Once again my friend and business colleague Chip Wagner has supplied me with The Chicagoland Monthly Housing Market Pulse for July and August. What does it mean for the luxury buyer in Chicago? Well, there is still a huge huge supply in the million dollar plus range (17 months for detached and 11 months for attached), making it a buyer’s market by any definition. Detached Properties - August 2008 Attached Properties - August 2008 Detached Properties - July 2008 Attached Properties - July 2008 Posted By: John D’Ambrogio Read the original post: Chicagoland Monthly Housing Market Pulse for July & August 2008
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Chicagoland Monthly Housing Market Pulse for July & August 2008
Consumer secrets Realtors can’t afford to ignore
How to gain market share in ‘08
Friday, January 25, 2008
By Bernice Ross
Inman News |
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| (This is Part 3 of a three-part series. Read Part 1, “Get rich in a niche” and Part 2, “Marketing to younger, first-time buyers can pay off.”)
The National Association of Realtors’ Profile of Home Buyers and Sellers for 2007 reveals some important secrets Realtors can’t afford to ignore. Here’s the inside scoop.
1. “Location, location, location” is still true
While people may debate what really matters most to homeowners, NAR’s research shows that the number one concern for all buyers (65 percent of all respondents) is “quality of the neighborhood.” Coming in second (50 percent) was “convenience to work,” while “overall affordability of homes,” “convenience to friends and family” and “quality of the school district” rounded out the top five.
The quality of the neighborhood was most important to married couples (68 percent), whereas single males were not nearly as concerned (56 percent). When working with buyers, be sure to explore what constitutes a “quality” neighborhood. Also recognize that couples will be less willing to compromise on this issue as compared to single men.
2. Give a little, take a little
Buyers, especially those in urban areas, were the most likely to compromise on the size and the planned expenditures on the home. They were the least likely to compromise on schools and quality of the neighborhoods. Only 2 percent of the respondents compromised on the distance from schools, 3 percent on the quality of the schools, and 5 percent on the quality of the neighborhood. Before showing property to your buyers who have children, carefully explore their expectations about both the quality and proximity of schools.
3. Correct pricing: the primary determinant of which properties sell
The next time a seller wants to “try it for while at a higher price” or a buyer wants to “steal a property,” here’s some data to share. Nationally, 36 percent of the properties sold at list price or higher. In the West, that number was 42 percent. Only 12 percent of the homes in the U.S. sold for 90 percent or less of ask price. In other words, properties sell when they are priced correctly. When they are overpriced, they languish on the market until the price is reduced to market level. Buyers can search for a steal, but once a property is correctly priced, it normally sells quickly.
4. Buyers look online first
As their first step in buying a home, 48 percent of all buyers either go online to view houses (32 percent) or to locate information about the home-buying process (16 percent). To address this consumer search pattern, link your Web site to your local multiple listing service as well as including a wide variety of items about the buying process. Consider offering a series of downloadable educational reports. Examples include explanations about FHA, HUD, foreclosures, how adjustable- and fixed-rate loans differ, closing processes, or how to save money on closing costs.
5. The Internet: more important than signs and agents?
One of the most surprising statistics from the NAR report was the steep decline in the number of buyers who located their property with a Realtor vs. on the Internet. In 1997, only 2 percent of the buyers found their property online, while 50 percent found their property through a real estate agent. In 2007, 29 percent of the buyers found their property online vs. 34 percent with a real estate agent. Buyers also found the Web to be more useful than working with agents. Seventy-eight percent reported that the Web was “very useful” vs. 70 percent who reported agents were very useful. In comparison, yard signs came in at 29 percent and open house at 24 percent.
6. Buying a home is still a real, not a virtual, activity
In 1995, Bill Gates predicted that real estate agents would become obsolete by the year 2000 because people would purchase their homes online. His prediction was wrong. The 2007 Profile shows that only 1 percent of all buyers did not visit the home they purchased prior to closing it. In fact, 81 percent of all buyers viewed the homes they purchased between two to six times. Home buying is an emotional process for most people, and looking at online pictures can never duplicate the sense of what it’s like to walk through the property. When it’s time to purchase, 99 percent of us want to see what we are buying in person.
In 2008, many of the traditional face-to-face fundamentals are still in play but so are the new Web realities. To prosper in 2008, you must address both.
Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of “Waging War on Real Estate’s Discounters” and “Who’s the Best Person to Sell My House?” Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com.
