"It's the End of the World As We Know It..." or is it?

By
Real Estate Agent with Realtor / Owner - RE/MAX Access

REM sang it and now we are singing it too. "It's the end of the world as we know it." Of course, we are talking about the end of the Real Estate market. But hasn't that been the hit song sung by CNBC and the news headliners for the last 2 years? So what is the reason for the end of the world this time? Let's recap.

It's the end of the world as we know itOn August 24th it certainly seemed as if the housing market was falling apart at the seams when the National Association of Realtors (NAR) announced the sales forecast for the 2010 year fell short. Sales of previously owned homes fell 27.2% in July as compared to June.  That is like saying if 200 homes sold in the month of June then only 146 home sold in July. So why was that such a shocker to the analysts? Did they forget that the 8,000 Tax incentive's Rule #1 was that Buyers had to settle by June 30th. (That was extended by the way at the 11th hour.)  Hello people, of course June sales would be higher than July sales. Of course the tax credit would artificially stimulate the number of settlements in June and create a bit of a "hangover" in July.

The Wall Street Journal stated that NAR announced the seasonally adjusted annual rate of sales is 3.83 million and it was at the lowest level since the industry group started its tally in 1999.  Immediately, the pundits were on the air saying how incredible this drop was, how far below analyst expectations this was, what a surprise this was and so on.  I recall an analyst caught up in the hysteria blindly saying that renting is always the best option for anyone considering buying a home right now. This is a perfect example of the media playing up the doom and gloom card. Remember folks, high ratings are what keeps them on the news and admit it, if they do not sensationalize, we won't listen or watch.

Of course on our end, we have been blogging about the "tax credit hangover" endlessly for months.  This dip comes as no surprise for us and if you have been reading our blog and newsletter, this is not a surprise to you either.  So much demand was created and condensed in the months of April, May, and June 2010, it only makes sense that there would be a huge falloff in July.  Is there cause for concern?  Sure there is, in regards to the economy and primarily unemployment.  Is it the end of the world as we know it?  Of course not!  Do we think REM is great? Yes! But we do not like the way the pundits sing their song and we disapprove of the way the media is spinning NAR's calculations. It is quite frankly dampening whatever remains of consumer confidence.

That being said, we are not blind to the negatives either. Let's look at the bad stuff a little closer. With the the home inventory increasing to a supply of 12.5 months (meaning it will take a year and a half to sell what we have for sale right now) and with the increased amount of bank owned properties entering the housing market, and short sales continuing to pop up on the market, there is more risk of price declines in the markets that are already suffering across the nation. More importantly, here in Philadelphia, we see a more stable market with smaller declines across the board particularly for homes priced under $400,000.  The luxury home market will feel the sting of somewhat greater price declines due to the buyer pool being smaller.

What does this all mean to you?  

Sellers - Price and condition are paramount.  Thus, to get your home sold in this market, you need to be priced below your competition AND have a better product.  Your house needs to show like a dream.  Marketing and exposure are never as important as there are today which is why you really cannot hire your the part-time agent or go FSBO, but hire that agent who excels in Internet Marketing and has a strong presence in the area.

Buyers - Turn the TV off.  There is substantial opportunity out there for you.  This may be the single best opportunity in your lifetime in that the combination of prices being where they are, the amount of properties to choose from, AND mortgage rates being SO low offers you incredible purchasing power.  "But what if prices go lower? "  Good question.... But what if mortgage rates go higher??  Even if prices fall $10,000 on that average sales price, that does not even come close to the amount of extra money you will be spending if mortgage rates went up even one point.   And I can tell you, sooner or later, this is going to happen.   

On the investment side, there are more opportunities out there for investors as well since it is harder for buyers to get loans.  In putting my money where my mouth is on opportunity in the Philadelphia real estate market, I have bought two properties in the last couple of months, one in East Passyunk and one in Northwood.   More to come on these in our next newsletter!

It's the end of the world as we know it. And I feel Fine!

 

 

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Ambassador
1,902,490
Nestor & Katerina Gasset
International Properties and Investments LLC - Wellington, FL
Realtors, Wellington Florida Homes For Sale

Christopher and Stephanie- excellent post. it continues to amaze me how people want to shut you up. When those who disagree with you want their say- you let them speak. But they don't offer you the same courtesy. Amazing hypocrisy and frankly- I am getting pretty sick of it. But then, that is where they want you and I to go. :) Katerina

Sep 01, 2010 12:39 PM #30
Rainer
21,070
Vincent Medina
ArtfulMind.Biz - Santa Monica, CA

nice post y'all... here is mine:

 

The Economist

Loss of a credit collapses the market

THERE was always some concern that the Obama administration’s attempts to prop up the housing market with a generous housing-tax credit could end badly. Opponents of the policy—worth up to $8,000 for first-time buyers—argued that it would merely move sales around, from after the deadline to before, and could produce a slump when the deadline passed. Such fears helped clear the way for an extension of the programme from its first 2009 deadline to April of this year.

