Thankfully the election is over, and we can get on with life.
Will the results impact our local real estate market?
1. Hopefully the politicians will start looking at foreclosure as a solution, not a problem. From CNNMoney.com yesterday:
The Obama administration is singing a different tune about foreclosures. A year ago, officials focused on stemming the foreclosure tide. Now they are touting the need for foreclosures to rebuild the housing market.
Last week Phyllis Caldwell, head of the Treasury Department’s Homeownership Preservation Office, told a congressional panel that “an important part of ensuring longer-term stability in the market is to enable properties to be resold to families who can afford to purchase them.”
And White House Press Secretary Robert Gibbs last month told reporters that without sales of homes in distressed areas the “recovery in the housing market stops. It’s frozen.”
The shift in rhetoric signals the Obama administration is recognizing that its loan modification program is foundering, experts said. Also, it is acknowledging that banks must address their swelling ranks of delinquent loans.
The political shift should help to reinforce these thoughts with the administration. There’s no foreclosure tsunami in sight, but by being more foreclosure-friendly, the-powers-that-be could increase the REO inventory and HELP the market by providing more well-priced homes to purchase. Please open the faucet a turn or two!
Pushing more foreclosures through might help stop people from defaulting – if the free rent program wasn’t so attractive, hopefully the poeple who can afford to stay would re-consider.
2. We’ll probably see mortgage rates stay ultra-low for the foreseeable future; under 5% for the next year. Turning Fannie/Freddie into a private-enterprise is 2-3 years away at best, so mortgage availability will be dependent on the taxpayer-supported GSEs providing a secondary market. It appears that the federal government will comply for now.
3. The cheap money should cause more buyers to want to engage, making an already-competitive marketplace even more challenging. If it becomes more obvious to politicians/servicers how difficult it is to find a decent house for a reasonable price, then maybe they try to unload inventory.
4. Unemployment, consumer confidence, economy? All have been sideline concerns that haven’t caused much panic among sellers and their pricing. For many who are selling, this will be their last hurrah of homeownership – so they think they should milk it for top dollar. Most chase their market down, selling for less, not more – or not at all.
Other changes that could have impact:
Sellers are being forced to re-consider their addiction to the comps, and look at the reality – the house is not selling. There are fewer comps, and they are less likely to mean something – just because somebody paid that much for a house a mile away, doesn’t automatically mean that another buyer will pay that for yours.
Servicers could get more proficient. No signs of that happening yet, but if they could streamline short sales or pre-approve pricing of them, we could see some real market clearing.
Realtors are doing NOTHING to help the situation. There are a few more generic radio and TV ads, but no real help from which consumers could benefit. Plus, Zip Realty announced yesterday that they have abandoned their salaried-agents nationwide, in favor of independent contractors. Zillow never made it into the sales arena, so it’s down to Redfin to chart a new course for agent-client interaction. Redfin’s website is their ticket – but only because the NAR and assorted villians refuse to create a powerful, all-encompassing website to dominate the space, instead of the half-baked realtor.com. In other words, expect more of the same nothing-burgers from agents, and watch them drop like flies – or be replaced by new blood.
There could be spurts in either direction. We could see a surge of sales activity in the hot areas like Carmel Valley, or hit spots where the demand has been exhausted, and lower pricing is the only answer. But it’ll look pretty stagnant to most for the next few months.
Everything here will fix itself given enough time. The only thing politicians do is slow it down, but I guess that’s their job – to look busy.
Elections over. The politicians don’t need your vote for a while.
Bring on the Foreclosuers!
Hopefully by the time the next elections come up enough people will be making money off buying + selling foreclosures they will be a political force.
Unfortuantely at this point in time deadbeats control the politics.
More cheese on the way: http://www.cnbc.com/id/39990450
Nothing substantial will change. By this time next year the tea partiers will be busy grabbing at the set-asides so they can bring home bacon to their districts and booking their champagne junkets with big-money campaign contributors to build reelection warchests just like the oldtimers on both sides of the aisle, and as soon as the White House gets a new tenant there will be another flavor of smoke and a set of newly tinted mirrors deployed to create the illusion of growth before the voters get impatient and switch things around yet again.