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| British realtor Mia Wilkinson stands in a two-bedroom apartment with a view of the Chicago skyline and Lake Michigan, Wednesday, Dec. 19, 2007. More foreigners are investing in homes in the U.S. thanks to the weak dollar, housing turmoil in the U.S. and sharp increases in home prices abroad. Wilkinson, who has been in the U.S. six years, has bought property in Chicago herself. (AP Photo/Charles Rex Arbogast) |
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By LESLIE WINES – 1 day ago
NEW YORK (AP) — Panden Rota, a Nepalese producer of fine rugs, is about to become a Manhattanite, the owner of a sumptuous apartment in the luxurious downtown neighborhood of Battery Park City.His primary residence will remain Katmandu, but his new home will allow him to spend more time at U.S. showrooms that display his rugs and with a brother and sister in New York. “I looked at many places and I decided that a Manhattan apartment will always hold its value,” he said.Rota is part of a growing wave of foreigners who buy second homes in the U.S. for work and play and as an investment.Cosmopolitan cities like New York and Miami have long served as second homes for affluent and accomplished foreigners. But the trend is growing. One in five American realtors has sold a home to a foreign investor in the past year, according to the National Association of Realtors.The events of 2007 have made the U.S. much more affordable for international home buyers. Severe dollar declines against the euro and pound have made U.S. homes much cheaper for Europeans. But even foreign buyers without that sort of currency advantage are benefiting from sharp drops in housing prices at a time when problems in mortgage lending are keeping many Americans out of the market.At the same time, many foreign real estate markets, especially in Europe, have experienced sharp increases in home prices.“There are markets like Paris and London and the South of France where some home values have gone up 100 percent,” said Christian Voelkers of the Hamburg realtor Engel & Volkers Group. “At the same time, U.S. prices have either stayed put or come down.”Volkers’ firm is eager to take advantage of this opportunity. Engel & Volkers, which caters to wealthy clients, plans to open 300 residential sales offices across the U.S. in the next few years. So far, it has offices in Florida, Connecticut and two in New York. The company said it is on track to open 30 more locations on the East Coast by the end of 2008.The currency advantage is greatest for British citizens, given that each pound is worth well over $2. By contrast, the euro currently is worth about $1.45 while the Canadian dollar in recent weeks is hovering near parity with its U.S. counterpart.“At this point the English are more actively looking in Manhattan than American buyers,” said Ivan Hakimian of New York’s Itzhaki Properties.Mia Wilkinson, a transplanted Englishwoman who works for Rubloff Residential Properties in Chicago, deals often with British and other foreign executives transferred to the U.S. for a few years. “Before, people would stay in corporate rentals,” she said. “But now these same people are turning around and buying properties.”Wilkinson, who has been in the U.S. six years, has bought property in Chicago herself.The expansion of foreign real estate investment in the U.S. also means that areas that once were not popular with international buyers are now receiving interest. Doug Aitkin, who works for North Carolina’s World Trade Center, said the Research Triangle area — comprising the cities of Durham, Raleigh and Chapel Hill — is now getting inquiries from French and Scandinavian home buyers, a new phenomenon.Constantine Valhouli, a principal with Boston’s Hammersmith Group, which advises real estate developers, said foreign home buying appears to have varied drivers in different cities. In Boston, property purchases by foreigners are strongly linked to the city’s booming biotechnology and life sciences industries. In addition, Boston venture funds are drawing large numbers of German, Swiss and Irish workers, some of whom take advantage of favorable dollar rates against the euro to help buy some real estate.Even some foreign students at Boston’s large collection of colleges and universities are able to join the ranks of home buyers. “There are some Boston neighborhood where it makes sense for students to buy and some where it does not,” Valhouli said. For instance, many one-bedroom apartments in attractive neighborhoods near the colleges rent for $1,300 to $1,800 a month, which equals the mortgage payment on a condo worth $200,000 to $300,000.Similarly, Charlie Jefferson, a Philadelphia developer, was surprised when two units in a new development in the University City area, home to the University of Pennsylvania, were purchased by foreign students. “We had never seen that before,” he said. “In the past we didn’t see foreign students with that kind of money.”In Los Angeles, demand from wealthy South Koreans for attractive condo towers and mid-level rise buildings has helped revitalize the once forlorn downtown neighborhood, according to Johanna Gunther, a senior vice president with the Ryness Co. there. “Downtown has not been an attractive urban residential market until recently, but Korean demand has been a big factor in the change,” she said. In recent years, the South Korean government has loosened restrictions on foreign exchange transactions, facilitating a large rise in Korean purchases of U.S. properties.And Scottsdale’s phlegmatic residential real estate market reportedly is getting a boost from Canadian buyers eager to enjoy Arizona’s dry warm climate.The National Association of Realtors found that 7.3 percent of the houses sold last year in Florida were sold to foreign buyers. Miami in particular is a magnet for buyers from throughout Latin America and Europe, helping to mitigate the fallout from the area’s housing slump.Despite the news waves of foreign buyers in many U.S. markets, few suggest international investors by themselves can entirely offset the nation’s housing crisis, brought on by the failure of many subprime mortgage loans made to home buyers with weak credit histories. Hammersmith Group’s Valhouli stressed that the fact that international investors are helping to prop up some troubled housing markets only emphasizes the level of stress in residential real estate.“Relying on foreign real estate investors is fundamentally as risky as relying on subprime mortgages,” he said, noting that both phenomena distort demand and can conceal the depths of the problem U.S. home buyers and sellers face. “Foreign buyers aren’t going to save the U.S. housing market. They’re just a temporary fix like a finger in the dike. Fundamentals matter.”
