Instead of talking just about prices, I would like to point out that it is actually your purchasing power that is most important. Your purchasing power (assuming you will be obtaining a mortgage to finance the home) is a combination of home prices and interest rates. Right now interest rates are being held low by activities of the fed. The fed will not and actually cannot hold the rates as low as they are now for much longer. What does this mean for you? For every $100,000 you borrow at 5%, your cost if $536.82. At 6% your cost is $599.55. The difference is 11%. Ignoring your down payment, translated that means that a home priced at $200,000 today would cost you the same as a home priced at $178,000 if the interest rate climbs 1%.
Now on to pricing. 2011 is expected to have about the same or somewhat more downward pressure due to distressed home sales (foreclosures and short sales). From November 2009 to November 2010 (the latest data we have) the average home's price in the Eugene area fell 8.2%. The median price fell 9.9%. I expect similar things for 2011.
What that says to me is that your purchasing power will be flat if interest rates go up only 1% next year. Your
purchase power will decline if interest rates go up more than 1%. So what does the magic crystal ball predict about interest rates? Well, I don't have one, but I do know that the average interest rate for the past 38 years is 9.04% at a cost of about 1.5 points. Today you can get a rate of 4.75% (up from 4.25% several months ago) at no points. The assuredness of today's rates versus the unpredictability of tomorrow's rates? If you are in the market for a home, sooner looks better (or at least more sure) than later.
Fannie Mae and the other foreclosures and short sales are defining the market. They are not priced to anticipate future prices at all. A typical foreclosed home (but bear in mind each bank behaves individually) will start dropping in price every month until sold. The price is what will move the home now.
Buying a foreclosed home, which is more likely to have suffered some damage than a short sale home), is similar to a purchase from a regular owner, except for two things: banks will often exert significant time pressure and will require you to use an addendum written by the bank's attorneys which will be more favorable to the bank than a regular sale.
The risks are the same as buying a regular home. Have a professional home inspection performed, even if you buy a brand new home. In a regular sale the owner will have filled out a 4-page property disclosure which I have found to be generally worthless. Homeowners are on average no more expert about their home than a regular driver is an expert mechanic. In a foreclosure the bank is exempt from the disclosures.
Houses are selling slowly, and this is what determines fair market value. So remember to factor in
interest rates unless you are an all cash buyer. This may be the best time to buy a home for the next decade or longer.
Dohn Riley, Hybrid Real Estate
Tuesday, December 21, 2010
Sunday, December 12, 2010
The Hubble Space Telescope Has a Birthday
The Hubble Space Telescope
The Hubble Space Telescope just had its 17th anniversary. For this occasion, NASA decided to take a memorable birthday photograph — in so many ways. This mosaic of 50 photographs spans a width of 50 light years. It depicts in many colored splendor the birth and imminent deaths of a family of stars, born together, and soon to be torn asunder by the tides of galactic gravitation. The early births are the titanic ones, 50 to 100 times the mass of our sun. These stars have a motto: Live Fast, Die Young, Go Out in a Blaze of Glory, and Leave a Beautiful Corpse. These super stars are the source for supernovae that briefly outshine the galaxy that gave them birth. They start to shine as the first of the tribe, consume their enormous resources at a prodigious rate, and don’t live long. During their lives, they affect the surroundings in many ways. These giant stars produce magnificent stellar winds that scour out the neighborhood, they build heavier elements in the inferno of their cores, and then they erupt, seeding their birthplace with those heavier elements so essential for life. Below is a low resolution version of this magnificent photograph that is helping scientists understand star birth and death better.
Shortly I will describe some of the areas in this fabulous mosaic in more detail along with magnified images so you can see the glory (or horror) yourself. But first let’s get a sense of the overall idea. This area was a cosmic dust bin about four million years years ago, not a regular trash pile, but the galactic equivalent of a dusty nook where all sorts of debris had collected, mostly hydrogen and helium. The probably gentle winds that blew this trash into the dusty nook we call Carina blew enough debris into this eddy that it started to slowly collect together. The force that caused this collection is gravity. As the dust and debris got denser, it heated up, slowly at first, but later faster and faster. Three million years ago it was the fourth of July, and the fireworks began.
