Tuesday, December 28, 2010


We were closed yesterday. I was supposed to be leaving town, but that obviously didn't happen. When I woke up, I couldn't tell how much snow there was, because it had blown around so much. There is no school this week, so I couldn't use the school closings as a guide. It was Monday after a holiday, so I didn't have yesterday's news to go by. Since we'd already cancelled the paper and Comcast was knocked out by the storm, I didn't have today's news to go by! So how did I decide to close?

Well, real estate is almost always a delayable purchase. Many buyers, as well as agents, don't want to drive if they don't need to do so. Those warnings and pleas from the Governor's office, to stay home if you can? They generally apply to us. In addition, most people don't want their properties shown in bad weather, because they don't want to take the risk that a prospective buyer would fall or get hurt trying to get in. Most inspections, closings, negotiations, and other business can be delayed for a day. Everything else, including anything that can be done with a computer and email, will proceed as usual. It's one of the benefits of the change in real estate, away from bricks and mortar and toward clicks.

Of course, we always worry that we will inconvenience someone who expects us to be open. That's why it matters whether everything else is up and running. As far as I could tell yesterday, not much was. So why make employees struggle to come in, only to sit around without any calls or visitors?

Finally, I think a lot of people hoped that the Christmas spirit would linger one more day, if we all took a deep breath and relaxed. And, at least for us, it did!

Tuesday, December 21, 2010

Is the Tide Turning?

Yesterday was the busiest day for property sales that we've had in a long time. I spent the morning today trying to track down the reasons, and there are several possible causes. Two sales came about because the owners brought down their prices. In at least one instance, that produced multiple offers, so clearly buyers are motivated also. They aren't closing before the end of the year, so I don't think it's for tax purposes on the seller's part. It could, however, be due to the cold weather and the arrival of heating bills.

Two of the buyers are coming from Manhattan, so we're wondering whether the bonuses came early this year. There have been some news articles that make that claim, so it could be true. One buyer is about to start a new job, and was in a hurry (although, in the past, those people could have--and probably would have--rented in the short term). One renter turned into a buyer, and that could be an outgrowth of interest rates rising, with the prospect of higher rates next year.

We've had walk-ins as well, which means that people have gotten the message that the time to buy is now. Or maybe it's our Christmas present as agents! Either way, we'll take it.

Tuesday, December 14, 2010

Rate Rise Alert

We've been talking about this for months, but it's finally happening. Interest rates are going up. The latest rates are almost half a percent higher than they were a couple of months ago. What does this mean?

First of all, the cost of owning a home with a mortgage goes up when the interest rates rise, meaning that fewer people can afford to purchase a home. It also indicates that, in most cases, buyers can afford to pay less for the same home, since they will qualify for a lower mortgage amount. In a buyers' market, which we are in now, that burden falls on the seller in large part. So, if you are selling, you will almost always receive less for your home when interest rates are higher.

In the larger sense, it could also mean that we are past the bottom of the market. Mortgage rates generally start to rise when things are starting to improve. Some of that is a signal from the stock and bond market that inflation could be a worry, and part is that the government will stop holding rates down if demand increases.

So, just as people often try to time buying an airline ticket to wait as long as possible to buy a non-refundable ticket at the lowest price, and frequently hesitate just a little too long (as I recently did....), you may already have waited past the point where you should have bought that property. Just don't wait any longer. Once things start to turn around, prices can move quickly. Consider this your warning!

Tuesday, December 7, 2010

Fenway Park South

We went to my brother-in-law's house in New Jersey for Thanksgiving. He lives outside of Princeton, in a nice residential neighborhood with very large homes (dare I say McMansions?). We hadn't been in many months, and, in the interim, he had undertaken a large renovation of their basement. He has recreated Fenway Park, from the Citgo sign and the Jimmy Fund emblem to the concession stand. He even bought seats when the Red Sox got new ones, and they are lined up in front of his 100-inch television screeen. He has the Green Monster painted on tin underneath the TV, done by a woman who travels by trailer from renovation to renovation around the country. (Who knew this was a business?)

But there's more! There is a concession stand in one corner, complete with official Red Sox peanuts and other snacks. The family has outfits identical to those worn by real Fenway Park workers. They have a pool table on one end, inlaid with the correct insignia. I'm impressed, and I don't watch baseball.

So here's the real estate question: What does it do for the value of their home? You can be the judge. There is one nod to the Yankees fans who come--they have Yankees toilet paper.

Tuesday, November 30, 2010

The Power of Low Rates

I have a real estate friend in Madison, Wisconsin--where the market seems a lot like ours much of the time--who thinks that the real estate market will not recover unless and until the government aims directly at our industry with programs designed to improve sales. Although the tax credits did that, they expired and left us, arguably, in worse shape than ever (however, people don't realize that, because they look at the fact that housing prices haven't declined much, and in some cases, they have edged up slightly--that's because all the first-time homebuyers have left the market, leaving higher-priced homes as the only ones selling). The government has focused on the banks, using first TARP money and then foreclosure actions to regulate activity. We probably haven't been helped at all by the foreclosure stoppage, since it just lengthens the period of time where the whole housing system is backed up. Until all those homes, which--foreclosed or not--the owners can't afford, get transferred somehow, there won't be a "normal" real estate market. Appraisers can't even use those transfers in computing value, since they aren't arm's-length transactions, but they obviously have an effect on values and on regular sales.

This same friend, although thinking that we need Federal intervention to improve our market, also has the most compelling argument for buying right now. He has made charts that show that a 10% drop in prices actually has less of an effect on monthly payments (the gold standard by which most buyers decide how much they can afford) than a 1% rise in interest rates. Therefore, buying a home now, with the current rates, costs you less than buying it later, even if prices drop by another 10%. If rates go up, that savings in the prices will be more than offset. Whether that obviates the need for governmental action on behalf of the housing industry, I'm not sure. But I am sure that it makes a compelling case for buying a home now.

Tuesday, November 23, 2010

The Week of Thanksgiving

It seems ironic, in an economic environment when many have less to be thankful for, that Thanksgiving seems to have become a week-long holiday. I was amazed to find, when I was driving home last Friday night, that I95 North looked much as it did on the Friday before a summer long weekend. Then I came to work yesterday, only to find that a lot of folks did not.

If we weren't so desperate in our industry to get things sold and closed by the end of the year, it might be nice to have a week in which to play catch up. We could do all the things that we haven't had time to do since Labor Day, and take a little extra time to get ready for the holidays ahead. However, when you are trying to finish up deals, recruit, collect bills, track down deposits, and negotiate next year's contracts for services, it's disconcerting to learn that many calls go unanswered and emails bounce back.

Yale gets the whole week off, and my running buddy was amazed this morning to see a school bus, since he thought all schools got the same vacation. Hopkins did, but the public schools are still in session. That should mean that some people must still be around! So where are they? And why aren't they answering their phones?

Tuesday, November 16, 2010

The End of Civility?

I'm going to make a kind assumption, and start with the premise that people don't understand the life of a real estate agent, or how they get paid. We work on commission, which means that we only get paid when something sells or leases. Obviously, that means that there are many instances when we do work for which we are uncompensated. While we have always accepted that fact as a part of our lot in life, it seems lately to have gotten much worse.

Our commercial agents shocked me recently when they told me that at least half of the buyers they go to meet arrive late, and some not at all. Also, they said that they are actually very surprised when a buyer or his agent takes the time to call after a showing with feedback or information. For instance, one agent was pleased that a buyer called him to say that he'd found space closer to his current building, and was no longer interested in the space we had shown him. I found it amazing that an agent would be happy to be told that someone wasn't renting something, but he said that it saved him a lot of time chasing the guy around for an answer.