The weather outside is frightful, and the economy may not seem much better, but the sky is not falling. Putting the current real estate market in perspective may help you enjoy the holidays a little better and hopefully will help you motivate yourself for 2008:
- Although inventories of new and resale homes have risen overall in 2007, the trend shows that they are now beginning to fall. Housingtrends.net shows that the inventory of single family homes and condos for sale in the entire Chicago area rose to an all time high of 70,784 units in July 2007 and has now fallen to 61,770 units currently.
- Prices in the Chicago metro and suburban area have gone down 5% in the last 12 months, but are still 32.5% higher than 2003 and 12.6% higher than 2005.
- As of Nov. 2, 2007, the current unemployment rate of 4.7 percent is lower than that of the 60’s, 70’s, 80’s and 90’s.
- The October 2007 jobs report marked the 50th consecutive month of employment growth, a U.S. record
- The Dow has grown so much that a 300 point drop sounds like a big deal but in today’s market its just 2 percent
- Oil prices are at record highs, but they do not have the negative effect on our economy that the media would have us believe. U.S. manufacturers and consumers are twice as fuel-efficient as we were in the 1970s. Today Americans spend just 4 percent of their disposable income filling up the tank, compared with 6 percent in 1980
- Except in select categories corporate revenues are near record highs
- The single biggest component of the economy is retail sales, which surged during November, making a surprisingly strong, broad-based climb that suggests the economy is not as weak as feared
- Rubloff Residential Properties experienced one of the most successful years in company history in 2007, second only to the record-setting sales seen last year
Very interesting Inman article — Is this really a valid way out?
Bills could provide incentives for rate-freeze plan
Critics worry about increased costs for lenders
Friday, December 07, 2007
By Matt Carter
Inman News
Washington, D.C., lawmakers have bills in play that could provide a carrot — or a stick — for lenders and loan servicers to participate in the Bush administration’s rate-freeze plan.
Legislation that would allow bankruptcy judges to modify the terms of Chapter 13 debtors’ mortgage loans could serve as a stick for lenders to conduct their own workouts, rather than have them imposed on them by a court.
The Center for Responsible Lending supports that approach, saying it has the potential to help more borrowers than the Bush administration’s voluntary rate-freeze plan, announced Thursday (see Inman News story). But the mortgage lending industry argues that changing the bankruptcy code to allow judges to conduct “cram downs” would raise the cost of borrowing for all.
Another recently introduced bill would shield loan servicers who engage in workouts with borrowers from lawsuits by investors in securities backed by loans.
One motivation for the Bush administration’s agreement with the “HOPE NOW” coalition of major lending industry companies was to address the reluctance of some loan servicers to modify loan terms to prevent foreclosures because of the fear of such lawsuits.
But federal regulators questioned whether one bill’s attempts to provide such protection are desirable or enforceable.
Both proposals were the subject of separate House and Senate committee hearings this week.
Bankruptcy “cram downs”
The Senate Judiciary Committee Wednesday debated legislation that would amend the bankruptcy code to allow judges to rewrite the terms of mortgage loans on owner-occupied homes.
Senate Bill 2136, introduced Oct. 3 by Sen. Richard Durbin, D-Ill., would amend federal bankruptcy law to allow judges to modify loans secured by a Chapter 13 debtor’s principal residence, allowing them to make payments at a fixed annual percentage rate over a 30-year period. Durbin’s bill would also allow bankruptcy judges to “strip down” the amount of a mortgage to the value of the home without the consent of the mortgage holder.
A similar bill, HR 3609, was introduced in the House on Sept. 20 by Rep. Brad Miller, D-N.C., and is also opposed by the lending industry (see Inman News story).
Sen. Arlen Specter, R-Penn., has introduced a competing bill to Durbin’s, SB 2133, which would require the lender’s consent to reduce the amount owed on a mortgage.
Bankruptcy courts already have the power to restructure troubled borrower’s auto loans and credit card debt. But critics like the Mortgage Bankers Association say allowing bankruptcy judges to rewrite the terms of mortgage loans would undermine confidence in the ability of lenders to collect payments, and increase interest rates on mortgage loans by up to 2 percent.
Unlike a car loan — in which the property serving as collateral for a loan decreases in value over time — mortgages are backed by property that, in the long run, tends to appreciate. So lenders argue that a judge’s decision to strip down a mortgage loan to reflect the current value of a bankrupt debtor’s home would amount to a “taking” of their collateral.
Durbin’s bill could also encourage more borrowers facing foreclosure to file for bankruptcy, critics said, increasing the case burden of bankruptcy judges and forcing them to deal with complex issues such as home valuations and mortgage interest rates.
But supporters of Durbin’s bill said bankruptcy judges are already proficient at rewriting the terms of auto loans and credit card debt, and that stemming the tide of foreclosures is in the best interest of lenders and the economy.
Mark Zandi, chief economist of Moody’s Economy.com, said he expects 2.8 million mortgage loan defaults in 2008 and 2009, with 1.9 million homeowners going through the entire foreclosure process and ultimately losing their homes.