The ignition was in the hearts of the most massive stars, for the most massive stars have the strongest gravity and are the fastest to call their collective sub-tribe (or debris) together. Once the conditions were right (enough pressure and heat), one of the most powerful of all reactions occurred — nuclear fusion. The stars lit with the fury of fusion bombs in their cores. These stars being massive shone in a an intense blue light casting heavy ultraviolet radiation about them. You can see them in the following pictures where, on the left side, the stars are hidden by gas and dust, on the right they are visible:
The hurricane-like gales these monsters produced roiled the interstellar medium, the gas and dust of their birthplace, creating new eddies where the density rose enough to start new waves of star birth. Then as the brutal winds continued, they eroded the sanctuaries where the conditions for star birth and maybe the precious cargo of planets might grow. It became a precarious race between spawning the beginning of a solar system and prematurely aborting its children and dwarfing its primary. This and more is depicted in this stunning and heartbreaking photograph. Look at the erosion of these pillars growing solar systems caused by the fantastically powerful light of the super heavy stars (above and to the left) not shown here:
In the above picture, you see how the shapes tell the tale of shifting cosmic winds. Look at the incredible turbulence in this maelstrom of growth, erosion, hope, and despair here:
And here:
With a close-up of the upper right portion of the above photo here:
This stunning display of the culmination of space and astronomical science awes me. It helps me remember to be humble, to be human, to respect my neighbor, love my friends, and remember the mortality of life. I hope you have enjoyed this ramble into astronomy. I guess I must miss the days when I taught the science. If you have any questions, please contact me via email.
These photos are small versions of the full sized image which is a 200 Mb JPEG. If you would like to download a copy for yourself, go here. Do not download the 200 Mb version unless you have Photoshop or its equivalent. The file is too large to display in a browser or with Windows Picture Viewer. My Mac is down, so I don’t know what a Mac might be able to do.
The Hubble Space Telescope just had its 17th anniversary. For this occasion, NASA decided to take a memorable birthday photograph — in so many ways. This mosaic of 50 photographs spans a width of 50 light years. It depicts in many colored splendor the birth and imminent deaths of a family of stars, born together, and soon to be torn asunder by the tides of galactic gravitation. The early births are the titanic ones, 50 to 100 times the mass of our sun. These stars have a motto: Live Fast, Die Young, Go Out in a Blaze of Glory, and Leave a Beautiful Corpse. These super stars are the source for supernovae that briefly outshine the galaxy that gave them birth. They start to shine as the first of the tribe, consume their enormous resources at a prodigious rate, and don’t live long. During their lives, they affect the surroundings in many ways. These giant stars produce magnificent stellar winds that scour out the neighborhood, they build heavier elements in the inferno of their cores, and then they erupt, seeding their birthplace with those heavier elements so essential for life. Below is a low resolution version of this magnificent photograph that is helping scientists understand star birth and death better.
Shortly I will describe some of the areas in this fabulous mosaic in more detail along with magnified images so you can see the glory (or horror) yourself. But first let’s get a sense of the overall idea. This area was a cosmic dust bin about four million years years ago, not a regular trash pile, but the galactic equivalent of a dusty nook where all sorts of debris had collected, mostly hydrogen and helium. The probably gentle winds that blew this trash into the dusty nook we call Carina blew enough debris into this eddy that it started to slowly collect together. The force that caused this collection is gravity. As the dust and debris got denser, it heated up, slowly at first, but later faster and faster. Three million years ago it was the fourth of July, and the fireworks began.
The ignition was in the hearts of the most massive stars, for the most massive stars have the strongest gravity and are the fastest to call their collective sub-tribe (or debris) together. Once the conditions were right (enough pressure and heat), one of the most powerful of all reactions occurred — nuclear fusion. The stars lit with the fury of fusion bombs in their cores. These stars being massive shone in a an intense blue light casting heavy ultraviolet radiation about them. You can see them in the following pictures where, on the left side, the stars are hidden by gas and dust, on the right they are visible:
The hurricane-like gales these monsters produced roiled the interstellar medium, the gas and dust of their birthplace, creating new eddies where the density rose enough to start new waves of star birth. Then as the brutal winds continued, they eroded the sanctuaries where the conditions for star birth and maybe the precious cargo of planets might grow. It became a precarious race between spawning the beginning of a solar system and prematurely aborting its children and dwarfing its primary. This and more is depicted in this stunning and heartbreaking photograph. Look at the erosion of these pillars growing solar systems caused by the fantastically powerful light of the super heavy stars (above and to the left) not shown here:
In the above picture, you see how the shapes tell the tale of shifting cosmic winds. Look at the incredible turbulence in this maelstrom of growth, erosion, hope, and despair here:
And here:
With a close-up of the upper right portion of the above photo here:
This stunning display of the culmination of space and astronomical science awes me. It helps me remember to be humble, to be human, to respect my neighbor, love my friends, and remember the mortality of life. I hope you have enjoyed this ramble into astronomy. I guess I must miss the days when I taught the science. If you have any questions, please contact me via email.
