Wednesday, September 2, 2015

Current Absorption Rates


Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 7.6 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 - 7 months.”



Monday, August 17, 2015

The Role of a Real Estate Professional

Throughout my career in real estate, I've run into the same problem at various times, and I always end up venting to people about it.  The last two times I've encountered it--once in residential, and once in commercial--I've complained, as usual.  This time, however, one of my friends suggested that I blog about it, so here goes:

Real estate is unlike almost any other profession, in that we only get paid when the result is satisfactory to the client.  However long that may take, we front load all the time and expenses, and wait to get paid until the lease or closing.  That, in and of itself, makes it a dicey and sometimes difficult job.  Still, though, some people feel that the lack of an hourly rate means that our services are free.  In reality, everything we do is part of our job; it's just that we get paid in arrears.

So here's the situation we face from time to time, and the one I can see coming, but cannot seem to prevent.  Someone we know--in these cases, friends of mine--approach with a real estate question.  They pose it, expecting that, due to my background, I can just answer off the cuff.  Usually, it's some version of "What's my property worth?".  That, in a nutshell, is the equivalent of asking a doctor what your symptoms mean, or of asking an accountant what you can write off of your taxes, or of asking a lawyer whether you have a good claim against a vendor.  Although these friends wouldn't think of approaching those other three in the same way, they seem to think that, because we don't charge by the hour, that the answer to the valuation question is something that we provide for free.  While it's true that a market analysis is given by more than one agent in many cases, that's a little different.  We may end up doing the work and not getting chosen, but someone is being hired, as with, say, an ad agency.  When you are asking so that you can sell it to your neighbor, or to someone who has approached you directly, that's over the line.

Unfortunately, I've learned the pattern for those who want services without obligation.  They are the ones who want to meet, and who want to chat for hours about their property.  They tend to be charming, friendly, and forthcoming, for the most part.  But they ask lots and lots of questions.  There's nothing wrong with that, but, when one long meeting becomes a second and third session, with more and more questions about when a commission is owed, I've learned that we won't make any money, in all likelihood.  This is true whether they are supposed to be signing a listing agreement, or a buyer broker agreement.  Once they've been asking the same details for long enough, they probably aren't that confused; they're just not going to sign.  I've learned that it's a way of extending the conversation until the information they seek has been extracted, at which point they keep chatting, to soften the blow, but begin to back away. 

I believe that, in many cases, such prospective clients are well-intentioned.  They call us intending to use us.  At some point, however, by chance, or through the "advice" of others, they begin to think that our knowledge is theirs for the taking, and, once they have it, they decide that they don't need our help anymore.  They tell themselves that this is just how our business works, and that they would be remiss not to take advantage of that fact.  Being charming makes them feel less bad about it, since they feel as though we're just having a nice conversation.  What we feel, on the other hand, is used.

Please understand that I'm not blaming everyone who calls and then doesn't sign a contract.  Things happen, we have competition, life changes.  I'm just writing about the particular pattern where the early phase drags on and on, and then the actual real estate event takes place without us.  Our agents are too polite to stop returning calls, but they can probably spot this before I can.  Next time, just put yourselves in our shoes.  And, if you work for a salary, that's hard to do, because you are getting a paycheck every month.  We are getting paid for advice, expertise, and knowledge, at least we are in a fair world.

Tuesday, August 11, 2015

Mixed Signals

If you ask more than one real estate professional whether the Connecticut real estate market is good or bad, don't be surprised if you get more than one answer.  The most accurate answer is "It depends". 

What that means is that some of the indicators are positive, like increasing numbers of sales (for the past five months), and some of the indicators are negative (still mostly falling prices, which remain 20% below 2006).  Even supply and demand signals vary.  The absorption rates are dropping, down to the levels considered normal for any market, but they lag behind many other places in the country--Denver, for example, counts time on the market in HOURS, while our latest figure was 102 days on average.  There are some signs of pent-up demand, such as multiple offers, or homes that sell right away, but they are mixed in with other examples of lowball offers and mortgage problems. 

Demographically, the trends also run hot and cold.  Millennials are reaching the age where even they are having children and settling down, but they have postponed homebuying longer than earlier generations, and there are signs that suggest that they don't aspire to home ownership the way that their parents did.  (Parenthetically, this is odd, because they clearly look for work/life balance and healthy, gracious eating and living, so one might think that they would not be so tied to expensive, busy, urban areas). 

So, we aren't sure about what the rest of the year will bring, but there's nothing new about that, is there?

Tuesday, August 4, 2015

Current Absorption Rates


Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 5.1 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 - 7 months.”
 


Monday, July 27, 2015

Prices Finally Heading Up?

It's been depressing to read the national news, and to see how the real estate market around the country has finally begun to rebound healthily in most areas, while we sat in the state with 3 of the nation's 6 worst markets.  The latest report, however, shows a tiny (0.4%) gain in year over year prices in our area.  That still puts us significantly below 2006 levels, but we are headed in the right direction at last! 


I think I've written about most of the reasons for our lagging performance, and the states around us, with the exception of the Boston area, also pull down the national figures.  Eventually, though, demand will absorb the houses that exist on the market, and encourage owners to sell.  It still takes longer here--Denver measures its absorption rate in hours, while we are at 102 days--but it's coming.
And not a moment too soon for those of us in the real estate business!


I would be remiss if I did not once again remind buyers that the greatest appreciation tends to occur within a fairly short time after prices begin to rise.  Supply tightens, and people get nervous, so they start to bid seriously, and prices go up, and the cycle repeats until something happens to halt the spiral upward.  Those who watch historical trends know to act quickly, and the rest of you have now been warned:  Buy now for best results.