Zandi said Durbin’s bill could allow 570,000 homeowners to avoid foreclosure, a number based on an analysis of homeowners who face a first payment reset through the end of the decade and who meet the new, tougher requirements for Chapter 13 bankruptcy protection adopted by Congress in 2005.
“The housing market downturn is intensifying and mortgage foreclosures are surging,” Zandi said, warning of a “self-reinforcing negative dynamic” of mortgage foreclosures, house price declines, and more foreclosures. “The odds of a full-blown recession are very high. There is no more efficacious way to short-circuit this developing cycle and forestall a recession than passing this legislation.”
Zandi dismissed arguments that the bill would raise the cost of borrowing or disrupt the secondary market for mortgages, saying lenders stand to lose more if the loans that would become eligible for modification by bankruptcy judges were to foreclose instead.
“Given that the total cost of foreclosure to lenders is much greater than that associated with a Chapter 13 bankruptcy, there is no reason to believe that the cost of mortgage credit across all mortgage loan products should rise,” Zandi said.
U.S. Bankruptcy Court Judge Jacqueline Cox, who adjudicates bankruptcy filings in Northern Illinois, said that the disparate impact of the mortgage crisis on African Americans and Latinos makes passage of the Durbin “critical.” She said bankruptcy court judges would not be overwhelmed by the process of modifying home loans, which would include determining the current market value of each home.
Thomas Bennett, a federal bankruptcy court judge in Alabama, testified that the changes proposed by Durbin would not help borrowers who were not willing or able to file for bankruptcy, and could have broader, unintended consequences on credit markets.
Bennett urged lawmakers to step back for 60 to 90 days and “leave everything where it is” in order to get a broader picture. He said a temporary moratorium on foreclosures or an interest rate freeze could give them time to consider the bill’s implications.
‘Safe harbor’ from lawsuits
At another hearing Thursday, the House Financial Services Committee debated a HR 4178, a bill introduced Nov. 14 by Rep. Mike Castle, R-Del., to protect loan servicers who engage in workouts under criteria established by the bill.
The bill would provide a “safe harbor” from lawsuits for loan servicers or other note holders who work with borrowers to restructure subprime loans in default, or loans where default is “imminent or reasonably foreseeable.” The safe harbor would also apply when workouts would maximize “net present value” of a loan.
The bill would apply to subprime loans made after Jan. 1, 2004. The retroactive application of the bill “could create additional anxiety in the mortgage markets about the reliability of legal obligations upon which investors’ expectations are based,” said Comptroller of the Currency John Dugan in his prepared testimony.
He questioned whether the bill would create new qualms for investors in mortgage-backed securities. “A loss – or even a significant diminution – of investor confidence in this market could adversely affect the flow of funds for housing credit for some time to come,” Dugan said.
FDIC chairman Sheila Bair called the bill’s goal of stimulating loan modifications by providing legal protection for loan servicers “laudable.” But Bair said that as written, the bill could be challenged on Constitutional grounds, as it “would appear to override existing contracts.”
Bair said that if Congress is determined to pass such a bill, it should contain language stipulating that “servicers have a duty to maximize the net present value of a loan pool for all investors and parties having an interest in the pool, not to any individual party or group of parties.”
http://www.inman.com/inmannews.aspx?ID=65458
The “Big Three” classified advertising categories — automotive, recruitment and real estate — are expected to have a 37.7 percent share of all online ad spending in 2008, and to have an 18.3 percent share of total ad spending, a research and consulting company reported today.
Borrell Associates, in a 2008 forecast report released today, also expects real estate to have an 8.7 percent share of the total online advertising market in 2008, and a 4 percent share of all advertising.
About 23.5 percent of the anticipated $12.3 billion real estate ad spend in 2008 will be spent online, compared to 48.9 percent of recruitment ad spending and 9.4 percent of automotive ad spending.
And the total spend on online real estate advertising is expected to grow 12 percent in 2008 compared to 2007.
Total spending on local online advertising is expected to rise 48 percent in 2008, to a total of $12.6 billion, according to Borrell’s “2008 Outlook: Local Online Advertising” report.
Local online advertising is expected to total $8.5 billion this year, up from $6 billion in 2006, $4.6 billion in 2005, and $2.8 billion in 2004.
Local-search advertising is expected to more than double in 2008, to $5 billion, with locally placed online video tripling to about $1.3 billion.
Locally owned real estate businesses are projected to spend about $3.5 billion on all advertising types this year, with about $702 million of that amount, or 20 percent, going to online ads.
Real estate services companies are projected to spend $8 billion on advertising in 2012, with about $3.3 billion, or 40.9 percent of this total, spent on online ads, according to a table in the report.
That would represent a 41.2 percent increase from the projected 2007 real estate ad-spending level.
Credit and mortgage services companies are expected to spend about $24.2 billion on all ad types in 2012, with $2.9 billion, or 12.1 percent, devoted to online ads. And financial services companies are expected to spend $6.4 billion on all advertising in 2012, with $952 million, or 14.8 percent, going to online ads.
