McGrew's News

Demand and Supply (and demand....)

I've always heard the phrase "Supply and Demand".  Seems like I actually may have learned about it a long time ago in a macro-econ class at KU.  But in these recent months I've come to understand that phrase is exactly backwards.  At least for those of us in the real estate business.  We've got the supply, the inventory of well priced property.  We even have historically low interest rates (still!).  But we've had precious little demand.

The fact is that without a good balance the market doesn't work very well.  Typical supply with sharply reduced demand makes for tough times if you're a seller.  And without consumer confidence the demand is tepid at best.  Which means that the supply has to be first rate, polished up and priced sharply to compete for those few and discerning buyers.

The good news is that local demand is starting to show some signs of recovery.  Here in Lawrence we've seen a return to more normal activity in the under $200,000 price range.  We've had some multiple offer situations.  We've even had some higher priced homes sell.  I know of at least one million dollar listing that recently went under contract.

Nationally, though the news is still very much a mixed bag, we are hearing more talk of "bottoming out", "signs of improvement", and talk of numbers that are "better than anticipated".  So maybe we are beginning to get the demand back into the equation in a more balanced way.  We'll see what happens over the next 30-60 days and let you know.

Mike McGrew

Bottom's Up....

In real estate right now, everyone’s sitting on the sidelines. No one seems to know what to do. That’s true for investors, homeowners or aspiring homeowners. Maybe your family has outgrown your first house and is ready for more space. Or perhaps your kids have flown and you’d like to downsize. You may even be a first-time home buyer. Whatever the situation, if you have your eye on real estate, you may be waiting – hoping – for rates to fall and prices to bottom out. Right?

 

Let’s talk about rates and prices for a second.

 

Rates:          Right now, if you have a job, 600 or better FICO score, access to about $7,000, and no tax liens or recent late payments, you can get 96% FHA financing for a house priced in the $180s. And Uncle Sam will give you a $7,500 income-tax credit if you haven’t owned a home for 3 years! By the way, the interest rate on this loan is around 5%, low by any historic measure. Are you willing to bet that rates will go significantly lower? As the number of loans made rises, rates will likely follow. Still want to wait?

 

Prices:         Are home values still in decline? The short answer is, I don’t know. But I honestly think we’ve seen the worst of it. We won’t know that we’ve hit the bottom of the market until some economic guru goes on CNN and announces that the bottom hit six months ago. In other words, we won’t know that the bottom has hit until afterwards.

 

If I’m wrong and you buy now, values could slide a bit more. But if you can remain in your house at least two to three years, those values will likely rebound rapidly because of pent-up demand when psychological caution abates and the economy rebounds. Meantime, you enjoy your new home.

 

If I’m right, you’ve bought at the bottom, secured an exceedingly low interest rate and made a great deal. Plus, if rates drop  further, you can refinance for an even lower payment later. Meantime, you enjoy your new home.

 

Either way, you win.

Moving up or moving down, you wonder whether your current home will sell. Assuming it is in good condition, priced realistically and marketed aggressively, the answer is Yes.  Sales contracts are being signed constantly.  Even this time of year.

 

The combination of lower prices and historically low rates makes this the most attractive time to buy a home that I’ve seen since I became a Realtor. 2009 may well be the best time in the history of Lawrence to acquire and finance real estate.

 

Steve Albright

Judy Brynds

Who wants the job now?

With all of the complex issues facing our community who do you suppose wants to run for the Lawrence City Commission?

We've got budget problems, transportation problems, a slow economy, rising mill levies, etc, etc.  Some would say we have image problems too.  This is hardly the time for candidates that want a part time job or to pad their resume. 

We need responsible growth minded business folks that will devote whatever time is necessary to get our economy back on track.  Elected officials that will take every opportunity to increase jobs, expand our tax base. and improve our future.

And talk about a thankless position.  People with the talent and skills to move the city forward better be prepared to be criticized and second guessed at every turn.  You have got to have a very thick skin to be a politician around here.

But I love Lawrence, even with all her imperfections.  And I know that there are many who feel the same.

So the call for the strong, growth minded pro-Lawrence candidates is sounded.  Who will answer the call?  Who wants to take the tough job in tough times?  On behalf of a community in need, I thank all who step forward and answer the call.

Plan NOW to sell in the New Year!

