January housing sales take a vacation

Although we saw an increase in showing activity during January, it seemed many potential buyers were in a wait and see mode as the inventory absorption rate spiked upwards to 14.4 months and sales took a hard dip to their lowest January rate since 1996 with 912 total sales.

• January absorption rate chart
• January sales chart

While some of the January figures are at least seasonable in nature, other factors that appeared to be in play included debate on the recovery bill (and the related homebuyer credit),

It would appear investors were an outsized portion of the market in January. Nationally, it was estimated that 45% of sales were "distressed" properties (i.e., lender owned or mediated). In the Cincinnati area this same trend was seen with an estimated 40% that were distressed sales. A point to note on this statistic: it is likely that the average price drops being reported are in large measure due the high volume of distress sales.

• View national housing indicators through the end of February.

A couple of positives: base inventory and homes being leased. Even though the absorption rate increased above last year's number, the active inventory dropped from 15,050 in January '08 to 13,132 in 2009. Along with that, more homes are being leased and taken off the market. With builders continuing their decline in new homes built, these trends should help the overall market stabilize.

The overarching message is that if you are going to sell in this market, then you must be realistic about expectations (and unless you have to sell - don't). Condition is the key factor to selling your home quickly unless it is "bargain priced."

Tech Focus: House Ventilation and Solar Attic Fans

With the weather still on the cold side, you're probably not thinking much about how to keep your house cooler during the summer. Although most of us don't think about ventilation until those hot and humid days, good home ventilation is important year round.

Attic ventilation is important for several reasons. In the summer it's important to move heated, stale air out of an attic space that would otherwise keep the house feeling "stuffy" and likely cause you to turn up your air conditioner. Just as important though, proper ventilation is necessary to keep down moisture levels that could lead to mold and a shortened roof life.

Older homes often use a passive ventilation system using a combination of soffit, gable, and rooftop vents. Many homeowners install thermostat-controlled fans to assist ventilation during very hot days. While these can be a good way to help cool the home, solar powered fans can be a great alternative and run automatically from sunrise to sunset. In some cases, they can provide a significant savings on installation since running a new outlet to your attic might cost more than the unit itself. If you already have a powered vent, you may be able to convert your current unit to operate on solar power and eliminate the electricity cost.

Kevin Yount, of First Day Natural Lighting, is a local installer of Solatube lighting and attic fans. When I spoke with him about the impact of a solar fan running during the winter, he pointed out that ventilation is just as important during the winter months to prevent ice damming. The critical issue is having sufficient insulation and air sealing so that you are not losing heat from the conditioned part of the house during the winter, or losing cooling in the summer. Kevin says that in his view, the ideal temperature of the attic should be roughly equal to the outside temperature.

And since we are all concerned about job growth these days, ABC News recently highlighted Sunrise Solar, an Indiana manufacturer that builds solar units and is poised for growth with implementation of the economic recovery bill along with his suppliers. (See the video clip on ABC.)

So before those hot, humid summer days come rolling along, consider whether your home has adequate ventilation and the advantages of solar fans including:

• Low cost to install, free to operate
• Prevents shortened roof life
• Helps keep home more comfortable, potentially reducing air conditioning costs
• Creates green jobs for installers and manufacturers
  

And to ensure any fan meets its full potential:

• Install adequate insulation and seal air gaps to keep from losing conditioned air
  
• Make sure soffit vents are open so that outside air is pulled through the attic, not indoor air

To help find a solar fan option for your home, check out some of these sites:

1. First Day Natural Lighting
2. Sunrise Solar
   
3. Solar Direct

To learn more about home ventilation and systems visit these sites:

Energy Star DIY Guide
DOE Energy Efficiency and Renewable Energy - Ventilation Overview

Thinking of investing in foreclosures? Look before you leap

With an abundance of foreclosures on the market and the current stock market a somewhat iffy proposition, many investors are taking a look at available foreclosures and short sales to see if housing is a better place to put their money. There are definitely deals to be had, but before you leap into this market consider these issues:

• Are you looking for short-term or long-term opportunities? This market isn’t quite right for “flip this house” type venturing. There are some rehab / resale investors out there, but I would say they are the exception rather than the norm – and they’ve generally been in this business for a while. In the current environment you should be prepared to fix, rent, and hold the property for a minimum of 3 – 5 years.
• Manage your expectations. Yes, deals are out there, but that doesn’t mean you’ll find a castle for $50K. A majority of foreclosures and short sales need a good amount of work to get them back into decent condition. Remember that the folks who lived here could not pay their mortgage, so don’t expect them to have kept up the maintenance.
• Manage your expectations – Part II. Banks aren’t taking just any offer that comes along. Don’t expect to throw out an offer of 50% of the list price and have it accepted unless the house is in VERY bad condition. Conversely, foreclosures that are in relatively good shape and priced aggressively are getting multiple offers and even going above asking price in a matter of days. Yes –there really are bidding wars in this market.
• Funding. Although there does seem to be some recent thawing with banks being more open to investment lending, rates and points for investment loans can be a bit steep and you can expect to need 20 – 25% down. You’ll also need enough to cover repair costs and make mortgage payments until you have it rented. This is truly a “time is money” situation. The ideal scenario? Pay cash to buy and fix the property, get a lease, then put a mortgage on the house to regain some liquidity and achieve higher (i.e., leveraged) return on equity. If you have equity in your primary home, a second mortgage may be another option for funding.
• Can you be a landlord? Not everyone is cut out to be a property manager. A short list of responsibilities includes screening possible tenants, general repairs (not to mention the possible 2 AM water leak call), and debt collector if payments run late. You can pay to have this part handled for you, but that will eat into your returns. Paid property management is not typical for the average investor.

These concerns aside, real estate can be a fantastic long-term investment, especially when buying in a market such as we have now. Historical returns on real estate rival that of stocks, and usually beat them when leverage and tax advantages are thrown in.

Still ready to jump in? Great! Give me a call. I am ready to help you locate a property that will fit your budget and investment objectives.