Pure-play Internet companies are projected to account for about 43.7 percent of local online ad revenue this year, with newspapers taking in 33.4 percent, directories accounting for 10.1 percent and broadcast television pulling in 9.3 percent. Magazines, other print publications and radio have a small share of the pie.
“We … expect that 2008 will bring more announcements about network affiliations between the pure-play Internet companies like AOL, Yahoo and others as these larger sites hit a wall in national sales,” the report states.
“This trend began more than a year ago when Yahoo and Google started forming relationships with newspaper companies and television stations to drive both national and local online sales. Formerly sworn enemies are seeing the wisdom of combining their strengths to increase revenues for both sides.”
Local advertisers, according to the Borrell report, “are becoming less willing to purchase mass advertising on the Internet and are much more inclined to try paid search and video advertising formats,” and, “The decade-long era in which the banner ad ruled the Web appears to be drawing to a close.”
Twice as much online video advertising will be placed locally compared to nationally, the report states, and “newspaper companies are at the forefront of online video sales.”
Online banner advertising is forecast to slow to single-digit growth in 2008 as video and paid-search ads gain steam, according to the report.
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Online real estate ad spend projected to reach $8 billion in 2012
Report projects 48% growth in total local online ad spend in ‘08
Friday, December 07, 2007
Inman News
The “Big Three” classified advertising categories — automotive, recruitment and real estate — are expected to have a 37.7 percent share of all online ad spending in 2008, and to have an 18.3 percent share of total ad spending, a research and consulting company reported today.
Borrell Associates, in a 2008 forecast report released today, also expects real estate to have an 8.7 percent share of the total online advertising market in 2008, and a 4 percent share of all advertising.
About 23.5 percent of the anticipated $12.3 billion real estate ad spend in 2008 will be spent online, compared to 48.9 percent of recruitment ad spending and 9.4 percent of automotive ad spending.
And the total spend on online real estate advertising is expected to grow 12 percent in 2008 compared to 2007.
Total spending on local online advertising is expected to rise 48 percent in 2008, to a total of $12.6 billion, according to Borrell’s “2008 Outlook: Local Online Advertising” report.
Local online advertising is expected to total $8.5 billion this year, up from $6 billion in 2006, $4.6 billion in 2005, and $2.8 billion in 2004.
Local-search advertising is expected to more than double in 2008, to $5 billion, with locally placed online video tripling to about $1.3 billion.
Locally owned real estate businesses are projected to spend about $3.5 billion on all advertising types this year, with about $702 million of that amount, or 20 percent, going to online ads.
Real estate services companies are projected to spend $8 billion on advertising in 2012, with about $3.3 billion, or 40.9 percent of this total, spent on online ads, according to a table in the report.
That would represent a 41.2 percent increase from the projected 2007 real estate ad-spending level.
Credit and mortgage services companies are expected to spend about $24.2 billion on all ad types in 2012, with $2.9 billion, or 12.1 percent, devoted to online ads. And financial services companies are expected to spend $6.4 billion on all advertising in 2012, with $952 million, or 14.8 percent, going to online ads.
Pure-play Internet companies are projected to account for about 43.7 percent of local online ad revenue this year, with newspapers taking in 33.4 percent, directories accounting for 10.1 percent and broadcast television pulling in 9.3 percent. Magazines, other print publications and radio have a small share of the pie.
“We … expect that 2008 will bring more announcements about network affiliations between the pure-play Internet companies like AOL, Yahoo and others as these larger sites hit a wall in national sales,” the report states.
“This trend began more than a year ago when Yahoo and Google started forming relationships with newspaper companies and television stations to drive both national and local online sales. Formerly sworn enemies are seeing the wisdom of combining their strengths to increase revenues for both sides.”
Local advertisers, according to the Borrell report, “are becoming less willing to purchase mass advertising on the Internet and are much more inclined to try paid search and video advertising formats,” and, “The decade-long era in which the banner ad ruled the Web appears to be drawing to a close.”
Twice as much online video advertising will be placed locally compared to nationally, the report states, and “newspaper companies are at the forefront of online video sales.”
Online banner advertising is forecast to slow to single-digit growth in 2008 as video and paid-search ads gain steam, according to the report.
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| (Inman News) While the “R” word — recession — has been tossed about frequently in economic discussions, a quarterly economic forecast maintains that the word need not be a part of the dialog, at least in the short term.”Now there are countless prognosticators throwing around recession. That may be the best indicator that a recession is not coming soon,” stated Ed Leamer, director of the University of California, Los Angeles, Anderson Forecast.
“Better remember a recession is not measured by the frequency with which the newspapers use the ‘R’ word. To have an official recession commencing anytime soon, we would have to experience a rapid rise of the national unemployment rate” from a level of 4.6 percent to about 6 percent by the end of 2008 — a loss of about 2 million jobs.
Not to say there is not risk of recession — Leamer’s report states that “there really is some significant recession risk out there.”
