Happy Fourth of July! The front page of last Thursday's New York Times showed the results of a poll of Americans regarding their feelings about real estate. Not surprisingly, it indicated that a big majority of those polled believe that owning real estate is still the American dream, and that it would be their choice, even though those same people were more divided as to the safety of such an investment.
It used to be that almost everyone believed that buying a house was the best and safest thing to do with their money. Their faith in the second half of that statement has been shaken by the recent financial crisis, but the first half is undeniably still true. Even those who do not own homes believe in the mortgage deduction's importance, and hope that the primacy of real estate will remain steady.
That's good news for the future of the economy. While we realize that there is still work to be done in convincing people to put down their deposits and buy, it's clear that they wish to be convinced to act. It also seems true that they would be happy to find reasons to do so. When that's the case, it's important to find ways to get people off the fence. Once those who are not absolutely required to sell begin to do so, others will follow. The consumer confidence necessary for that isn't there right now. It's up to government, unfortunately, to find a way to make that so. Jobs have to be created, and the future needs to look a little brighter. But the underpinnings are there. The beliefs remain.
So this Fourth of July, while you are watching the fireworks and soaking up the sun, make plans to get out there soon and buy some real estate. It's the patriotic thing to do!
Showing posts with label government. Show all posts
Showing posts with label government. Show all posts
Monday, July 4, 2011
Monday, June 13, 2011
Is Madison, Wisconsin Leading the Way for Us?
As most of you know by now, I belong to a group of large independent real estate companies around the country. Some are in big cities, but most are in smaller cities (although bigger than New Haven or Hartford). For some reason, Madison, Wisconsin seems to be the most like our region. Dave Stark, the owner of Stark Real Estate there, and I have discussed this, and it's likely to have a lot to do with the employment base. They have both the state capitol in Madison, and the University of Wisconsin, and those are the two biggest employers. If you didn't know that before, you weren't watching the state workers picketing the Madison capitol!
Having a lot of non-profit and government workers in a region usually makes the employment situation steadier, as well as the use of commercial space. Universities and governmental bodies think in terms of decades, not months. Also, you don't often have the boom times that you would find in Silicon Valley, say, or Wall Street, or even a smaller place where a large manufacturer might open or expand a facility.
Therefore, I thought it was very good news last week when I received Stark's quarterly mailing. While they had the same horrible first quarter that seemed to prevail everywhere, the recent signs have been encouraging. They see lots of pending activity, and increased interest in real estate. I hope it gets here as fast as a big storm seems to do!
Having a lot of non-profit and government workers in a region usually makes the employment situation steadier, as well as the use of commercial space. Universities and governmental bodies think in terms of decades, not months. Also, you don't often have the boom times that you would find in Silicon Valley, say, or Wall Street, or even a smaller place where a large manufacturer might open or expand a facility.
Therefore, I thought it was very good news last week when I received Stark's quarterly mailing. While they had the same horrible first quarter that seemed to prevail everywhere, the recent signs have been encouraging. They see lots of pending activity, and increased interest in real estate. I hope it gets here as fast as a big storm seems to do!
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!
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, 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.
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.
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.
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.
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.
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.
Friday, August 21, 2009
Hazy is the Word
Well, the weather is hazy, hot, and humid every day now, and the outlook for prices in real estate is hazy as well. I just got a report from a real estate owner friend in Wisconsin, showing that activity there is way up, but that median prices are falling as sales rise. That seems to be true pretty much everywhere, and everyone seems to know it except sellers. They are still thinking that recovery means the stratospheric gains of a few years ago.
It's not really clear why they continue to think so. After all, the rapid rise of the stock market in the past few months has not brought stock prices up to where they were when they started to fall, so why would real estate be different? Lower-priced homes are moving because there are tax incentives and new buyers entering the market, but the incentives don't apply to those with higher incomes, so the government isn't going to prop up prices in those brackets artificially. The only things that will get those buyers off the fence are massive, sustained improvements in the economic climate, or perceived bargains. The latter is the only one within the control of sellers. Also, since prices have fallen for all kinds of items, sellers can buy more with the money they get for their homes at lower sales points, even if they are not reinvesting in real estate at the same lower levels.
Although this all makes sense, the psyches of sellers and buyers have never been terribly swayed by logic. Let's hope that this time is different, and that some of them will get real before the weather turns cold.
It's not really clear why they continue to think so. After all, the rapid rise of the stock market in the past few months has not brought stock prices up to where they were when they started to fall, so why would real estate be different? Lower-priced homes are moving because there are tax incentives and new buyers entering the market, but the incentives don't apply to those with higher incomes, so the government isn't going to prop up prices in those brackets artificially. The only things that will get those buyers off the fence are massive, sustained improvements in the economic climate, or perceived bargains. The latter is the only one within the control of sellers. Also, since prices have fallen for all kinds of items, sellers can buy more with the money they get for their homes at lower sales points, even if they are not reinvesting in real estate at the same lower levels.
Although this all makes sense, the psyches of sellers and buyers have never been terribly swayed by logic. Let's hope that this time is different, and that some of them will get real before the weather turns cold.
Wednesday, June 3, 2009
Lagging Statistics
Now that we're finally seeing some increase in the number of buyers and the resulting sales, the statistics for April are out. They show that prices fell and units fell. Not surprising, since that's reflecting activity from the first quarter. It doesn't measure today's pulse, but rather what was happening 60 to 90 days ago.
If we're lucky, the news will convince sellers not to be greedy, and buyers that it's a good time to get a reasonable price on the real estate they wish to own. It will let the government know that it can't stop trying to help the housing market. If we're lucky, it will not send everyone screaming for the hills, or more accurately, back into the cocoons where they have been hiding since last fall.
All of this does show the importance of the consumer confidence index, which is a measurement the government puts out on a periodic basis, to judge the mood of the buying public. Lately, this number has been at historic lows. The most recent results, however, have shown a sharp uptick in consumer confidence. We consider this number, along with personal income levels and interest rates, to be one of the three most important ways to predict the level of real estate sales. We could have told the press that sales would rise in May, after seeing the rise in consumer confidence. Since it's such a subjective measure, though, almost anything can affect it. That's why I'm hoping that the April sales numbers don't send it plummeting again.
If we're lucky, the news will convince sellers not to be greedy, and buyers that it's a good time to get a reasonable price on the real estate they wish to own. It will let the government know that it can't stop trying to help the housing market. If we're lucky, it will not send everyone screaming for the hills, or more accurately, back into the cocoons where they have been hiding since last fall.
All of this does show the importance of the consumer confidence index, which is a measurement the government puts out on a periodic basis, to judge the mood of the buying public. Lately, this number has been at historic lows. The most recent results, however, have shown a sharp uptick in consumer confidence. We consider this number, along with personal income levels and interest rates, to be one of the three most important ways to predict the level of real estate sales. We could have told the press that sales would rise in May, after seeing the rise in consumer confidence. Since it's such a subjective measure, though, almost anything can affect it. That's why I'm hoping that the April sales numbers don't send it plummeting again.
Wednesday, January 21, 2009
Back to the Cold
Today is my first day back from vacation. I just finished going through my 600 emails and dozen papers, and tomorrow I will start writing articles that I've promised to people. Like a lot of people, I hope that the new President and his administration will bring a new beginning for our industry and others. The government is certainly pumping money into the economy--it just has to find its way down to the real estate market. And, in the Northeast, the weather isn't helping! Every day seems to bring snow, ice, or freezing temperatures. We know from other years that people don't look at property under those conditions. We also know that it can lead to a nice pop as the spring market blooms (pun intended), and never before have we needed that so much.
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