With that low standard for polite behavior, I have to guess that most buyers don't stop to think that an agent who shows them property is not paid to do so, and in fact uses his or her own car, gas, and time to do so. I've been told that many who do not call back assume that, if you don't hear from them, you are supposed to know that they are not interested. While that may be true, it doesn't help us to do our job for the owner. If you were the owner of the property, and not the prospective buyer or tenant, you would certainly be unhappy with an agent who couldn't give you information or feedback about a showing, and probably wouldn't be satisfied with the answer that they hadn't called with a response. That leaves us caught between a rock and a hard place.

While real estate agents are resilient, and while they are taught to follow up if they don't get a call, it would certainly be nice to be thanked for our time, and treated as professionals. In the current commercial market especially, buyers and tenants often know that they are using us to test the waters, so that they can go back to their current landlords to renegotiate their rent. If we oblige them, and give them what they need at our own expense, is it too much to ask that they get back to us and thank us?

Wednesday, November 10, 2010

Thinking of Waiting for Spring?

At this time of year, we often hear people say that they are putting their searches for property on hold until the spring. While we understand the appeal of taking an item off the To Do list at this busy season, I want to point out the possible consequences.

Savvy buyers don't talk about the price of the property, they talk about the monthly payment. Current mortgage rates are so low that the cost of risking an increase in rates almost surely outstrips the risk that you might buy now and have prices decline slightly before they rise again. The low rates also trump any idea that you have to bargain for the last nickel. Take the deal, lock in the rate, and gloat later.

Many consumers are acutely aware of the aspects of this housing market that favor buyers. They therefore think that, regardless of what a property is listed for, they should offer 20% less. They seem to believe that sellers are desparate, and that they need to bottom fish in order to purchase now. Since only the well-priced properties in good condition are selling, it's not even really true, as I have pointed out before, that there are so many things to choose from that such a strategy can succeed.

Let me remind any such people that this market is not a zero-sum game. Both the sellers and the buyers can win. The sellers can sell and repurchase at the current lower prices, with the lower interest rates. The buyers can buy and also take advantage of these rates. Everyone can walk away better off. This is an unusual time in that respect. If you figure out what the monthly payment will be, you may discover that it makes far more sense to buy and move than to wait.

Friday, November 5, 2010

Today's Register Article on Home Sales

Today's business section has an article reporting that unit sales are down, but prices are "inching" up. This may surprise people, but it's important to remember how these statistics are compiled, and that's by adding all the sales in one time period and comparing them to all the sales combined in another time period. That's not an apples-to-apples comparison, unless by chance the same house sold in both periods, and you just looked at that sale.

With so many properties on the market, and the lagging state of the real estate industry, only the best homes are selling. By that, I mean the ones that are priced compellingly and are in close to pristine condition. There are some exceptions, especially in areas that are in demand and have less inventory, but in general only the "good" buys are selling.

What does that mean for sellers? Don't assume that your home is worth more than it was last year, and don't assume that you can price it aggressively. One of the most striking changes in the real estate field over the past 25 years is the amount of market knowledge available to, and often absorbed by, buyers. They know what your home is worth, and they aren't--except in the rarest of circumstances--going to pay more. If your house stands out, in price, location, appearance, or condition, you have a better chance of selling it. Those are the home sales showing up in the statistics. Adjust your expectations accordingly!

Wednesday, November 3, 2010

Home for the Holidays

This is the second of my annual posts. It's another one that is often the same, although this year I might even being writing it a little earlier than usual. It's time to remind those who want to close out the year by finishing a move that we have arrived at the eleventh hour.

By the time a buyer makes an offer, gets it accepted, does his/her inspection, obtains a mortgage and insurance, and closes the property, it will be the end of December. And that's if nothing goes really wrong.

The buying process has always contained some amount of sturm und drang, and there may be a little back and forth negotiation after the inspection results, but it is the mortgage process where the time frames have drastically changed. People who have not financed or refinanced recently will be shocked at the current level of documentation required for getting a mortgage. Often, they even spend time arguing about whether something is necessary--not worth your time, if you try--and it may take some time to produce all that is needed. The appraisal process can also take longer, especially since the low rates mean that there is a great deal of refinancing work being done at the banks now.

Even insurance is more complicated than it used to be. I remember the days when you could call on the day of the closing and get a binder. No more. Flood insurance in particular seems to slow up some transactions, where it is required.

The final point to keep in mind is that the holiday season is often a vacation time and/or a busy time for attorneys. Buyers have to plan ahead a little more to get things closed at the very end of the year.

There's my annual warning, so now it's time to get going!

Tuesday, October 26, 2010

It's That Time of Year Again

Every year I write the same thing at this season, because every year it's true: the best time to buy real estate is between Halloween and Thanksgiving. Why is that? Because that's when sellers are most likely to accept an offer that makes a transaction either possible or particularly enticing to the buyer. As the weather gets colder, and thoughts of heating oil, plowing driveways, and holiday hiatuses on open houses and offers creep in, sellers weigh, as they should, the costs of carrying a property through the winter (for that is most likely what they will end up doing, if they don't sell by Thanksgiving) against the reality of an offer that is less than they want to accept. In addition, there's no guarantee that prices will even go up in the spring, and a outside chance that values could decline over the quiet months. As a further inducement, some sellers have tax reasons that make closing before the end of the year important or at least profitable. Although some people say that tax considerations could change with a new Congress, I think most would agree that uncertainty generally doesn't favor waiting when one is talking about the chances of taxes going either up or down. Even the economic news, which has seesawed over the past year, should make one cautious about holding out for better times.

This year, with so much inventory on the market, and so little time before the holiday season, it's especially important to consider pricing properties at levels that are not just correct, but compelling. Stand out from the crowd with a price that entices, and get your property sold while others just sit. And do it before the first flakes of snow hit the ground!

Thursday, October 21, 2010

Back From Boise

I just returned from Idaho, where the national group of independent real estate companies to which I belong was meeting, and I can report that it's scary out there. We have all cut costs, and are continuing to cut costs, finding new businesses and new ways of doing business, and changing our organizations to adapt to a changing world. No one thinks that it's going to get easier in the next couple of years.

We are probably not that different from owners in many industries. When you look at the stock market, it may seem as though times are better, since many are reporting higher earnings. However, when you examine things more closely, most of the improvement comes from cutting costs and laying off employees, not from raising revenues. Especially when you get to smaller companies, that strategy has its limitations. As one member of our group reminded us, you cannot save your way to prosperity.

While the whole country is affected, it's a good time to be in the Midwest. Those in that area say that it's because what doesn't go way up doesn't come way down, and that may be so. Everyone agreed, though, that some ways in which we traditionally made our profits--traditional brokerage, relocation, and commercial sales--are all suffering, and people are increasingly looking to new sources of income--mortgage, property management, and insurance (which, ironically, was fairly recently thought not to be much of a moneymaker for real estate). Short sales continue to affect all parts of the country, with the Midwest again being better than Nevada and other hard-hit markets.

We talked about the trends, the harsh realities, and the future of our industry. Afterward, we adjourned to do the only thing we could then think to do--drink!

Thursday, October 14, 2010

Not Enough Listings?