While the construction sector has been losing jobs, that alone won’t be enough to tip the scale toward recession, Leamer states in his latest forecast report, titled, “Nervous: Why this time is really different and why we will survive the near recession experience.”
While past U.S. economic cycles have featured a fattening and trimming in manufacturing jobs, this time around there has been no such fattening. Manufacturing jobs have been in a slow decline.
Leamer states, “The bad news is that we lost 3 million manufacturing jobs in 2000-01 but the good news is that there aren’t many more to lose.”
His forecast is that employment in sectors other than manufacturing and construction should hold up, though it notes that overall expansion in employment has been weak — gaining only 6 percent since the last major economic downturn in 2001.
Some economists had said that home prices would not tumble and foreclosures would not surge without job losses stemming from a recession because that would be unprecedented.
But “innovations of the subprime mortgages in the form of greatly reduced lending standards created a new class of borrowers who are now walking away from their homes, not because they lost their jobs but instead because they cannot afford their homes on their current incomes.”
In other words, there is now a disconnect in the housing market and jobs market.
“If we can get through another couple of quarters without rising joblessness, we will have completed the first and hardest part of the housing correction, and the drag that housing is creating for the economy will substantially abate,” Leamer stated.
Of course, the pain in the housing market will likely continue, with several years of price declines and depressed levels of new construction, Leamer predicts.
As for more Fed rate cuts, Anderson Forecast senior economist David Schulman said in his own report that he envisions a Fed Funds rate of about 3.5 percent or lower by mid-2008, with the 10-year U.S. Treasury bond trading in the 3.75 percent to 4.5 percent range.
“Should the Fed fail to ease significantly we believe our ‘no recession’ forecast would be at significant risk. Historically the markets tend to lead the Fed, not the other way around and before too long we suspect the Fed will follow.”
With deterioration in housing credit, losses on mortgages are estimated at about $400 billion, Schulman stated.
Even Freddie Mac is facing a “capital adequacy problem,” he said in the report — “So much for the government-sponsored credit entities becoming the proverbial cavalry to rescue the mortgage market.”
The collateral damage associated with the credit meltdown is widespread, Schulman states, reaching municipal bond insurance companies and impacting the cost of finance for state and local governments. Faith in credit-rating agencies has been “severely weakened,” he states.
A key to the Anderson Forecast’s “no recession” forecast is resiliency in the overall economy and stock market, and Schulman cautions: “there are more than usual uncertainties around the 2008 forecast than in prior years.
“For example, before 2008 is over the markets will have to overcome the anxieties associated with the presidential election and we may be even more concerned about both anti-inflation policy and the potential for a post-Beijing Olympics hangover in China.”
A separate Anderson Forecast report on California, prepared by economists Ryan Ratcliff and Jerry Nickelsburg, predicts that the state, like the nation as a whole, will avoid recession.
“The combination of real estate weakness, government belt-tightening and Hollywood labor disputes all create a sluggish economy for most of our forecast, but we still do not see enough systematic weakness for a recession,” the report states.
A quarterly Census report on employment and wages suggests that the state’s job market may be worse off than previously thought, and the financial activities sector lost 21,000 jobs in the state through first-quarter 2007 after peaking in May 2006.
State unemployment should peak at about 6.1 percent in late 2008, according to the forecast, which also predicts a 74,000 total peak-to-trough job loss in the state’s construction sector.
http://www.inman.com/InmanNews.aspx?ID=65435 |
It has often been said that the top end of the market is the last to cool off and the first to rebound in a housing cycle. I thought it might be interesting to look at the statistics in the Chicago marketplace (city of Chicago) to see if there is a story to be told. I looked at sold properties for the full year of 2006 and compared them to the 2007 sales to date. For the purpose of this study we are defining high end homes at $1,000,000+.
In 2006 there were 434 single family homes sold with an average sale price of $1,673,223 with an average market time of 149 days.
In 2007 so far there have been 388 single family sales with an average sale price of $1,716,713 with an average market time of 179 days.
So the single family home sales for 2007 have followed the headlines somewhat in that it has taken about 20% longer to sell 10.5% fewer homes but at an average of 2.5% increase in sale price.
We find a more optimistic story in the condominium market:
In 2006 there were 373 condos sold with an average sale price of $1,757,204 with an average market time of 210 days.
In 2007 so far there have been 393 condo sales with an average sale price of $1,636,726 with an average market time of 208 days.
So the condo market has been healthier in number of sales (up 5.3% so far) and quicker sales (2 days faster) but has seen the average price ease by 6.8% so far in 2007.
The active inventory of single family homes stands at 533 at this date. This represents 16 1/2 months of inventory at the current rate of absorption. Anything over 6 months inventory is a bearish factor that weighs on the market place. Also, actual available numbers of homes are usually under reported at this time of year and we should expect that number to increase significantly after the first of the year.
The active inventory of condos stands at 685 at this writing. The represents almost 21 months of supply at the current absorption rates. This is also a bearish predictor for the condo market in the near term.
