Zillow – Can you use it?

Zillow made a big splash on the real estate/internet scene late last year and early this year. This past week it was in the news again as it is being sued for misleading consumers as to the valuation of their homes. Many real estate professionals have been having headaches as a result of Zillow, as their prospective customers point out how high a valuation it shows (for sellers) or how low a valuation it shows (when working with buyers).

How does Zillow work? In a nutshell, it uses publicly available tax records and computes the dollar value of recent sales for the size of the home within a neighborhood and geographical area. This can lead to some very large errors in some situations, while giving very accurate results in others. If one is comparing a subdivision with more or less identical homes, on identical lots Zillow will give a relatively accurate market value. It will miss any special improvements or deterioration, damage, etc. On the other hand, in non-homogeneous neighborhoods with waterfront, golf courses or lake front, Zillow just doesn’t know how to value that information as of now. Maybe in the future.

So, am I saying disregard Zillow? No! It can be a useful tool if used correctly. Do not take the default Zillow ‘zestimate’ at face value. Go deeper in the program and select the comparable homes that work with the one that you are trying to value. Try to pick good comparables – this is where the professionals know which ones to pick. They’ve seen many of these homes, been inside and know the neighborhoods. Water front, lake front, golf course, damage, updated, etc. One can also adjust the improvements of the home and additions that may not be available to Zillow.

By fully utilizing Zillow in this way, one can get a much better ‘zestimate’. The only remaining problem is that it can still be somewhat inaccurate because very often the tax records are wrong. Results can only be as good as the data, and it is often inaccurate or misleading for various reasons.

Another major problem that Zillow doesn’t address is the trend of the market. Currently, some markets are in a down cycle. Comparing sales of a year ago or even six months can be risky as the values may have gone down, sometimes considerably. In a rapidly expanding market, the opposite can be true. Here’s where the professionals are needed to give you a proper analysis.

So feel free to use Zillow, but be aware of its limitations and shortfalls and do a little work making the ‘zestimate’ better. After all, if it was so good, banks wouldn’t need to send appraisers to check on a property before giving out a loan.

Please contact me through my website at www.GabeSanders.com if you have any questions or comments.

New Home Inventories UP

From a recent Metrostudy report comes the following news: (My comments are at the end)

October 27, 2006 VERO BEACH The surge in new-home construction in St. Lucie and Indian River counties has contributed to a glut of unused inventory, a housing report released Thursday suggests. West Palm Beach-based Metrostudy, which tracks new-home starts, reported 362 homes completed but unoccupied east of Florida’s Turnpike in St. Lucie County in the past three months. At the current pace at which people have been moving into homes within the county, Metrostudy projects it will take 8.7 months to fill those homes.

The 697 unoccupied units west of the turnpike are an 8.9-month supply. “There are three forces affecting demand: psychology, affordability and temporal displacement,” said Brad Hunter, director of Metrostudy’s South Florida Division. “Even after that change in perception, however, it will take a year and a half, more or less, before builder sales normalize.”
In Martin County, there are 304 finished vacant homes, translating to a 4.3-month supply. The annual pace of new home construction was at 886 units, but there are 623 additional units now under construction.

“True, new construction adds to our inventory, but there are buyers who insist upon new construction,” said Jennifer Atkisson-Lovett, president of the Realtors Association of Martin County.

In Indian River County, the inventory of finished vacant homes are also at high levels, with 381 finished vacant homes in the area south of State Road 60, a 5.5-month supply. There are 324 units available in the area north of State Road 60, a 5-month supply.

“There’s no doubt that there’s an excess of newly built developer homes on the market as evidenced by boosted developer incentives,” said Sally Daley, a broker and owner of Daley & Co. Real Estate.

