Amazing quote via the Palm Beach Post on what has some Florida Realtors perturbed:
"Some Realtors are grumbling about prices not falling. Guess who they’re blaming?
Here’s what Thomas Lawler, former Fannie Mae economist and current
president of Lawler Economic & Housing Consulting in Vienna, Va., has
to say in his private newsletter:"A growing number of Realtors in Florida are frustrated with the state and
national Realtors groups’ efforts to ‘spin’ the market as one that is
strengthening and where home prices are stabilizing."Many (though probably not yet most) Realtors are frustrated by customers who
continue to list their homes at price levels that are ‘unrealistic,’ and as a
result, sales volumes – and thus commissions – continue to remain depressed."While Realtors have noted to customers that many home builders in Florida
have slashed new-home prices in order to move bloated inventories, many home
sellers are still holding off, hoping – along with FAR and NAR – that prices
will start moving back up soon."
Its seems that the Realtors are trying to "get real," while the NAR continues to stoke unrealistic expectations and illusory hopes . . .
Hat tip: Kevin Depew Minyanville.
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Source:
Builders optimistic, survey says
Linda Rawls
Palm Beach Post, Monday, March 05, 2007
http://www.palmbeachpost.com/business/content/
business/epaper/2007/03/05/c1bz_rawlscol_0305.html
This makes a point I’ve brought up repeatedly…that those that NEED to sell will slash prices, take the hit and move on (or declare backruptcy). Many others would LIKE to sell at these “high” prices, but won’t if they don’t get their price. This accounts for much of the “inventory”, imho. I think we’re past the peak of the speculator rinse job. I could be wrong, obviously.
I always figured the straw that would break the back of housing prices was when the real estate agents finally realized that pressuring sellers to lower their prices was the only way that ANY transactions were going to get done.
No transactions, no commissions. Figure it out, NAR.
No, the realtors are not trying to “get real”. They are trying to get commissions, just as they were on the way up when they were exhorting buyers to buy immediately, pay whatever it took to get the home, and take whatever mortgage would make the deal possible.
The realtors are salespeople who depend on commissions.
I recall a study showing that, when realtors sold their own homes, they kept them on the market longer than average and got a better % of the asking price.
When it is somebody else’s home, the realtors want a deal to happen and happen quickly. When it is their own home, they want a good price.
Agents are not forced to accept a listing with unrealistic price. It’s their own fault if they sign a contract agreeing to sell a home at price they can’t get.
I guess NAR is going to help homebuilders get rid of inventories before they “help” the homeowners. Guess who’s gonna get the truth last?
What most “agents” (loosely defined as out of work actors, newly degreed students, and generally those who “can’t”) fail to realize is that for most of there professional career money has been thrown there way with little or no work involved. They are now seeing that it takes some work to become an accomplished agent (there are very few who are worth the paper that there biz cards are printed on).
They are still in a mexican stand-off with the sellers since they are brainwashed to believe the shit that comes out of David Lerah’s (sp?) mouth that we ‘ve seen a bottom now for almost 5 full months. Each and every month we’ve “seen the bottom” for the past 5 months. How many bottoms are there going to be before the sellers wise up, take the money and move on?…that’s a rhetorical question…
MS
The agents could care less regarding the price they sell a house for…they just want to sell houses. There is a huge difference between taking a haircut when your client drops his price by 10%, or not moving the house and earning nothing.
And part of the use of a good agent is to get the house listed for a marketable value. I have no pity for them if they can’t do their job.
looks like the grunts on the front lines are capitulating. It must be getting close to washout time
Lawman,
I respect that logic would dictate that “agents could care less regarding the price they sell a house for”. But, the reality is that “agents SHOULD care less…”
Unfortunately, with some of their head cheerleaders telling it’s up, up, and away, it takes a while for cognitive dissonance to be resolved away. There is a pervasive brainwash exercise that happened over the past few years with real estate agents. Their business changed right in front of them, and many of them don’t see it… much like travel agents didn’t see it until it was too late. It’s only when they are FORCED to believe, that we will see opinions change.
Unfortunately, with the subprime lending restrictions substantially tightening, sellers are increasingly out of touch with reality. You might say that the earth cracked in the last few weeks, and the divide is quickly widening between buyers and sellers. Just look at inventory. It’s on a tear, even greater than last year.
