Looking Into The Crystal Ball of 2009January 2009 Real Estate Newsletter Gay Rosen, ABR, CBR, GRI, SRES Licensed Real Estate Associate Broker
It is often the case that we all seek a retrospective approach to those events that took place the previous year good, bad or otherwise. Perhaps we will soften the sharp edges of what transpired, motivated by the promise of a new year, and being positive is always good – as long as we are also realistic in the process!
2008 for many Realtors was difficult. The year affected not only buyers and sellers but also real estate professionals from all walks of life who suffered the wounds of a less than successful year. Then, of course, both buyers and sellers are exposed to so much media, that they don’t know what to believe, what to do, and what will be…..
I was quite successful in 2008 and am now ranked Number One in both my community and in my Brokerage in New Rochelle (per the WPMLS). I do not think that it has to do with luck though. It has to do with analyzing and then utilizing the paradigm shifts that have been taking root in real estate. The game has changed for the time being and we all have to adjust to the new rules.
To close out 2008, therefore, we must look at the industry’s most significant paradigm shifts. Don’t mistake these for trends-these are long-term, if not permanent, foundational changes to the way real estate will be conducted in 2009…and well beyond.
“While maybe, deep down, we naively hoped that writing a $700-billion plus check would instantly infuse new life into our failing economy, it’s important to realize that overall economic health is far down the road. And, according to most real estate pundits, the boom years of the early 2000s will probably never be seen again.” RIS Media
Why would this be the case? Home prices escalated so much and so quickly, and I can recall that if one did not view a home in the first few days it was listed, it would have been too late as it was sold. Realtors and home-owners were not utilizing current market solds for pricing inasmuch as pricing what they ‘wanted’ for their home… and unless they were truly greedy, they would obtain that high price. Those days are most likely gone for good. Those skyrocketing housing prices, together with those loans that were seemingly granted to any breathing individual led to most of the problems we are feeling today as homeowners, real estate professionals and American consumers in general.
“We’re in the fourth year of a market correction following an unprecedented decade-long run-up,” says Alex Perriello, president and CEO of Realogy Franchise Group. “So what do we do now? We have two choices: we can hope, in due time, that the market will recover…or we can roll up our sleeves and accelerate the process of this recovery.”
To stimulate sales, Realtors like myself must restore consumer confidence in the housing industry. Buyers need to know that with interest rates low, and a great inventory available, it is a wondrous time in which to buy. Realtors must know our local statistics not by zip code but by price, property type and neighborhood. Properties must be priced correctly.
With all the talk about consumers “sitting on the sidelines,” unfortunately, there are many who’ve now moved from the “sidelines” to the parking lot. The economic meltdown that began in late September has left many consumers less worried about selling their homes, and more worried about keeping their jobs and paying their bills.
“We have this mindset across the U.S. that I call, ‘recession, depression, obsession’,” explains Ron Peltier, chairman and CEO, HomeServices of America. “With all of the negative media, consumer confidence is at an all-time low. In business, in general, 70 percent of the GDP (gross domestic product) is driven by consumers. We are in for an extended recession, perhaps even depression, if you talk to some people. And, if we continue to obsess over that, people will hold tight. “Our job is to make consumers understand why real estate is still a smart investment,” he continues. “We need to take the proper initiative in each market to get to the news media and talk about the very things we know ourselves-yes, the market corrected and yes, values have dropped, but over a five-year horizon, real estate is still a great investment and very safe. If consumers embrace that, we believe that there will be buyers.”
While industry professionals continue to examine the bailout bill and its possible effects on the housing industry and America at large, many lending institutions are taking the problem into their own hands and offering programs and support systems to families across America. “We will work with families who want to save their homes but are struggling to make their payments,” says Charlie Scharf, CEO of Retail Financial Services at Chase, one company that’s being proactive in today’s uncertain market.
With the lending landscape continuously changing, institutions are modifying their practices to best suit the needs of homeowners. In fact, for the first time in 30 years, HUD revised its RESPA rules in order to restore trust in the housing market. “The new RESPA rules seek to bring more clarity and certainty to the real estate market,” says Steve Preston, HUD secretary. In addition, the government bailout that was approved in October was recently revised. Regulators were given the power to change the plan, hoping to gain the support of all Americans. The plan, as it stands now, is to give money to financial institutions in return for stock, rather than buying the securities that no one else wants. The objective? Get the banks to start lending again.
Prospective buyers are waiting to see if they still have a job, if their bonuses are being realized, and once that has been determined, then I feel they will take advantage of the good mortgage rates being offered. FHA loans are being offered to potential buyers with an income less than $110,000 but with only 3% Down, so there are some good introductory programs out there, and at the other end of the spectrum, jumbo rates are still being offered at low interest rates also. At the end of the day, real estate is a very good investment. With the stock market being challenged on a daily basis, if a prospective buyer is purchasing a home – not to flip – but as a home in which to reside in and enjoy for the ensuing years, that home will appreciate, and with homes being offered at realistic prices – now is still a great time to both buy, and it is still a good time to sell – especially if you are buying elsewhere, and can take advantage of the lower priced homes, and if you had purchased your home prior to this economic uncertainty.
If a home-owner needs to sell, and is having difficulty paying his/her mortgage then reach out to your bank before your home goes into pre-foreclosure or foreclosure. Speak to your real estate agent or to myself about your alternatives. I can only help you if you are honest with me with your needs, and so we can map a timeline and plan. You also need to be delinquent in your mortgage payments before a bank will discuss a Short sale with you. I know attorneys who are well-versed in Short Sales and who can advise also.
Over the past months, we’ve witnessed an unheard of amount of information, deliverables and attention paid to green initiatives. Moving into 2009, expect this shift to become even more prominent and permanent as buyers seek homes that are eco friendly, and a home that offers more in this area will also be that more attractive to more buyers.
The wealth of information online is experiencing exponential growth on a daily basis, taking transparency to a whole new level. Consumers want more information-and they want it fast. Real estate verticals such as Realtor.com, Zillow, Trulia and Point2 have become mainstays by offering the ability to view millions of listings and their photos. The internet is now the desired media for buyers to view potential homes, and the MLS (Multiple Listing Service) has recently changed the 15 photo limitation to 30 photos realizing the need for same.
Where are we all going? People will always need to buy and sell. Many home-owners who didn’t need to sell, chose not to place their homes onto the market – waiting for the traditionally strong spring market when they might need to sell . Based on that, I feel that we will have a large number of homes entering the real estate market this spring and the buyers – with these wonderfully low interest rates will be buying – but once again seeking the house that offers value. Should there be ten homes priced the same, and if 2 in 10 homes are sold in a four month period, then it will be those two homes that offer the most that will be sold. It will not be a time in which to test the market, to feel that your home is better than any other…It will come down to what has been sold recently with no emotions in the fray.
This is where a good Realtor is important. I would like to feel that my clients chose someone who knows the market, who understands their individual circumstances and needs, and who listened to my counsel in this ever changing and challenging market. As a Certified Residential Specialist (only 30,000 + agents in the U.S) and as both a Certified Buyers Representative and an Accredited Buyers Representative, as well as a Senior Residential Specialist (only 20,000 + agents within the U.S.) I am here for all of your real estate needs.
Should you wish to discuss the market at all, please feel free to contact me.
Gay E. Rosen