NOTE: This is a re-write of a post from several weeks back--the timing was wrong so I wanted to run it past all of you again so that if any new ideas have come to the surface of late, you could share them.
RECOVERY? Will that ever happen? Or are we in for 10 more years of this??? Have you asked yourself this question? Look back on the days when caution was a word we did not use much less act upon when it was needed the most. I could go into depth here, just covering all the gory details of how this recession began and how it has worsened as time goes on; but I will not do that. Instead, I would like to open up a discussion of just how we, as real estate professionals, are approaching the potential "2nd" housing dip that is projected by a handful of economists.
A HANDFUL OF ECONOMISTS AGREE ON A 2ND HOUSING DIP
I don't have all the answers, but I think we need to talk about the potential and AR is the best place to do it, I think! We need all the thinking on this so that we can plan our next approach with our buyers and sellers....otherwise we end up in another downward spiral that will end badly. It may end badly anyway, but I believe that if we take a bold stance now and bring our ideas to the table, we will be able to soften the blow.
I am a "realist" and I am frankly quite alarmed at the idea that the banks are about to "dump" hundreds of thousands of "short sales" and foreclosures on the market in the next few weeks. This and the fact that as of May 1, we will not have the tax credit in effect any longer.
Are we prepared for this? I am serious---do we have the intestinal fortitude to handle another huge slug of houses coming on the market all at once?
Are we ready to get out there and warn current homeowners that property values are going to take another big hit???
HOW DO WE TALK TO OUR BUYERS? WHAT DO WE TELL THEM ABOUT THE STATE OF THE MARKET? DO WE TELL THEM THAT WE ARE GOING TO SEE ANOTHER DROP IN PRICES? HOW MUCH? WHEN DO WE SEE THIS HAPPENING? HOW WILL WE APPROACH THE POTENTIAL "STALLING" OF SALES WHEN IT APPEARS ANOTHER "HIT' IS ON IT'S WAY?
- SOME IDEAS FOR THE NEXT "BIG HIT"
1. How much discount is figured into your inventory now? Begin to evaluate current asking prices on houses in your area. Identify the difference of asking price in relationship to selling prices.
2. How many short sales have taken place? Compare this to the number of regular sales in your area. Short sales and foreclosures WILL affect your inventory and must be included in your plans for some time to come. If you can establish a % of short sales to regular sales that is good.
3. Using this %, Calculate the necessary discount going forward. Even though there are still a number of regular sales happening now, this could change quickly. This percent change in price is critical to know in order to price properties appropriately going forward.
4. How do you plan on advertising in this housing climate? It is important to nudge the buyers out of their "slumber" regarding housing--they have not been focused on anything to do with buying a house for some time now--they need to know a few facts: prices are down between 20-30% from the highs of 2006-2007. Houses in Prime locations are coming on the market for the first time in decades and are reasonably priced. Information regarding a local market needs to be highlighted in any advertising venue
5. Plan FOR a 2nd dip! Even if we think the worst is over, there are a number of economists who believe that there is a lot more to come! Be Prepared!
These are just a few things that I have started to incorporate in my work as I talk to homeowners who think the worst is over--and there are plenty of those out there! Southampton, NY is a predominantly second home market, the average seller thinks we are not as affected by the economy as other markets are. Explaining the effects of the real estate recession is not easy--it has affected us like nothing else ever has. We have seen property values drop precipitously for the Hamptons---and in that case it has become a buying opportunity of a lifetime. Sales have kept the inventory low but that is about to change. Information is vital right now; keeping the public alert to the fact that this is an opportunity of a lifetime to buy a home if they are in good financial shape, is crucial to the outcome of 2010. We are going to see ups and downs for sure and we can be in control of the outcome if we are informed and in turn, inform our clients and customers of the conditions of the market.
Let's do this together. We can come up with a number of the best tools that will help get all of us through the difficult things ahead---even if the 2nd dip does not happen, at least we will be prepared if it does!