The California Association of Realtors says inventory shortages dented pending home sales in June, as lenders signed off on more short sales but had fewer “real estate owned” properties, or REOs, to market.

CAR’s Pending Home Sales Index was down 3.8 percent from May to June, but at 121.4 was up 4.7 percent from a year ago. An index of 100 is equal to the average level of contract activity during 2008.

REO’s accounted for 20.2 percent of pending sales in June, down from 29.2 percent a year ago. Short sales were up, but only slightly, accounting for 21.4 percent of sales statewide, compared with 20 percent a year ago.

All told, distressed properties (short sales, REOs and others) accounted for 42 percent of pending sales, down from 49.5 percent a year ago.

“Pending sales declined in June, partly due to a lack of housing supply — especially in REO properties,” CAR President LeFrancis Arnold said in a statement.

“The shortage of REO inventory is also putting upward pressure on bank-owned home prices, with the median price of REO properties showing a double-digit year-over-year gain of 11 percent in June.”

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Share of distressed sales to total sales (single-family homes)

Type of Sale	June 2011	May 2012	June 2012
Equity Sales	50.5%	56.0%	58.0%
Total Distressed Sales	49.5%	44.0%	42.0%
REOs	29.2%	22.6%	20.2%
Short Sales	20.0%	21.1%	21.4%
Other Distressed Sales (Not Specified)	0.2%	0.3%	0.4%
All Sales	100.0%	100.0%	100.0%

Source: California Association of Realtors

There was considerable variation at the county level, with distressed properties accounting for a low of 20 percent of pending sales in affluent Marin County, compared with a high of 63 percent in Lake, San Benito and Solano counties.

Single-family distressed home sales by county (percent of total sales)

County	June 2011	May 2012	June 2012
Amador	51%	50%	55%
Butte	34%	37%	36%
El Dorado	54%	47%	44%
Fresno	57%	57%	54%
Humboldt	29%	34%	29%
Kern	66%	48%	48%
Lake	86%	70%	63%
Los Angeles	47%	41%	41%
Madera	83%	79%	57%
Marin	26%	21%	20%
Mendocino	63%	44%	48%
Merced	64%	54%	52%
Monterey	57%	52%	50%
Napa	51%	44%	47%
Orange	35%	33%	31%
Placer	53%	47%	41%
Riverside	61%	54%	52%
Sacramento	64%	58%	53%
San Benito	74%	59%	63%
San Bernardino	69%	59%	58%
San Diego	28%	23%	22%
San Joaquin	63%	62%	61%
San Luis Obispo	42%	35%	34%
San Mateo	24%	21%	21%
Santa Clara	31%	28%	23%
Santa Cruz	36%	33%	42%
Siskiyou	42%	54%	59%
Solano	72%	70%	63%
Sonoma	51%	45%	40%
Stanislaus	70%	65%	61%
Tehama	73%	65%	45%
Yolo	51%	45%	46%
California	49%	44%	42%

Source: California Association of Realtors

Refinished hardwood floor image via Shutterstock.

Q: I love the Sweat Equity column, especially the exotica about French drains. My question is more mundane, I’m afraid, but important to me. It’s a sort of “project management” query.

I live in a Berkeley, Calif., brown shingle. The living room walls and ceiling badly need painting.

But the living room also has an old carpet, beneath which we believe is a hardwood floor that could be refinished into something nice.

Which project should we do first: the paint job or the floor? If we paint first, and the rug gets messed up, that’s OK. But does the process of sanding and refinishing the floor somehow mess up the look of those new walls with dust, etc.?

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A: French drains — exotica? It’s just digging a trench and putting some gravel over a perforated pipe to channel water away from the foundation.

Your “chicken or the egg” question has more heft. Your concern about sanding dust on the newly painted walls is well taken. Likewise, there is a concern about plaster grit from the painting preparation process marring freshly refinished engineered hardwood flooring.

Here’s how we suggest you go about the project to end up with the best of both worlds: a freshly painted room and a pristine hardwood floor.

First verify that you have hardwood underneath the carpet. Lift a corner of the carpet and see what’s underneath. You’ll probably need a pair of pliers to pull the carpet off the tack strip. The typical Berkeley brown shingle has oak hardwood flooring. It was cheaper than carpet back then and allowed the occupant to choose area rugs to suit his or her taste.

Presuming there is hardwood under the rug, leave the rug down. Because you’ll be filling, sanding and priming first, the old carpet can live its last days as a drop cloth. Then seal off the room by taping plastic sheeting over the doorways.

Patch the walls and ceiling. “V” out any cracks with a teardrop paint scraper and fill them with Spackle or patching plaster, and sand the patches smooth. Next, repair any dings in the woodwork by sanding the edges of any chips smooth. Prime any bare wood with quick-drying primer.