Current list prices for single family homes average $2,038,824 which indicate they are listed over 16% higher than average sale prices which should necessitate price reductions to achieve sales.
Current list prices for condos average $1,883,868 which also shows a spread of a little over 13% to sale price which indicates a downward pressure should be coming on list expectations.
Current market time for active homes is already 8% longer than the sold average but the market time for condos is at 291 days-an amazing 40% longer time than successful solds!
Put his all in your crystal ball—I think that there will be more side movement in prices with increasing inventories and lengthier market times before we turn the corner on this housing cycle.
Tuesday, November 13, 2007
By Glenn Roberts Jr. Inman News
LAS VEGAS — The slumping housing market should turn around in 2008 or 2009, the current and former chief economists for the National Association of Realtors trade group said today during a presentation at an annual conference.
Housing markets in Arizona, California, Florida and Nevada were among the hardest hit in the country by the downturn, NAR Chief Economist Lawrence Yun said, noting that some local markets have performed well despite the national trends. Markets such as Salt Lake City; Salem, Ore.; Allentown, Pa.; Seattle; Raleigh, N.C; Albuquerque, N.M.; Buffalo, N.Y., and San Antonio, Texas, have experienced “robust home-price appreciation,” Yun said, counter to the national trend. He also singled out several housing markets that can be considered underpriced, among them Lexington, Ky.; Nashville; Pittsburgh; and Denver, and noted that job growth in Wichita, Kan., makes that market right for a real estate boom.
While NAR’s projection that the U.S. median existing-home price will drop about 1.5 percent this year compared to last year — the first such drop since the Great Depression, Yun said that drop is not alarming given the huge run-up in prices leading to that drop. “Significant? I would say not, but it’s factual.” The economy, while not robust, is not in a depression, he said. The association projects the median price to remain flat in 2008. “This is a small, minor adjustment after a strong run-up in housing prices,” he said. Some high-priced markets, such as San Francisco and New York, where home prices appear to be out of whack with typical income levels for the area, may actually be “superstar cities,” Yun said. These so-called superstar markets, he said, “can maintain, for whatever reason, that premium above the rest of the market.”
It remains to be seen whether markets like Seattle, in the shadow of tech giant Microsoft, and internationally popular Miami may also emerge in this superstar category as markets that seem to defy statistical gravity. Also, he said that the Northeast region, which was one of the first to experience the market downturn, may be on its way out, according to housing data.
Wall Street has been coming clean about the extent of its losses related to the mess in the subprime mortgage market, he said, and that is a necessary step for the market’s turnaround. He also said that he believes talk of the “credit crunch” is overblown, as many buyers are still able to obtain mortgage financing and are moving toward more conventional types of loans. There are still problems, he noted, with obtaining jumbo loans in high-cost markets such as California, and NAR has been lobbying to increase the dollar amount for conforming loans, which would assist some buyers who do not currently qualify for conventional loans and cannot afford jumbo loans. The housing market in 2007 will compare to 2002 in terms of sales, though the volume of sales are expected to be about 1.9 million less this year than they were in 2005, Yun said. This drop in sales, he said, cannot be attributed “to just purely the subprime market disappearing,” he said, and there are other factors such as buyer fear and uncertainty that also must be factored in.
John Tuccillo, a real estate consultant who served as NAR chief economist from 1987-97, said he is less optimistic about the market recovery than Yun, who estimates that things will begin to turn around next year. Tuccillo said that his expectations are for a recovery in late 2008 or possibly 2009. “I see $100 a barrel for oil,” he said. “I see a dollar that is falling like a stone relative to other currencies. The U.S. is forced to borrow up to $400 billion a year from foreign creditors. And that adds up to a slowing economy to me; it adds up to higher interest rates.”
But, like Yun, Tuccillo said that local markets matter more than the national market to real estate professionals. There are some key indicators that can help real estate professionals identify when their local markets are going to turn around, he said, including a drop in new listings, a drop in the days on market, and a rise in the sale price of homes relative to the listing price. “When you begin to see the number of new listings begin to go down, that’s stage one of the recovery,” Tuccillo said.
While some are blaming Wall Street and Fannie Mae and Freddie Mac for the severity of the housing market’s problems, Tuccillo said that mortgage brokers and Realtors should also take a look in the mirror. “How many of you are getting back with the client and taking responsibility for getting them into a bad loan,” he said. There is “moral hazard” built into the system real estate transactions, he said. “Everybody forgot about risk. The system stinks … because at the front-end of the market, people close the loans and walk away with no responsibility and pocket their checks.” When the audience applauded, he added, “Why are you clapping? I’m including you.”
Tuccillo also discussed demographic trends for the next market cycle, and said that real estate professionals are going to need to step up their game to appeal to Generation X and Generation Y buyers. Web sites such as craigslist.org, if they gain more market traction, threaten to take more transactions away from Realtors, he said. “The issue here is getting into and understanding new technologies and new channels of communication. They will become an increasing part of your life. Tinkering with your Web site is not going to do it.” He also said, “You have to make sure that everything you do, everything your agents do, has to be about the customer and not about them.” And consumers are seeking “world-class” service, convenience and efficiency, he said.