We were talking yesterday in a couple of offices about the current state of our listing inventory. While the average person might think that every third house is on the market as we speak, much of what is available is either shopworn, overpriced, or needs work. Today's buyers, who believe that they are in a buyers' market, expect that every week more properties will be listed, and that prices may even come down further. Therefore, they think that they can be--and they are--extremely picky about what they want.

While it is true that new properties come on the market each week, many of the new entries suffer from the same problems as the old ones--i.e., overpriced or need work. When we get buyers who are motivated and in a hurry, they often feel that they have surprisingly little inventory from which to choose a property. At the same time, we know that many sellers out there feel that they should wait to list until there are fewer signs in yards (not counting the ubiquitous political kind!). Properties that are in pristine condition, which would command top dollar, thus stay off the market, while their owners wait for a better time to sell.

Ironically, it would be hard to find a better time to list those particular properties. There are buyers out there, and there are more of them all the time that come out to look, as many feel that the recession is over, but rates are still low, and believe what we're all hearing, that this is the best time to buy in 50 years. Yet those buyers cannot get over the fact that they aren't seeing exactly what they want. Given the high inventory, they keep looking. They even think that they can find rooms painted in the colors they prefer. Most don't seem to want to do any work to the place of their dreams.

This mismatch between what buyers want and what sellers are offering leads us to believe that, although inventory is high, there are actually not enough listings on the market, of the type that will sell quickly. If you own a property like that, call us now. You may be pleasantly surprised at the results!

Thursday, October 7, 2010

Thank You, John Paulson

If any of you have not read reports about hedge fund investor and Wall Street prognosticator John Paulson's recent speech about the economy, I can summarize it this way: Buy real estate. He told listeners that, if they didn't own a house, they should run out and buy one. If they did own one, they should buy a second home. If they already had two, they should buy a third and loan their relatives money to buy homes as well. He called it the best time in 50 years to purchase real estate, mostly thanks to historically low interest rates.

Since we are used to seeing all the stages of a real estate cycle, we know that we are at the bottom, and hope that we may even be starting up. While sales fell badly in the third quarter, due in large part to the expiration of the tax credit, prices in our region only dropped 1 to 2%. That's far less than most people think prices are off, and shows that the underlying value is solid.

Now ask yourself how you will feel next year if you do not buy now, and prices, sales, and interest rates all go up in the intervening time period. If you feel that you have enough house and enough mortgage debt, even with the prices and rates, then you'll be fine. But will you be kicking yourself if that house you coveted is now $100,000 more, and rates are up to 6 or 7%? If so, then you know what you have to do. So, as Nike says, just do it!

Wednesday, September 29, 2010

Why Does Consumer Confidence Matter?

I like to read the papers as early as possible in the day. As a morning person, I find that I can absorb bad economic news best before 6 AM. This morning, I was challenged to do just that, as consumer confidence hit a low that was unexpected by analysts. That, of course, will make the real estate market worse.

It's somewhat of a chicken-and-egg situation, because the poor real estate market has a lot to do with what happens to the consumer confidence index. Is it so low because recent news about housing sales has been so negative? Or is low confidence causing the level of real estate sales to drop? Although it's hard to know for sure, it's probably some of each.

If you were making a list of what goes into the strength of the real estate market, apart from local issues and demographic trends, you would probably cite three things: household income; interest rates; and consumer confidence. Income is obvious, because the more you earn, the more you can afford to buy. That can occur because your job pays more over time, or for other reasons, such as the run-up in prices caused by two-income families going up dramatically and allowing housing prices to follow. Interest rates also have a clear effect. Since the only thing that really matters to most people is the amount of their monthly payment, lower rates will let them buy more house for the same monthly nut.

Consumer confidence is really the measurement of people's expectations about the near-term future, both of their own situations and the national economy. To translate that into housing prices and sales, the index reflects what they think will happen to their jobs and wages. Unless they feel positive about their prospects, they are most likely not going to take on additional or increased debt. Unfortunately, there is a multiplier effect as well; when they read that others are not feeling rosy about the future, their own opinions tend to drop as well.

The Federal government is charged with raising confidence about all of our futures. Let's hope, for all our sakes, that they come up with something that works, and sooner rather than later.

Thursday, September 23, 2010

Our Annual Day of Caring

For the past eight years, we have closed all of our offices for one fall day, and volunteered in non-profit settings around Greater New Haven. Tomorrow is this year's day, and we will be at Saint Martin de Porres Academy in the Hill section of New Haven. Some of us do hard physical labor, while others do office work. It's great to work as a team across offices, with coworkers that we don't get to see all the time.

Day of Caring was created by United Way after 9/11. I remember the first year, and how good it felt to be doing something positive on such a mournful day. Agents came up to me and commented on their gratitude, to be able to commemorate sorrow and do good at the same time. Over the ensuing years, it became part of the H. Pearce calendar, that demonstrated our values as a company, and gave back to the communities that nourish us.

This year seems a little different. While we still believe in giving back, and we still support United Way, many agents are hurting economically themselves. They may have taken a second job, or given up luxuries (and maybe necessities), as they struggle to cope with a flailing real estate market. We all have uncertainty and worry about the future.

Ironically, this is the time when we should be helping others the most. It's when you reach out to give a boost to someone needier that you feel best about your own life, your own good fortune, and the future of all of us. We all need a helping hand every once in a while, and it's nice to have given one ourselves.

Thursday, September 16, 2010

Finally Some Helpful Press

There was a wonderful article in the Wall Street Journal this week, that actually listed ten reasons TO buy a home. As you can tell by the title, we have come to expect that every article will result in calls from clients who have decided not to go forward with a purchase. Therefore, we were thrilled to get some help from the WSJ.

You would not be surprised by most of the reasons, because you've heard them all before. There were a couple of arguments that were particularly good, however, in the way that they were phrased. One was the perennial issue of whether a buyer should buy before the market hits bottom. All real estate professionals know the answer to that--you cannot predict the bottom, so you should just get somewhere near it and not worry. The article, however, quoted a talking head as saying two years ago that prices had to fall another 17% to reach where they should be, and that the Case-Shiller Index in those two years showed prices down 18%. That's pretty close to the bottom.

The other points I really liked were really variations of the same theme---you get a better home when you buy. That's because better properties get sold and worse properties get rented, but it's also true because you can't (or won't) personalize a rental the way you can or would your own place. It's a version of what I've been saying--that you have to like where you live--but it gives some concrete reasons as to why buying does a better job of providing that.

Low mortgage rates, big inventory, fewer taxes, long-term growth--all of these ideas were listed as well. Let's hope that some of you take the plunge after reading the paper!

Thursday, September 9, 2010

Should We Let the Market Fall? Part 2

In my entry yesterday, I blogged about the NYT article talking about what's happening in the current market (very little) and what could or should be done about it. The first issue I discussed was the possibility of a double dip, and whether that would happen. Today I have a suggestion about the type of governmental intervention that might prevent further declines.

All of the efforts to date ($23 billion in tax credits) have been focused on homebuyers, particularly first-time homebuyers. As I have opined before, first-time buyers are the most likely to buy no matter what market conditions might exist at the time they are ready to purchase. Since interest rates are low, and prices have come down somewhat, and since they have nothing to compare those prices to, they should be motivated already. The problem is that there is little well-priced product out there for them to buy, low sales notwithstanding. The inventory lacks homes which are not even being marketed due to current conditions, and many that have been on the market too long and for too much.