A word of caution here: Even if the trim has been painted recently, in all likelihood many of the previous coats are lead paint. Lead is toxic and poses a health risk. In the next few weeks we plan to do a detailed treatment of dealing with lead paint, but for now you can find information about the right way to remediate lead paint at www.aclppp.org, the Internet home of the Alameda County Lead Poisoning Prevention Program.

Now it’s time to take up the old rug and along with it a lot of the grit and sanding dust from the patching. Give the floor and walls a quick vacuum to get even more dust. This completes the paint prep work.

With the paint prep done, switch gears and have the floor sanded and refinished. It’s best to call a professional. They have the tools and the experience that even an outstanding do-it-yourselfer can’t match.

After the floor finish has cured — give it at least three days — cover it with a layer of thick construction paper made for protecting floors during construction. Tape the edges to the floor with a low-adhesive painter’s tape, and make sure to tape any seams. Then wash the walls and wood trim with a solution of trisodium phosphate. Rinse with clear water and allow it to dry. Prime any patches. Finally apply two coats of high-quality latex paint in the color of your choice.

We are aware that some paint manufacturers tout a paint that is a primer and finish in one. But since we have no experience with these products, we’re hesitant to recommend them.

We’d let the paint dry a day or two before removing the paper to reveal a freshly painted room and a handsome new floor.

Tip: Remove all switch and outlet plates and cover the switches and plugs with a strip of blue painters’ tape before painting.

You see it everywhere: the call for Realtors to engage online with blogs, social media and an interesting website. With so much homebuyer research and interaction happening online, it’s an important way to stay connected with your contacts.

More importantly though, what are you saying in those channels?

Do your posts primarily consist of new listings or requests for referrals? How can you develop richer, engaged and educational content?

Think more about what you are saying than where you are saying it. While it’s fun to jump in and learn the latest social media channels and new sites, it’s important to remember that the focus should be on sharing information that can truly benefit clients or prospects.

The book “Blue Ocean Strategy” outlines the benefits of building a business in uncontested market space: creating new customers, not fighting over ones that already exist. Your blue ocean could be using your social media channels to reach potential homebuyers who don’t even know they can buy now.

Today, 18 million renters make enough money to buy a home, but consumer surveys show that more than 50 percent are held back by the down payment. The Center for Responsible Lending found that based on average home prices, it would take 14 years for the typical American family to save enough money for a 20 percent down payment.

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coin image via shutterstock

These potential buyers remain on the sidelines, convinced they can’t afford to buy now and unaware that in every community there are multiple down payment assistance programs available. With today’s online platforms, Realtors are uniquely positioned to help amplify the message that programs are available and educate homebuyers on their options.

It doesn’t mean you need to become an expert on assistance programs; you just need to demonstrate that you know how to connect buyers to the right information. And, when you show them their opportunity to buy, you may very well be on the road to winning a new client (and referrals).

To find homebuyer assistance program information in your area, start by looking at these sites:

Find your state housing finance agency’s website and search for programs to discover what’s in your area.

Sign up for subscriptions on Patch.com and other community sites. They often report on home news and local programs. As related stories come out, you can share via your social media and blog.

Set up keyword searches on homebuyer assistance topics at Google.com/alerts. You can choose terms like “Tucson down payment assistance program” and stay on top of media coverage about programs and news related to local programs.

By becoming a curator of this relevant content and sharing with your networks, you can move beyond sharing new listings and establish yourself as a helpful and knowledgeable Realtor.

I like Evernote. A lot. What has made the note-taking app so invaluable is its powerful ability to organize disruptive thoughts. Now, the serendipitous idea for a blog post on real estate mobile technology is OK to have while I work on a broker listing presentation. I just whip out my iPad or iPhone, record my thoughts into my “Raveis Blog” note in my notebook and then transition peacefully back to what I was doing. No muss, no fuss.

I have been using two interesting features on Evernote for some time to further organize my thoughts. You may or may not have heard of these, but I find them important to share.

1. Related Notes for Chrome Web Clipper

The Web Clipper is one of the coolest, most convenient features offered by Evernote. It makes recording our unexpected (but important!) thoughts while Web searching a cinch; simply select the clipper and capture Web pages, photos, etc.

Last month, an important update was announced for Web Clipper users on Chrome: Evernote would display related notes after a clip was completed. When I first read this, I thought, “Big deal.” This is just like a “related articles” feature on a website or blog. But, when I tested the feature, I was pretty impressed.

For example, when I clipped Michael McClure’s article, “6 Things You Should Be Using Evernote for Every Single Day,” Evernote pulled up three related notes: one on our blog (where I and other contributors cover technology, like Evernote); one on deciphering real estate data at a local vs. national level (also related to real estate); and the final was a “Welcome Evernote” note (not sure how I feel about that one, but a little more on that later).