I hope everybody enjoyed the ride from 2004-2008. We’ll be doing it again in a couple of years.
Gene, you OK?
Your comments used to be more balanced, and have a few good things to say too. Now you are all-negative, all the time.
Don’t let them get you down man!
Hi Jim-I’m curious about your musing that realtors aren’t doing anything to help the situation. I’m a consumer of realtor services (recent seller, and hopeful buyer). What could the realtor profession do to improve the situation? Unassuming genuine curiosity, no malicious intent at all, just a consumer.
There is an ignorance among realtors, masked by their superiority complex.
The bulk of the listing agents think they know more than the buyers’ agents, and are happy to dismiss them if they don’t offer close to list price.
But they are slow to re-calibrate to today’s market.
#1 It might be the last buyer that comes your way.
#2 The buyer’s agent might know more than you.
Most listing agents would never consider such thoughts, and they sit on listings for months at a time figuring the market “will get better someday”.
They have no grasp of the importance of right-pricing in the new era where buyers know the comps better than the agents do.
Examples:
One of my primary duties is to solicit listing agents to see if they or their sellers are players – do they get it?
I just asked if the sellers might consider an offer of $1.2 million on a house listed for $1.499 that’s been on the market for six months.
You and I know it isn’t worth $1.499. Her response?
“That’s well below market”, and directed me to a sold comp of $1.2 that was smaller.
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On a different house the termite damage was $100,000, but we were going to remodel anyway.
We made a low offer, not asking for a termite clearance, and the seller countered full price – which would actually be a net of $100,000 over list price.
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On a third listing, a short sale, we offered $75,000 over list price because an in-house agent also had an offer that we thought sounded like a full-pricer.
The seller countered $250,000 over list price.
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Let’s note that these are all nice people who sound like they know what they are doing, have experience, etc. But in crunch time are they here to make sales, or hold out for some pie in the sky? MOST are hoping for pie.
Another reference point is how many sales have they had this year – it is a direct reflection of how they have calibrated to the new market, and are willing to listen/learn something. If you are interviewing agents, you must ask how many sales they have had this year. If it is less than one a month, than they haven’t calibrated, or are part-timers. Neither are a bad thing, but you deserve to know their ability to help you – especially if you are a buyer.
If you get a lousy realtor for a listing agent, you already know what to do – keep lowering the price until it sells, in spite of them. But for buyers stuck with a lousy agent, it means you’ll never buy a house at a decent price – you’ll be paying retail or retail-plus, because that’s the only way they can make a deal.
Thank you for the response. If I wasn’t happy with my buyer’s agent (and I am)-she’s trying very hard in a very challenging environment-I’d jump ship. You’re examples above are precisely what we’re experiencing in the farther corners of the county, albeit on a much less grand scale (by about 50-60%) 🙂
Here’s a couple of numbers on list price vs sales price for the past 4 months in 92126.
Oct 2010 (44 total sales, 22 under list 50%)
Sept 2010 (49 total sales, 25 under list 50%)
August 2010 (51 total sales, 16 under list 31%)
July 2010 (42 total sales, I’m missing some data, 11 under list, 26%)
Conclusion in the past 2 months if you want to sell you better start with a low list price and sell quickly or be willing to take less than your list price. If not, you’re going to be sitting and waiting. Buyers don’t seem to interested in the current sellers list prices.
I don’t really see catalysts on either side to get the market moving. Buyers just saw price/sqft numbers drop in the past month, and sellers don’t seem to be interested in doing anything with their price as long as they can wait until next year.
Let’s make a distinction though.
The list prices that are being discounted – where did they start?
Do they start at the recent comp sales prices or lower?
Or do they pack on the 5% to 20% above recent sales, just to make sure they get what they deserve for their gold-plated faucets and heavy-duty nails?
It is a CRITICAL distinction that the MSM completely ignores. They are thrown to think the demand “is not there”, and “prices” will be dropping substantially to compensate.
I think they are wrong – sales are soft because the sellers are way too optimistic with their dreamy list prices. And this is where realtors are doing NOTHING to make a difference.
I’m in the middle of packing, Jim, (agony, torture, ugh!) but with the five minutes I have to spare, I wanted you to know bubbleinfo was my first stop (after emails) today. I should be back around midnight to check in and hope they’re are many more comments with such a thought provoking subject matter of “Change Coming?”.
