Have you ever wondered why buying a house is not like buying anything else?  Here is a short video that explains all the closing costs and how the flow of a house purchase goes from buyer to seller  —

The short answer is yes.  The better questions is: why?

A Recent Experience

Unfortunately, this experience is all too common.

The home seller would like to have an Open House scheduled.  Why?  Lots of reasons but more on that later.  Open House scheduled.  Sunday 12:00 (noon) to 3:00pm.  Sure.  It could be 1:00 to 4:00 or 12:00 to 4:00 or any block of time you see fit but the tradition is Sunday afternoon. More on tradition later.

The advertising:

• e-mail fliers to 2227 Realtors working in the most immediate 20 mile radius of the house.  These are the Realtors most likely to have potential home buyers that might be interested in the house.  Additionally, these are the Realtors most likely to be interested in homes that are currently on the market in the event they have an out-of-town client of just want to stay informed about the market.
• Open House announcements go into Realtor.com and every other real estate centric webs site that Joe and Jane Home Buyer are looking at when searching for a home to buy.

The Preparation:

• the home sellers, to their eternal credit, prepare by making the home look like a picture from a magazine, they lay out a nice food spread — cookies, brownies, popcorn, a cake, bottled water, coffee….the works.  They even made little Thank You boxes filled with goodies to give to people who came by.
• the Realtor advertised a drawing for a $100.00 gift certificate (see fliers to Realtors, above).  If you came by and put your name on the piece of paper that came by you had a chance to win $100.00 through GiftCertificates.com that could be used virtually anywhere.

The Result:

Two sets of people came by during the three hour period —one young woman who had read about it on Realtor.com and two guys (would be real estate investors) who saw the notification on Redfin.com.  No Realtors either by themselves or with potential home buyer clients. Pretty poor showing.

Why Open Houses Don’t Work

Lots of home sellers like the idea of Open Houses because of the tradition.  You see, in the pre-Internet and pre- Buyer Agency days, Open Houses were a great way to get people to see your house.  There weren’t any Virtual Tours that people could see on the Internet, there weren’t Buyer Agents that could take you to see any house you wanted any time you wanted to see it based on your own schedule.  You see, a Buyer Agent can show you the house almost anytime. It’s like your own private Open House.

Traditions die hard.  There is some glimmer of hope that some potential home buyer some where did not realize your home was for sale or, maybe, they haven’t gotten around to getting their own Realtor yet and are just kinda looking a houses to get ideas or get motivated to buy one.  When they see your house, they’ll really like it and want to  buy it or run back to a Buyer’s Agent and put an offer on your house.

Some Homes are Sold At Open Houses

About1 % of all homes sold are sold as the result of an Open House.  This means, of course, that 99% are sold other ways.  But, for that 1%, it means that:

1. they probably don’t have a Realtor and are just looking and really do get swept up in the moment,
2. they have a Realtor but their Realtor was too lazy to go around on a Sunday afternoon looking at houses with them,
3. they have a Realtor they don’t trust to show them all the really good houses so they sneak out on a Sunday afternoon to look at Open Houses,
4. they have nothing better to do on a Sunday afternoon and they like Open Houses better than a movie or the museum,
5. they are the neighbors looking for decorating ideas or want to see your place to compare it to their place.

The bottom line is that their is really only one good reason Realtors have Open Houses.  It’s so they can possibly run into someone who is unrepresented by another Realtor and who might be interested in using their services.  In other words, it’s a great way to prospect for new business.

It’s also a great way to have a party.  A good Realtor (and good home sellers) will lay out the spread like the home sellers at my recent Open House and invite everyone in.  The only problem is that you never know who is going to show up or if anyone is going to show up.

As a lot of people know, we a fast approaching the April 30th deadline for home buyers — first timers or existing home owners — to be a party to a legally binding contract to purchase their next (or first) home. If people can reach that point and close by June 30th, first time home buyers stand to benefit from an $8,000 tax credit while existing home owners will receive a $6,500 tax credit.  These are nice chunks of money.

The Mad Dash

What I’ve been finding in the MD Suburbs is a lot of homes going under contract. Homes that have been on the market quite a long time, homes that have just recently gone on the market, foreclosed homes, homes of Sellers with Equity. Shorts sales, not so much.  It’ll be impossible to close by June 30th with a short sale so those are continuing to sit while home buyers search for houses that can reach the settlement table by June 30th.

