Monday Morning Numbers 11/29/10

I was going to write a piece Saturday on interest rates. But when I fired up my computer on Saturday morning, it decided that booting all the way up wasn't on the agenda for the day. So my Saturday workday got re-prioritized to rebuilding a laptop. Fortunately, years of computer support experience taught me to have a regular backup, so there wasn't much lost aside from time and patience. That's three times this year that I've had to rebuild this beast. The first two times I'm pretty sure that I know what happened, but this time is a little less clear. One more time and I go buy a gun and take this #$%*&@ out to a shooting range. Anyway, let's get on with some numbers:

Active Listings: 116

Contingent Listings: 44

Pending Listings: 43 (21.2% of the inventory)

New listings: 6

Months of inventory: 6.4
Click here for the updated price per square foot chart.

No big changes this week. 6 new listings is a little higher than I would have guessed, but as it turns out 5 of those were REO's.

Later this week I'll try to work on that interest rate update.

Monday Morning Numbers 11/22/10

Monday again. Here we go:

Active Listings: 112

Contingent Listings: 50

Pending Listings: 44 (21.4% of the inventory)

New listings: 8

Months of inventory: 6.4
Click here for the updated price per square foot chart.

Raw inventory fell off a little bit more this week, but our months of inventory remained steady, along with our level of pending sales. One thing that I've noticed over the past month or so is a noticeable increase in the level of contingent sales. These are most typically short sales that are awaiting approval from the lien holders. That might be an indication that we'll be seeing an increase in the percentage of short sale closings in the next few months.

It's Thanksgiving week, and this is typically one of the lower activity weeks of the year. I'll probably come up with something to babble about late this week, probably Saturday. I gotta have something to do - it ain't like you could get me within a mile of a major shopping center this weekend.

Every day I drive past a church on Ocean Avenue, and they have a marquee sign that usually has something witty or insightful. For the past week or so, it's had "Thanksgiving is good. Thanksliving is better." I'd have to concur with that. Here's wishing you all a Happy Thanksliving!

Focus On North Vandenberg Village

This week the wheel makes another complete turn, and we're back to the beginning of our neighborhood focus cycle with a look at activity in North Vandenberg Village. For some background on the area, go back and check out my first post on it from last year.

This has been a relatively light activity area for a while, and things haven't exactly picked up over the past few months. We have a total of 8 active listings on the market here as of this afternoon (2 REO's, 2 short sales, and 4 traditional). That's essentially unchanged since I last reported on the area in June. Sales activity has been modest. We currently have 4 contingent sales (all short sales) and 2 pending listings (1 REO & 1 trad).

The past three months have seen 6 sales in the area (3 REO & 3 trad). That's not a lot, really, but it's not too bad considering the low inventory level. We appear to have a little more activity on distressed properties now than we had this summer. It's a little hard to nail down a price trend there on these numbers, especially given that the area is varied in price and size of houses. It does appear that some of the recent sales that we've seen were a little more in need of some TLC, so that might be bringing things down slightly.

Next week I'm not sure what I'll be posting for my mid (OK, late) week post. It's Thanksgiving weekend, so maybe it'll just be some ramblings from a drunk and bloated middle-aged guy. Kind of like your crazy uncle that no one wants to sit next to at Thanksgiving dinner. Or maybe I'll come up with something good. You'll just have to wait to find out with me.

Monday Morning Numbers 11/15/10

Here we are again. Another Monday morning, another cup of coffee, and a fresh set of market stats to start off the week:

Active Listings: 118

Contingent Listings: 45

Pending Listings: 45 (21.6% of the inventory)

New listings: 6

Months of inventory: 6.4
Click here for the updated price per square foot chart.