Although Lawrence has not experienced a drastic real estate decline like some other markets, it is no secret that sales volume is down here too. Lawrence is generally a “buyers’ market” with downward pressure on prices and an overabundance of new and resale homes in inventory.

Here’s the good news for both buyers and sellers:  1) Interest rates continue to be at historically low levels; 2) In spite of what you read and hear in the media, banks and lenders are still making real estate loans, even to first-time buyers; 3) There is a $7500 first time buyers’ tax credit available; 4) With a couple of years of sales declines behind us there is bound to be some pent-up demand once consumer confidence is restored.

Do you want to be in a position to sell your home in the near future?  Here are some helpful tips:

1. Take a critical and objective look at your home and evaluate it from the buyers’ perspective.  Will your home compete favorably with others like it on the market?
2. Are there obvious repairs needed or deferred maintenance that won’t pass inspection?  Don’t forget to look at your roof, siding, windows, furnace, A/C and water heater.
3. Do you have outdated wallpaper, paint colors, fixtures and finishes that need to be freshened up?  Pay particular attention to kitchens and baths.
4. Does your house give a nice impression from the street?  Curb appeal can be enhanced with added landscaping, a fresh coat of paint or a new door.
5. If you’re planning to move anyway, start getting rid of clutter, box and store items you seldom use, have a garage sale or donate your “stuff” to Goodwill.
6. De-personalize and neutralize as much as possible so your home looks more spacious and buyers can envision their furnishings in your home.
7. Clean, Clean, Clean - top to bottom, every room (and closet) in the house.  Don’t forget the garage!

Leave prospective buyers with the impression that yours is a home that has been well cared for, well-maintained and is move-in ready.  Anything less and savvy buyers will move on to the next property.  That’s the reality folks.

The spring market is traditionally the best time to sell your home.  In Lawrence, that’s just a few months away.  Take time to plan NOW and start making necessary improvements and enhancements over the next couple of months that add value and make your home more marketable.

 

John Esau

Faith, Hope and Perspective

During these recent tumultuous weeks on Wall Street, I've been getting lots of emails with advice about keeping the faith, staying with long term strategies, ignoring the emotion of the moment, etc.  Perspective, they say, is important in these trying times.

Seems like good advice that is applicable on Main Street too.

Residential real estate in Lawrence has been a terrific long term investment.  "Long term" being the main point here.  Over time, the idea that you can own real estate using responsibly borrowed money, get tax benefits and appreciation potential in a solid community just makes lots of financial sense.  Unfortunately, we may have gotten a bit spoiled lately.  Our recent unrealistic expectations are now being painfully realigned with reality.  

So it is important to remember the fundamentals of residential real estate. 

And among the most important fundamental of all is one of the most basic human needs: shelter.  Everyone needs to live somewhere.  And not just to be protected from the elements, but to have a home, something to be proud of, something to give roots and stability to life. 

So, with apologies to the stock market, the intrinsic value of real estate is undeniable and in a historically strong community like Lawrence, the long term risk is very low while the long term reward has been excellent.

I hope you can keep your perspective, have faith in our community and take advantage of the current opportunities to own real estate in Lawrence.

What does the credit crunch mean to a Lawrence buyer?

With all of the media coverage of our current economic situation, many prospective home buyers are wondering where they stand.  The truth: not much has changed in the lending world regarding owner-occupied real estate.  The days of 100% financing for bad credit borrowers are gone but if you have decent credit and 3% to put down, chances are that you won’t have any issues securing financing. 

The credit crunch is mainly a problem in coastal areas where the price of housing has far out-paced income levels. In parts of California, for example, a starter home that would cost about $150,000 in Lawrence can cost as much as $700,000.  In order for the buyers in these areas to qualify for a loan, they chose risky, adjustable rate or even optional payment mortgages with below market teaser rates that never would pay down any of the principal on the loan.  Once the prices started to decline, the appreciation that these buyers were counting on to provide enough equity to refinance in to conventional financing was non-existent.  When their teaser interest rate expired they were stuck with a payment that in some cases doubled, causing them to default on their mortgage. Many were forced into foreclosure.  In our area, these risky loans were rare.

In Lawrence, some buyers took advantage of 100% loans simply because they were available.  Most of the time, the buyer had cash on hand that they elected to use on property enhancement instead of down-payment.  Most of the residents of the Mid-West have a conservative financial mind-set and are able to meet the modest down-payment requirements that are still readily available.

