Home Value Statistics

In its 2009 second quarter publication, the Federal Housing Finance Authority reported Greater Lafayette ranked number 7 among the nation's 296 largest MSA's in the year to year change in home values. According to the government report, the average home value in the second quarter in Greater Lafayette was 2.25% greater than the second quarter of 2008. Personally, I believe this number is optimistic, but the relative ranking of 7 among 296 is encouraging and believable.


Interestingly enough, in reviewing the 25 largest MSA's, only three had a positive year over year change and of those three, two were less than one percent (Denver and Pittsburgh) and the third was 2.90% (Houston). The most troublesome changes in value were in Merced, CA (-27.15%), Las Vegas (-26.21%), Vallejo, CA (-23.75), Miami (-22.53%) and Medesto, CA (-22.53%).


Of the 296 MSA's, the only communities ranking ahead of Greater Lafayette were Spartanburg, SC (3.48%), Amarillo, TX (2.67%), Fort Smith, AZ (2.55%), Houston (2.42%), Macon, GA (2.33%) and Lubbock, TX (2.27%). Here is how the other major Indiana cities fared:


City: % change, rank

Anderson: -1,82% 98
Bloomington: 0.40%, 50
Columbus: -0.45%, 95
Elkhart: -2.36%, 142
Fort Wayne: 0.08%, 70
Gary: -2.79%, 152
Indianapolis: -1.24%, 119
Kokomo: -1.72%, 135
Michigan City: -0.03%, 73
Terre Haute: -3.18%, 160


Although the relative condition of the Greater Lafayette residential market is reason to be thankful, it is not time to break champagne, noise makers and balloons. We are still experience nervous buyers, inconsistent demand, on-going foreclosures and frequent short sales. However, our numbers are not getting worse, our supply of new and existing homes for sale is better matched with local demand compared to one and two years ago and there is every reason to believe we are much closer to the end than the beginning. Have faith.

Parade of Homes

Just a reminder, the Builders' Association of Greater Lafayette is hosting its annual Parade of Homes on Saturday and Sunday, July 18th and 19th and Saturday and Sunday, July 25th and 26th. Each Parade home will be open from 1:00 -- 5:00. For detailed information about the 20 homes in the Parade, including an impressive mapping feature, visit the BAGL website.

A softening in demand?

I reported to you earlier in the spring a delightful pop in buyer demand. We began to notice the increase in March and it continued through most of May. I define a "pop" as when measurements in demand compare favorably to the same time frame in the prior year.

We noticed the improvement first in showings, next in accepted offers and it manifested itself in closed sales. During the same period in time, we noticed a decrease in the number of homes for sale in Lafayette and homes for sale in West Lafayette. Once again, we found this encouraging....a reduction in what was clearly an oversupply of inventory.

Regretfully, shortly before Memorial Day, we saw a bit of a reversal, specifically a slip in our showing activity. Written offers dropped slightly in June (compared to last June) and we anticipate closings in July will be below July, 2009. On a year to date basis, closed units sales in the Lafayette area are down by 13% from the same period of time last year.

It is always hard to speculate what causes increases and decreases in sales activity, but in this case, it was in all likelihood driven by 60 basis point increase in fixed rate mortgages in May. According to Freddie Mac statistics, the average fixed rate mortgage rose from 4.86% in May to 5.42% in June. However, this is not all gloom and doom. The average fixed rate in June is still 90 basis points better than the 6.43 average in June, 2008.

I guess this is more evidence to show that we have reached the bottom of our local real estate recession and are bouncing up and down. I do not believe we have begun the final and steady road to real estate recovery. We look forward to the second round of buyers that will be generated by the $8,000 first time home buyers credit (the folks whose houses were sold to the first time buyers, who are now have become buyers without a house to sell) and the economic strength that is yet to come from the unspent Federal stimulus money.

Don't forget the TASTE is Saturday night

Tippecanoe Arts Federation's major fund raiser, the Taste of Tippecanoe, is this Saturday in the Wabash Landing area, the John Meyers Pedestrian Bridge, the Depot and downtown Lafayette. The show opens at 4:00 and entertainment runs through midnight, including a large fireworks display. Entertainment will be performed on nine stages and over 40 local restaurants will be offering some of their favorite recipes.



Entrance tickets can be purchased at the event gates scattered around the perimeter of the show or in advance at the TAF office near the intersection of Sixth and North Streets, at any Payless Supermarket or online at the Taste website. Advance sale tickets cost $5.50 and can be purchased Thursday or Friday. Entrance tickets purchased at the gate are $10.00.



Join us on Saturday night for some great fun and support the Arts at the same time. After all , "it's the biggest party of the year."

Recent modest increase in fixed rate mortgages

I've shared in some earlier posts that in March, 2009 we began to experience a favorable trend in buyer activity. It was not just a seasonal increase, but an improvement compared to the same time frames in 2008.

Initially, our company saw an increase in the number of showings scheduled on our listings (I am not able to measure showings scheduled on listings with other companies, but I am confident the experience of others was similar ours). Next we saw an increase in the number of earnest money checks we collected (an indicator of an accepted offer...again, I can only measure those collected within our own office, but I sense our competitors enjoyed the same experience). Specifically, the number of earnest money checks collected in March, April and May exceeded the number collected in the same months in 2008. Finally, April residential unit sales throughout the market (not just at our company), exceeded April, 2008.

In late May, we began to notice a lull in activity. Specifically, in the last two weeks of May and in the first week of June, the number of showings we scheduled on our listings were measurably less than the same weeks in 2008. However, the situation improved last week when the number of showings was only 5% below 2008. In my mind, the change in the level of buyer activity ties almost exactly to the increase in fixed rate mortages we say in the middle of May. Fixed rate mrtgages rose by 50 to 75 basis points in less than two weeks.

Let's put this in perspective by looking at the history of 30 year fixed rate mortgages over the last year and a half.

Month - - - - - - - - - - - - - - - - - - Average 30 year fixed rate mortgage*

Jan, 2008 - - - - - - - - - - - - - - - - - - - - - - -5.77%
Feb, 2008 5- - - - - - - - - - - - - - - - - - - - - -5.87%
March, 2008 - - - - - - - - - - - - - - - - - - - - -6.62%
April, 2008 - - - - - - - - - - - - - - - - - - - - - -6.54%
May, 2008 - - - - - - - - - - - - - - - - - - - - - - 6.56%
June, 2008 - - - - - - - - - - - - - - - - - - - - - - 6.88%
July, 2008 - - - - - - - - - - - - - - - - - - - - - - -6.94%
Aug, 2008- - - - - - - - - - - - - -- - - - - - - - - 7.00%
Sept, 2008 - - - - - - - - - - - - - - - - - - - - - - 6.65%
Oct, 2008 - - - - - - - - - - - - - - - - - - - - - - -6.85%
Nov, 2008 - - - - - - - - - - - - - - - - - - - - - - 6.69%
Dec, 2008 - - - - - - - - - - - - - - - - - - - - - - -6.01%

Jan, 2009- - - - - - - - - - - - - - - - - - - - - - - -5.80%
Feb, 2009 - - - - - - - - -- - - - - - - - - - - - - - -5.83%
March, 2009 - - - - - - - - - - - - - - - - - - - - - 5.66%
April, 2009 - - - - - - - - - - - - - - - - - - - - - - -5.48%
May, 2009 - - - - - - - - - - - - - - - - - - - - - - - 5.49%
June 16, 2009 - - - - - - - - - - - - - - - - - - - - - 5.94%

Source: HSH Associates, Financial Publishers (Pompton Plains, NJ)
*The rates are an average of conforming and jumbo mortgages from 2,000 lenders surveyed weekly.

I can't help but believe that the reduction in buyer activity around and after the Memorial Day holiday was driven by the jump in fixed rate mortgages. However, when put into prespective our current interest rates are nearly 70 basis points below the level we saw last Thanksgiving and a full point below August, 2008.

Let's hope ,as US consumers we can quickly become accustomed to the "new normal" interest rates and recognize they are still at a level that is far below what we have seen in the last decade.

Strong April Sales

Although it is too early to measure May homes sales in its entirety (some closings late in the month take a week to get posted), the results for April are encouraging. Tippecanoe County single family home sales in the first three months of the year did not compare favorably to the same months in 2009. I guess that should not come as a surprise. Retail sales over the holidays were muted and unemployment numbers continued to increase in the first quarter.

However, as I reported in earlier posts, we began to see a measurable increase in the number of showings scheduled for our listings in early March. More specifically, in most of the weeks since early March the number of showings scheduled were equal to or greater than the same week in 2008. The favorable showing activity culminated in 154 closed sale in April, compared to 147 in April, 2008.

I recognize this is a short trend, but it is another piece of evidence that we have found the bottom of the residential market in central Indiana and are beginning the slow path to climb out of the trough.

What a great time to be a first time homebuyer

I think it would be safe to say that within the 20 years that I've been involved with residential real estate, this is the best period of time I've experienced to be first time home buyer.

• Interest rates are attractive,
• credit is still available to those who have paid their bills on time,
• the FHA loan program offers responsible terms for low down payment loans,
• there is a wide variety of homes to choose from,
• the Greater Lafayette market has not suffered from a "free fall" in property values like we have heard about elsewhere, and most importantly,
• The American Recovery and Reinvestment Act of 2009 authorizes a direct income tax credit to first time home buyers equal to 10% of the purchase price of the home, not to exceeded $8,000.

The tax credit is an amazing opportunity and it is simple. Anybody who has not owned a home as a principal residence in the last three years and closes on the purchase of a new or existing home as their principal residence between 1/1/09 and 12/1/09 is eligible. Once you have closed on your home, you can amend your 2008 income tax return and apply for a refund equal to the tax credit amount or apply the tax credit to your 2009 income tax liability.

There are only two "catches" to the program that I can see. 1) The size of the tax credit is reduced for buyers who have income in excess of $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. 2) Home buyers who use the home as their primary residence for less than three years are subject to a recapture of a portion of the tax credit. For those who live the primary residence for more than three years, there is NO recapture of the tax credit!

For those who are interested in learning more about the program, Coldwell Banker Shook, in conjunction with three local lenders, is conducting several First Time Home Buyers Seminar. They will be offered two more times this spring:

-Tuesday, March 31st, 6:30 at the Tippecanoe County Library -- Klondike Branch (corner of Lindberg and Klondike Roads, or

-Wednesday, April 29th, 6:30 at the Tippecanoe County Library -- Downtown Library.

Each session will last about one hour. They will be very informal. Registration is not necessary.

If you have any questions about the tax credit, shoot me an email and I will do my best to get you an answer (cshook@shook.com).

Charlie

P.S. As I wrote this post, the men's basketball team lost a great game to UConn in AZ. To Matt Painter and the Boiler basketball team, thanks for a great year and helping us remember what student athletics is all about.