I’m no expert, but I think it’s the way the numbers get reported. According to the “reported” housing numbers sale prices are only down a few percent YOY, but this does not take into account all the new homes that builders are offering all kinds of incentives or upgrades like; mortgage payments, closing costs, pools, cars, counter tops, guns and whatever else they can dream up to move houses.
All these incentives and upgrades need to be added to get the true sale price change. I.E. if you have a $400K home which has a $100K in “free” upgrades or incentives the reality is this is a $500K home which in now selling for $400K or a 20% discount. This needs to be reported as such and not some how be considered as “stabilizing”.
If you’re an existing home owner near a development where the above is taking place you’re obviously going to have to drop your selling price by a comparable amount.
Some (most?) sellers don’t take this into account they see home prices are “stabilizing” so they think they should be able to sell their home for this “reported” price without realizing what they really need to do is slash their price dramatically to counter all the incentives that builders are offering to move homes. Just my humble opinion.
The builders and homeowners are both competing to unload their homes. Soon we are going to have a third party in the mix. The banks themselves. As foreclosures rise banks are going to be desperately unloading REO of their books. Guess what that is going to do to home prices ?
Long time readers of Ben’s Blog know that the Palm Beach Post has never bent over to accomodate the REIC.
This phenomenon is neither new nor unusual. Of all asset classes, personally-occupied real estate is probably the least elastic in price. If a seller can’t get his price, the tendency is to hold onto the family homestead a while longer rather than slash the price dramatically in order to move it. The “sky is falling” crowd fail to account for this fact of human nature when they expect a quick implosion in real estate. What’s much more likely to happen is what happened in the late 1980s and 1990s, a long period of flat or modestly declining prices.
If a seller can’t get his price, the tendency is to hold onto the family homestead a while longer rather than slash the price dramatically in order to move it.
Yeah, except when you take into account the huge number of ARMs and IOs, will they even have the option of staying put this time?
Nova Law said: The “sky is falling” crowd fail to account for this fact of human nature when they expect a quick implosion in real estate. What’s much more likely to happen is what happened in the late 1980s and 1990s, a long period of flat or modestly declining prices.
We live in interesting times, so it’s hard to compare now with the 80’s or 90’s.
We now have the highest % of vacant homes and ARMs in history. We are also at the lowest rates in history. These dynamics are vastly different. While the outcome could be the same, it is far from assured given these different circumstances.
‘Someone’ wrote a letter to Barron’s last year about the government setting up a “Strategic Real Estate Reserve” modeled on the SPR…
“…whereby empty condominiums are purchased by the government to hold (at a profitable markup of 20%-25% for the current owner, of course…) putting more cash into the hands of the economic vanguards of our current boom, the condo flippers.”
“…[Then you subsidize buyers who move in (focusing on folks whose pensions have been shucked) and anything left over we swap with Asian Central banks for our bonds.]”
Interesting idea, but looks like we won’t need it since the real estate market will hold up on the confidence of the NAR media plan.
I have been skeptical of those who say we are going to witness a significant drop in real-estate prices. However, I am coming around to that view.
One thing to keep in mind is the psychology of people who become RE agents and/or investors. Research by psychologist Martin Seligman has shown that overly optimistic personality types do better in sales-oriented careers than others. This makes sense – many salesmen are great simply because they refuse to be realistic and instead keeping nagging people to buy against all odds.
I believe the same thing is true for RE agents, who are basically salesmen. The problem with an overly optimistic personality type is that these people are often the last to recognize a serious problem. Therefore, I am betting many RE agents will continue to pretend prices are not falling (despite the protests of the agents quoted above). This could cause a “crash” scenario when they finally recognize that they will not earn any commissions at all if they continue to stick to their delusions. Then it will be sell, sell, sell as everyone rushes to move inventory at the same time.
I think this problem of hyper-optimism is afflicting RE investors. Reality-based personalities are less likely to get sucked into a bubble mentality. Hence we are in a situation where many of these “investment” properties are owned by “investors” who refuse to deal with the fact that their fledging RE empires are cash flow negative. Because of their overly-optimistic personalities they will continue to hold these assets until the breaking point, when creditor demands finally force them to sell – at which point they become desparate and desparate people always offer the lowest prices, esp. when tons of other desparate sellers are dumping the market.