The raw number of active listings dropped a fair bit this week, partly due to the fact that our new listing activity was a little slow. But look at that months of inventory number - it actually went up this week despite that decrease in active listings. How does that happen, you might ask? It's because we've had a slower sales over the past few months. For the uninitiated, the way I calculate that number is adding the total active and contingent inventory, then using three months of sales to calculate how long it would take us to sell all of those listings at our current sales rate. This week's number for 3 month sales is at it's lowest point since March. I expect that we'll start to see that increase a bit soon because we had an increase in pending listings a month or two ago. But then that settled back down, so it's not going to last for a long time.

Later this week I'll be updating activity in North Vandenberg Village.

Inside the Life of a REALTOR® - Working on Commission

I'm sure that many of you love to watch TV. I know I do, at least sometimes. And if you're interested enough in real estate to be reading this blog, I'll go out on a limb here and say that you occasionally like to watch shows on channels like HGTV that feature my chosen profession. I've seen some of those shows. And I'll let you in on a little secret: Like most other stuff that passes for "reality" on TV, it's usually a load of BS. So what I thought I'd start this week is an occasional look into how things in our profession really work.

I'm going to start it off this week by giving you some insight into how we actually make money. I know that there are a lot of interesting ideas that the public has about that topic. I'll sometimes talk to someone who will enviously tell me "Gee, you guys get 6% of every transaction that you work. All you have to do is sell 5 or 6 houses a year, and you're rolling in the dough". I wish that were true. At an average sales price of around $200,000, that would be $12,000 in my pocket every time I closed a transaction. Sweet.

Before I go any further here, I want to make something very clear. None of what I'm about to share with you here should be read as any kind of complaint. I love what I do, and I wouldn't want to do anything else for a living. I just want to educate you on how this really works.

The truth is somewhat less lucrative than that $12,000 figure might lead you to believe. Here's the reality: Let's say that we have a very typical (for our market) $200,000 transaction. I have the listing, and someone from another office brings us a buyer. Most of the time we set these up on a 6% commission (there isn't a "standard" rate, but that's pretty typical). In order to actually get the other agent to sell this property, we have to be offering them compensation - almost always half. Now I'm down to 3%. $6,000 still seems like an OK deal, right?

But wait a minute - I don't own my office. That listing that I have isn't really my listing from a legal standpoint. It belongs to my broker. That 3% is, technically speaking, his share of the deal. He's got an office to keep open and he has expenses just like any other business. So the way this typically works, each agent has an agreement with their broker on what is known in the industry as a "split". That split depends on the broker's policy and a negotiation between the broker and his/her agents. Every office has their own policy on this. What we usually see is that newer agents get somewhat lower splits, sometimes as low as 50-55%, and as agents get more productive, those splits increase. In the case of the very top end producers, they'll often have splits in the 85% or more range.

Let's use a 70% split as an example. That $6,000 just became $4,200. But that still isn't what's going to be in that commission check. There are usually other fees to be paid in there for which could include office fees for things like a transaction coordinator, errors and omissions insurance, franchise fees, etc. So the check gets a little smaller, probably under $4,000. Now, it is possible that you can avoid this whole split issue in this business by getting a broker's license and striking out on your own. There are a few independent brokers in our market that have had varying levels of success. You can go that route and keep more of that commission for yourself, but you aren't going to have the name recognition and national advertising of a franchise behind you.

But there's more! There are a lot of ongoing fixed costs associated with just being in this business. We have licensing fees, association fees, MLS membership fees, and so much more. And most offices have some form of desk/technology/resource fee that we pay regardless of our transaction level. And we have general business expenses as well. And if it's a short sale and the lien holders cut the commission? Smaller payday. If that deal goes south and doesn't close? No payday.

And let's not even talk about how much time goes into closing a transaction. I'll save that for another episode. But the bottom line is, you have to be doing more than 5-6 transactions a year to be making a decent living in this line of work. Suffice it to say it's nothing like the "list a house, get a big check" business model that you might think it is.

