So...How's The Tyler Market?

The most recent numbers are out for July and the trend was largely as expected. In this post we'll explore the most recent numbers that drive the local Tyler/East Texas real estate market and provide our analysis of what that means.

Home Sales

July homes sales, according to local GTAR MLS data, were up about 9% from the same month last year.  However, July sales were about 11.2% less than June 2011 marking the first month in 2001 where sales fell from the previous month.  Compared to the same 12 month period a year ago, cumulative home sales through July 2011 were down slightly (-1.5%). Both June and July sales were trending higher than same month prior year sales.

Median Home Prices

Compared to the same 12 month period a year ago, median home prices remain virtually unchanged. Median home prices, while having some seasonal variability, have remained relatively steady and, since March, 4 of the 5 months have been trending slightly higher than the same month previous year.

Inventory

Available inventory for July was virtually unchanged from June - up about 0.2%. Compared to the same 12 month period a year ago, monthly inventory of available homes has increased. Over the last 3 months, current months inventory had been staying relatively unchanged compared to the same month previous year.

 Months of Inventory

The months of inventory (MOI) data indicates the time to sell all current available homes based on current absorption rate or sales rates. The most current MOI is 14.5 months (down from 14.6 months in June). Year over year MOI has been trending slightly upward as a result of both higher inventory and slower monthly sales. Inventory rates above 6 months indicate a buyers’ market, where there is an abundance of available homes compared to qualified buyers. A number below 6 typically indicates a sellers’ market where the demand for homes is greater than the supply. As a general rule, all other parameters being equal, home prices will trend lower in buyer markets and higher in seller markets.

Some Other Numbers That Influence the Market:
 
Unemployment
 
After several months of trending downward , local unemployment rates have climbed slightly to just above the 2010 levels - 8.1% in June (compared to 7.7% in June 2010). Recent unemployment levels had been slightly lower than the same months last year. Higher unemployment still continues to be the primary contributor to a lackluster housing market.

Mortgage Interest Rates
 
Mortgage interest rates continue to linger at historically low levels. The most recent weekly benchmark 30-year fixed rate as of 8/17/11 was 4.45% down slightly from the previous week’s rate of 4.46%. Historically low mortgage rates continue to provide some momentum to the market.

Our Summary Analysis
 
Currently considered a buyers’ market where inventory exceeds demand. Inventories are up and cumulative home sales are not selling at as fast a pace as they were in the same months last year. Despite higher inventory and less robust sales, median prices have continued to trend relatively steady. Low interest rates continue to provide some momentum for buyers; however, that is tempered by more rigorous qualifying guidelines and a tepid overall economy - still sluggish from higher levels of unemployment. Bottom Line - likely expect more of the same until job growth is more robust and unemployment levels begin to drop. As inventories continue to climb, there may be pressure on sellers to lower prices as buyers continue to be spoiled by choices. With historically low interest rates and plentiful inventories, this is an excellent time for buyers to make their move. New buyers, moving up or downsizing - now is a great time to take advantage of great values in the market.

Why Do Some Houses Sit While Other Houses Sell?

Selling at the Top of the Market

Recently, someone asked if there are different strategies for selling a home in a slow market versus a robust market. The short answer is no - or at least it should be. The reality is, there are successful approaches for selling a home at the top of the market - regardless of the market itself. After all, we cannot control or change the market, so we must have a sales process that works effectively to make sure that our clients' homes sell at the top of the market. What's that process - it has 4 key strategies that I'll summarize below - Positioning, Exposure, Negotiation, and Execution.

In terms of positioning, the objective is to position your home against the current market to have the highest perceived value. Now price is a significant component to that - and pricing strategies will vary depending upon the current market conditions - but understanding and getting an assessment is paramount to proper positioning. While most agents rely on the industry standard CMA (comparative market analysis), that tool, by itself does not provide a comprehensive assessment of the market and can often leave thousands on the table for a prospective seller. To set the best price, up front, which is the absolute best pricing strategy, it is important to have a comprehensive strategic market assessment that provides details on pricing and trends that make it clear and understandable to the seller to set the right price.

Other important components of positioning your home against the others on the market are staging and curb appeal. We offer a strategic home preparation plan to the our sellers that includes staging reviews, a complete home preparation audit and curb appeal plan to ensure that our client's are armed with the details they need to make their home stand out within the market.

Exposure is another key element to selling a home at the top of the market. Even if a home is priced perfectly and is beautiful - if no one sees it it makes no difference. An effective exposure campaign will align with current buyer trends and preferences. Many agents still rely on outdated an ineffective traditional marketing methods - yet, technology has vastly changed real estate and the means for attracting qualified buyers. By understanding current technology. buyer trends and preferences, we can apply our resources in a more targeted effort in those areas where your home gets the most exposure.

From a negotiation standpoint, it is important to understand that you've lost 80% of your negotiating power once you have the offer. What I refer to as pre-emptive negotiations can add value to the home. So how can you strengthen your negotiating position. Well, any good lawyer will tell you that they never ask a question they don't already know the answer to. Why is that - very simply it improves their negotiation position. The idea is to negotiate from a position of power - and knowledge is power. Pre-inspections on homes offer one such alternative. Knowing up front what will come up on an inspection report - and having the opportunity to repair items ahead of time - gives the seller the advantage in negotiations. And remember, the cost to actually repair or replace an item is, as a rule of thumb, about half of what is asked for in an allowance. Also, having clear guidelines and parameters of your ultimate goal is helpful and allows your agent to set some expectations early in the negotiation process.

Finally, execution of the agent, team and broker can make a difference in the home selling process. Perhaps the most vital to this is feedback and communication. An effective home marketing plan should have a systematic communication strategy in place that outlines the frequency and method of communication between the agent and owner. By providing ongoing feedback and market data, home sellers can be confident of their decisions until the home is sold. Particularly in a changing market, the ability of an owner to make appropriate and timely changes can make the difference between selling for more and selling more quickly.

Any home can sell at the top of the market or the bottom of the market. The difference may well be the approach to getting it sold.

Don't Underestimate the Impact of Lower Mortgage Rates

With the recent financial turmoil in the market, one positive side effect has been another drop in mortgage rates. While the rate drops may seem trivial to many, the truth is, on a mortgage, the impact of lower rates can be significant and should not be underestimated in the home buying decision.

I'll use a few examples to illustrate the impact. Let's say you have a 30-year fixed mortgage of $100,000 at 5%. The payments (principle and interest) would be $536.82 and over the life of the loan (assuming you would pay it for the full 30 years) you would end up paying $193,255.78. Now, look at the difference for the same mortgage at 4%. Payments would be $477.42 and, over the life of the loan you would pay $171,869.51. That's a difference of over $59 per month in payments and over $21,000 less over the life of the loan.

Even a one half percent (0.5%) drop in interest rates on the same amount, is the equivalent of a 5.5% drop in price on the home. So for those buyers who continue to wait for home prices to drop further before entering the market, may see their perceived savings evaporate if interest rates move even slight up from their low levels now. Clearly, the interest rate movement is far more volatile than the home prices so anytime rates move down, the overall price of home ownership becomes even more affordable.

So, with interest rates falling again, now is the best time since November of last year, to make your move if you are sitting on the fence waiting to enter the home buying market. Waiting could end up costing you thousands of dollars - a bigger difference than you may have thought...but now you have the scoop so....what are you waiting for... they call it a buyers market for a reason.

To get more information on pre-qualifying for a mortgage or to begin your home search in the East Texas area, visit our website at http://www.spotlightteam.com/.