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In addition, the Related Notes feature will also display all the notes you’ve ever clipped from that same domain. You can see an example below:

These features make it incredibly helpful to create a logical patchwork between new and rediscovered, older thoughts. This can result in better content development and better service to clients.

The Downside: Yes, you’ve already detected it — this feature is offered only on Chrome (if you’ve noticed otherwise, let me know). Evernote has stated that the addition will be offered for other browsers in future Clipper iterations, but, until then, you may want to start experimenting with what has been called the world’s most popular browser.

The other issue, albeit small, is the content of Related Notes. In the above example, I was surprised Evernote came back the with the “Welcome to Evernote” result, especially when I had several other notes that had a stronger correlation to the clip. However, I was still able to generate solid ideas based off the other results. I suspect future enhancements will address this issue. So, kudos, Evernote!

2. Email Documents Directly to Your Evernote Notebook

This is another helpful feature I’ve been using. Evernote provides a specific email address to which you can send anything — buyer/seller agreement templates, marketing/drip campaign templates, or your itinerary for a getaway to Punta Cana. It’s very simple to set this up:

• Sign into your Evernote account, make sure it’s the desktop version (use the “Web Sign In”).

• Select “Settings.”

• Under Account Summary, see an “Email Notes to” field.

• Copy that email address and add it to your contacts. In my case, I added it to my Gmail contacts, as that is my ESP.

• Identify a default notebook to which you’d like to send your documents. Do this by right-clicking on the desired notebook within the Evernote UI, select properties, then check the box that says, “Make this my default notebook.” You’ll see that mine is “Gmail.”

• From here, it’s as easy as sending documents to that email address. They will then automatically be added to your default notebook.

I was tipped off by writing from @MichaelHyatt, best-selling New York Times author, on a way to further fine tune where your documents end up. For example, if you don’t want the note to be sent to a default notebook, such as “Gmail,” you can specify an alternate notebook within the subject line, itself.

• Address an email to your custom Evernote address, which you added to your contacts.

• In the subject line, add your desired notebook name, preceeded by the “@” sign.

• You can even tag the note within the subject line of the email, by using the ‘#’ sign followed by a tag. Check out a sample below:

This is a super easy way to make sure all email documents pertaining to your business, or your personal life, stay in one, easy-to-reference place.

The Downside: I have to be honest, I really don’t see a downside to this feature. I think the “Default Notebook” could get confusing, because your emails and documents could end up in the wrong spot. However, if you program yourself to use the tagging system in the email subject line, you should be A-OK.

Again, Evernote is making the process of thought and information gathering from as many sources as possible faster and easier.

For more information on Evernote, I highly recommend following the company on twitter, @evernote, as well as checking out the company’s Trunk: http://evernote.com/trunk/.

• Foot traffic can give a strong indication of future home sales.  SentriLock, LLC. provides NAR Research with monthly data on the number of showings.
• Foot traffic in the area covered by the REALTOR® Association of Fox Valley (Geneva, IL) rose 20% in June of this year compared to June of 2011.
• Year-over-year growth in showings has been stronger in all of the last 12 months and the spread has expanded this spring no doubt driven by record low mortgage rates.

The discussion of inventory shortage has become more prevalent and more pronounced.  The data at the national level clearly shows fewer listings.  The decline in inventory has been particularly sharp in the following markets based on large broker reports from those areas: Phoenix, Las Vegas, San Jose, Cape Coral, downtown Seattle, and even the suburbs of Detroit.  Local inventory data from Realtor.com also confirms that most markets have a measurably lower inventory now compared to one year ago.

Though new home construction has started to recover, the number of new homes coming onto the market today is far below the historical average and not even close to satisfying the current inventory shortage.  In fact, the absorption of new homes is greater than new supply, thereby resulting in an actual fall in the number of newly constructed homes for sale.

The only potential source of relief to inventory shortage could be from distressed properties, the homes with a seriously delinquent mortgage problem or homes already in some stage of foreclosure.  But any inventory addition from this submarket will only be for the short term because the pipeline of distressed homes is thinning out as well.  At peak a couple of years ago there were 4.7 million homes with mortgages that were late by at least 3 months or already in foreclosure (according to a NAR estimate based on data from the Mortgage Bankers Association).  As of the first quarter, 3.5 million homes are in the distressed stage.  The more aggressive refinancing programs via HARP and HAMP for distressed homeowners will also further reduce the figure.  Foreclosure completions occurring with each passing day further removes more properties off the distressed list and into financially-strong hands as evidenced by exceptionally low mortgage default rates of homebuyers from 2009 onward.  Therefore, one cannot assume that some looming shadow inventory numbers are on the horizon to help relieve the housing shortage conditions of today.