Meanwhile, NAR announced today that its Pending Home Sales Index, a forward-looking indicator based on purchase contracts signed in September, rose 0.2 percent from August to September. The latest index is now at 85.7, up from 85.5 in August. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined in the index and the first of five consecutive record years for existing-home sales. The PHSI in the Midwest rose 5.4 percent in September to 82.3 but is 14.4 percent below a year ago. In the South, the index increased 1.5 percent to 99.3 but is 19.7 percent lower than September 2006. The index in the West slipped 0.1 percent in September to 80.5 and is 25.6 percent below a year ago. In the Northeast, the index dropped 10.1 percent in September to 69.5 and is 23.1 percent below September 2006.
***
Big referral fees lure agents into second-home market
New developments vie for baby boomers’ business
Friday, October 26, 2007
By Bernice Ross
Inman News
Would you like to receive $5,000 or more for a single telephone call? If so, there’s a great way to make more money if you’re willing to step out of your normal real estate market area.
The market may be in the doldrums, but there’s one part of the market that seems to be going strong — that’s the second/retirement home for the baby boom generation. If you’re willing to make a referral outside your area, you can make a substantial amount of money for doing nothing more than making a phone call.
Baby boomers are flush with cash. In 2006, boomers between the ages of 50 and 60 reportedly spent $1 trillion. We also know from the demographics that people are most likely to purchase a second home between the ages of 50 and 60. If you examine the birth statistics, the peak of the baby boom occurred in 1960. Peak spending occurs at age 46. Consequently, the demographics suggest that the market for second or retirement homes should be hitting its peak over the next 10 to 15 years.
Because of the substantial increase in property values and corresponding increases in property taxes and insurance, many older clients are wondering how they will live on a fixed retirement income. In many states, property taxes go up as properties appreciate. This poses a difficult situation in that many owners will be forced out of their current homes because they cannot afford the increase in property taxes. A second issue is that many can no longer afford the increased rate of insurance. Consequently, many retirees are looking for opportunities to find great places to live that have appealing amenities, a warm climate and a lower tax burden.
I recently spoke with John Chin of Land Resource. They have an intriguing model that is attractive to both brokers and clients. The Land Resource model is designed specifically for people who want a second home or a home for their retirement. The Land Resource developments are located in North Carolina, South Carolina, Tennessee and West Virginia. According to Chin, they’re selling “a lifestyle — coastal, mountain or lake living in warm-weather climates with health and financial peace of mind.”
When Land Resource selects a property to develop, it must meet a number of important criteria. The most important is keeping the cost of living at a minimum. Consequently, their developments are in relatively warm locations where residents can minimize the amount of money they spend on heating and air conditioning. They also look carefully at minimizing the total tax burdens their owners have to pay. Their current developments have both low state and property taxes. They also select locations with “medical friendly” services and prices. An additional requirement is that each of their developments be no more than 30 minutes from a major airport and city. Residents have the benefit of enjoying a relaxing lifestyle with access to major services.
Another important criterion is conservation. “With each of our properties, we strive to strike a perfect balance between master-planned-community design and the natural areas that surround it. By protecting natural, open space on our properties, we help maintain stream and water quality, as well as providing habitat for plants and wildlife in the area.”
From a brokerage perspective, Land Resource properties are quite appealing. Their referral fee is a full 5 percent to the referring broker. Like the Ginn Co., they require a $1,000 refundable deposit to visit their property. They cover up to $350 of your clients’ airfare, and provide hotel accommodations, a guided tour of the property, and a concert or other fun event. If you have a number of clients in your local market area, they will host a dinner in a nearby fine restaurant. You can invite clients who may have an interest in a second home or in relocating when they retire. Their current conversion rate is 40 percent.
If you serve the luxury market, the Ginn Co. is niched specifically in the boutique or luxury market. The Ginn properties are located in Florida, North Carolina, South Carolina and St. Thomas. Plans are on the books for future resorts in Eagle-Vail, Colo., Grand Bahama Island, and Burke, Vt. Ginn provides lots for custom building and a wide variety of custom homes. The referral fee for the Ginn properties is 2.5 percent. Agents must register their clients prior to showing them the property. Ginn also invites agents to tour their properties prior to referring clients to them. Clients are invited to a Ginn event where Ginn picks up most of the transportation, hotel and entertainment costs. Like Land Resource, Ginn clients are asked to post a $1,000 refundable deposit. The broker referral is protected for 365 days.
If you have people in your sphere of influence or past clients ages 45 to 60, it’s easy to ask them about whether they are considering purchasing a second home or a different home when they retire. Thinking outside your local area can be an easy way to earn a sizeable commission for doing little more than filling out a Web site form or making a phone call. That’s about as easy as real estate can be.
Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of “Waging War on Real Estate’s Discounters” and “Who’s the Best Person to Sell My House?” Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com.
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