 

It’s a GREAT time to buy! Especially for first time home buyers.  Our market currently has an abundance of inventory that is priced right and Sellers that are ready to negotiate.

 

Additionally, congress recently passed a housing stimulus plan that provides a $7,500 tax credit to buyers that have not owned a home for the past 3 years.  In many cases this credit will more than re-coup the down-payment and closing expenses related to a home purchase.  Once you factor in the tremendous tax advantages that come from home ownership, principal reduction that comes from paying your mortgage and the eventual property appreciation that will return once the dust settles, the actual cost of owning your home can be much less than the cost of renting.  Home ownership will play a large part in your overall financial health and over the years will likely prove to be the best investment that you can make.  The saying goes “Buy low, sell high”; this is the first time in decades that you have the opportunity to buy at the bottom of the market.  Take advantage of it now because it won’t be here for long.

 

Steve La Rue

Don't they know?

.....how good Lawrence is?

You know: the companies that are looking to relocate, the site selectors, the out of town commercial real estate agents.  They MUST know what a great place this is.

And it really is.  I've been here all my life.  So has my dad.  And I can't imagine a better place to raise my family.

Lawrence has everything.  Diversity, arts, change of seasons, college sports, close to bigger cities.  But not too close.  An hour from a major airport, educated citizens, a caring community attitude.

How can any other city really compete with us?

But other cities do compete with us.  And more often than not they win.  They don't win for just one particular reason.  There are lots of things we get beat on.  Sometimes we're too small.  Sometimes we're too far.  Sometimes we're not near a certain other company's plant.  Sometimes we're too close.

So for all we have going for us, we need to have more.  We need to have a variety of properties for companies to choose from.  Buildings and vacant land.  But vacant land needs to be permit ready right now to count.  Because the other communities have it.

And we need to give incentives.  Or whatever you want to call it.  (One of my colleagues in the office calls it corporate welfare.)  The fact is that the other communities are all too happy to give away land, give abatements and even cash up front to lure a company to their town.  It is the way the world is today.  We don't have to like it, but we do have to understand it and be willing and able to do it.

So if we want to win some of these opportunities, to add jobs and ultimately to add some tax revenue, we need to make sure that everyone knows how special Lawrence is.  And then we need to get out our checkbook, make an investment in our future and close the deal.

Mike McGrew 

Basics for the First Time Home Buyer

It is that time of year again, and like wildflowers, real estate signs are springing up in yards across town. Home buyers will rub their palms together in excitement. After all, the timing is right, as most rental property leases are ending, and many of those who were renting are now in the market to buy. Where does a first-time home buyer seek guidance? A good, ethical real estate professional is a nice place to start. What are the basic facts that a first home buyer should know, and what are some good questions to ask a real estate professional?

One of the first things a first time buyer should know is that in most markets, it is traditional for the real estate professional's commission to come from the seller's proceeds. In other words, buyers generally don't have to pay for buyer agent representation. Whew! This is a load off the shoulders, as a buyer is going to have to consider a down payment and other closing costs. Just to be sure, before embarking on the buying journey, the buyer should ask the professional about who will pay his or her commission. Ask: "Are there any instances in which the seller would not pay a buyer agent's commission?" Also, buyers who plan on acquiring a home loan will want to develop a relationship with a lender early on. Ask your real estate professional for some references.

To increase the chances of having a streamlined transaction experience, it is a good idea to choose a local lender. Local lenders know the local market and the laws and requirements that apply to transactions in the area. They know and use local appraisers and will likely be more responsive, as they offer the opportunity for a face-to-face relationship.

Buyers should ask their lender which loan programs best suit their personal needs. Discuss with the lender all of the costs associated with buying a home. Consider the down payment, and all other closing costs. What will the earnest money check (if this is included) apply towards on the day of closing?

The real estate professional should explain to the home buyer more about earnest money, and the process it goes through. In general, earnest money is included with an offer to let the seller know the buyer is serious and will not walk away from the transaction on a whim. The earnest money is usually at least 1 percent of the total amount of the offering price and is held in an escrow account until the day of closing.

Buyers should obtain a pre-approval (or pre-qualification) letter from the lender. This lets buyers know what price range they are able to shop within and will help the buyer's real estate professional in searching for properties. In some cases, buyers may be concerned about having enough money to bring to the table the day of closing for a down payment and other closing costs. Ask the real estate professional how common it is for buyers in the local market to ask sellers to pay a portion of the buyer's closing costs. This is one avenue the buyer may wish to pursue in order to reduce some or all of the necessary costs associated with closing.