Interestingly, the states with the increasingly acute housing shortages are the ones facing a rapid depletion in shadow inventory.  Arizona and California are two examples.  These states are non-judicial foreclosure states, meaning that a homeowner who does not pay his or her mortgage on time faces the immediate prospect of being forced out (California has been recently passing new laws to slow that process, however).

Meanwhile, states with continued decent numbers of inventory have a high shadow overhang.  Illinois and Connecticut are examples.  These two states require judicial proceedings before a home can be foreclosed and judges have been taking their time.

Very interesting dynamics are developing.  Areas facing housing shortages today will likely continue to face shortage conditions over the intermediate future.  Areas without a housing shortage could have excess inventory in the near future.

The one important unknown to all the inventory equations is the number of normal (non-distressed) homeowners who have been waiting and waiting to put their homes on the market.  It is not possible to quantify.  However, one would suspect that most of these non-delinquent homeowners would only list their home for sale with the intention of buying another one as a trade-up or trade-down property, so the net impact on inventory would be a wash.

The Realtors® Confidence Index report provides monthly indicators on current real estate market conditions and the outlook for the residential real estate markets.  The report summarizes information pertaining to Realtor® confidence, price trends and expectations, buyer/seller traffic, buyer profiles, and issues affecting real estate.  The June edition is based on responses of over 3,400 Realtors® to a survey conducted for the time period June 25 –July 3, 2012.[1] Given that all real estate is local, conditions in specific markets may vary from the overall national trends presented in this report.

Respondents’ comments generally indicated expectations of continued market recovery:

• Realtor® confidence about current market conditions for all types of residential property was sustained in June after a rapid buildup earlier in the year.  The RCI-SF(single family) current index is at 57.9. The levels of confidence in the real estate markets for townhouses and condominiums is weaker, but the indexes are trending up, which indicates that an increasing  proportion of Realtors® have moderate to strong expectations.  An index of 50 reflects a medium level of confidence.

• Prices continue to firm up with 64 percent of Realtors® reporting constant or increasing prices compared to the same time a year ago.
• Looking forward, 84 percent of Realtors® expected constant or rising prices in the forthcoming year.
• There is strong buyer interest but not enough listings: buyer demand is reported to be growing faster than supply, and many respondents are reporting multiple offers. The buyer traffic index is at 60.01, with the seller traffic index at 41.22.
• The percentage of Realtor respondents reporting distressed  (foreclosed and short sales) sales was stable at 25 percent, compared to approximately 33 percent a year ago.

A lack of inventory for sale, major problems in obtaining mortgages on a timely basis, and appraisals that do not capture the current state of the market were reported as having a negative impact on the housing recovery.

Home prices keep going up, according to the latest data from the Federal Housing Finance Agency.  Prices are up 3.7 percent from one year ago to May.  The Mountain states covering Arizona, Nevada, Idaho, Montana, Utah, Colorado, and New Mexico showed the strongest gains with a 6.3 percent annual gain.  Read the FHFA press release here >

The following table shows home price trends according to various separate measurements using different methodologies.  Though the magnitudes differ, one consistent theme is that home prices have been rising in recent months.  No doubt there are markets with continued falling prices, but now there are more markets with rising prices, which thereby raises the national price index.  Another point to note is that all price measurements are lagging indicators.  What is happening now in late July is likely to even further strengthen home values because of tightening inventory conditions.  Qualitative information, such as foot traffic at open houses, the number of phone inquiries, and the degree of seriousness of buyers are all rising according to REALTOR® member survey of market conditions.  Though some homebuyers are now entering the market a step late they are still nonetheless essentially buying at record high affordability conditions.

Of the below price indices, Case-Shiller and FHFA are useful to assess broad market price changes as they utilize the repeat price methodology.  But they are not all that timely.  NAR and HUD data are good to know for brokers and homebuilders as they show direct business revenue and the economic impact of a home sale.  However, for REALTOR® members and serious consumers, the data to monitor closely is LPS and CoreLogic because lender business decisions are made from these valuation models.  There are numerous other price information data out there on the web and they generate some silly fun, though they should not be taken seriously since business decision makers do not take them seriously.

Now, one big drawback of rising prices aside from buyers who wanted to pick something up at the absolute bottom is that appraisals may not be catching up in a timely fashion.  Thus, appraisal related delays could be with us for the near term.  Those REALTOR® members with access to NAR’s RPR should print out localized information to share with appraisers and lenders.  As always any special non-tangible information about the property should also be shared with appraisers and lenders.

© 2012 RealEstateEconomyWatch.com. Real Estate Economy Watch is published by Reecon Advisors, Inc.
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