Archive for the 'Contracts' Category
An Unexpected Surge
Local real estate markets have felt surprisingly busy over the past month. November is usually when things start to slow down for the holiday season, but this year has seemed different. After a slow fall, business actually seems to be picking up recently.
Are the markets really busier than normal for this time of year? The best way to investigate this question is to look at the number of contracts written by month. Let’s compare to the average market activity of pre-financial crisis years (2001 through 2006) to hopefully get “normal” seasonality. The following data comes from the CT Multiple Listing Service, which is deemed reliable but not guaranteed.
So … what do we see in the data?
1. The market has been consistently slow since the tax credit. We just can’t get away from the tax credit can we? Contracts had to be signed by the end of April 2010, which shows up loud and clear on the chart. Moving on…
2. October was not busier than “normal” in terms of the number of deals. The number of contracts written was less than the baseline years, though we have been closing the gap.
3. However, October was busier versus previous months than typical years. Rather than falling off since the peak of the activity in May, the number of deals has been trending upwards since May in 2010. We’re gradually returning to traditional seasonality.
4. We still see peaks and valleys in the second half of the year. Fewer deals seem to happen in July and September, showing up as dips in the trend line. More deals seem to happen in August and October, showing up as peaks in the trend line.
It looks like our perceptions are not supported by any data; the market really isn’t busier in any measurable way. That’s why we pull the stats, to make sure we’re not extrapolating our experiences and perceptions to the overall market. In this case it looks like our business is simply trending differently than other agents.
Not that we’ve complaining … we like helping people with their real estate needs!
How Often Does the Listing Agent Bring the Buyer?
The other day we were wondering, how often does the listing agent for a home also represent the buyer? This situation is called Dual Agency, and is something we’ve explored in the past. However, we never looked to see how often it happens in our area.
To attack the question we looked at all the single family home sales that have closed so far this year in Hartford County. The data came from the CTMLS, which is deemed reliable but not guaranteed, and was gathered on the afternoon of the 20th.
The same agent represented both the buyer and the seller in about 1 out of every 11 deals. There were 4,678 total sales, and 9.1% of the time the buyer and seller used the same agent.
We really had no idea what to expect as an answer, but 9% seems reasonable based on our experience. Agents have an opportunity to sell their listings to unrepresented buyers (who become their clients) through the advertising of their listings and through open houses. We would also expect agents with a very strong listing presence in a particular neighborhood or town to be more likely to sell their own listings since they would also attract a pool of buyers interested in their territory.
This quick analysis leads to a number of additional questions that would be interesting to research. For example, is the percentage of dual agency deals seasonal? Has it changed over time? Are some agents more likely to sell their own listings than others? If so, are there any hints as to why? If there are agents who do a disproportionate number of dual agency deals, should sellers seek them out or shy away? What are our percentages and how do they compare?
Hmmmmmm. Maybe some answers to these additional questions will even make it into a future post.
Friday the 13th
The other day we were talking about our current pending deals, and noted that we both have closings scheduled for mid August. Closing in the middle of the month is pretty common, but we discovered that our two deals have something in common. Neither us, nor our clients, wanted to close on Friday the 13th.
Friday is the most common day for real estate closings in Hartford County. In looking at data for over 30,000 single-family and condo closings since the beginning of 2007, there are more than twice as many closings on Friday as any other day of the week. The reason we often hear for a preferred Friday closing is so that people have time to move in over the weekend before returning back to work on Monday.
Are we the only agents with an aversion to Friday the 13? No, no we’re not.
In weeks that contain a Friday the 13th (red bars below), there is a noticeable decrease in the number of Friday closings. Clearly not everyone is afraid of the day, but there are others who would prefer not to risk it. The chart shows that many buyers choose to close on Thursday the 12th, while some push it out to Monday the 16th.
