Today The Charlotte Observer ran yet another front-page article about our housing market “Home prices soften anew….Sales and building permits also fall, but the Charlotte market is still healthier than many in the U.S.”It’s not a bad article. It even breaks down the sales % decline and building permit % decline by county.
However, I can’t stress enough the importance of every home buyer asking their real estate agents to do comprehensive research about the specific listing (and even subdivision if feasible) before they make an offer on a home. Think of it as a background check of the home and its Lake Norman housing community.
For the sake of this article I am going to use Lake Norman’s Crescent Homes Community: The Farms. However, you can do this exact analysis on any home and community throughout the Lake Norman area and I assume throughout the country depending on the MLS data available.
Case Study: The Farms in Lake Norman
Do a quick search on the MLS for the past three months including the number of active listings, pendings and solds. The Farms currently has 41 active listings, 1 contingent sale and 11 homes sold since May 16, 2008. This means that at the current rate of sales The Farms has about an 11-month supply of inventory. That’s actually much better than most of our subdivisions and overall Lake Norman real estate statistics.
This is probably THE MOST IMPORTANT step in this process. Do an “Archive” search on each for the properties sold in the past 3 months AND the home you are thinking about purchasing. An archive search in our MLS database tells us the entire history of the property including previous sales, the actual initial listing date, the actual initial lisitng price, the number of price reductions and the final sales price. This is the only way to find out the real MLS listing data for a given property. (Even this is only as accurate as our MLS so there will be errors.)
Using this archive information, calculate the actual days on the market and the actual % of the sales price versus the first listing price for each comparable property. This is what I found about the 11 sales at The Farms:
|Listing Price||Sales Price||% Change||Days on Market|
|1||$570,000||$475,000||– 16.7%||1/29/07 – 8/14/08|
|2||$550,000||$515,000||-6.4%||9/07/07 – 6/19/08|
|3||$585,000||$547,000||-6.5%||3/13/07 – 7/21/08|
|4||$739,900||$538,750||-27%||3/22/07 – 8/01/08|
|5||$779,900||$565,000||-27.5%||8/06/07 – 7/25/08|
|6||$691,000||$540,000||-21.9%||11/17/06 – 8/15/08|
|7||$645,000||$549,999||-14.7%||10/12/06 – 5/23/08|
|8||$628,500||$620,540||-1%||3/14/07 – 5/16/08|
|9||$648,900||$667,575||+3%||6/04/07 – 7/03/08|
|10||$697,000||$630,000||-9.6%||11/16/06 – 7/08/08|
|11||$774,500||$660,000||-14.8%||5/17/06 – 7/08/08|
* Note: Sales 6-11 were new construction so the days on market include contruction time
Do an assessment of the currently active listings to gain a perspective about the overall community’s strength and weaknesses and the competition within the subdivision. Here is what I found out about The Farms after doing such an assessment:
- 7 are bank-owned
- 2 are offering a lease/purchase option
- 30 are vacant…most are new construction but several are resale
I also found out out: The Sales Office has been moved to The Point community down the road despite the fact that there are two more phases to be built. And, lock boxes are now on the new homes so Realtors can use lock boxes to access for showings rather than having a sales rep with them. Finally, they are now requiring that each of their feature builders only have ONE home in the process of being built, down from two when they opened this subdivision several years ago. All of these are signs of the weaker home sales and economy. This is a great neighborhood and Crescent Communities is THE developer of Lake Norman but even they are cutting back for now.
Before making on offer there is one more thing to do if this is a re-sale home: research the tax records to find out as much as possible about the current owners: When did they buy, what was the purchase price,and, if possible, what is the loan amount.
Based upon the above data, I would conclude that while there is not an over abundance of listings, the majority of the sales have been new construction especially in the higher price range so resales in this community may have to be more flexible in price. Good homes (good location, lot, home floorplan and amenities) are selling for about 5% less than the listing price. However, if a home is overpriced the overall listing to selling price drops significantly, both with new and resale homes.
I would give this background information to my buyers so that they can make an informed decision about what price to offer on a property.