Why shouldn't the Federal government consider a one-time tax credit for sellers, maybe as a percentage of the loss in value that they have incurred, or maybe as a credit when they both sell and then buy? Many people would not even qualify, just as many buyers made too much money or bought houses too expensive for the homebuyer credit. Some have lived in their homes for so long that they would never lose money when selling, and some will sell but not purchase again. However, it would be a strong signal from the government that sellers need to lower prices before the market can move again. If that could be accomplished for the same price tag as we incurred giving an incentive to buyers, it might free up the whole sales chain. Buyers who can't buy because they already own a home they can't sell would then trade up or move, and people who just can't stomach not getting what they would have gotten a few years ago might feel that the tax credit made up for that, at least in part. There are many details to be worked out, but something needs to happen, and I don't think that even job creation will change the perception about the current state of real estate without some sort of outside help. Waiting around is costing us all time, money, and sound sleep.

Wednesday, September 8, 2010

Should We Let the Market Fall?

There's a very interesting article on the front of today's NYT business section about the differing predictions as to future real estate prices, and what to do about the flailing state of demand. Some experts think that real estate has been overvalued for the past couple of decades at least, and that the medium-term future upside will be limited to minor price increases. Those people often believe that we are at the beginning of the dreaded "double dip", and that real property prices will drop again.

Other experts feel that real estate is a luxury good, and that people will spend more on housing if they can. As my most recent prior blog would indicate, I'm in that camp. Especially when you consider the age of the baby boomers, I believe that they will "nest" over the next number of years, spending as much as they can on houses where they feel that they could live in retirement, and where their children will visit them. That would argue for higher values, at least for premium properties. As people spend less on food, they are going to spend their excess income on something, and I'm betting on housing over travel (not as easy as it used to be), cars (not politically correct), and clothing (ditto). Housing is where you can express your individuality without looking like a conspicuous consumer.

If you believe this scenario, then housing will improve as soon as consumer confidence rises and remains higher. For more on governmental intervention, I have an idea about that, too, so tune in next time.

Monday, August 30, 2010

Don't Just Invest, Enjoy Your Investment

Many of you have probably been reading all the dire news about the real estate market lately. It was the worst July in 15 years, and the outlook for the rest of the year isn't great. I think we can safely say that those of us in the business already knew that, just by the lack of calls, sales, and closings. The articles in the papers aren't helping, either. They keep telling people that houses are no longer safe investments, guaranteed to go up each year and to outpace inflation.

But, really, what's so bad about that? Your home should be a place that you enjoy living in, and where you are happy to be without regard to appreciation. Over time, no investment goes up steadily; even ones which are extremely risk-averse do poorly when inflation is high. I recently had a friend tell me about his fancy new wine cellar. He is building it to display his 297 bottles of wine, most of which were bought as investments, after careful research. My friend knows exactly what they are now worth--just over double what he paid for them. As we laughed about his knowledge of the wine collection's appreciation, he downplayed the investment value. After all, he told us, even if their value goes to zero, they will still be available to drink and enjoy!

And what about a similar view for real estate? It's always been true that homes should be bought for more than their investment value, and buyers have always been aware that they shouldn't buy if they might have to sell right away. Although it's not quite the same as the fact that a new car loses its greatest amount of value just as it's driven off the lot, the costs of reselling property mean that there has to be some increase in price just in order to break even on a resale. What it seems that we've all been forgetting lately is the consumption value of living in your investment, and enjoying it in the short run. So try to think of real estate as a consumer good, which you can enjoy and use; while you are at it, maybe you should lay away some bottles of wine as a hedge for your bet!

Thursday, July 29, 2010

Second Quarter Results

We just released second quarter statistics from the Greater New Haven region, which showed a major uptick from the same quarter of last year. Of course, the homebuyer tax credit was expiring, so there was a rush to close units while that was still in place. Also, however bad the economy still is, there is some national sense that things are better than in 2009, and the base of comparison was therefore low.

Within the region, Guilford and Woodbridge had the highest prices, with Madison coming in third. Prices generally went down from the second quarter of last year to the first quarter of this year, and then climbed in the second quarter of this year. Unit sales went up more sharply, rising 20% from last year's second quarter through this year at the same time.

It would be interesting to know how many of the sales were from properties which have been on the market for a long time, languishing at high prices, where a price reduction sparked an offer. Anecdotally, we know that many of the stories we hear involve sellers who are finally putting things on where they will sell. They are helped in their efforts by mortgage rates, which are so low that they allow for buyers to feel that they are getting a good deal, based on monthly payments. A recent article in a national paper suggested that buyers are trading up as a way to lock in cheap money. Let's hope so!

Wednesday, July 21, 2010

Stimulus Money

Everywhere I've driven lately seems to have road construction going on, and it seems to be paid for by Federal stimulus money. You certainly can't tell by driving around that towns and cities are in fiscal crisis! The real estate stimulus money is gone, even though closings that were delayed can still take place through an extension bill passed recently.

I was one of those who thought that giving a tax credit to first-time homebuyers was unnecessary. First of all, they are the people most likely to buy under any circumstances. Secondly, interest rates are very low. And lastly, I thought it was repeat and second-home buyers who needed pushing.

I guess I was both right and wrong. Most buyers didn't even qualify for the full tax credit, or even part of it. Although the second version of the credit allowed repeat buyers to participate, many of them earned too much to get the benefit. However, it's clear that sales plummeted as soon as the stimulus money expired. That indicates that even those who did not get the money back were affected by the offer. And, as we all know, perception is reality. Whatever it took to get buyers off the fence was needed, and the tax credit seemed to help. It moved people who would have bought anyway into an earlier closing, which pushed sales up in the first part of the year, and will have a negative effect in the second half.

There is another kind of stimulus available, however, and that's a perceived bargain. Sellers can make their properties attractive by lowering prices. There's a great deal of evidence that that is exactly what's happening in some segments of the market. Things are selling, but at discounts off the asking prices. Even in New York City, long considered exempt from the housing recession, recent articles have referred to big discounts leading to sales. Until the Federal government acts to spur housing again, we'll have to depend upon owners doing it through pricing. And, given the normal seasonal fluctuations in the market, they'll have to do it soon if they want to sell in 2010.

Wednesday, July 14, 2010

Weather and Real Estate

I'm looking out my window at what promises to be the first full day of rain all summer. We need it! And it's hard to object, when there's been so much sun for so long. It's a great day for people to do what they haven't gotten done through the sticky season. Procrastination is very easy in hot, humid weather.

Well, that applies to buyers and sellers of real estate as well. We've known for a long time that there is a bell curve to open houses, for example. If the weather is too nasty, people don't come. If the weather is too good, people don't come. We also know that wintery weather causes almost everyone to cancel showing appointments. The height of summer is usually very slow, with few phone calls, although vacations have a lot to do with that also.

So what's the message here? Just as when you travel, you should expect weather delays when you buy or sell real estate. But on a day like today? Grab it and get business done!

Wednesday, July 7, 2010

Waterfront Statistics

Since I've been blogging about prices and trends in New Haven compared with its suburbs, I was prompted to look at the shoreline statistics. Since we've been talking about the upper end of the city market, we checked sales of waterfront property since the beginning of the year. Taking Branford, Guilford, and Madison, a dozen homes on the water over $1 million (which we assumed meant all but an anomoly) sold in the first six months of 2010. They stayed on the market anywhere from one day to over 600 days, and none sold for the full listing price. The lowest listing to sales ratio was 62%, although most I calculated were in the 85% range, with only a couple selling at over 90% of the listed price. One was in Branford, three were in Guilford, and the rest were in Madison.

