following:

May of 2009 – 352 houses for sale.   May of 2011?  310.  Down 12%   Buyers have fewer houses to choose from . . .

May of 2009 – 30 houses “sale pending”.  May of 2011?  51.  Up 70%  Buyers are buying more houses . . .

May of 2009  – 24 houses closed.  May of 2011?  36 closed.  Up 50% Buyers did buy more houses . . .

Prices?

This is what is interesting . . .

May of 2009 – Median “For Sale Price” – $212,450.  May of 2011?  $219,000.   About the same.

May of 2009 – Median “Closed Price” – $187,200.  May of 2011?   $188,500.  About the same.

May of 2009 – Median “Under Contract Price” – $227,500.   Last month?  $175,000.  Down a whopping $52,000 and 23%.

What is going on? More houses selling.  Fewer houses on the market.  And a blood bath, apparently, in what buyers are buying.

They are INCREDIBLY price sensitive right now.

Now – these are monthly numbers in a restricted sample.  So they dance around a lot.  But the volatility is not in the asking price.  Or even the closed price.  It’s in the price of the homes that buyers are putting under contract.    April and May are normally big months for houses in Perrysburg going pending – and right now if the price is right it can be sold.

Price it wrong . . . and it will sit.

More stats:  we are down to 5 months supply of inventory right now – a recent low.  And the average house takes about 4 months to sell/close.

Pretty data pictures: