Christian Jacobsen's Blog

Luxury home market continues to struggle in Utah

Christian Jacobsen (Jacobsen Real Estate) — Fri, 29 Feb 2008 18:11:19 -0800

I pulled some stats from the Wasatch Front MLS (WFRMLS) to illustrate how the luxury home market been struggling as of late. This table includes all of the listed homes in Utah currently on the WFRMLS.

	Currently for sale	Under Contract	Under Contract/Available
Homes under $400K	14136	3659	26%
Homes over $400K	5835	545	9%

The luxury market has hit hard times for two main reasons. First, the available financing for luxury homes changed drastically about 6 months ago. Up until last summer a luxury home Buyer getting a jumbo loan could expect to pay a rate about .25% higher than a conventional loan. Currently, a jumbo loan is about 1.25% higher that a conventional loan. That amounts to an increase in monthly payment of around $400-450 on a $500K loan.

Unfortunately, there isn't a light at the end of the tunnel for jumbo loans. There has been a lot of talk about how our government's economic stimulus plan will affect jumbo loans in Utah. In my opinion, the effect will be minimal in Utah. You see, our government's plan is to raise the limits for conventional loans to help those homeowners and buyers in the luxury segment get financing at better rates. However, the limits are going to be figured in each county by multiplying the median home price by 1.25%. The current limit for a conventional loan is $417K and it is unlikely we will improve on that number in all the Counties in Utah...except maybe Summit County.

If financing isn't enough to deter a buyer from buying a luxury home then not being able to sell their home should do the trick. Most buyers of luxury homes are not first time homebuyers and therefore need to sell their current home in order to pull the trigger. Although things have been improving significantly in the lower priced homes, this past fall and winter were dreadfully slow. Luxury home segment seems to get hit the hardest when homes aren't changing hands. It's hard to step up to your dream home when there aren't any takers on your home. This "domino" effect should begin to improve as the homes under $400K continue to move.

In order to move your luxury home you need an aggressive marketing plan and a market savvy Real Estate agent to implement that plan. Call us today for an honest market analysis on your home free of charge.

Do I need an agent as a Buyer?

Christian Jacobsen (Jacobsen Real Estate) — Fri, 22 Feb 2008 13:56:14 -0800

In my post last week, Real Estate commissions: how exactly do we get paid?, I wrote about how real estate agents get paid....How the services of a buyer's agent will not cost the buyer any money in a transaction. Besides the fact that the services will cost nothing, there are actually more reasons a potential buyer should seriously consider utilizing the services of a buyer's agent. Such as...

The Buyer's agent will work just for you and have only your interest in mind in a transaction.

- Do you really want to get yourself into a limited agency situation? Limited agency can create potential problems that can be avoided with a buyer's agent.

- We will get you the best possible price and negotiate the terms of the agreement in your favor.

2. A Buyer's agent can assist you with finding the perfect property.

- I have shown up to 40 different properties to a buyer in one day. The truth is that you can see many more homes with a buyer's agent much more quickly thanks to our key box technology. It sure makes it easier to find that diamond in the rough.

3. A Buyer's agent will make sure the paperwork is done properly and that all your "bases" are covered.

- The truth is that you are far more likely to end up in a legal battle if you try and go at it alone.

4. A Buyer's agent will facilitate the sale and make sure you don't unknowingly buy a "problem" home.

- Let's face it, not all homes are created equal. Whether it's home inspectors, title issues, Radon gas or even potential homeowner's association problems. We know whom to call to find those nasty problems before they become yours.

5. A Buyer's agent can educate you on the current market conditions.

- I know, I know, we live in the information age. Anyone can figure out the current market conditions...right? Let's face it, most information you find on the Internet can tell you what has happened in the past. Wouldn't you rather know what's happening in the market right now from a seasoned professional who has been watching the market for a decade?

6. A buyer's agent can do a valuation on any home you may be interested in and help you determine an offer price.

- Anyone willing to make me an offer right now for the http://www.zillow.com/ zestimate for my house? If so, we have a deal. Zillow is much more accurate in other states compared to Utah. Why? Well, because Utah is a non-disclosure State. Which means sales prices are not public record. As a real estate professional, I do have access to sales prices as well as information like how much most sellers are discounting in my area. That's why I know my home is not worth my zestimate.

In the market for a home? Call or email us today.

The tasteless, odorless, silent, invisible killer

Christian Jacobsen (Jacobsen Real Estate) — Tue, 19 Feb 2008 11:51:07 -0800

When I first started in the real estate business 9 years ago I learned of a potential threat to all of us living here in Utah...Radon gas. Like many people I knew nothing about this gas and I was oblivious to its dangers.

If someone were to ask you about the following items, which would you say is the most dangerous?

Radon Gas
Drowning
Fire
Airplane crashes

We commonly hear about all of these things and take preventative measures against all of them with the exception of Radon gas. We station lifeguards at public pools and beaches, install smoke detectors in our homes and fire sprinklers in our buildings, we endure safety speeches before every flight we take. However, radon gas is estimated to cause more deaths in the US than each of these things. In fact, Radon gas is the second leading cause of lung cancer in the US with smoking being the leading cause. Interestingly, those who are exposed to elevated levels of radon and smoke increase their chances of lung cancer by 10 times.

Unfortunately, we have an elevated risk of Radon gas here in Utah. My understanding is that the granite rock so prevalent in Utah is the cause of our elevated levels. In my zip code, 84109, 60 of the 184 home tests reported by the state of Utah were above acceptable EPA levels. In fact, it is estimated that 3 in every 10 homes in Utah test above the EPA acceptable levels. Compare that to the national rate of 1 in every 10 homes testing above acceptable levels and you can see why our awareness of this threat should be on all of our minds.

Radon gas is a natural occurring gas that typically moves up from the ground to the air above. It is caused from the natural breakdown of uranium in soil, rock and water and is radioactive. It is widespread throughout the US and is found in all types of buildings. Radon gets in your home through cracks in solid floors, construction joints, cracks in walls, gaps in suspended floors, gaps around service pipes, cavities inside walls or in the water supply.

Radon Gas is measured in picocuries per liter or pCi/L. The national average outdoor level is .04 pCi/L and average national indoor level is 1.3 pCi/L. The EPA considers levels above 4.0 pCi/L dangerous and recommends taking action. Testing is easy and there are different testing methods to consider. Test kits start at $10-$30 and can be found online or at many big box home improvement centers.

Being in the real estate business I am astonished by how many buyer forego testing for radon gas. Furthermore, I rarely come across radon mitigation systems installed in the many homes I tour daily. With the estimated levels of radon in the homes here in Utah I would expect to see many more. According to the EPA, only 20% of new homes being constructed include radon resistant features like roughed in vent pipes or making the foundation radon resistant.

How will this affect you when buying or selling real estate? Well, when purchasing an existing home always test for radon or recommend that your home inspector test for it. If you are going the new construction route, insist that your builder take preventative measures like installing the vent piping. When I have worked with buyers that elected to test for radon, a surprising percentage of the homes came back with elevated levels. In those situations, most of the sellers were willing to foot the bill for a radon mitigation system. All of them were appalled when they discovered that the home they have been living in for years was dangerous. This saved my buyers $1700-$2000 and gave them the peace of mind of living in a safer home.

Real Estate commissions: how exactly do we get paid?

Christian Jacobsen (Jacobsen Real Estate) — Sun, 17 Feb 2008 11:14:53 -0800

A common misconception I see regularly with first time homebuyers and sometimes repeat buyers is that they don't understand how and by whom real estate commissions are paid. The graphic below shows how commissions are paid in a typical real estate transaction.

As you can see in this model and in a typical real estate transaction, the Buyer pays no commissions. Yet, it seems every day I encounter Buyer's unwilling to hire a Buyer's agent for fear that it may cost them money.

Often, the Buyer thinks that if they only have one agent representing both the Seller and Buyer that they will be saving money. However, in this scenario the agent would often collect both commissions and represent both the Buyer and Seller in the transaction. This is called limited agency and it can present many potential problems as you can imagine. Does the agent have the Buyer's best interest in the transaction? Is the agent impartial to which home the Buyer purchases? Limited agency is illegal in many states although it is legal here in Utah. As you can see a Buyer with the best of intentions can potentially put themselves in a less than ideal situation.

Wasatch Front Real Estate market picking up

Christian Jacobsen (Jacobsen Real Estate) — Mon, 11 Feb 2008 15:03:53 -0800

Our market this winter has been slow, the pace of which we haven't seen in about ten years. In fact, in January only 587 homes or condos sold in Salt Lake County. That was a typical January that we had in the late ‘90's and nothing like the January's of the last few years. Just to give you an idea of how slow this January was; we had 1145 sold homes or condos in January of last year in Salt Lake County. That's twice of what we had this year. Furthermore, February has also started out poorly with only 98 homes or condos sold so far in Salt Lake County (up until February 8^th).

Right now you are probably wondering if I've lost my mind. After all, if January was so bad and February has started poorly, then why do I think the market is improving? Well, in the last week or two I've begun to notice things picking up in the Real Estate Market in and around Salt Lake City. So, I decided to do a little research to confirm my thoughts. My research surprised me.

Currently, we have 1413 homes or condos under contract to be sold in Salt Lake County. What does that mean? It means we are heading for a good February and maybe a strong March. Let me explain. The typical Real Estate contract runs it's course in about 30 days and the majority of these homes or condos that are under contract will become sold in the next 30 days. Not all the homes or condos that are under contract will sell, however, the majority will. We are shaping up for a good February. Maybe not quite like the banner years of '06 (1203 sold homes/condos), or ‘07 (1148 sold homes/condos), but, definitely better than most expected. March looks like it may be strong too. (Stats provided by the Wasatch Front regional MLS)

Now I'm saying we've been able to avoid the sub-prime mortgage fallout. It's just that we have so many other positive influences on our real estate market here locally. Influences like strong economy, large influx of people, creation of good jobs. Those things have been able to alleviate the woes other parts of the country have been experiencing. We still have a larger than average inventory. So, we will need to string together a few strong quarters to get things back to normal.

So what does this mean for homebuyers and sellers? Well, for the homebuyer that have been waiting for prices to drop significantly, it may not happen. At least with the large inventory right now you will have many homes to choose from which makes it easier to find a seller willing to work with you on the price (albeit not the huge discount you wished for). Currently, buyers are also dictating the terms of most contracts, something that hasn't happened in the last few years. Rates are low and inventory is high. In my opinion, now is a fantastic time to buy.

For home sellers, the up-tick in the market is a good sign, however, with the large numbers of homes for sale, only the best-priced homes will move. That means that you will need an aggressive marketing plan with addition to being the best value in your area to successfully sell. Most professionals here locally that I have talked with are thinking that we should be back to normal inventory levels by the end of this year.