Despite my initial belief in a “soft landing” for the RE market, I am beginning to think we could be witnessing the start of a RE crash. Psychology will affect the RE market just as it affect other asset markets.
I recall a study showing that, when realtors sold their own homes, they kept them on the market longer than average and got a better % of the asking price.
When it is somebody else’s home, the realtors want a deal to happen and happen quickly. When it is their own home, they want a good price.
This is described extensively in the book “Freakanomics”. It shows that there is a disconnect between the interests of the seller and the agent. I advocate getting an agent to take a larger percentage above an agreed upon base price. Tough part is finding an agent willing to work that way in an age of inflated housing prices. The agents have gotten rich in the last five to ten years for VERY little effort.
Remember 2000 when ‘visibility’ was the popular word around earnings time?
P.S. Just for fun, call up a mortgage broker or two, tell them you owe $500,000 on an option ARM on a house you paid $500,000 for, that’s now worth $450,000, and you want to refinance at a low fixed rate so you can try to hold on to it. Let us know what you find out.
This is a must see:
The Mortgage Lender
IMPLODE-O-METER
http://ml-implode.com/
.
With the market and the spin as it is I can see three things coming on. The use of appraisals, more free MLS systems and more discount brokers. If the real estate sales brokers and the NRA wish to curb the the use of these services then they are going to need to promote services such as appraisals and homeinspections as they communicate and still keep strong relationships with homeowners who want to list.
he sky is starting to fall….
http://www.nytimes.com/2007/03/10/business/10real.html?ex=1331182800&en=442d8daf6bf56cac&ei=5090&partner=rssuserland&emc=rss
You know,the last thing you want to do is make a realtor mad.
Over the last several years they’ve grown way too accustomed to eating other people’s lunch.
6%.
That’s MY 6% commission you’re delaying!
Get with the program you home sellers!
Realtors have a tendencey to deny the duplicitousness of their chosen profession.
For all the hating on realtors going on in this thread, I will observe that nearly everyone I have ever known who tried to buy or sell a home without a realtor lived to regret it.
Sellers representing themselves typically don’t know how to realistically price their home, don’t know how to deal with contract formation, don’t know how to separate business from personal in negotiations, don’t know how to deal with buyers who have agents, don’t know how to deal with problem when they arise, don’t know how to deal with escrow issues, and don’t know anything about the law.
Buyers representing themselves don’t know how to assess an asking price, don’t know how to make an offer, don’t know how to structure a legal contract, don’t know how to place escape clauses in a contract, don’t know how to deal with escrow issues, don’t know how to separate their desires from their budget, and don’t know how distinguish risky properties from unappreciated bargains.
Three acquaintances who tried to sell or buy their homes without a realtor ended up in nasty lawsuits. But, HEY!, they saved 6%!
No, realtors don’t make money unless a sale happens, and some are bad at what they do. This problem only arises when people fail to do their due diligence and engage a realtor’s services based on the fact that she’s married to their cousin. You can’t protect people from their own stupidity – if they’re too stupid to hire a good, solid, reputable realtor, then they are definitely too stupid to buy a sell a home without one.
NAR and Housing Forecasts
With the oft hallucinatory David Lereah now gone from the NAR, one would expect hope that the Realtor Group would take off the cheerleading outfit and get real. So far, that wish appears to be unfulfilled. There’s been only grudging signs of any realit…
Certainly brings the national versus “local scene” into perspective. But I do, however, think that those realtors grounded in reality represent the minority, particularly considering how many licenses have been issued over the past five to seven years to opportunists versus career realtors. I actual know a few of the latter that are still doing quite well, but they are specifically targeting those who have the ability to lower prices (something we all know a lot of homeowners simply can’t do right now).
How Counter-Productive is Realtor Association Spin?
One of themes we’ve looked at over the years is the spin that some trade groups put out on top of their data releases. Some data runs put out by Trade Associastions, like the ATA tonnage index, or the Home Builders Index, are the straight dope — an un…