News from Around the Country

I just got back very late last night from Cincinnati, where The Leadership Council (a group of large independent real estate brokerage firms from around the country) met at Comey & Shepard's offices there. The trip itself was uneventful, except for the US Air flight from Philadelphia to Dayton (no, there's no more direct flight from New Haven to Cincinnati!), where the gate attendant announced that the plane had no working bathroom. Sounding just like someone's mother, she then proclaimed that, if you thought you'd have to go, you should go now, before getting on the plane! A new low in air service---and they're probably working on coin-operated toilets as we speak....

We always learn a lot at these meetings, and this one was no exception. On a beautiful fall Sunday, we sat in a windowless basement conference room all day, and listened to tales of woe from around the country. The brokers in this group were all hoping that the bottom has arrived; indeed, there are some signs that it has passed. Their average sale prices, however, were all down from a year ago, and most had unit declines of 10 to 20% from a year ago, and a two-year decline of more than that. Homes under $200,000 are selling everywhere, mostly to first-time homebuyers. Homes over $700,000 are not selling anywhere, to anyone.

In a twist on the common phrase, there is no broker left behind. All of us have had trouble getting transactions closed in this market. Financing is hard. Closings are delayed or cancelled. There doesn't seem to be any difference in big companies vs. small; all are affected. In fact, so-called traditional brokers are doing better than the discount or 100% companies in percentage of business. All parts of the country have had issues, although the places that didn't go up much (in our group, Tulsa and Des Moines) are much less impacted now. In fact, those companies in our group are chugging along. New construction and commercial real estate were low points for pretty much every firm.

We remained optimistic and, for the most part upbeat, helped by good food and plenty of wine. Next spring, when we meet in Iowa, we'll be hoping to break out the champagne. Until then, it's back to work!

Where are the Luxury Buyers?

I thought I should write a little bit more about the information on market inventories that I described last time. As I stated, there is a direct correlation between the price and the amount of months of inventory on the market. So, for properties under $200,000, there is a 1.7 month supply. For each increasing value bracket, that supply goes to between 2 and 3 months, between 3 and 4 months, between 4 and 5 months, and then goes to over a year above $700,000. Only 2.7% of the sales now are above $700,000, and there are more homes on the market in that price range than in either of the two price ranges below that.

This surprises me in some ways. While I know that consumers are cautious, and I realize that the governmental incentives are aimed at a lower price point, one would still think that the combination of low interest rates and a skittish stock market would drive people to spend their savings on real estate. In addition, there are still those who could be downsizing and yet be spending above that amount for a property. Since investing one's assets is so problematic these days, real estate stands out as a tangible asset that is currently selling at bargain prices.

We bought our home at what turned out to be the bottom of the last market cycle, and it has turned out to be our best investment. While you cannot pick the bottom of the cycle without luck, this clearly has to be a time that will turn out to be good, considering the interest rates and prices. Why not take advantage of that, and look back years later with great satisfaction on your best investment?

Market Inventory

We recently received a market inventory study from Madison, Wisconsin, showing that higher-end properties were not selling and lower ones were. Not a big surprise, but we decided to look at our market. What we found was similar, and striking.

Properties over $700,000 are less than 3% of sales now, there are enough homes in that range on the market to represent more than a year's supply, and the sales have fallen almost in half from last year. At the lower end, under $300,000, there exists only a supply of two and a half months, sales have risen by a third, and they represent 41% of all sales. While we knew that first-time homebuyers were driving the current market, it's still fascinating to see that laid out in statistics.

Overall, in our region, prices have fallen 15% since the same time last year. If you put all these facts together, what it tells you is that you are more likely to sell your home quickly if it's in a lower price range and you price it aggressively. But you knew that already!