So what I’m seeing is a little bit of a replay from the early part of the century. There is definitely a spike in home buying activity. Will it last?  Probably not.  My guess is that May 1st will cause a return to a more leisurely pace.  Even though the Spring market is usually the busiest time of the year for real estate, the current economic environment does not lend it self to a robust season.  Mortgages are hard to come by, people are strapped for the cash they need for a down payment and closing costs and without the home buyer tax credit as an incentive my guess is that the housing market will resume its slump.

Make Hay While The Sun Shines

If you’re a home seller, this period may be you best chance to get your home on the market and, if it is priced competitively, get it sold.  In fact, I’ve heard of some homes that, when priced aggressively, are getting multiple offers.  I know that no home seller likes to price their home below market even though it will be more likely to create a “bidding war” than pricing too high. Still, it’s something to think about.  Price your home to grab the attention of potential home buyers and present it in a condition that will outshine your competition and people will be competing to buy it by April 30th.

Or just wait.

Realtors and other real estate professionals have known about this for at least a year.  It’s been written about in the real estate blogosphere for months. Now the mainstream press is starting to pick up on it.  Here is the headline in the Washington Post: Foreclosure Wave Threatens Stability of Hosing Market (note: the Washington Post website will archive this article after today and require registration to read it.  Registration is free!).

This story is not buried in the back pages. It is at the top of the newspaper on the front page.  The Washington Post thinks it’s that important.

You should really read the article for yourself but here’s the gist:

• Many, many more home owners are becoming seriously delinquent with their mortgages.
• Banks have been working through the foreclosure process which can take as long as a year.
• Once this “shadow” foreclosure market oozes out into the market these foreclosed homes will further depress home prices
• This foreclosure mess is not short term.  It is expected to take at least three years for the homes to be released to the market and then bought by other home buyers

It’s a mess.  We can wring our hands, worry and fret. However, we cannot change reality and when the mainstream press starts to pick up on this stuff and give it prominent coverage, we would be well advised to sit up and take notice.  The Washington Post is not some rogue blogger sounding alarmist.

Here’s Part of the Solution

If you are a home seller with equity in your home, take note.  If you are a home seller with compelling plans to move — job relocation, retirement, assisted living, etc. — take note.  You cannot and will not be able to price your home at a level where it will not sell. Home sellers with equity in their homes will be “taking a hit” on their equity. This is sad.  It’s not fair.  It is reality.  Pricing a home above market levels is a recipe for a prolonged home sale (months and months and months of sitting on the market without an offer to purchase).

The sad reality of the current economic situation with increased unemployment combined with this coming foreclosure wave combined with extremely strict mortgage guidelines (i.e., a tight credit market) is that home prices will continue to feel substantial downward pressure for a long time to come.  In other words, at this point in time — Spring 2010 — we are probably at the top of a housing market that will continue to falter.

One of the “free samples” of a Realtor’s services we provide to Sellers is the CMA — the Comparative Home Analysis — sometimes referred to as the Competitive Home Analysis.  No matter what you call it, the Realtor takes some time to do some research into what a particular home might sell for given current market conditions, location and condition of the home.  Lots of factors come into play during the research, not the least of which, is the Realtors personal experience both with the area and in the profession, generally.  An experienced Realtor will be pretty close, if not dead on, when determining a recommendation for a selling price.

All that said, Realtors are not appraisers.

I take that back.  Some Realtors are appraisers.  They may have been appraisers that decided to help people buy and sell houses or they may have just decided on a change in career.  Sometimes, Realtors decide to go through the process to get licensed as appraisers, too.  However, the vast majority of Realtors are not appraisers. So, even though an experienced Realtor will, through their own research and experience, recommend pricing to a home seller, it is the appraiser that will determine the valuation for the house for the mortgage company the buyer is using.

The Buyer’s Perspective

Everyone knows that home sellers want to sell their homes for the highest possible price (we’re not talking bank owned foreclosures or short sales). We also know that home buyers want to purchase their home for the lowest possible price.Thus, an experienced Realtor working for the buyer will perform a CMA independently so they can advise the home buyer about strategies to structure an attractive offer.  Again, the CMA prepared by a Realtor working as a buyer’s agent should be pretty darn close to true market value.  What the home buyer offers is a different story.