Separately, Tradition in Port St. Lucie came in first in South Florida for new home starts, with 873 units started, however only 235 families moved into those homes. The Newport Isles subdivision in St. Lucie County came in fifth on the list with 429 new starts and 299 move-ins.
“Some people are still afraid to buy,” said Richard Hope, president of the Treasure Coast Builders Association. “They keep waiting for the bottom to fall out but builders have already offered some very good incentives. They don’t want to lower their prices too much because they want to keep the value that they sold at before.”

Hope speculated that increased demand for new homes on the Treasure Coast will increase within 18 months.

Gabe’s comments:
The counties with the highest inventory of new vacant homes will have the most price pressure on the sale of all homes. The developer/builder just can’t afford to hold homes and pay taxes for an extended period on vacant homes. Sooner or later, they will drop prices, offer incentives and other inducements to facilitate the sale of their property. (Allready happening now)

This is very unwelcome news for the home owner that is selling an existing home, new or old. The falling prices of new homes are now competing against all sales in the area. With inducements, pricedropss, etc., one may be able to buy a brand new home for less than what some are asking for re-sales. This is a very tough situation and if you are selling a home, I would strongly recommend that you consult a skilled professional or at least do some extensive research on what is available and price your property accordingly.

Nationally new home sales were up a little over 4% for September, but this is because prices dropped by almost 9%. Existing home sales dropped in September and the Median Price for the South East has also gone down.

In Martin County, the inventory of new construction appears to be easing, but there’s a lot of re-sales from investors. This is also true in Saint Lucie County. I’m afraid we’ll have to wait and hope for the inventory to go down before we see a little better market.
If you have any questions or comments, please contact me through my website at: http://www.gabesanders.com/

UPPER END CONDO SALES REMAIN SLOW

There’s been some good news lately on the state of the real estate market, especially for Martin County. Unfortunately, even though we’ve seen some more activity from prospective buyers, it has not translated into more sales for the condo market. Especially for the higher end market (over $300,000).

Since June 2006, there have been only 12 units sold for over $300,000. (Compared to 76 units for under $300,000). The list to sales price was a very low 88.9%. (Sale price averaged 88.9% of listing price)

Here are some graphs I prepared from data made available by the Martin County Board of Realtors:

Conclusions: There is a lot of uncertainty in this segment of the market. Condo/HOA fees are going up from the fall out of the Insurance Crises. Property Taxes are high from the recent appraisals that are now reflecting prices from the height of the market in 2004. Inventory for available units is very high and for the snow birds there are some choices in other areas of Florida where the market is even worse and prices have come down considerably making some of our properties look very expensive. New construction and investor flips are abundant from Miami to Palm Beach and on the West Coast. The picture is not a pretty one at the moment.

Is there any good news? Well, the inventory appears to have leveled off and we didn’t have any hurricanes this year. Lots of talk about insurance and property tax relief from politicians. These are all positives. This is still Martin County, our amenities and life style are far superior to most if not all of the rest of Florida. There’s good news for the buyers when they come. Lot’s of choices and those units priced aggressively will be the first ones to sell.

Current prices are still high. I think there will be an adjustment downward of about 20% before we see some more activity. Let’s just hope for the best.

Please direct all comments and/or questions through my website at: http://www.gabesanders.com/ or http://www.GabeSanders.com/

Gabe Sanders REALTOR, e-PRO Internet Certified Professional

HOUSING FORECAST IMPACT ON THE TREASURE COAST

In a recent article by Moody’s Economy, the forecast for housing nationwide is pretty gloomy. How does this affect the Treasure Coast? Well, no one has a crystal ball, even though some claim they know. Here’s my take on what’s going to happen.

First, we must separate Port St. Lucie from Martin County, as there are some significant differences in the two counties, mainly, the average price of homes and the current inventory. Currently in Saint Lucie County there are close to 6,000 residential units available for sale for a median asking price of $260,000. This does not include the large number of for sale by owners or the units now in the rental market. In Martin County, the homes available number just under 3,000, but have a median asking price of $430,000. In this mix, there is a vast number of new homes at lower prices in Saint Lucie County.