We expected there to be more of an aversion to Friday the 13th closings than the data shows. Especially since many of the agents we know are mildly superstitious (no sense putting clients at risk of bad karma/energy/whatever). Maybe people don’t realize that the closings they schedule on a 13th are also on a Friday. Or maybe they’re too embarrassed to admit their phobia. Or maybe we’re just a little too sensitive to this sort of thing.
Would you schedule a closing on Friday the 13th?
Extending the Home Buyer Credit
The National Association of Realtors (NAR) has been leading a push to get part of the Federal Home Buyer Tax Credit extended. But don’t get too excited – their proposal won’t give allow anyone new to claim the credit.
Before diving into the details, here is a quick review of the current rules of the game:
1. First time buyer or existing owner (extra criteria).
2. Binding purchase contract by April 30, 2010.
3. Closing by June 30, 2010.
In a June 11th press release, NAR argues that 180,000 buyers met the first two rules but are at risk of missing out on the credit because their lenders will not be able to underwrite the mortgage in time. In fact, they state that “as many as one-third of qualified applicants have been notified by their lender that their mortgages will not close before June 30th.” NAR would like to protect these buyers by extending the deadline for closing to September 30th.
NAR’s main concern is that the surge in purchases at the end of April is overwhelming lenders. Others seem to believe that the tighter lending standards and the new appraisal rules that fall under the Home Valuation Code of Conduct (HVCC) are a big part of the delay. A number of articles, including Senator Reid’s press release on the issue, state that there is “growing concern” that short sales will be impacted.
We have heard about mortgage delays with some of the larger national lenders and with special programs (like CHFA) that require additional steps or approvals. However, buyers using standard mortgages with local and regional lenders are seeing their loans go through without much trouble. Appraisals can be an adventure when someone is assigned from outside of the area (like from Rhode Island!), but they have occurred in an expeditious manner. Short sales are a whole different animal, and the concerns identified seem to lead to a discussion about when the purchase contracts becomes binding – not a debate for today.
Buyers in Greater Hartford are seeing some of the same challenges that have been reported in the country overall, especially when they use national lenders. Hopefully we won’t see too many closing delays as the month of June comes to an end. And if the “closing by June 30th” rule is relaxed, that will help ensure everyone gets the incentive they were expecting.
Real Estate Activity Decrease by Town – May 2010
May is a busy real estate month. More deals are done in the spring than in other times of the year, and the month of May is right there in the middle of the spring. In most years, the months of April and May have the two highest totals of contracts written (buyers and sellers agreeing on a sale). May usually edges out April, but not always. It depends on how the holidays fall, and whether there are other major events that distract buyers from the real estate market.
The chart below shows the contracts written by month for single-family homes in Hartford County. Data is shown for all of 2004 and the first five months of 2010. All data comes from the Connecticut Multiple Listing Service, and is considered reliable, but not guaranteed.
May didn’t win this year, which isn’t much of a surprise. Everyone already knows why … tax credit. Nuff said.
But how about the individual towns? Did all of them show the same fall-off in activity? Did the tax credit matter more in some towns than in other towns?
This table shows the number of single-family home contracts written for each town in Hartford County. The percent change in the market activity between May and April is shown in the final column, and is used to sort the table.
There is a huge range of results; from apparently no impact in Burlington all the way down to a 75% decrease in activity in Canton, East Windsor, and Wethersfield. Scanning through the percent difference column, it’s interesting that there are towns throughout the whole range – they are not bunched together.
The results also don’t seem to follow median sales prices. Of the more expensive markets, Farmington, Simsbury, and Glastonbury showed smaller declines than most towns, but Avon had one of the largest. Of the less expensive markets, Bristol, Hartford, East Hartford, and New Britain were pretty evenly distributed throughout the middle of the range.
Despite the broad decrease in activity, buyers and sellers are still out there looking for homes. Buyers may have more of an advantage because there is less activity, but not in all cases. Desirable properties continue to sell with multiple offers if they are priced appropriately – just last week we had listing and buyer clients participate in multiple offer situations.
What’s your take based on your search or sale?