While this is an exceptionally low number of sales in that period of time, it does tend to confirm the idea expressed in earlier pieces that the City of New Haven is outperforming other high-end areas. The surprising thing about this particular comparison is that waterfront is the ultimate example of location, location, location. The most frequent comment on its primacy as an investment choice is that "they're not making any more of it". When even that theory fails to prompt sales, especially during a time when the traditional hoped-for investment bankers are doing well enough to buy waterfront summer homes, there's cause for real concern about the economy. Let's hope that the next quarter shows a different result.

Monday, June 28, 2010

Where Have All the Buyers Gone?

The national news, as well as area papers, are full of stories about the abrupt dropoff in housing sales for May. Everyone knew that this might happen when the tax credits expired, but the amount of the decline is still surprising to people. After all, many families did not qualify for the credits, which decreased as income increased. Also, although the second round of credits applied to repeat buyers, it was always aimed at first-time buyers. They bought, but probably mostly in the first round, from what we could see. Ordinarily, first-time buyers make up about 45% of the total market for sales. With the tax credit, that percentage had increased to 55%. Even though that means that we have moved 10% of the sales from the future into the present (now the past) with the help of tax credits, there is still almost half of the buying population unaccounted for in these numbers.

Where did they go? It seems that consumer confidence, once again, has reared its ugly head. All the news reports about job losses, retail sales, and the stock market have affected homebuyers negatively. While we knew that this could happen--it's some version of the double-dip theory--it still surprises those of us in real estate, to some extent.

Interest rates are very low. Housing prices are back down, in many cases, to where they were several years ago. Everyone knows that, even if you sell low, it doesn't matter, as long as you also buy low. Consumers have stayed out of the fray for most of the tumultuous recent past. So they should be out in force, and they're not.

One theory is that there's too much on the market, and therefore they have paralysis. Another is that they think prices will continue to decline. It is true that mortgages are harder to get. And, of course, it's summer--hot and humid weather tends to keep people from doing all but the essential tasks of life.

However, we're all watching with bated breath. The housing industry cannot afford a long layoff from sales, as we endured at the beginning of last year. Congress, take note!

Monday, June 21, 2010

New Haven Residential Statistics

After I wrote my last blog on the New Haven residential market, I received a call from a reporter who follows the blog, asking whether my assertions were based in fact. Always an interesting question about a blog...Anyway, our office did some statistics for the East Rock market, using last year and this year, with houses in two ranges: $300-500K and houses over $500K.

Even though I had said that that market area was very healthy, even I was surprised at how true it turned out to be. The median number of days on the market was 55 for the first price range, and an amazing 20 days for the second range. The list to sales price ratio was 95% for the 300-500K range, and 94% over that amount.

It's hard to compare numbers when you are looking at larger areas, such as entire cities and towns, or even zip code regions. This analysis was done street by street, in a relatively small area, and so cannot be extrapolated to other places. Translation: Your home in a suburb, or even another part of New Haven, or even in another price range in the same neighborhood, may not sell that quickly or that close to the asking price! Although it's also true that you cannot say that, even in this small subgroup, these figures will necessarily hold, it's good news for the East Rock section.

Monday, June 14, 2010

Mortgage Changes

We've talked about mortgages before, but it's always worth pointing out when things change. The appraisal issues--time to get one and values obtained--were front and center near the end of last year. Now it's the paperwork and length of time involved in processing an approved loan. I'm not sure that most buyers realize how much documentation is involved in getting a loan from approval to closing. Almost all loans now come approved with contingencies--various types of proof that are needed to substantiate the loan or the loan amount. To many people who have been through the process in the past, what gets requested now can seem absurd. Even to those of us who have been steeped in the industry, the constant changes in RESPA requirements seem bewildering and onerous. There is even a three-day period now between the closing statement production and the closing.

For buyers in a hurry, these rules can be infuriating. Perhaps even more so, sellers--who may not have gotten a loan recently, and may vastly underestimate what's involved today--are often unsympathetic and extremely annoyed. Even attorneys weigh in on the difficulty of scheduling a closing these days.

A good analogy might be the security checkpoints now present at every airport. Comparing them to what was necessary 20 years ago is almost impossible--it would be like comparing a stagecoach journey to a space trip! In addition, many of us feel that we're just trying to avoid a repeat of the last disaster; in one case, 9/11, and, in the other case, the financial meltdown of 2008. Whatever the reason, and whatever you may privately believe about how much the new regulations will prevent similar problems, many of these procedures are here to stay. So pull up a chair, and wait patiently for the closing.

Monday, June 7, 2010

Buyer Brokerage Again

It's time to explain buyer brokerage again. The real estate business has changed a great deal over the years, and buyers don't always understand the changes. It is similar in many ways to the medical field, where privacy concerns have led to the HIPAA law, requiring patients to sign documents each and every time that they see a physician. Even lawyers have gone in this direction; a client must now sign a retainer agreement before any work on his or her behalf can begin.

Well, we have those rules as well. When you begin to work with an agent, he or she is required, at the first significant contact, to present representation forms. Although we are allowed to take you into our own listings, that is because, in those cases, we represent the seller. We cannot take you into someone else's listing without having buyer brokerage. If we do, we don't have to be paid. Would you work at your job without knowing whether you are going to get a check?

These rules are also for your protection. If we don't represent you, we cannot tell you things that it would be in your interest to know. For instance, we are only supposed to tell you the listed price without a buyer brokerage agreement, not what we think you should offer or what we think the property is actually worth. The current regulations arose out of a genuine feeling that everyone deserves his or her own agent, looking out for his or her own interests. Almost all of the time, the seller still pays the commissions to both agents--that's because the seller is the one with the cash, since buyers cannot roll commissions into the mortgage amount. However, even that will probably change some day.

In the meantime, be kind to your agent who asks you to sign a form that you didn't used to have to sign. He or she is just trying to do his or her job in the best possible way, and to help you get all the information you need to make a good decision.

Tuesday, June 1, 2010

As Cambridge Goes, So Goes New Haven?

We spent last week in Cambridge, and it's easy to see the upside of a big university on its surroundings. As we wound our way through the side streets in an effort to avoid Harvard Square at graduation time, we could see the sprawling evidence of gentrification everywhere--Central Square, Inman Square, Davis Square, Porter Square, etc. The subway has gone farther north, but so has the population. And it's not all students anymore--the same young professionals that we are hoping to retain in New Haven are buying condos in converted triple deckers and apartment buildings, and all of the retail and nightlife that follows such is thriving.

While New Haven isn't attached to a large city, as Cambridge is, you can really see the possibilities of building upon the advantages of a college town. If we can continue to add jobs in the sciences and information-based arenas, and we can still provide the entertainment and dining options that New Haven is known for, then our future will stay bright.

And what do we need to do to help this process along? It's pretty simple--create jobs. Connecticut and New Haven must work together to make it an attractive place to start and expand businesses. The City must also focus on keeping crime low and attractiveness high. Private entrepreneurs, whether in real estate or investment or venture capital, can do the rest.

Wednesday, May 19, 2010

Who Would Have Thought It?

If someone had told us twenty years ago that the center city's residential properties would be holding value better than those in the suburbs--better even than direct waterfront--we probably would have scoffed. It's clear right now that the hot market is New Haven--the closer to downtown, the better.

This isn't by accident. President Levin of Yale, who has been in office for fifteen years, lived in New Haven for many years before he became Yale's leader (and, in fact, has continued to live in his own home, rather than the one that Yale provides). He has made it clear that he would be happy if every new hire lived there as well. The last time that I heard, 47% of Yale's senior faculty lived within the city limits. In today's New Haven Advocate, the stated equivalents of New Haven's municipal police and firefighters were 13% and 17%. Yale's showing clearly represents the payoff of a long-term strategy.