Monday Morning Numbers 11/8/10

I'm not one of those people who typically has a lot of trouble adjusting to time changes. I've seen enough of them at this point to take it in stride. But that said, it feels weird to be writing a Monday Morning Numbers post with the sun already up... Let's take a look at our market stats for this week:

Active Listings: 127

Contingent Listings: 41

Pending Listings: 46 (21.5% of the inventory)

New listings: 6

Months of inventory: 6.1
Click here for the updated price per square foot chart.

Not much different to report here this week. Pending listings dropped a little bit, and we had a little slower week for new listings, but everything is still pretty much where it's been for a few weeks. It'll be interesting to see how things move as we get into the holiday season. I've said before that our traditional cycles have been out the window for a couple of years, but that they might be coming back to some extent. If we are going back to a traditional cycle, I would expect to see slower sales and listing activity over the next couple of months. We'll see how it plays out.

Later this week I'm going to do something that I've toyed with for a while and kick off an occasional series of "Inside The Life of a REALTOR®" posts. I keep trying to come up with something fresh to write at least occasionally - I can only write so many REO updates. When I'm doing two posts a week, it's hard not to keep covering the same old ground all the time. So I hope this is a good addition and you'll find it interesting and entertaining.

Focus on Condos

This week we're taking a look at activity on condos in our market. When I talk about condos, it's really a much broader category than the technical definition of condominiums (I'll spare you the boring details). Essentially, if it shares a wall with a neighbor and it's not in the Country Club, I call it a condo for our purposes.

We have a pretty high level of these properties on the market at the moment, with 17 active listings. And we're pretty high in distressed properties in this segment, with 10 REO's, 1 short sale and 6 non-distressed listings. In addition we have 6 contingent sales, all short sales.

Sales activity has been fairly steady on these units, with 10 pending sales (3 REO/3 SS/4 non-distressed). Over the past 3 months, we've had 9 sales (4 REO/4 SS/1 non-distressed). The prices appear to be pretty flat over the past several months for most of this segment, but a high inventory of distressed properties is a concern.

When we look at the decline in prices from the peak in our market in late 2005, it would appear that we've lost somewhere in the neighborhood of 50-55% of value. But when we look at condos, it appears to be a much steeper decline. Many of these have lost more in the range of 65-70% in value from the peak. Why is that?

There are a few things at work here. First, it's harder to finance these deals than it used to be. Most lenders have guidelines regarding owner occupancy and HOA delinquencies in a development, and many of our condo associations have some problems in those areas. But what I think is more of a factor is that these were probably more overvalued during the peak than houses in our market. Back in the peak days, houses were selling in the range of $400-425K in the entry level, and even with the ridiculously easy financing in those days it was harder for first time buyers to qualify for a house. So many of the first timers then were buying condos, driving up demand and prices. Now, you can buy a pretty decent house in the $180-200K range, and at those prices, a lot more first time buyers can qualify for a house. Most people (though not all) prefer a house over a condo. Yet another factor is that HOA fees have increased dramatically over the past few years in many complexes, due to a need to build reserve levels and a rise in HOA delinquencies. Some of those HOA's are around the $250-300 per month level, and that's a big chunk of money to factor into the budget.

I've said it before, and I'm sticking to it - I think that condos will be slower to start price recovery than the rest of our market. Until we start to see some financially healthier HOA's and loosened lending guidelines, we'll probably continue to struggle in this segment.

Monday Morning Numbers 11/1/10

Good grief, it's November already. How does that happen? I suppose that we're about to replace all of the obnoxious campaign commercials with obnoxious Christmas commercials. I love my DVR for letting me skip the bulk of those things... Let's take a look at this week's market stats:

Active Listings: 126

Contingent Listings: 39

Pending Listings: 51 (23.6% of the inventory)

New listings: 10

Months of inventory: 6.2
Click here for the updated price per square foot chart.

No big changes this week in our numbers, although our months of inventory has continued to rise. As we transition some of these pending listings into sold units over the next several weeks, we might see that number drop back down into the 5 month range again, assuming we remain steady with new listing activity.

Later this week I'm going to take a look at our condo market.