Something else that may provide first time home buyers mental and emotional sanctuary is the option of purchasing a home warranty. Most home warranty plans last for one year and offer coverage on many of the items in a home. Usually, after a home warranty is purchased, a buyer will need to pay a set fee to have covered items repaired, which can be minimal compared to the actual cost of repairs.

Home warranty programs can be very appealing when one is buying an older home, with older mechanical units. Every market is unique. All aspects of the real estate transaction should be researched for each specific area to find out the best answers to each home buyer's questions. Seek out a professional. The process of buying a first home does not have to be daunting, as there is plenty of help available.

Adam Miller

It is Simply Time to Buy

Lately, everyone has been reading about the poor state of our economy, the weakened stock market, and the how the Fed continues to cut rates in hopes to revive our financially distraught nation. 

When put this way, of course, our situation sounds dire; but there is truth to the story, or else, we wouldn’t agree it is a problem that we all share and hope to overcome.  Our economy, like all things in life, thrives and declines in cycles.  Sometimes it is up, and sometimes down, and individuals are affected differently in every phase.

The housing market has been affected, too.  Many sellers have suffered this year, some more than others, depending on which market (area) they are in, and what product (house) they wish to sell, and for what price. 

Yes, some sellers are waiting on the dark side of the moon, for the skies to shift, and market conditions to turn back in their favor—but, at the same time, daylight fills many buyer’s eyes, and presents a perspective where the process of buying looks pretty appealing.

It is hard to ignore, for those who are ready to buy a new home, this is truly a prosperous time! 

With interest rates down, inventory up, and many sellers dropping prices—it is hard to argue that there is much better of a time to buy a home than right now.

Let’s face it: the negative press is enough to scare even those who are ready away from making a purchase.  That is how fear works. It feeds on itself and creeps under the skin of just about anyone, inducing a bad case of self doubt and doubt in external factors, also. 

This is why we must clear our thoughts, and look at the housing market over the last few years to gain a holistic perspective.

Looking back, the national housing market was on the fast track between the years 2001 and 2005.  During this time, homes were appreciating rapidly and sellers were taking full advantage.  It was only natural that this market, running on high, would have to eventually slow down and catch a rest.

Those who purchased during these record breaking years spent good money on their homes, feeling confident that they would eventually see positive returns on their investments.  For those who have had to sell two/three/four years later, in a sluggish market, during a time when the national average price has been reported as declining, many individuals have not seen their hoped for cash return.  Some sellers are even forced to bring money to the table in order to close a sale. 

What does all of this mean?  It tells a story about patterns, and reaffirms the fact that, with few exceptions, it is a buyer’s market out there.  When rates are down, prices are down, the market is down, and it is simply time to buy.  In a system that thrives in cycles, when everything is down, it won’t be long before it springs back up, and that includes the market conditions for sellers.  

Some analysts say that the housing market may be leveling off.  And begin its turnaround in 2009.  Conditions will shift, homes will begin appreciating again, and with any luck, when you go to sell, market conditions will again favor you, but this time as a seller. 

It is also nice to know that your decision to buy is helping the economy and the housing market readjust and become healthy again.  Buying can be a positive step for you, for others, and for the nation.  It is simply time to buy!

Adam Miller, Realtor

Great Debate?

Lawrence is a community with a tremendous history, one that we can all be proud of.  Our town was founded as an outpost against the prevailing conventional wisdom.  An island of freedom in a sea of slavery.

Lawrence was created as a counterpoint in a great debate.  And we have honed our skills for over 150 years.

Challenging authority, demonstrating healthy skepticism, a 'show me' attitude (with apologies), these are things that we pride ourselves on.  Maybe too much.  There are those among us that relish the game so much that resolution of the question is not very important.  But stalemate has brought us to our current situation, an economically stagnant city.

It is decision time.  We've had the debates.  We see other communities getting the jobs, the synergies of higher employment and more tax revenue.  We see our city, county and education leaders struggling with budgets that won't fund all of the services we wish to provide for our citizens.

It is time to decide to grow.  We must be willing to invite, encourage and incent companies to come to Lawrence and invest.  And we must do it now.

There will be more debates.  Lawrence will never become silent and still in the face of difficult issues.  But to decide to grow our economy now and in every reasonable way possible, that decision is long overdue.

Mike McGrew