Looking like a long winter for home sellers

The latest pending sales for October came out today. Unfortunately, not in the direction one would hope for: falling 1.8% on a monthly basis and 24.9% down from October 2009.

Looking past the foreclosure mess that came roaring into view last month, most housing activity showed slight growth from the summer's dismal readings. While sales have shown a modest uptick from August, inventory continues to be the weight keeping prices low and buyers on the fence.

Locally, September's monthly sales were down 30% on a year over year basis. Inventory increased by 8% from September, and the inventory to sales ratio was still elevated at 11.5 months.

Regarding existing home sales, the faint glimmer of light was an increase in sales price - but that is attributable mainly to fewer foreclosures and first time buyers as a percentage of overall sales (so, no, sellers - don't get the idea that this means you can raise your asking price).

(See local Cincy MLS-based charts here)

On a national level, the existing home sales drop year over year wasn't quite as sharp, but still high with a 19.2% decrease (seasonally adjusted). One positive sign was in new home sales, rising 6.6% to a seasonally adjusted rate of 307,000 units annually. Not exactly boom times, but moving in a positive direction.

At this stage of any nascent housing recovery, it is hard to see what will inspire potential home buyers back in the market. Low mortgage rates don't seem to be doing the trick. It may be that any real growth will have to wait until unemployment rates have shown a steady decline and the fear of declining house prices has passed.

All fired up

Winter gray is starting to make its presence known and thoughts of a cozy fire may be something you look forward to. The question is, will that fire actually provide some heat, or simply be something nice to look at.

You've probably heard that older style, open masonry wood fireplaces can lose more heat than they provide, but there are ways to address those problems. Here's a few options you might want to consider, gain real benefits from your fireplace, and maybe save a little money too:

• Keep the hot side hot / cold side cold. One of the biggest issues with an open fireplace is that they can be extremely drafty. When not in use, find a way to keep your warm indoor air from literally going up the chimney. A piece of batt insulation behind the flue opening or a chimney balloon can be a good way to close the draft - just remember to remove if you actually build a fire.
• Open a window. As counter-intuitive as this may seem, providing a small level of outdoor air for combustion (such as opening a window slightly in the same room and closing off the room from the rest of the house) can help prevent warm air in the rest of your home from being pulled out the chimney while a fire is burning and your flue is open. This option is intended for those looking for ambiance from their fireplace - not heat. Alternatives exist to create a separate air intake that performs the same function without closing off from the rest of the house, but this is a more expensive approach.
  
• Glass doors. A modest step towards keeping warm air from being pulled from other rooms. Inexpensive and easy to install. However, this is also more of a fix when the fireplace is used for ambiance as opposed to gaining any real heating efficiency.
  
• Inserts and hearth stoves. There are a wide variety of choices (and prices) for installing a "closed" system that will preserve the heat created from a fire and put it into the living space. These can be as simple as installing a "heat exchanger" that captures the heat and uses a fan to push it into your living area, a "stove" that sits on the hearth and makes use of your existing chimney, or even a fully enclosed firebox that is installed in the existing opening (this last choice usually being the most efficient - but also the priciest).
  

If you can afford them, inserts and stoves offer an additional benefit in that they burn wood far more efficiently and produce less emissions than an open fireplace. Interestingly, homes in Cincinnati do seem to have a high percentage of open fireplaces regardless of the price point. Here's to making the most of them.

For more info on inserts, check out these websites:

• Woodheat.org
• Comparison of some high-efficiency inserts
• Energy Savers overview of wood and pellet heating

Can foreclosure mess get worse?

Those of us working in real estate just kind of shake our heads with the latest batch of news regarding foreclosures, bank problems, upset MBS investors, on and on.... Yes, it will eventually sort itself out, but many days it feels like that light at the end of the tunnel is just a bit dimmer and further away.

Much of the information about foreclosure moratoriums is filled with hyperbole from all sides. For a good explanation of the issues surrounding the latest bank problems, check out this video targeted mostly at real estate professionals:

Big risk in buying REOs

August sales a little less gloomy.

After July sales seemed almost non-existent, August showed signs of only marginal improvement. Many were expecting that we'd see a little better activity given that mortgage rates continued to see new lows. What's surprising perhaps is that home affordability is even better than when the tax credit was in effect, but that doesn't seem to be spurring any new sales.

The headline numbers both locally and nationally seemed to offer a mixed assessment. Highlights included:

• New home sales were still anemic, but flat compared to July
• Mortgage applications for both purchases and refinancing declined (suggesting the spurt of refis from rate drops has gone as far as it will go for now).
  
• Existing home sales nationally increased 7.6% from July (but down 19% year over year)
• Locally, the inventory is still in the stratosphere at 11.4 months given current sales rates. A minor improvement from July, but still 4 months higher than August of '09. The average sales price jumped to $172.4K.
  

View the Cincinnati MLS based charts

Digging into the numbers a little deeper showed some interesting activity. In particular, the average sales price is being impacted by the fact that higher priced homes have seen more buyers vs. the "starter homes" that were selling earlier in the year. For example, a snapshot of sales in the Cincinnati MLS for homes priced over 1 Million showed that from April, May, and June there were only 11 sold. In the 3 months following, there were 22 sales at that level (having a greater impact on averages given the low sales volumes). The $1M+ homes range is perhaps a skewed segment of the market, but the same type of disparity is being seen at mid to upper level price points.

So far, September seems to be experiencing an increased level of activity with more buyer showings taking place. Whether this translates to actual pending sales and closings remains to be seen, but demand at least seems to be returning.