News from Augusta, Georgia

For those of you who have been reading this blog for a long time, you know that twice a year I go to some other part of the country, to meet at another large independent real estate company, and consult for them on best business practices, with a group of other independent broker owners.  Last week, we were in sunny Augusta, Georgia, where the weather, and the golf, were both excellent.

Most of the brokers surveyed there thought that the national market for real estate was flat, and would remain so for the rest of the year, and most had experienced a slowdown in the late summer.  In some markets, although sadly not ours, it has picked back up again since.  Most also saw prices close to flat.  Some had units up and prices down, and some the reverse.  It's more or less the same story we've seen for the past few years:  two steps forward; one step back.

Many of those present had the same concerns, including wondering when the millennial generation will buy houses.  Is it student debt, lack of roots, later marriages, or something else, that's causing the delay?  Most markets were seeing big numbers of renters, often outstripping the supply of rental housing.  People accepting jobs are regularly leaving their families at the old location, so there would be two households instead of one created.

Still, there were trends about which we were optimistic.  Commissions for agents are up, independent companies are bucking the trend of decline in many of the large franchise firms, and consumer confidence has risen.  All in all, a good week.

Report from the Field

I've just come back from a meeting of my counterparts at other large independent Realtor firms.  This time, we met in beautiful Hanover, New Hampshire, although we hailed from all parts of the country.  Almost all the firms are seeing fairly large increases in both units sold and average prices, with supply limited to very limited, depending upon region.  The Northeast is clearly lagging behind the rest of the country.  Although we are definitely seeing signs of improvement, we have not gained back the number of jobs that other places have, and that affects real estate sales.  Boston, as it often is, proves the exception to the rule, as it seems to be enjoying robust growth.

Almost everyone present said that the past thirty to sixty days had been slower than the rest of the year, but reported an uptick in sales before that, as interest rates began to rise.  Isn't it amazing that, no matter how often we preach that rates are at unusually low levels, and that buyers should hurry to capture great rates, most people wait until rates have already started to climb before rushing to buy?  Most agreed, however, that mortgages were more difficult to get than they had been, with regulations changing so often that it can be hard to keep track of the rules.  Most locations saw slower growth in the luxury end.  San Francisco, like Boston, marches to the beat of its own drummer, and is wildly popular.  NYC also is seeing increased action at almost every level of the market.

It was striking to see how much like Connecticut Northern New England is, with small offices in every town, and agents spread out over a much greater footprint, versus the big, centrally located mega-offices found in other parts of the country.  As with our Yankee counterparts in New Hampshire, we see older agents, less technology, and more traditional sales tools than our friends in the West are finding.  I guess that's why we are still called The Land of Steady Habits!

Sales Around the Country This Spring

It's always interesting for me to visit with my friends from other large independent companies around the country, especially when the market is changing rapidly.  I just got back last night from Charlotte, and the mood from other places is almost giddy.  The feeling nationally is that market activity will be back within 10% of normal levels by the end of this year.  That's a big improvement from the projections we heard only last fall, when most experts thought that historical norms of housing turnover would not return before 2015.

Now the commonly heard complaint is lack of inventory.  There simply aren't enough properties for sale to meet the demand. The average number of months of inventory seems to be about three.  Well-priced, well-maintained homes in many areas get multiple offers--sometimes dozens--within a few days or weeks of being listed.  Once they go under contract, the problem that arises is that appraisals have been lagging, as they always do, so there are issues with mortgages.  In some cases, sellers and their agents are going back to the highest bidder and telling them that they need to release all the contingencies, including mortgage, or they will proceed to the next offer. New construction is hot everywhere.

Here in Connecticut, we're recovering slowly.  (Maybe that's why they call us the Land of Steady Habits?)  We have just over eight months of inventory overall in our county, with some towns much higher than that.  Guilford, for example, has 17 months' supply.  Our supply of million dollar homes will last several years.  So, for us, the report from other places tells us what the future will be like.  And it will be great.  However, if you are a buyer, my advice is to buy right now!

Leading RE

We belong, as many independent real estate firms do, to a network of similar professionals. In our case, it's call Leading RE. When its member firms combine their sales, Leading RE outsells any of the national networks, and its reach extends around the globe. I just spent some time on the website, and the tools available to us far exceed what could be obtained in the pre-web days.

What's the advantage to consumers? For one thing, we can refer people from New Haven to anywhere around the world, and ensure that they receive service at a high level. It's the difference between walking in the door of any professional establishment and having the name of a good person at the other end of the phone. Also, it allows us to coordinate the services on both ends of a move. We can use trusted colleagues in another location, and count on them to keep us informed about what's happening with the purchase or sale in their area. Sometimes that involves bridge loans or changes in moving dates, and it helps to have everyone in the loop.

These things are helpful for agents as well, obviously, but it is their ability to take advantage of the accumulated knowledge base of others in the field that is most useful. Sometimes you just need to avoid reinventing the wheel! In fact, we belong to a much smaller group of large independents, The Leadership Council, about which I've written before. We just started a joint site to post training, advertising, marketing, and various documents which would be interesting for the group to see.

It took a very long time to get our very fractionalized industry to the point where it could share more than basic rules of conduct in common. But it's been worth the wait!

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!