Despite some effort, Congress in the end decided against a second extension. With the support of the credit gone, a period of housing-market weakness was inevitable, but the actual decline has been distressingly bad.

On August 24th (2010) the National Association of Realtors reported that sales of existing houses for the month of July—the first in which most sales were started after the deadline—fell 27% from the previous month. Single-family houses sold at the slowest rate since 1995.

Those grim figures may not be a one-month fluke.
New home sales are counted when contracts are signed, which means that July was the third month of data after the credit had expired. It was also the worst on record (the previous low came in 1981). Sales of new houses were down 32% year-on-year and down 80% from July 2005.

These rock-bottom sales figures indicate that housing markets in some cities have all but ground to a halt—despite extraordinarily low mortgage-interest rates. They may also presage a new period of declining prices. Falling prices could drive more homeowners into foreclosure, which is the last thing most markets need. At current low sales rates, it may take a decade to clear the backlog of houses owned by the banks.

If there is a bright side, it is that these numbers may force policymakers to reconsider a housing-policy approach that has clearly come up short. In the meantime, any hope that housing construction and employment may begin contributing to growth has been soundly squashed.

 

Opinion:

We need more participation in our civic duties...like writing our congressperson(s).

These are metrics apparently revealing the immediate impact and cause & effect.

 

source: http://economist.com/node/16889179?story_id=16889179

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Sep 01, 2010 12:44 PM #31
Rainmaker
260,193
Coral Gundlach
Century 21 Redwood Realty, Arlington Virginia - Arlington, VA

This blog is fantastic and spot on in every way!  Love the use of the song.

Sep 01, 2010 01:36 PM #32
Rainer
7,863
Eric Castongia
Zephyr Real Estate - San Francisco, CA

Turn off the TV-best idea of the day.  The media is doing more to destroy our market than anything else.  Now if a fabulous time to buy!  Unfortunately, we can't show our buyers that they missed that opportunity until 6-12 months after they've missed it.

 

Sep 01, 2010 01:40 PM #33
Rainer
15,176
Joe Feinhandler
First Priority Financial dba Best Equity - Coronado, CA
FHA, Jumbo, San Diego

Great post. End of the world or not I know that I feel fine :)

Something that I use as motivation is looking at the closed sale escrows in my county monthly.  Does not really matter it they are up, down or sideways I just look at my goal and how small a percentage of the total sales are.  For this month I need .02% to hit mt goal of 7 purchase loans this month. 

Good luck out there and I hope you can get 2 hundredths of a percent of your local biz this month too.

Sep 01, 2010 02:04 PM #34
Rainer
70,825
Donald Tepper
Long and Foster - Fairfax, VA

Great song reference. Remember the song "Signs"? A bit more of a counter-culture theme, but the whole idea of economic indicators (signs) plus the physical real estate signs--along with the query of "Can't You Read The Signs?"--seems applicable here, too. See http://www.youtube.com/watch?v=Z1Q7cP3ij5g (And it turns out that the original performers--the Five Man Electrical Band--are still around and performing. They did me a favor a few weeks ago, not real estate-connected, so a special "shout out" to them!)

And if it's the "End of the World as We Know It," the world is always changing, always reinventing itself. We've got to keep up with it. One of my favorite song lyrics--to return to your theme--is from the Rolling Stones' "19th Nervous Breakdown": ". . . . and your father's still perfecting ways of making sealing wax."

And I think a lot of folks are still trying to get better by doing things the way they've always been done when, as you note, it's the end of the world as we know (or more precisely, have known) it.

Sep 01, 2010 02:12 PM #35
Ambassador
730,682
Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate
Realtor / Owner - RE/MAX Access - Philadelphia, PA

All- if ever I was confirmed that 99% of you GET IT and are talking about it to your peers and clients, I am certainly confirmed today. Your comments were super relavent and I think we all agree "Don't believe the Hype" Public Enemy ROCKS! 

 

Sep 01, 2010 02:49 PM #36
Rainmaker
548,296
Gretchen & Mel Ahrens
ColumbiaGorgeFSBO.com - Hood River, OR

Given the dramatic market reductions in real estate, there are many reasons for homeowners to go it on their own. For some, it means not having to pay to sell their place; others it means hanging onto some of their equity, etc... FSBO is not for everyone but many people are very capable of getting market exposure and pricing their property right. Mel

Sep 01, 2010 03:20 PM #37
Ambassador
1,232,312
Tammie White
Benchmark Realty, LLC (615) 495-0752 or www.TWRealtyGroup.net - Franklin, TN
Franklin TN, South of Nashville

This is excellent information.  Those buyers should turn off the TV and speak to you for local information.