There is another factor at work, however. Current demographics favor the central city, although this is a change from earlier generations. Young professionals have always preferred urban life, but now, increasingly, so do empty nesters. The arts, the dining, the conveniences, and the lack of commuting time have all contributed to make New Haven a popular housing choice. Even those with school-age children, if those children attend one of the city's prestigious private schools, have been moving into the city neighborhoods.

And that's all good news for the region, since a vibrant city makes for healthier suburbs.

Wednesday, May 12, 2010

Independent Realtors

The rise of so many national real estate franchises has led some people to believe that only national companies get business from out -of- towners moving in, and that only national companies can expose your property to a wide range of people. That turns out not to be true.

H. Pearce belongs to Leading Real Estate Companies of the World, an organization of high-quality independent firms. This group sells more real estate than any franchise company. It also has comparable statistics for productivity and earnings.

That shouldn't be surprising news for owners and buyers. After all, is McDonald's the best restaurant in any town? And does your favorite breakfast food get sold through a few franchises, or through a plethora of mom-and-pop eateries?

As with other industries, the trend is clear: Big firms gobble up smaller ones, until there is a perceived need for personal service and distinctive work. At that time, new firms spring up to fill the demand. It's true in banking, retailing, and a host of other fields. We're no different, and we're glad that the evidence bears out the quality and competence of the locally-owned real estate company. Go local--have your dollars stay here!

Wednesday, May 5, 2010

Where the Money Is

I've been reminding agents this week that most, if not all, of the money people make investing in real estate comes during the run-up in prices after a downturn ends. While it can be somewhat equivalent to trying to be a market timer in the stock market, it's a little easier to judge in real estate.

We know that prices and units have both been flat or declining since the beginning of 2006. We also know that there is a lot of pent-up demand, as people have been sitting on the fence for some time now. As soon as demand picks up, there's a good likelihood that prices will follow. Those who act now, and get in on the ground floor (no pun intended) will reap the biggest rewards.

Of course, that applies as well to investment property. There is a fairly good selection now of rental and other property. This might be the time to take money out of that 1% (or less) money market account, and buy some real estate.

Wednesday, April 28, 2010

First Quarter Market Statistics

Our crack internet team has just finished compiling statistics on sales and prices in our region for the first quarter of 2010. Yes, it's true--the market is way up. Sales in New Haven county are up 34% over the same period last year. Prices fell 7%, which was less than they had been falling, and also reflects a shift in the mix of what's selling. The first-time homebuyer tax credit has the greatest impact in the lower price ranges, and that will make a difference. Also, the upper end of the market tends to be the most discretionary, and the lack of consumer confidence has had those buyers continuing to sit on the fence. If you'd like to see the full report, go to http://www.hpearce.com/, and pull down the Services tab to access Market Reports.

I just got back from a meeting of some of my peers, the presidents of other large independent real estate firms. Around the country, the news is much the same. Last year was so bad that we're all feeling better. We're all worried about what will happen when the tax credit disappears on Saturday, but we all agree that this second round has not been as effective in spurring sales. All of us have slashed costs, but know that a healthy company cannot survive in the long run by cutting expenses instead of increasing sales. We are fortunate here compared to markets like Reno, but even my friends there are seeing an improvement. Since 67% of their sales are foreclosures and short sales, that wouldn't be hard! We continue to be encouraged that independent firms are doing so well in competition with the franchises, and know that our ability to move quickly and make decisions has helped us immensely in this downturn. We were meeting in Davenport, Iowa, where the market never spiked the way ours did, so the landing has been much softer. There is a lot of activity there, and the average home price in some offices is about $90,000. That would be quite a bargain here!

Friday, April 23, 2010

Markets and Marathons

This posting is a little delayed, since I ran the Boston Marathon on Monday. The relief of having it over, plus the exhaustion, kept me from writing sooner! Every time I run a marathon, I think about how much it is like the real estate business. The basic foundation is the preparation. You have to put in the hours. Some naturally talented people seem exempt, and can run or sell without spending a lot of time getting ready, but the general rule is that you reap what you sow. The long 20-mile runs, or the late nights at the computer, pay off in the future. You can't just wing it.

There's also some amount of luck involved. Performance in a marathon depends greatly on the conditions of the day and the course--temperature, elevation changes, wind, and congestion on the course. It also matters how you feel on a given day, and you won't really know how you will do until you get to 20 miles or even beyond. Success in real estate depends on market conditions--we don't control interest rates, bank policies, political postions, or consumer confidence. Local economic factors, such as unemployment rates or business expansions, are also variables we can't change.

However, in both marathons and real estate markets, we can do the best with what we have. We have the same conditions as everyone else on the course, and we can outperform others with training and perseverance. We can be mentally tougher, and we can dig deeper. As the marathon really starts at 20 miles, salesmanship starts when the client says no.

Finding a way to succeed is crucial in both endeavors, but there's at least one difference: It doesn't hurt to walk when you finish selling a piece of real estate!

Wednesday, April 14, 2010

Good News All Around

We just finished our annual meeting at the New Haven Country Club. It's a beautiful day, and it was a great time to reflect on the past year and celebrate the recovering market! We sign many signs that real estate sales are improving; in fact, our first quarter numbers show a 34% increase in sales throughout our region, and a 15% increase in listings. We are proud to say that we made money last year, although we are looking forward to having it be a little easier this year. Consumers seem to be coming out of hibernation, and activity is definitely up.

Awards were given to our 20-year associates, and to our Chairman's Circle of top producers. Even in a challenging environment, the best agents always find a way to be successful, and we honored their accomplishments. Longevity is also important to us as a company, since we are a family business in its second generation.

We reviewed the many tools that our company has for marketing and sales. We have a first-class website, and are endeavoring to improve individual web pages. Realtor.com is a great resource, and we pay for enhanced service, so we emphasized those advantages, along with real estate tours (now uploaded to YouTube as well). Our agents also have access to a wonderful listing presentation service called Toolkit, as well as Xpress Docs, an online provider of marketing materials.

By focusing on these basic offerings, we have enhanced the service we provide for our clients. We are well-positioned to catch the recovery wave!

Thursday, April 8, 2010


It stands to reason that there will be many more people looking to rent, if the wave of short sales and foreclosures continues. In fact, it seems hard to believe that in some suburban places there will ever be enough homes for rent. Still, there are houses out there that owners, for many reasons, choose to lease out.

If you have a home you wish to rent, what should you do? First of all, consider leaving some basic furnishings, if the renter needs them. Often corporate transferees rent for a while, before their families arrive. They usually make wonderful tenants, since they typically go home every weekend and work long hours when they are here. Secondly, be open to pets if possible. I never realized how many people have pets! It's certainly understandable that an owner wouldn't want animals, but it is possibly the biggest reason that tenants reject certain options. Finally, be as generous as possible with your appliances. It is a hardship to rent a home without laundry facilities, particularly in a town or region where there are few if any laundromats.

Most people who rent out homes over long periods of time have some story of the "renter from hell", just as most long-term tenants have encountered the "landlord from hell". However, there are many, many examples of positive experiences, and a little flexibility can go a long way.

Friday, April 2, 2010

Stimulus Needs Stimulating

Last year, when the first-time homebuyers incentive plan was introduced by the Federal government, there was a clear uptick in the number of buyers in the market. This year, the plan was reintroduced, along with a second incentive for existing homebuyers. It was obviously another, supposedly stronger, attempt to increase home sales.