Regardless of what the home seller and home buyer may agree upon, if the home buyer needs to obtain financing, the mortgage company, bank, or credit union will not (repeat: will not) provide a mortgage to the home buyer for more than the market value of the house as determined by a professional, licensed appraiser.

Many times the appraised value of the home comes in very near the contract price (the price agreed upon by the home seller and home buyer).  Sometimes, it comes in higher.  Some examples include:

• estate sales — the heirs just want to sell the house and be done with it
• divorces — there may be pressure for one of the parties in the divorce or the courts to sell the property
• job relocation — a home owner may not want a vacant property or the mortgage on home they aren’t living in
• illness — a home owner may need to move into a long term health care facility assisted care facility and need to sell the home to pay for it

One particularly sad reason homes may appraise for more than the contract price is that the home seller has over priced the home initially in the hopes of obtaining a price higher than the market will bear.  The house sits on the market for an extended period of time.  At some point, the home seller really either needs to sell the house or has just tired of the constant interruptions to their life by potential home buyers.  The home seller will then either lower their asking price substantially to attract a home buyer or they will accept a “low ball” offer just to be able to move on.

Mr. Market Calls The Shots

The sad truth about home pricing is that neither the home seller, the home buyer, the Realtor nor the appraiser control the price of the home.  The market does. Many economists call this the “invisible hand” — market forces that are not fully understood create the environment for fair value. As much as a home seller wants to sell their home for a high price  and as much as a home buyer wants to purchase the same home for a low price, it is the market that determines the price.

That’s why we saw such wild fluctuations in home prices over the last ten years. Home prices went wildly up because, oddly, the market was supporting the price appreciation (due to exotic mortgage products, mostly).  Now, market value has fallen because  a large number of home buyers can no longer pay their mortgages making huge numbers of homes in distressed condition available for sale at bargain basement prices. Simultaneously, credit has become extremely difficult to obtain reducing the potential home buyer pool even more.

The market has spoken.

Check out the Real Estate Market Trends for your area .  Just click here.  You will get a totally FREE report e-mailed to you.

Beginning on March 1st, I started running stats from a company I partner with — Altos Research — for some of the towns in the area.  I had two goals:

1. I wanted to provide some information that was concise and fairly easy to interpret as well as graphical and,
2. I wanted to see if stats and the accompanying town name would boost my readership or blog visitors.

Goal #1 was easy to achieve. Altos Research provides a nice Wordpress plug-in that enables me to name my parameters and it formats them into the blog.  Pretty neat. Pretty easy.  Goal #2 was another story.  I use Google Analytics to monitor traffic to my blog and it doesn’t seem to have gotten an appreciable boost as a result of a week’s worth of stats.  Maybe that’s just too short.

The other side of this experiment got me wondering if people really care about a rolling blog of stats.  Sure, if you happen to catch your own town, it’s interesting for the day.  If you don’t live there, not so much.  I was picked up by LocalSpur.com the day I ran College Park, MD stats.  That was kinda neat.  It didn’t create a huge spur of traffic, though.

So, now I’ll return to what I think, what I know and what I can find out about the local real estate market and National events (e.g., expiration of the home buyer tax credit) as they affect the local real estate market.

Quite honestly, this chart is just as depressing as the other towns we have been visiting in Prince Georges County, MD. Lots of homes on the market, moderate pricing and long Days on Market. You can also see that just as many homes have come on the market (5) as have been absorbed by the market (5). This shows an extremely slow turnover or "sell" rate.

Median Price for homes in LAUREL, MD 20707 as of March 5, 2010 is $310,069

Inventory for homes in LAUREL, MD 20707 as of March 5, 2010 is 81

Average Days on Market for homes in LAUREL, MD 20707 as of March 5, 2010 is 230

The charts are trying to show positive news. Median pricing is trying to find a level but still bouncing around. Inventory was declining which was a good thing but it is now beginning to creep up again which will increase downward pressure on prices as home compete with one another for buyers. Days on Market is moving in the right direction although the number of days is still extremely long.

