Bruce @ The Buschs

Discussion of the graph in the previous post led me to further analyze the data, resulting in the graph below. Because of the differing amount of short sales and normal sales in each townhip, the effects being felt in each location will also differ.

Trenton is experiencing the most short sales and also the greatest effect at over one third of the sales being “short”. While Ewing and Hamilton have the next most short sales, the effect is greater in Hightstown and Hopewell Borough because of the limited amount of total sales.

Yes, Virginia, all real estate is local.

All real estate is local.

While analyzing the sales data for types of mortgages (see below), I realized that the short sale information was staring me in the face, so I decided to see just how many short sales there were in our local Mercer County market.

While the national press keeps telling us just how bad things are, the data for our local area may suprise you as we had only 8% short sales. Add to that the 6% of sales that were of bank owned (read foreclosure), that leaves 86% of the sales to be what we would consider “normal”.

Yes, Virginia, there is some normal real estate activity taking place.

All real estate is local.

After a long discussion about how people are able to buy a home in the current climate, I undertook a project to look at how individuals are financing their purchases. The chart below is a compilation of the past six months of home purchases in Mercer County, New Jersey. There were 1385 homes sold according to our local Multiple Listing Service, TReND.

Approximately 75% of the purchases were made by means other than cash. Not all conventional loans are 20% down, so somewhere between 25% and 75% of the home purchases were made with less than 20% down (at least 25% were at 3.5% down or less, as that is the least percentage down that FHA allows).

So yes, Virginia, people are getting mortgages with less than 20% down.

Okay, so let’s figure this out together. There were 212 average sales per month in Mercer County real estate over the past year. They sold for an average of $338,901 and spent an average of 89 days on the market. A quick check of the membership roster in our local Multiple Listing Service reveals 1664 members in offices with zipcodes in Mercer County. The average total commission rate for a sale probably comes in around 5.5%.

That is a total of 2544 sales (1.52 per member) or a total sales amount of $862,164,144. This should result in total commissions of about $47,419,027.92.

With there being two members working on each transaction, each member would receive an average $14,248.50 in commissions for the year, which is generally split between the member and the company they have their license with. Assuming 52 weeks per year — 5 days per week — 8 hours per day, for a total of 2080 hours per year, that works out to $3.43 per hour. And then you have to take out the 15% for social security taxes, your multiple listing, membership and license fees, your Errors and Omissions insurance, car expenses, etc.

Even if you assume the agent is only working while the listing(s) are on the market (89 days x 1.52 listings), that is still 1082 hours or $6.58 per hour, before expenses.

The federal minimum wage is set to rise to $7.25 per hour effective July 24, 2009.

It would appear that we need either higher commissions, more sold houses, or fewer agents in order to meet the requirement of the Federal Minimum Wage.