Well, this time it doesn't seem to be working. Most brokers, including the one I spoke to this week in Phoenix, don't see the results. There could be more than one reason for this. First of all, most things like this--including big sales at stores--work better when people think that they are limited in time. If they think that deals will be offered again or extended, they are not as likely to move quickly. Secondly, it keeps getting harder for new buyers to get mortgages. This means that there may be buyers out there who want to buy, but who cannot qualify with the higher FICO scores now required. That last point is not necessarily a bad thing. If we can just stop and remember how we got into this mess, we will want banks to think twice before loaning to those who may not be able to repay.

I believe that there is also a fundamental flaw in the stimulus package, however. The government is trying to push demand from first-time buyers, who comprise the one group who will buy in almost any situation where they can. After all, they haven't bought homes at lower prices or with lower mortgage rates. They are generally buying because of changing life circumstances, and graduations, marriages, and babies happen regardless of the economy. Also, there are, in the end, only so many new households being formed. It might have made more sense to give the incentive to folks who didn't have the same motivation to move. After all, isn't it a little like giving a car price break only to teens?

Wednesday, March 24, 2010

Open Houses

As the weather improves, we are seeing more and more open houses, and more and more buyers are showing up. I guess it's not surprising that many of them are first-time homebuyers, and I guess it's not surprising that many of them are unrepresented--that is, they come to the open house without an agent or an agency agreement.

Since many of these buyers are younger, it should stand to reason that they read about the open houses on the Internet, where we can put open house notices. Interestingly, we do get a fair number of visitors from newspaper ads, which seems old-fashioned for Gen X and Gen Y buyers. Some are just driving around and come in when they see the sign.

Many of us now do a goodly portion of our shopping on the web, but there are certain things that are hard to buy that way (although I do have a friend who bought a tuxedo for his son's wedding on the web, his wife made him buy another one in person!). Houses, despite better and better virtual tours, fall into that category. You have to look in person at the place you're going to buy.

The new generation of homebuyers doesn't want to plan ahead for house shopping, any more than they want to plan Saturday night early in the week. Therefore, open houses are the most efficient way of looking at properties without having to make an appointment, and hence the high number of buyers visiting open houses these days.

What does this mean for sellers? Ironically, the oldest means of advertising--signs and open houses--are once again at the forefront of our collection of sales tools. Overlook them at your peril, and keep an open mind. And, of course, clean and de-clutter your house!

Thursday, March 18, 2010

Finally, an Upturn

I was looking at our financial results from last month recently, and I began by just checking our numbers, which didn't seem great. Then I compared them to the column from last year at this time, and I almost began dancing around the office. The numbers that I thought were mediocre (and they were) were 80% better than at this time last year!

This proves the old adage that everything is relative. If something is bad enough, anything else can be an improvement. While that may seem obvious, the effect may not be. If many people--especially buyers--start believing in this upturn, a little improvement can turn into a good market.

It did feel at the beginning of the year that there was a widespread feeling that this recession had gone on long enough. Everyone seemed to be ready to turn the page. Now we can add a little proof that this may indeed be so.

And just in time for spring!

Tuesday, March 9, 2010


Now that the weather has finally improved, we're noticing a lot of activity with calls and open house visits. We are seeing people holding back on making decisions, however, with the idea that they will have more to choose from soon. We think that there's plenty to choose from already!

While many more houses will come onto the market in the next month or two, they will come on at the higher prices that owners think they can command in springtime. They also will move quickly if they are still considered bargains.

I guess the conclusion you would draw from this data, as a buyer, depends upon whether you believe in the "one person for each person" theory of marriage, or whether you think that a number of people could have been your ideal match, based on the circumstances. If you fall into the latter category, you would tend to support that concept in househunting as well, and feel that there might be several good choices you could make at any given time. As someone who has been married for a long time, I would also add that it's easier to change what you don't like about the house you buy than what you don't like about the spouse you pick!

In our office, whatever the view about the above questions, there's a general impatience with all the waiting around. We're ready to write those offers!

Monday, March 1, 2010

Mortgage Rates are Going Up

Newspaper articles over the weekend made it clear what we already knew--mortgage rates are going up. Policies are changing, and banks can only make money by passing some of the charges along. As their ability to make money with fees is curtailed by governmental regulations, it's inevitable that the result will be higher rates.

Banks make money in at least three ways on mortgages. First, they collect fees when the loans are made. This is where the recent oversight by the Feds has led to restrictions on fees of every kind. Secondly, they make income from the servicing of loans; i.e., fees for handling the monthly payments. When a bank sells off loans in the secondary market, either to reduce risk or to preserve capital, it loses those servicing fees. Lastly, they make money from interest on the loan itself. If the first two sources of funds are curtailed in some way, it stands to reason that the banks would need to raise interest rates.

Although we have read a great deal lately about Washington's displeasure with banks and bankers, it does't seem reasonable to expect them to make loans that don't make a profit. After all, they are for-profit entities (and we want them to be, since we don't want to have to keep bailing them out!). In addition, someone has to pay for all the oversight being done; it takes time and employees to answer all the questions and fill out all the forms required by the government. There is a great deal more of that lately, and the costs of compliance have risen.

Therefore, we should all understand that money lost from one source of income must be made up for somewhere else. If we lower credit card rates and fees, or checking account fees, or late fees, something other fee or cost will have to go up. This time, it's mortgage rates.

Tuesday, February 23, 2010

Short Sales

Will there be more short sales in 2010, or will the market end the glut? I'm betting on the former, as there will still be many, many people who have negative equity in their homes. Our President, and the banks, are hoping that moral suasion will cause owners to continue to pay on mortgages that are underwater. The banks may not be thinking about the fact that they themselves have walked away from bad investments, and therefore it makes sense that homeowners and building owners might do the same. While there is still a degree of stigma in not honoring the debt, that's often weighed against extra money in one's pocket every month.

Now, not every owner is a candidate for a short sale, as banks do have the right to go after the extra amount from other assets. However, the government is leaning on them not to foreclose, which limits their options. Plus, they know that it costs about 15% of the value of a property to foreclose on it, and they don't want to lose more than necessary.

We have begun a joint venture with New Haven Asset Management to get those short sales approved and closed. One of the chief problems with doing one is that it can take up to a year, and buyers often won't, or can't, wait around until the lender or lenders agree. It makes a lot of sense to have somebody specialize in getting those approvals, and using them to make sure that the properties close. We have been doing that for a few months now, and the results are impressive. It's also common for lawyers to tell us, during a short sale handled by NHAM, that they plan to send future short sales to it, rather than reinventing the wheel themselves each time.

Every era in our country has led to new lines of business, and short sale management is one whose time has come. While we'd rather do business the old-fashioned way, where there is enough money to go around, the main thing is that we'd rather do business. Adaptation is often the key to success, and we're doing that.

Tuesday, February 16, 2010

Snowing Again

It's snowing tonight in Guilford, and it seems to have been snowing quite a lot lately. When our kids were little, they used to get excited by snow, and hope for a day off from school. The phone would ring, and I would tell them that it was the sound of people cancelling their real estate appointments. No school, no showings. Although that was a decade ago, things haven't changed. When the weather is bad enough, no one looks at real estate.

We're lucky that we aren't in a business where a day like today means that those sales can never be made up at another time. If a plane takes off with empty seats, or a theater has no patrons, that's money down the drain. At least most people looking for property will look again on a nicer day. Generally, it's not an impulse purchase, or a date-specific one.

