RECOVERY? WILL THAT EVER HAPPEN?...OR ARE WE IN FOR 10 MORE YEARS OF THIS???

By
Real Estate Agent with Douglas Elliman Real Estate 30HA0800896

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.

ECONOMISTS AGREE

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.

MORE AND MORE QUESTIONS WILL COME UP

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? 

WE NEED TO PLAN OUR NEXT MOVE

  1. 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.  WE NEED INFO TO GET THROUGH THISInformation 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!

 

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Rainer
18,100
Patty Purdue Laforte
Realtypath LLC - Salt Lake City, UT

In Salt Lake County we have about 25% of our active listings are short sales so we are much better off than other markets for sure, but short sales will continue to drive prices down in the neighborhoods where they exist.

I think the best way to combat this is with lots of listings.  The agents in our market that sold 30 or more homes last year (our worst year in 26 years) were high volume listing agents.  Remember that homes sell during all times - prices falling, interest rates at 18% - it's just a lot more work to get the deals but they always exist.  There are always people getting divorced, married or having more children than bedrooms.  The buyers who quit buying are the ones that only want to do it for the investment.  I believe the major shift is that people are going back to buying homes for a very basic reason - to have a place of their own that they can eventually pay off.  Basically stabilizing their housing expense.  With rent it goes up each year - with a 30 year fixed mortgage you know what your expense will be going forward for 30 years. 

That is a great reason to buy.

Apr 11, 2010 02:57 PM #2
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Sara: I have heard bad things about the real estate market for so long that it's hard to determine when the news started--I do know that we were informed in January that the banks were being told by the government that they were not going to be allowed to continue to drag out the process for homeowners that were not qualifiying for a modification. This was a big story here on AR and in the financial news. All I know is that the banks do not want to work things out for homeowners--they make too much money in foreclosure and short sales therefore they are not doing modifications as was originally planned. It may not happen as a million houses hitting the market all at once; even if they just drip-drip-drip them onto the market--it will matter! Thanks for commenting

Apr 11, 2010 03:13 PM #3
Rainer
225,278
Kirsten Lindquist
Pacific Union International - Sonoma, CA
Realtor - Sonoma Wine Country

Hi Paula:  We are waiting for the "shadow inventory" to appear here in Sonoma County.  So far, and to the best of my knowledge, the flood has not begun.  I'm hearing that the banks are trying to unload properties on the courthouse steps rather than on the open market.  What's happening in your area...on your court house steps?

Apr 11, 2010 03:24 PM #4
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Patty: That sounds like a resonable position to take---especially since there are so many more houses on the market in general. I am becoming very selective in what I list now because there are a lot of overpriced houses out there still. If an owner thinks they can get a premium now-I advise them what the truth is and then I move on---eventually they may have a change of heart but they can have someone else handle their property until they get serious. Meanwhile, we have been hit hard here in the Hamptons. It has been a very difficult market to price houses in and even to list them--we can't tell homeowners how long it will take to sell their homes---we have a hard time pricing homes too--I have to take sales from the last 2-3 weeks, even use in-contracts where I can and I have to look further afield for comparables. It is a lot more detail work now then before. Thanks for reading and commenting.

Apr 11, 2010 03:24 PM #5
Ambassador
890,780
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

This won't be over until there is a job recovery.  There won't be a job recovery until employers stop wondering what is going to tear their pocket open next... 

When jobs come back, housing comes back.

Apr 11, 2010 03:31 PM #6
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Kirsten: I haven't heard of sales happening on the courthouse steps yet--but we do have an agent who started an auction company to help out homeowners before they go to foreclosure. Most homeowners here, even if they are in trouble, just keep denying it and ignoring it; now there are a lot of sales that happen quietly--I am starting to hear "short sale" more too. We have a handful of agents who know the short sale transaction--I have heard of some agents who are caught up in these deals, have no idea what they are doing and end up hung out to dry for months before anything happens. I have thought of doing a training but it takes a great deal of time and I am selling housse without doing it so I may wait and see if I need to..Have you taken a short sale course yet?