The pricing chart is interesting because it shows a kind of delayed reaction to outside stimulus and home owner wishful thinking. Check this out: home prices are pretty steady up through November of 2009 when the home buyer tax credit was due to expire. Certainly there was a lot of activity and probably a lot of homes got sold during that time period.

Homeowners heard about the activity and started to raise prices in response (big spike), winter came on with the Holidays and then the snow storms and a very lethargic market. Prices started to plummet, again. Now, we have returned to August 2009 levels.

Home owners that want to sell their home would be advised not to chase the market but to lead the market with aggressive pricing to sell their home.

As you can tell by this stats table there are a lot - 74 - condos and townhouses on the market in Beltsville, MD. You can also see that that are taking a long, long, long time to sell - 299 days (on average).

Median Price for homes in BELTSVILLE, MD 20705 as of March 5, 2010 is $131,696

Inventory for homes in BELTSVILLE, MD 20705 as of March 5, 2010 is 74

Average Days on Market for homes in BELTSVILLE, MD 20705 as of March 5, 2010 is 299

The orange line is the 90 day moving average. This is a trend line. The black line is the 7 day moving average which shows more what house prices are doing week to week. What I am seeing is a steady downward trend in home prices. I also see a huge jump in housing inventory. Since these are condos and townhouses, I can only assume that there are a massive amount of short sales and foreclosures that are entering the market.

Foreclosures are OK. The short sales will take close to eight months to flush through the market. Meanwhile there will be continued downward pressure on home prices.

Even though these are condos and townhouses, the pricing for these homes will also continue to put downward pressure on single family home prices.

Think about it. If you could buy a nice townhouse for several tens of thousands of dollars or even one hundred thousand dollars less, would you?

Beltsville is also home to the US Department of Agriculture - Agricultural Research Center which operates a huge research farm. Driving through the USDA - ARS is like being out in the country.

Beltsville has a mix of single family homes, townhouses and condo. Today we look at single family homes.

As you can see the Days on Market here are longer than any of the other towns we have visited, thus far, and it looks like a new home is listed for every home that is sold. Pricing is moderate for single family homes.

Median Price for homes in BELTSVILLE, MD All ZIP Codes as of March 5, 2010 is $269,315

Inventory for homes in BELTSVILLE, MD All ZIP Codes as of March 5, 2010 is 88

Average Days on Market for homes in BELTSVILLE, MD All ZIP Codes as of March 5, 2010 is 280

These charts show a slightly positive upturn in home pricing in recent months. This may indicate that home prices have fallen to the level where the homes are attractive to home buyers. Housing inventory has also risen, though, and this may create some pressure to keep pricing low.

Days on Market, as mentioned above, is extremely long. However, that chart appears to be moving in the right direction (i.e., down). So, to me, these stats look mildly positive for the Beltsville, MD housing market.

Low prices, relatively high inventory and extremely long days on market. As we have been winding our way through some of the towns in northern Prince Georges County, MD you may have seen a trend. In case you missed it, here it is: falling home prices, lots of homes on the market and a long time to find a buyer for those homes. The only remedy for this is to price the home so that someone, anyone will see that it is a good value. Whether you call this a "bargain" or "giving it away" the sad fact is that unless a home is in pristine condition and priced aggressively you can expect the house will sit on the market without a buyer for a very long time.

Median Price for homes in COLLEGE PARK, MD All ZIP Codes as of February 26, 2010 is $216,165

Inventory for homes in COLLEGE PARK, MD All ZIP Codes as of February 26, 2010 is 96

Average Days on Market for homes in COLLEGE PARK, MD All ZIP Codes as of February 26, 2010 is 278

Median Price is the only bright spot. Of course, median price only helps with showing a trend and does not speak to particular neighborhoods (e.g., Hollywood, College Park Woods, Yarrow, etc.). It is mildly encouraging, though, that after a precipitous drop, prices seem to be bouncing back slightly.

Someone mus have told all the home sellers that prices had started to bounce back a little because, all of a sudden a lot more homes are one the market (the inventory chart). This is not an encouraging sign. It just means that there are a ton more short sales and foreclosures or that people are trying to catch the wave of the home buyer tax credit combined with the spring market. Either scenario puts downward pressure on home prices.

Days on Market seems to be taking a little bit of a dip which is a good thing. Still. Do you want your house on the market for close to a year?!?