There are also the issues of showings and open houses. Unless everything is perfectly plowed, it can be tricky to have buyers coming in on icy sidewalks. It's often hard to park with snow piled on the sides of streets. And few places look their best with wintry boots and shoes tracking the outside slush onto rugs and floors.

I wonder if the Internet has changed all this for us. When you're home due to cancellations, as I am this evening, do you go online and shop for your dream home? Or a vacation place? Or the new location your business needs? We hope so!

Tuesday, February 9, 2010

Commercial Update

The national news about the state of commercial real estate really could not be much worse. I've heard it described as the "first or second inning of a long game", meaning that the decline in prices and activity is only going to get worse over the next couple of years. Financing is probably the biggest issue; many people are on loans referred to as "extend and pretend", meaning that they are not loans that would be made today. Owners are paying fees to keep those loans in place, in the hopes that they can make it through this period with bank financing in place. Some cities have lots of foreclosures. Others have lots of empty space--Phoenix alone has 80 million square feet of empty space.

Surprisingly, however, what we're seeing in our two offices, in North Haven and in Rocky Hill, is an increase in calls and potential clients. Our listings have more showings than they've had in a long time. Our ads are bringing in inquiries. Agents are busier.

This doesn't translate right away into sales and leases, and certainly not into commissions. We have two very large transactions where the deals are done, but we have not been paid, or paid in full. There are lots of other incidences of agreements in the pipeline, but not signed. It's very common for a tenant or buyer to find exactly the space they want, yet not make up their minds to pull the trigger. Other deals fall through on financing snags, so the picture is not all rosy.

Even still, there are some types of property that we could sell much more of, if we had the inventory. That includes first and foremost small free-standing buildings of 6 to 12,000 square feet. We have one such listing that just went under contract after a furious bidding war, and will sell for over the asking price. There is also significant interest in medical space. Doctors, and it seems most other professions, all want to own rather than rent. So we're hopeful about 2010, and that seemed highly unlikely even a couple of months ago.

Tuesday, February 2, 2010

Get off the Sidelines

If you've been waiting for the economy to straighten itself out, and for the real estate market to be clearly on the way up, you're waiting too long. History has shown over and over again that those who act before there is certainty are the ones who make the most money. Since most purchases and sales are, in reality, driven by family issues and not by national ones, that's not so hard to prove.

We bought a condo in 1981, when the economy was bad. We got a great price on it, and we moved in. We were getting ready to have kids, and there were no children allowed, so we put it on the market and bought a house. As soon as we moved into the house (the day we closed, in fact), we found out I was pregnant, and we'd bought a one-bedroom house. Although we planned to renovate, another, bigger one came on the market up the street, so we bought that too. What were we thinking? Anyway, the two houses were both bought in 1983, and the first was sold that year, as well as the condo. We made money on the condo, since we'd been the first to move in. We made no money on the little house. The value of the second house doubled in the the first couple of years, as the market went wild in the mid-80s.

What's the lesson here? You could reasonably say that it is to think ahead before you buy, but that's not my point today. My point is that we made almost all the appreciation on the house that we owned when the market started to rise. We also made money on the condo on that theory. The little house we only owned for a few months, and we would have made money there if we had been willing to own three homes for longer. It's a version of timing is everything, but it requires buying early in a cycle. People who waited until later in the 80s got caught in a declining market after 1988, and weren't able to get out for what they had paid.

The parallel to today's market is: If you wait until everything is rosy, the money will have already been made by those who bought sooner. Buy now.

Wednesday, January 27, 2010

Market Statistics

I just gave an interview to a reporter about last year's numbers for the state of Connecticut. The Commercial Record showed that sales were about even with 2008, while prices were down about 10% from 2008 to 2009. She wanted to know whether that surprised me. It did not.

The above results are typical for markets that are in moderate recovery. When they decline, they decline first in units and then in prices. On the way back up, we see units increasing before we see prices returning. This is also because, when the economy is not strong, it's people at the lower end of the price spectrum who are most likely to buy or sell property, either because they are first-time homebuyers, or because they are forced to sell. These reasons account for the decline caused by a change in the mix of units changing hands.

The other piece of the decline is caused by the value of the same house going down in this market. Most houses, especially when they are competing with foreclosure sales, are selling for less than they would have a year ago. That's the part of the decline I would call same-sale price loss.

If you add those two explanations together, you can see that the 1% a month loss in value that I've been blogging about is not going to go away any time soon. On the other hand, we should see unit sales beginning to rise faster than they did in 2009, particularly as long as the government continues to give incentives to homebuyers. And that's good news.

Thursday, January 21, 2010

The Phones are Ringing!

A new year and a new decade have started, and I've never heard so many people say that they were happy to put the old year behind them. We can tell that they've moved on, because our phones, even in Commercial, have taken a big leap from December. It will be a few weeks before we see the results, but, in the meantime, we're busy.

What does that mean for sellers and buyers? It means that people are coming off the sidelines. They've put their lives on hold for long enough. Even in commercial real estate, where there are dire predictions for the next couple of years, business goes on. The leases may be shorter and smaller, but space needs will prevail at some point.

Therefore, there will be competition for well-priced listings. Well-priced is the key here. There are still plenty of listings getting no play, but others go right away. The latter ones are perceived to be good deals. There are also a lot of short sales in the market; i.e., houses where there the proceeds will not cover the debt. Banks are required to get within a certain percentage of fair market value, so don't look for big bargains in that department.

If you're a serious buyer, buy now. You need to leave time to get through the whole sales process, and you don't want to miss out on the tax credits available. And please, don't assume that you can take 10 or 20% off the listed price (see paragraph above!).

If you're a serious seller, be realistic about the price. And list now, to get a jump on the competition.

Sunday, January 10, 2010

New Year, New Attitudes

Happy New Year! It is clear from watching the stock market that investors in that area have confidence about the future. In our business, we are looking forward to the same sort of sustained rise during 2010. I just returned from Arizona, where the number of sales has gone up quite a bit from the year before, although prices continue to lag and short sales are still very common. Since we are behind Arizona on the real estate curve, we can look there to see what's down the road for us.

What they are worried about is the glut of homes that could come up for sale if owners lose interest in trying to hold on to them while values are low. Moral suasion may not be enough to convince people to continue paying on mortgages that are underwater. There have recently been a number of articles about just that--homeowners moving into rentals and spending the difference in their monthly payments on trips and consumer goods. That's not good for real estate.

We will be somewhat protected from that phenomenon in Connecticut, I believe, since whatever happens on the West Coast and in Florida will most likely cause the government to take steps to prevent the spread of anything that might impede a general economic recovery, and before it gets to us. They took prompt action in the banking crisis, and the recent extension and expansion of the tax credit for homeowners is a good indication that real estate will be treated in much the same way. In addition, since we had nowhere near the amount of speculation and building as the South and Southwest, we are not in the position of having lots of empty houses and condos to fill. Sometimes it's not bad to suffer from slower growth!

In the meantime, we should take heart in the surge of interest in real estate in Arizona and other similar markets. Investors are buying, and there is activity. I talked to one agent who said that her experience there is bearing out what I've been preaching in this blog: Those properties that are priced correctly and are in good condition are hard to get, since they receive multiple bids early on. Although there is a great deal on the market, only homes and buildings considered to be good values are moving. So, if you want to sell, be sure that you are in that category. If you want to buy, get a jump on that trend and buy before the spring market and before the tax credit expires on April 30th.