Change is certain, it is what a market does – no straight line. Regardless of the location of your real estate market (East Coast, Mid West, West Coast) there has been a change. I have written on some subjects of these changing markets and this particular entry will address what it means to the Sellers. There are currently two types of changes; #1 corrections as stated in the California market or Miami, Florida ‘Loft’ market with falling prices and/or #2 intrinsic value, value based on an underlying perception, which can just slow down the time it takes to sell real estate (while values don’t change that much).
These two types of changes can put Sellers in a state of mourning. Sellers are either experiencing a monetary loss (comparing their sale to what their neighbor got a year ago) OR the Seller is just worried how long their house will sell (time being money towards insurance, taxes, mortgage payments). Very possible for the owners of the listings out there to be experiencing feelings of fear, loss and regret. Quite literally, they need to go through the five stages of grief. Their Listing Realtor in their ‘’corner’’ should be aware of these stages and, when appropriate, help their client/Seller move through them.
Selling homes is an emotional job and Realtors must stay connected in order to assist with the decisions. Not all decisions are pragmatic ones and without knowing the emotions of the ‘’home sale’’, I believe a Realtor is disconnected. Likewise, a Listing Realtor can’t take on the responsibility of the market but should seek to understand their clients mind set. Review below the stages of grief.
DENIAL; recognize if your friend who is selling their home, or a client is in denial. Get the facts of the market out, explain the market. Go through sales in the area, the city and the price range.
ANGER; Sellers can understandably get angry and upset. If their home was worth more 1.5 years ago and they ‘almost’ moved but decided to allow their kids to finish school, they could be upset. Another example is just the time it takes to close on their home. If the owner/Seller was use to 60 days from start to close, and now it takes 120+ - they will be surprised!
FRUSTRATION; During this stage clients start venting. Hardest part of selling a home is the days it takes to get an offer(s). Sellers work hard at preparing their home to be listed AND continue their preparation through most showings (if they live in the house being sold). It would frustrate ANYBODY to mentally prepare to sell a home, then stage it, move extra furniture out, clean up each time before every showing AND THIS GO ON FOR 7 MONTHS (maybe not as much the investment property being sold – I am mainly talking H-O-M-E where we eat,sleep,’’relax). Another rub for Sellers is the lack of day to day ‘’work’’ when their home is on the market. Sellers do so much before their property is listed, but sits back once the home is being marketed by their Real Estate Broker. Compare that to a Buyer, who can put their nervous energy into a meaningless newspaper list of properties or review listings on the internet, maybe even drive around a neighborhood.
DISAPPOINTEMENT; Point in time when Sellers realize things may be different than what they had hoped for. The Seller begins to come to terms with making the necessary adjustments to get their home sold (and very much needs to have market information ready to review, reviewing quickly and easily numbers+charts+graphs).
SENSE OF ACCEPTANCE; Seller is ready to put together an updated strategy to get their home – their property, sold!
Thursday, November 15, 2007
Thursday, November 1, 2007
An Actual Report of the Local Real Estate Market
When articles or news stories get your attention on the residential real estate market, pay close attention to the style of reporting. Are the facts based ONLY lon ocal information OR are statistics being used that are for the entire United States?
As it stands today, there are a number of markets experiencing a sharp decline in housing values. These same markets have been riding a wave which started around 1995 (like some places in California) and continued with 20% to 30% appreciation (at their highest levels for 5 years plus running) through 2005. As stated by the owner of the company I hold my license with, Gary Keller of Keller Williams Realty, ''...from 2001 through 2006 the real estate market got 'overtime', bonus playing time so to speak...''. His comments come from the loosening of the lending, the liberal regulations on lending practices nationwide.
In 1995, the markets simply began a cycle that could be expected, however in 2001/2002, the current President Bush continued what the former President Clinton was doing with an emphasis on home ownership. Two Administrations in the White House spanning approx 12 years plus a new level of acceptance by the Federal Reserve in ''manipulating'' our economy resulted in some loan programs never seen before. This fueled a market that was due a correction.
These new loan programs supported the continuation of the appreciation of home values in areas like the city of Boston and many parts of the state of California. One fact that has been brought to my attention is the fundamental principal that housing values and income must be in line, otherwise a ''bust'' will follow - ALWAYS! If home prices are double and triple compared to income, either a second income needs to be created (as seen in the 1980's with two income households becoming a norm) or a third income could be seen (like now with children aged 17, 18, 19+ who are staying at home and bringing in $300 to $600 per month towards housing expenses for the family). In any event, housing prices and income must stay relative. With the continuation of housing prices in some markets in the United States, and income not growing, we get the news of depreciation in neighborhoods.
As the lenders correct themselves (they have) and take their medicine (they have and are) and work through the reporting of their mess (they are and some of the reporting has been bogus, i.e. the reporting on Country Wide) ''things'' are getting back on track. Loans towards persons with poor credit, flexible income are almost non existent. However, that is just the ''sub prime'' markets. ''Normal'' lending, the lending that has always been around? - that is doing fine.
