The above was a popular country music song that sums up how I feel about 2008.  I am writing this on December 30th because I am ready for it to be over today – I do not want another day of 2008.

From someone who has been in the Real Estate business on Hilton Head for 27 years, everything that could possibly go wrong in 2008 did – we had bank foreclosures, credit problems and on October 1st everything went haywire when we had the “financial meltdown”. 

Pent up Demand

It seems to me that so many people have the attitude that they are going to wait until the real estate market bottoms out.  With not many people buying property, anxious sellers are reducing their prices to the point that they feel is necessary to get the property sold.

Looking to the future of Real Estate

In the future I think we will look back and all say that we should have bought in December of 2008. 

All my clients who bought after September 11th in December and January of 2001 and 2002 are very happy because values went up afterwards.  This is the last time we were in a similar market where nothing seems to be moving.  This is why smart money is buying now!

Here recently anybody who’s read any of the publications or online blogs knows that almost every single writer is predicting doom and gloom for real estate.

Our local paper recently had a couple articles that could make someone think ‘wow don’t ever buy real estate’.  One of the headlines said “Luxury Buyers Don’t Purchase”.

However, I did read an article that was very interesting the other day on Yahoo talking about how the new refinancing boom will help the real estate market.

Lower Rates

The article said “the Treasury and the Federal Reserve have created an environment which makes this development almost impossible to avoid.”  It also went on the state “it is quite likely the country is about to enter a new mortgage refinance boom”. 

Local Lenders

By talking to local lenders we all know they have been barraged in the last two weeks with people wanting to refinance. 

Some data I saw from the Mortgage Bankers Association said they had the highest number of applications for loans since July 2003.

What all this means is that obviously when people refinance their rates are lower which means they can afford more houses which means this may be “the ray of sunshine that we’ve been looking for”. 

Obviously Wall Street has been in the news recently and most of the things that have been going on have made investors leery of the trust factor (of Wall Street). 

Helping Real Estate

Obviously when things like this happen people tend to have more confidence in the real estate market then they do investments.  In the long run this will help people purchase more real estate even though in the short run we have been effected because people’s investments have been so low that they don’t have the money to purchase. 

People Believe in Real Estate

The advantage of buying real estate is that people get to make the decision them-self.   They pick out the property they like and they feel better about their investments. 

In the past, more people have invested in Wall Street because they felt these were “professionals”.  But the erratic behavior and dishonesty of several people have hurt Wall Street as a whole, even though there are bad real estate agents just like there are bad stock brokers.  Recently the bad stock brokers have been getting more publicity than bad real estate agents. 

Obviously the greed on Wall Street is bad for everybody.  I’m not saying I’m glad it happened but I do think it is going to make people more conscience that one of the best investments they can make is real estate.

We have had some good news recently as it relates to interest rates.  This has a very positive effect on real estate values; lower interest rates means you can buy more property because your payments are less. 

The Most Important Thing is Inventory

The thing that affects real estate values the most is not interest rates, but inventory.  The higher the inventory, the less chance you have of property values increasing.  Unfortunately right now, Hilton Head Island is experiencing high inventory in almost all price levels.  It makes common sense and economics 101 tells us that supply and demand affect pricing and right now we are in a situation where the inventory is putting pressure on pricing.

Good News for Buyers

Obviously this is good news for buyers because they have a large selection of good properties at good prices.  There is a silver lining in every dark cloud. 

Historically, 6-months inventory has been the base line – in other words, prices increase as inventory dips below 6-month and prices decrease as inventory goes above 6-month inventory.  The larger the inventory the larger the decrease.  The smaller the inventory the larger the increase.  In April of 2005 we had a 1-month inventory and prices were going up 25% per year. 

It is my hope that after the first of the year sales will increase and inventory will start decreasing and we will get back to a more normal market.  The last 60 days have been the worst market I have seen in my 27 years of real estate on Hilton Head Island.

Great News!  Interest rates have been reduced and the fed has cut the key lending rates.  The national average for a 30-year mortgage is at 5.06% – the lowest since 1960. 

Great for Real Estate

Obviously this is great for the real estate market because it makes housing more affordable.  In fact, housing might be at an all-time low affordability rate adjusted for inflation when you consider that prices are off 25%-35% from several years ago and with interest rates down as well the cost of ownership is down tremendously. 

Help Around the Corner

Recently I have felt that the market has not been slow because of interest rates, but slow because of consumer confidence.  Maybe this will help with consumer confidence.  We are willing to take any help we can get.

