Good news in real estate (mostly for buyers)

Believe it or not, there's much good news in the real estate market.

If you're a prospective buyer, you're aware of this, of course. Lots of choices; frequently low prices; interest rates at historic lows; a fantastic first-time home buyers' tax credit. Let's take those in order:

CHOICES: There are 1,439 houses on the market today, in Racine County. In February 2007, there were only 513 single-family homes on the market.

LOW PRICES: On average, prices are down, which actually might mean nothing (except that cheaper houses are being sold), but we've got some startling specific examples from as recently as last week proving that bargains exist.

INTEREST RATES: Last week, rates for a 30-year mortgage fell to 4.85% -- the lowest rate ever recorded by Freddie Mac, the government-backed mortgage financing company.

TAX CREDIT: There's an $8,000 tax credit in the American Recovery and Reinvestment Act of 2009, for qualified first-time home buyers purchasing a home before Dec. 1 of this year.

But even sellers need not despair, despite the horror stories they've seen nationally -- horror stories like in the Fort Myers, FL, area, where thousands of foreclosed homes on the market have brought prices down to one-third or one-fourth of what they were three years ago. If you want to live in Florida. There's even some (relatively) good news buried in the latest foreclosure statistics. American CoreLogic, a national real estate reporting service, notes that Racine's foreclosure rate of 1.5% in February -- up one-tenth of a percent from last year -- is still lower than the national rate of 1.7%. But 4% of all mortgages in the city are at least 90-days delinquent ... although that, too, is less than the national rate of 5%.

Let's start with some local statistics, pertaining only to single-family homes in Racine and Racine County:

Single-family homes only; does not include condos, vacant land,
duplexes or commercial property. Source: Multiple Listing Service

Two things stand out, of course: fewer sales and lower prices. (That 19% year-over-year drop exactly matches national figures.) But sellers need to take those price figures with a grain of salt. Despite those averages, a house in the county that sold for $180,000 last year is not necessarily selling this year for $146,000, according to Michael Voss, president of the Racine Board of Realtors.

What is happening is that more first-time buyers are getting into the market -- and more lower-priced homes are selling. "First-time home buyers are buying homes more in the range of under $155,000," he says, "so those houses are moving faster than those in the $200,000 - $300,000 range." Voss didn't just pluck that first figure out of the air; $155,539 was the average price of homes sold in the county during January. Two years ago, in January 2007 -- during what Voss calls a "sellers' market" -- the average price of homes sold in the county was $163,164. That's a decline of just 4.6%, compared to the one-year 18% and 19% figures above.

"Upper end homes," Voss says, "are not as affected, just as vacation homes in some areas are not as affected as others are. If a home is very unique, it is kind of on its own."

Voss insists that prices have "pretty much stabilized and settled to where they should be selling at right now, around their assessed amounts. When the inventory and foreclosures are cleaned up and sold, it will be back to more of a normal market. We are already seeing more buyers coming out and activity is up from a couple of months ago."

Realtors are, by nature, optimistic. But this week's property transfers from the Racine County Register of Deeds both supports and contradicts Voss' position. In Racine, eight houses sold for prices ranging from $20,000 to $87,000, with five priced at $33,000 or below. There were only two sold over the $155,000 average (one of them a multi-family apartment house) -- but the majority sold for far less than their assessed -- and presumably fair market -- value.

Here are the prices of the even dozen properties sold in Racine during the week of March 16-20, compared to their "fair market value" assessments from Zillow.com or the Register of Deeds:

• 1624 S. Memorial Drive, right, sold for $20,000; assessed at $72,000
• 1617 Rapids Drive, sold for $27,000; assessed at $97,000
• 1827 Green St., sold for $31,000; assessed at $107,300
• 1426 William St., sold for $32,900; assessed at $108,300
• 2214 Geneva St., sold for $33,000; assessed at $133,800
• 1609 Quincy Ave., sold for $53,000; assessed at $112,400
• 3205 Pierce Blvd., sold for $55,000; assessed at $118,500
• 1031 Florence Ave., sold for $87,000; assessed at $141,000
• 726 Yout St., sold for $88,000; assessed at $113,000 (not a residence)
  

• 3514 Osborne Blvd., sold for $152,000; assessed at $164,500
• 932 Roosevelt Ave., sold for $193,800; assessed at $162,400
• 1042 College Ave., right, sold for $770,000; assessed at $755,000 (a 3-story apartment building)
  

The 10 single-family homes went for an average of $69,000, and there's probably a story behind the buyer and seller of each of 'em. What is striking is the large divergence between the assessor's idea of fair market value compared to what the marketplace decided this month. Much of that difference, no doubt, can be attributed to the lag time between when the properties were assessed more than a year ago, the current inventory glut and the present real estate market collapse. It also raises a question about the city's decision a few years ago, now being reconsidered, to reassess every two years rather than every year. (And, no: our property taxes won't go down just because our assessment are too high. Assessments will be/should be lowered to something approximating the fair market price, but the mill rate will go up a commensurate amount to fund local government at the level to which it has become accustomed.)

Jim Ladwig, Racine County register of deeds, says, "I don't necessarily disagree with you on the assessed value of some of the homes being high, as the real estate values have declined during the economic downturn" and he points out -- correctly -- that the register of deeds is not responsible. "Each municipality has their own assessor... I know they have statutory guidelines they must follow."

With the "leveling off" -- Voss' term -- of home prices over the past year, "home buyers are at an advantage," able to be incredibly choosy and buy "the right home at a more realistic price."

So what's the good news for sellers? The main reason the average price of sold houses is so low, according to Voss, is the large number of homes in foreclosure, and those first-timers buying less-expensive houses. Not all homes are selling at a deflated price, Voss says. "For the most part, a homeowner who keeps his house updated and makes normal home improvements will see that home hold its value, or even appreciate."

Price appreciation also depends upon when they bought their house: a homeowner who just bought a home two or three years ago, will probably not see any appreciation in that short a time, Voss says, emphasizing that a home is a long-term investment. "You buy a home, live there for many years, and then can expect to sell it at an appreciated value." For example, he says, "back in January 2000, the average price of a home sold in Racine County was $125,578. If you sold that home today at the average price of $155,539, you would see a profit of $29,961 -- so you have lived in your house for nine years, had a roof over your heads and still come out walking away with over $29,000. This is proof that a home is still a great investment."

Voss' message is clear and direct: "The time to buy a home is now," he says ... over and over.

But maybe not so much the time to make a killing selling one...