Another key word, intrinsic value, is what to keep an eye on. How are the markets in these areas like California going to work out? What is unkown is what the borders to these markets are. Because of the long, rich years of massive appreciation (higher values while income stayed put) there should be many years of a drop - 2011 some experts are predicting for these markets that had such a huge spike (spike will follow with ''bust''). While this will be hard news for people in this areas that were taking home equity loans to support their living year after year, Buyers who had to stay on the fence and rent will get into this market - GREAT for them.
With our local ''5 County Area" (Travis, Hays, Williamson, Caldwell, Bastrop)/Austin market doing well economically and staying on the radar of expected population growth (plus of course job growth) we are a bit of an exception to much of the national news. We have around 6.5 months of inventory. The ''experts'' state that under 6 months is a Sellers market (locals state under 5 months for Austin is the Sellers market) while over 6 months is a Buyers market.
For prices to drop, the ''experts'' state that the months of inventory need to reach 9-10-11 months to see a price drop. We experienced a drop in sales in August (contrary to the reporting in the Austin Statesman, we Realtors usually do see a drop in August) and a drop in sales in September. This ''drop'' in sales has been compared to 2006 and though relative, it should be pointed out that 2006 was a CRAZY year for ''wide open lending practices never seen before''! So is the drop expected after such a high year in 2006? or is this a trend? Lets watch the economics of Austin and the intrinsic value of real estate......and hope the reporting of news in the Statesman begins their stories how they like to end them :)
As it stands today, there are a number of markets experiencing a sharp decline in housing values. These same markets have been riding a wave which started around 1995 (like some places in California) and continued with 20% to 30% appreciation (at their highest levels for 5 years plus running) through 2005. As stated by the owner of the company I hold my license with, Gary Keller of Keller Williams Realty, ''...from 2001 through 2006 the real estate market got 'overtime', bonus playing time so to speak...''. His comments come from the loosening of the lending, the liberal regulations on lending practices nationwide.
In 1995, the markets simply began a cycle that could be expected, however in 2001/2002, the current President Bush continued what the former President Clinton was doing with an emphasis on home ownership. Two Administrations in the White House spanning approx 12 years plus a new level of acceptance by the Federal Reserve in ''manipulating'' our economy resulted in some loan programs never seen before. This fueled a market that was due a correction.
These new loan programs supported the continuation of the appreciation of home values in areas like the city of Boston and many parts of the state of California. One fact that has been brought to my attention is the fundamental principal that housing values and income must be in line, otherwise a ''bust'' will follow - ALWAYS! If home prices are double and triple compared to income, either a second income needs to be created (as seen in the 1980's with two income households becoming a norm) or a third income could be seen (like now with children aged 17, 18, 19+ who are staying at home and bringing in $300 to $600 per month towards housing expenses for the family). In any event, housing prices and income must stay relative. With the continuation of housing prices in some markets in the United States, and income not growing, we get the news of depreciation in neighborhoods.
As the lenders correct themselves (they have) and take their medicine (they have and are) and work through the reporting of their mess (they are and some of the reporting has been bogus, i.e. the reporting on Country Wide) ''things'' are getting back on track. Loans towards persons with poor credit, flexible income are almost non existent. However, that is just the ''sub prime'' markets. ''Normal'' lending, the lending that has always been around? - that is doing fine.
Another key word, intrinsic value, is what to keep an eye on. How are the markets in these areas like California going to work out? What is unkown is what the borders to these markets are. Because of the long, rich years of massive appreciation (higher values while income stayed put) there should be many years of a drop - 2011 some experts are predicting for these markets that had such a huge spike (spike will follow with ''bust''). While this will be hard news for people in this areas that were taking home equity loans to support their living year after year, Buyers who had to stay on the fence and rent will get into this market - GREAT for them.
With our local ''5 County Area" (Travis, Hays, Williamson, Caldwell, Bastrop)/Austin market doing well economically and staying on the radar of expected population growth (plus of course job growth) we are a bit of an exception to much of the national news. We have around 6.5 months of inventory. The ''experts'' state that under 6 months is a Sellers market (locals state under 5 months for Austin is the Sellers market) while over 6 months is a Buyers market.
For prices to drop, the ''experts'' state that the months of inventory need to reach 9-10-11 months to see a price drop. We experienced a drop in sales in August (contrary to the reporting in the Austin Statesman, we Realtors usually do see a drop in August) and a drop in sales in September. This ''drop'' in sales has been compared to 2006 and though relative, it should be pointed out that 2006 was a CRAZY year for ''wide open lending practices never seen before''! So is the drop expected after such a high year in 2006? or is this a trend? Lets watch the economics of Austin and the intrinsic value of real estate......and hope the reporting of news in the Statesman begins their stories how they like to end them :)
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