Sep 01, 2010 04:05 PM #38
Ambassador
730,682
Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate
Realtor / Owner - RE/MAX Access - Philadelphia, PA

It is really great when a blog post starts an insightful conversation !  I will be back in the morning to comment more on individual comments !!  Thank you everyone for taking the time to share your thoughts.   Since this post was both timely and relevant, it become the featured article of our September newsletter as well.  ~ Chris

Sep 01, 2010 09:36 PM #39
Rainmaker
309,039
David O'Doherty
Hometowne Realty Clayton East - Clayton, NC
Clayton NC Homes, Raleigh, NC

Wow I don't know what is better reading the post or some of the wacky comments. #4 was so off base! Is this the new phenomenon here ?

Sep 01, 2010 09:43 PM #40
Rainmaker
246,344
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

I have had a great August and fully expect September to be just fine too - all real estate is local - and the DC real estate market is just fine! suburbs are a little difficult but the DC market is great -

Sep 01, 2010 09:48 PM #41
Ambassador
1,552,240
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

That statistic in July did seem like the end of the world if you looked at the bar charts so I agree. But then again it is not REALLY the end of the world. There is always the next month. People can get bent out of shape with change, and change will keep changing.

Sep 01, 2010 09:56 PM #42
Rainmaker
514,675
Russell Lewis
Realty Austin, Austin Texas Real Estate - Austin, TX
Broker,CLHMS,GRI

GREAT post and a thoroughlyly enjoyable read. I like it when a longer post makes sense and keeps my attention and by the way...sellers need to turn off the TV too!

Sep 01, 2010 10:10 PM #43
Ambassador
738,987
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

@ Russell...comment # 43..  how about turn off the tv period, for everything... lol  Seriously, so much of the news is garbage and old, that it repeats itself, that I will only really watch some stations that I get the straight news... but then again, even some of this has opinion that has an agenda.. which is why I like blogging much better, expecially when it is spot on like this one.  thanks

jeff belonger

Sep 01, 2010 11:24 PM #44
Rainmaker
553,834
Susan Mangigian
RE/MAX Preferred, West Chester, PA, RS152252A - West Chester, PA
Chester & Delaware County Homes, Delaware and Ches

I think this is a superb post!  I certainly could not have said it better myself!  Sellers have got to realize they need to be priced more competitively and be the best house out there in amenities and condition.  It's not easy but it's the truth.  Things are still selling and it's only natural that things slowed down after the deadline and in the summer, when historically, we are always a bit slower.  I would remind #31 that's it's bad form to cut and post their own blog post into the comment stream of another blogger.  I also disagree with comment number 4.  It was clear to me that you were recapping as you stated in your first paragraph, not trumpeting doom and gloom.  This article was a pick me up for me.  I'd like to send the link to my sellers.  

Sep 02, 2010 10:16 AM #45
Ambassador
730,682
Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate
Realtor / Owner - RE/MAX Access - Philadelphia, PA

Susan, Thanks and thanks to the rest of you guys. We wrote this post for consumers. It is difficult to make sense of the statistics. We had to do a bit of research to make sure we got it right. It is too easy to mislead. My (Steph) favrite part of the post is the REM song personally : ) Like Gary said above... I wonder what will end the world next month?

Don't be too hard on #4 or on Vincent's attempt to share : ) At least they did not put a link in there spamming Viagra or FL Swamp Land . We rarely edit but those comments, we do get rid of.

Sep 02, 2010 12:59 PM #46
Rainmaker
95,918
Mindy Sylvester
MVP Realty - Naples, FL
Naples Fl Real Estate

NAR figures are a single statistic. Nobody's proclaiming "Doom and Gloom" now, here in 2012, because of the July numbers -- there's a LOT of other metrics involved, especially unemployment and months of (inventory) supply. This crisis cannot be reduced to a soundbite.

Sep 03, 2010 11:56 AM #47
Rainmaker
1,508,686
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Authentic Feng Shui Expert

Hey Chris and Steph, congrats on your featured post! I to love the "turn off the TV" there is wayyy to much drama and reports on the negative aspects of the market or information in general. What about all the good that is going on, no wonder people are so down, all they be fed is "sadness" stop the madness and keep it positive :)

Sep 09, 2010 07:47 AM #48
Rainmaker
1,508,686
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Authentic Feng Shui Expert

ooo and great visual haha

Sep 09, 2010 07:48 AM #49
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