One of the problems we have had in our market are bank’s reluctance to lend money.  In fact, there are only several banks on Hilton Head Island doing lot loans at this time and they have restrictions on what they will do.  Lot sales are down 92% this year compared to a 10-year average.  If you cannot get a loan on a lot, most people are not going to purchase one which makes the market worse and drives prices down.

It is about time we got some good news; most news recently has been very negative.  All you have to do is look at the front page of the newspaper and it is one negative headline after the other.  This has had a major effect on consumer confidence driving it to a 30-year low.

Over my first 25 years of real estate, most everyone used to say that the three most important items in real estate were location, location, location.  It seemed if you purchased property in a great location it did not matter what happened, it would go up in value.

Not True Any More

Location is still important in purchasing real estate and when someone considers purchasing they want to buy in the best location they can.  Most real estate experts say that they three most important things in real estate are price, price, and condition. 

Why?  In a price sensitive market, people are looking for the best value and they are more interested in what kind of “deal” they are getting compared to the location.  There are a lot of great properties in great locations that are listed for sale that have not had a showing in the last three months because the price is substantially higher than other similar properties that are in good locations.

Condition

People seem to be interested in buying properties they do not have to do any work on.  Years ago, there used to be a saying in real estate that said “the bucks is in the yucks”.  Today, it seems that people are not willing to fix homes up because there is such a large inventory of available properties and there is bound to be one out there in better condition than yours.

Staging

We have seen a lot of properties sell on Hilton Head simply because they were staged by a professional decorator.  Real Estate, even in a slow market, is still an emotional sale.  If the home shows well, looks good and is priced well, it has a much better chance of selling.

Yesterday’s Wall Street Journal had an article titled “The Future for Home Prices”.  They talked about how prices have dropped as much as 35% in some areas.  The reality of the market is that the market is slower now.  A lot of people believe that real estate is still a better place to have your money than most other commodoties. 

Recent activity on Hilton Head for the same time period over the last 10 years shows an average of 847 home sales; this year we have sold 472 for a 44% drop.  Villas we had a 10-year average of 1,128 sales; this year we have had 458 sales for a 59.4% drop.  Lots we had a 10-year average of 321 sales; this year we have had 29 sales for a 91% drop.  Obviously, I tell people that the market is not as strong as it was and there is no way for me to hide my head in the sand and ignore this fact.

With every problem there is always a silver lining – the silver lining is for people who have money and are willing to buy.

If you have ever visited my Hilton Head Island Real Estate website, you might have noticed the “foreclosure” tab on the top bar.  I have been fortunate enough to have a relationship with several banks and handle their foreclosure properties.  People are always asking me if I have any foreclosures. 

As a rule of thumb, foreclosures are better buys simply because you have a more motivated seller and the seller is not emotionally attached to the property.

Homeowner Pricing vs. Bank Pricing of Real Estate Properties

So many times when we go out to list a property, the seller will try to sell us on the value of the property, tell us what a great home they have, how great the neighbors are, and how they raised their four children in this house.  They attach a value to all those memories.

However, when a bank forecloses on a property, there are no memories – the only memories they have are bad memories.  They got stuck with the property, it was over appraised and the people didn’t pay their dues and now they are stuck with the loss.  In 99% of foreclosures, the people that lost the property owed more than the property was worth forcing the bank to take a loss on the property.

A bank realizes that the longer they hold the property, the more they lose.  They also realize that the house usually sells for the most as soon as it hits the market.  The longer it stays on the market, the less it sells for, so they usually list these properties at attractive prices.

Are foreclosures always the best buy?  Not always, but usually they are a much better value because of the seller’s motivation. 

If you have any questions concerning foreclosures please feel free to give me a call or visit my listing of Hilton Head Island and Bluffton foreclosures.

I just listed a house on Sandhill Crane in Sea Pines and had not even had a chance to put it in MLS when one of our other agents walked into my office and said he had a prospect for the property.  I wondered how he knew about the listing.  He mentioned that one of the other agents had told him about the house and when he told this agent what his prospect was looking for they said the best house for them was the house I had just listed on Sandhill Crane.  The house had previously been listed with an agent from another company.

I explained the house to John and told him what a great value it was and he is showing the house today. 

After John left, I said to myself, “that is the value of working at a company like Charter I Realty“.  Because we have 85 agents, each agent is sharing ideas with other agents and we are able to pass along information about different properties that they might not pick up from Hilton Head Multiple Listing Service.  It is what I call “water cooler sales”. 

At Charter I Realty we are extremely proud of our agents and their average production.  Year after year our agents average many times what other agents sell on Hilton Head.  There is an old saying, “birds of a feather flock together” and I think it is proof that we have the best agents on the island working at Charter I Realty.