Bad news tends to make the headlines, so chances are the following good news about the Central Kentucky housing market is reaching you for the first time: closed sales of residential properties were actually a little better in September of this year than the same month last year, according to the Lexington Bluegrass Association of Realtors (LBAR) MLS figures.
Reports concerning the national housing market bombard us daily, whether it's about the economic downturn, falling home prices, foreclosures, large inventories of homes or the expected long recovery period. It makes the average homeowner reluctant to sell in this uncertain market. Buyers, on the other hand, have a lot to choose from and hope to find a good deal, but some remain on the fence waiting to see if the housing market has reached its bottom.
Nationally, there are signs that in certain markets, overbuilding and speculative pricing are working their way through the system, especially if they were not part of the big boom and bust markets like Las Vegas, Miami, and Phoenix. According to Wachovia, in October 2005, near the peak of the boom, the median sales price for a U.S. home reached 7.3 times the capita income; by this May, it had fallen to 5.7, in line with historical norms.
Here in Central Kentucky, the real estate market has continued to outpace national trends. LBAR President Judy Craft states that "the combination of our local stable economy, low mortgage interest rates, stable home prices and recent federal action is resulting in, once again, Central Kentucky outpacing the national market in several key areas." Existing home median sales prices over the last three months were up an average of 2.5 percent for the Bluegrass, while the National Association of Realtors (NAR) reported a drop of 8 percent and 9.5 percent for July and August, respectively. Existing home sales rose 1.34 percent in September, while NAR reported an 11-15 percent decrease in July and August.
According to the Lexington Bluegrass Association of Realtors' Year to Date Market Activity Report published through September of this year, sales of single family residential homes are down 14 percent, while townhomes/condos are down 9 percent. Median sales prices for single family residential for the same time period are down 2 percent. However, for existing home sales, the median sales price is unchanged when comparing September 2008 to the same month in 2007. Existing home sales for September numbered 530, which is above last year's figure of 523: a 1.3 percent increase. Inventory is down 7 percent while pending inventory is up 0.9 percent when comparing September of this year to last year.
Overall, comparisons of September 2008 to September 2007 show more market improvement than a year over year, year-to-date comparison.
Although these numbers in comparison with many other markets are respectable, sellers and buyers need to understand the real estate market is shifting daily and recognize they need to quickly adapt to the current economic conditions.
The biggest single mistake a seller makes is pricing a property too high. In today's market, homeowners must price competitively due to the large number of homes for sale. So, if you are selling, don't be surprised if it's a low offer, and respond to all offers, even if it is low. Don't be offended and don't take it personally. Negotiate and see what happens. Remember, this is a business transaction.
Most importantly, make sure you are dealing with a qualified buyer who has been recently pre-approved for a mortgage. Be flexible about contingencies a buyer may need, but cautious when entering into a contract that is contingent upon the buyer's current home selling. In a sluggish market, it's difficult to predict how long it will take the buyer to sell their existing home. Consider adding a kick-out clause in these cases, which gives the seller the right to cancel the contract if a better offer comes along. If not, you could tie up your property and lose valuable marketing time. Maintain your property, make the necessary repairs and keep it clean. Make sure your property stands out among the others!
As a buyer, it is extremely important to get preapproved by a lender before you even begin the process of looking at homes since there are fewer options for borrowers these days. Lenders are writing more traditional fixed rate mortgages and have stopped underwriting riskier loans. Shop around, be cautious, and be conservative; the days of easy money are over. Know and get a copy of your credit scores as soon as you decide to move. Credit scores partly determine the type of loan and interest rate that will qualify you for your purchase.
Remember, the best advice: before you write an offer, now it's more important than ever to sell your existing home prior to purchasing a new one. Carrying two mortgages in today's market is a huge risk that most of us, along with the banks, aren't willing to take. Today's market also represents an outstanding opportunity for sellers to purchase another home and move up in price. Even if you have to sell your home for less than you had hoped, there is a good chance to make up the difference in the purchase of your next home.
Jennifer Mossotti, CCIM, is a Realtor with Prudential de Movellan Real Estate and former LFUCG councilmember.