Your #8 and #11 comments were especially profound. See you in 10 hours…
Jim, I’m always negative when the subject is politicians. This happens to me every election season when I see people thinking that they’ve actually voted for “change.”
The good news is, the country will eventually survive somehow. The trick will be to be still standing when the dust settles. So far we’re still here.
“I don’t really see catalysts on either side to get the market moving.”
The only thing that will get markets moving again is a round of employment growth in something less durable than buildings. In the past 50-60 years, the prime movers have been cars and technology. The country went wrong in the past decade when it got bamboozled into believing that it could be houses that don’t wear out and need to be replaced for generations, but I think there’s a reasonable chance we won’t make that mistake again anytime soon.
“There is an ignorance among realtors, masked by their superiority complex.”
Ignorance masked by arrogance; yeah, that about sums it up.
Such excellent commentary on this site! Thanks Jim.
Realtor.com is sort of funny. Just pictures and descriptions. What smart buyers want to see is 1) When was the last sale and what was the price? 2) How many days has it been on market?
Even realtor.com tells me there are a lot of high end properties in Minnesota just sitting empty for the past 2 years. Is there a super-low “mothballed inventory” tax rate I don’t know about?
Again, it is really great to hear unbiased analysis and great commentary about the demand side here. Demand side isn’t a sexy story so the MSM doesn’t want it.
Are we really unbiased, or do we just tend to cancel each others’ out?
“The list prices that are being discounted – where did they start?”
“Do they start at the recent comp sales prices or lower?”
These are interesting points. From what I’ve seen in the data I look at for a gauge September was probably a month of sky listings giving some ground because the median price per sqft was still high. In October the median price per sqft came down quite a bit, so I don’t know.
If I had to gauge October based on the data I’ve seen it was a month where the sellers that couldn’t hold out until next year took what they could get. Maybe the quality of sold inventory was down, or maybe it was just an outlier. Too early to say but like everybody else it looks to be a slow winter this year. No push to beat a tax credit deadline and high optimism from sellers that next year will be better (they’ll wait it out).
Heh – anyone who says “demand isn’t there” is really saying “demand isn’t there are the current price point.”
You’d think they’d learn.
Need an edit function ….
When the price is right, there will be plenty of demand. Guarantee it.
GeneK #13
:word:
Jim, weekend before last i held an open house on a short sale, saturday and sunday. It rained heavily,but 16 groups came thorough. Of the 10 I actually had a chance to talk to at some length one not very knowledgeable, one had been to the planning department already and pulled the file (!) and the rest were at least as knowledgeable as the average agent. I have 2 solid backup offers if the firs falls through. Another agent picked up a listing a week ago today and had the same experience,3 full price offers by monday. There are hundreds of properties here that have been on the market for month after month,some for several years. The price reductions always seem to be too little,too late and it costs sellers a LOT of money,hundreds of thousands in some cases.
Another big mistake made by the non-calibrated listing agent is thinking that just because they had a rush of lookers the first couple of days, they are priced too low – and if you don’t want to pay their price then plenty of others will.
A week later they are as dry as a bone, but few wonder what happened – it never occurs to them that the new-era, well-informed buyers are gone – on to the next fresh
piece of meatnew listing.I still look through listings on Redfin in my former price range and area and notice a lot of listings that are priced too high, and occassionally some listings that seem to be priced way too low. Redfin has four auto-comps listed for each house; assuming the house is typical for it’s square footage in the neighborhood (not poor condition, not in excellent condition with uber-upgrades, whatever), average the numbers, maybe add on 5% if you are being greedy-bam, you’ve got your list price. How hard is that? Takes five minutes.
I periodically check listings that are similar in layout and price range (at least by my estimate) to our home, but in the past couple of years there have been virtually no listings, REO or otherwise. It makes refi really difficult, because the appraisers keep comparing our 4/3 single story on a reasonably large view lot to “comps” that are multilevel and crammed onto tiny lots where their only view is their next door neighbor’s side wall. I haven’t the faintest idea what our listing price should be if circumstances were to lead us to a sell decision.