These photos are small versions of the full sized image which is a 200 Mb JPEG. If you would like to download a copy for yourself, go here. Do not download the 200 Mb version unless you have Photoshop or its equivalent. The file is too large to display in a browser or with Windows Picture Viewer. My Mac is down, so I don’t know what a Mac might be able to do.
Saturday, December 11, 2010
Willamette Weather or Why the Walnut Crop Failed in 2010
Many of our local crops from tomatoes to walnuts did not do well this year. And you can blame it on the weather. Why the weather? Crops of all sorts depend upon the weather for the warmth, coolness, dryness, or wetness required at different stages of their life cycles. Walnuts, for instance, need some but not too much rain during the pollination period around April through May. Look at the average annual precipitation for the Eugene area in the following figure.
Notice that the curve is fairly smooth except for February being slightly less than it should be. This is due to the length of February being the shortest month by 5 to 10 percent. If you add around 0.5 inch to February, it becomes a smooth curve. This is what plants expect in terms of rainfall. This is what they are genetically tuned to thrive with. However, the 2010 water year was different. The general weather patterns were shifting from an El Niño to a La Niña event without the usual neutral year. In Oregon, this often messes up the springtime and early summer weather patterns away from average toward wetter and cooler. Now take a look at the rainfall I recorded for 2010 versus annual in the following image.
Notice that the largest anomaly from average was during March through June. Walnut pollination season precisely. Hence, no commercial walnut crop. Here is why I care: I love to eat walnuts throughout the year, but especially in the winter and spring. I also enjoy baking my award-winning walnut sourdough bread. But no walnuts to be had at my local Herrick Farms, so this year I am paying double the price for imported walnuts from California! The wet June also explains why my wife's tomatoes were a pulpy disaster. Strangely though, the Cherry Bomb chile peppers and the tomatillos were great. So was the excellent cabbage that had a great mustardy tang to it.
While the distribution of rain over the year was quite odd, the total amount for the year was not very different from average. You can see this in the following picture which shows cumulative rainfall during an average year (in Eugene about 50 inches; at my house maybe 55 inches) versus the 2010 season (about 58 inches as measured at my home).
The good news from all this is that the odds are extremely good that this spring and summer will not resemble last year's. Thank goodness for that. But there is a price to pay: we are likely to have a colder, wetter start of the 2011 rain year, but hopefully later a perfect year for walnuts.
Notice that the curve is fairly smooth except for February being slightly less than it should be. This is due to the length of February being the shortest month by 5 to 10 percent. If you add around 0.5 inch to February, it becomes a smooth curve. This is what plants expect in terms of rainfall. This is what they are genetically tuned to thrive with. However, the 2010 water year was different. The general weather patterns were shifting from an El Niño to a La Niña event without the usual neutral year. In Oregon, this often messes up the springtime and early summer weather patterns away from average toward wetter and cooler. Now take a look at the rainfall I recorded for 2010 versus annual in the following image.
Notice that the largest anomaly from average was during March through June. Walnut pollination season precisely. Hence, no commercial walnut crop. Here is why I care: I love to eat walnuts throughout the year, but especially in the winter and spring. I also enjoy baking my award-winning walnut sourdough bread. But no walnuts to be had at my local Herrick Farms, so this year I am paying double the price for imported walnuts from California! The wet June also explains why my wife's tomatoes were a pulpy disaster. Strangely though, the Cherry Bomb chile peppers and the tomatillos were great. So was the excellent cabbage that had a great mustardy tang to it.
While the distribution of rain over the year was quite odd, the total amount for the year was not very different from average. You can see this in the following picture which shows cumulative rainfall during an average year (in Eugene about 50 inches; at my house maybe 55 inches) versus the 2010 season (about 58 inches as measured at my home).
The good news from all this is that the odds are extremely good that this spring and summer will not resemble last year's. Thank goodness for that. But there is a price to pay: we are likely to have a colder, wetter start of the 2011 rain year, but hopefully later a perfect year for walnuts.