Apr 11, 2010 03:33 PM #7
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Lane: I think you are right--the problem with jobs is: where are they going to come from? They may all be government jobs!!! That won't help the average person who is willing to get out there and work hard, maybe start a new business, or even creative entrepreneurs won't have the incentive to do what they do best! We are going to look back on these times as a very "dark" period--maybe a new version of the Dark Ages, if you know what happened during those times; everything stopped, people had nothing and life became so survival oriented that there was no advancement. Lets hope that does not happen! Thanks for reading and commenting

Apr 11, 2010 03:39 PM #8
Rainmaker
1,559,970
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

I don't think we'll see 10 solid years.  In the next few years, buyers will begin to resurface.  Once that happens, prices will inch back up again -- not as quickly, or as steeply. 

Apr 11, 2010 06:22 PM #9
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Carla: Thank you for your input---I am hoping there is not going to be 10 years of this, but as I look at the possible long-drawn out activities regarding the modification  process I fear the worst. There are people out there who will hang on to their homes no matter what--banks will drag out the process until the homeowner cries UNCLE! And I am hearing stories where a homeowner has been in the modification process for 18 months!!! Some have been in the category of pre-foreclosure for 2 years while the banks drag on and on without giving the homeowner an answer--Then there are those homes that the bank suddenly, after a long drawn out review, auctions off without warning the owner! Lawsuits abound and it can take forever for a settlement--we have not seen any completed litigation that I know of yet, in any one of these messy lawsuits.

Apr 11, 2010 11:03 PM #10
Rainmaker
1,559,970
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Paula . . . you're right.  It is going to be a long while to "iron out the kinks."  The fall out from the bail out!

Apr 12, 2010 04:52 AM #11
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Carla: You should copyright that statement: "The fall out from the bailout" has a real ring to it and that may be how we identify the next 5-10 years!!!

Apr 12, 2010 05:29 AM #12
Ambassador
890,780
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Everyone can't work for the government... They can't collect 30% of everyones' paycheck in taxes and then pay out 100% for the paycheck or there will be massive debt...

Oh, wait... there IS massive debt.

Apr 12, 2010 04:16 PM #13
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Lane: Thanks for your valuable input--according to the government--everyone who works IS working for them! Frightening isn't it? And as far as the debt goes, it's downright "un-American" to run up debt like that! Do you think there is a plan to lower the debt? I don't think so.!

Apr 12, 2010 10:24 PM #14
Ambassador
2,079,669
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

Paula - I am seeing increased activity in our local market for the last couple of months - those that have money are picking up investment properties and Canadians are taking advantage of their dollar's strength. Real change won't happen until people are back working full time again. Great post!

Apr 18, 2010 01:33 AM #15
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

BarbaraJo: Good for you and your area! We are also seeing an inching up in prices---sales are still off but not by much...thanks for reading and commenting!

Apr 18, 2010 06:13 AM #16
Rainmaker
620,905
Debra Leisek
Bay Realty,Inc Homer Alaska - Homer, AK

Until jobs come back and people quit feeling so uncertain we will not recover.. there is money, there is reason for hope but the admistration needs to quit the course they are on and right the course to something less anti business and start letting the private sector work.. the only growing segment in jobs is in DC and that is not right... we can not support them forever...

Sep 06, 2010 09:23 AM #17
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Debra, Thanks for finding and reading this older post--it is still timely, no? I wonder what is going on in the heads of government officials NOW--it is really something that we don't seem to be re-covering---just floating along in the state of "NOT KNOWING"....and nearing another precipice that we will have to struggle out of again---if it is possible now!!!

Sep 06, 2010 09:32 AM #18
Rainmaker
620,905
Debra Leisek
Bay Realty,Inc Homer Alaska - Homer, AK

I didnt realize it was old it is so timely... I suggested it to be featured... on this Labor Day nothing has happend since April has it? thanks

Sep 06, 2010 09:46 AM #19
Rainmaker
494,549
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Debra: thank you so much for suggesting this---it will be interesting to see if anything comes from the suggestion--sometimes I think they (the powers that be), have their own few that they like--will wait and see. meanwhile, it is so refreshing that you are able to see my point here--it is so obvious to me!!!

Sep 06, 2010 10:07 AM #20
Rainer
68,862
Laura Reilly
Real Living Real Estate Professionals - Redding, CA
Home Sales Realtor - Short Sale Team Member - Redd

Hang on in California, it's going to be a bumpy ride! Fasten your seats belts!

Feb 04, 2011 12:34 AM #21
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Rainmaker
494,549

Paula Hathaway, REALTOR, LBA

...The Most Informed Agent In The Hamptons!
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