Saint Lucie County/Port St. Lucie

So, what’s going to happen? As long as the inventory remains this high, the pressure on prices will continue. For those trying to sell homes bought during the height of the market in 2004 and 2005, it will be very difficult to make a profit and more than likely there will be a loss. Currently the interest rate is low and we are getting a modest demand for homes mainly from down South, from many first time buyers’ and some retirees that can no longer afford prices to the South. If interest rates go above 7% and/or gas prices go back up, this demand will go down, further putting a downward pressure on prices. I predict 1 to 2 years before the sales catch up to the inventory and then a more balanced market with prices stabilizing and then a slow appreciation, not the huge gains of the past few years.

Martin County

The inventory in Martin County has leveled in the past few months and this should indicate a little more activity. The problem in Martin County, is the prices have been driven so high through speculation that many prospective buyers just can’t afford the area. Even those with the resources are scared off by insurance and tax rates. The more moderate prices in Martin are normally older and smaller homes that carry prohibitive insurance rates today. If we are lucky with the next hurricane season, I think the insurance rates will ease some and prices will get a little more realistic. There’s an excellent chance that the Martin County real estate may hit bottom early to middle 2007.

The above discussion is only for residential – single family housing. The condo market is currently a completely different issue and there is a true glut of inventory. Prices have come down a little, but they are going to come down a lot more before sales start to pick up. There is just way too much inventory compared to demand.

If you have any questions or wish to contact me please visit my web site at http://www.gabesanders.com/.

TREASURE COAST HOME SALES PLUNGE 48%

A continued decline in prices is making homes more affordable, but new-home shoppers may still find it difficult to finance residences that cost almost double what they did four years ago.
Sales of existing homes dropped 48 percent in August from 2005 levels in the Fort Pierce-Port St. Lucie Metropolitan Statistical Area, which includes Stuart, the Florida Association of Realtors said Monday.

“We are getting back to more of a balanced market, which is probably a good thing,” said Dale Armor, president of the Realtors Association of Martin County and broker with Acquisition Experts in Stuart.

The median home price slipped 6 percent to $251,900, but was still well above the $131,900 median figure in August 2002.

Armor said he is looking forward to October numbers.
“Those will be the first indicators of where we really are,” he said. “I think every month we are moving to a more normalized market.”

Last year was an anomaly, said Jerry Mabus, president of the Realtors Association of St. Lucie County and broker with All Florida Realty Service Inc. “It is hard to compare it to anything.”
August 2005 was one of the hottest months of that year’s real estate market with 741 sales. By October, the market had cooled to 334 closings.

Currently, starter homes are the weakest segment of the St. Lucie market because first-time homebuyers are still struggling to afford them, Mabus said.

Homes still sell in 60 to 90 days if priced right, he said. Reasonable interest rates and low unemployment have kept the local market “somewhat positive.”

In Indian River County, existing home sales dropped 25 percent to 151 in August from levels last year, according to the Realtors Association of Indian River County Inc. The median home price was $221,250, down 17 percent from August 2005.

Condominium prices in Indian River dropped to $160,950, down $123,550 from August 2005, the county’s association said. Only 28 units sold versus 62 the previous year.

“We have hit the bottom or we are close to it,” said Mark Seeberg, president of the Realtors Association of Indian River County and partner at The Professionals Realty. “We are now taking an economic turn and things are looking brighter.”

Falling gas prices and a decline in the 30-year fixed mortgage rate are positive indicators for where the market is going, he said.

Statewide, sales decreased 34 percent from levels of last August. In the West Palm Beach-Boca Raton area August sales fell by half, the state reports shows.
Despite the sharp year-to-year drop-off in sales, 2006 is expected to be the third-strongest year on record for sales nationwide, the state association said.

If you have any questions as to how the above affects your plans in real estate please contact me through my site at www.GabeSanders.com