Why Isn't My Home Selling?
In addition to making sure that your home is correctly listed on the Multiple Listing Service (MLS), see if your agent has built a virtual tour or website where the (as mentioned below) excellent photos can be a much larger size than those in the MLS. I like to devote a page to each room specifically along with appropriate verbiage guiding the viewer to understand the images or perhaps to set the emotional stage to help "feel" the room. One key to determining if the photos are appealing or not is to examine whether the camera used was wide angle enough to show the room well and whether or not the pictures have been de-keystoned (adjusted so that the walls are parallel as opposed to leaning ) and are vertical. A last important feature of excellent photography specifically for the Eugene market is to make sure that, while the interior is well lit, the view through the windows to the outside is also well lit, not just white out or with a flash reflection. Most Eugenians are outdoorsy folk, and showing the view outside the home helps them see themselves living there.
My rule of thumb for pricing (depending on where your home is in the price range and your need to sell) is that if you home is on the market for two months without an offer or at least someone viewing it twice or more, your home is overpriced by 10%. The only variable in the previous rule of thumb is where you are relative to the average price. If you are below that price (as of November 23, 2010 it is $202,900), change the two months to one. As you go higher above the average price, increase the months. Several years ago in a slightly seller's market, the average time on the market to get an offer for a home priced at $1,000,000 was one year.
Also, use psychology on your side, be sure that the buyer's experience from parking at your home through the front door into the first room entered is impeccable. Here is the reason why: If everything appears well tended and loved at the beginning when someone is meeting your home, they will tend to overlook other flaws later as they explore. This is easy to see if you take the opposite approach: there is dry rot around the garage door, weeds are growing in the driveway's expansion joints, the lock on the front door is difficult for the Realtor to open and the door sticks, the paint is peeling on the front of the home; then the potential buyer enters the home saying, "I wonder what else is wrong." Not a good attitude for a potential buyer to have.
All else being equal, essentially it all boils down to presentation and price. Therefore ask your Realtor to show you the competition. Walk through those homes with a pencil and paper noting what is the same, better, or worse than your home. Also make a note of how long those homes have been on the market as well as the price changes that may have occurred. Add or subtract those features in the competition compared to your home, and see if the price you have is the BEST of the lot. If not, reduce your asking price. Every study I have seen indicates that the longer your home is on the market, the LESS money you will sell it for in a market like today's. I think you would be well advised to consider making your home the best deal by at least 5%.
Talk to your Realtor about all of these ideas. Good luck with your sale.
Dohn Riley, Hybrid Real Estate, Eugene, Oregon
541-726-7220
homes@dohnriley.com
My rule of thumb for pricing (depending on where your home is in the price range and your need to sell) is that if you home is on the market for two months without an offer or at least someone viewing it twice or more, your home is overpriced by 10%. The only variable in the previous rule of thumb is where you are relative to the average price. If you are below that price (as of November 23, 2010 it is $202,900), change the two months to one. As you go higher above the average price, increase the months. Several years ago in a slightly seller's market, the average time on the market to get an offer for a home priced at $1,000,000 was one year.
Also, use psychology on your side, be sure that the buyer's experience from parking at your home through the front door into the first room entered is impeccable. Here is the reason why: If everything appears well tended and loved at the beginning when someone is meeting your home, they will tend to overlook other flaws later as they explore. This is easy to see if you take the opposite approach: there is dry rot around the garage door, weeds are growing in the driveway's expansion joints, the lock on the front door is difficult for the Realtor to open and the door sticks, the paint is peeling on the front of the home; then the potential buyer enters the home saying, "I wonder what else is wrong." Not a good attitude for a potential buyer to have.
All else being equal, essentially it all boils down to presentation and price. Therefore ask your Realtor to show you the competition. Walk through those homes with a pencil and paper noting what is the same, better, or worse than your home. Also make a note of how long those homes have been on the market as well as the price changes that may have occurred. Add or subtract those features in the competition compared to your home, and see if the price you have is the BEST of the lot. If not, reduce your asking price. Every study I have seen indicates that the longer your home is on the market, the LESS money you will sell it for in a market like today's. I think you would be well advised to consider making your home the best deal by at least 5%.
Talk to your Realtor about all of these ideas. Good luck with your sale.
Dohn Riley, Hybrid Real Estate, Eugene, Oregon
541-726-7220
homes@dohnriley.com
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