Report from Denver

I just returned from a meeting of similar companies from around the country, held this time in Denver.  We always poll the group about market trends, and there was a great deal of commonality this year. Inventory, or the lack thereof, is the driver in most of the United States.  Even Connecticut is short on supply in the lower price ranges, and in the healthy range for all but the million plus category.  That higher supply in more expensive homes is also true in most areas around the country, but the real story is that starter homes and homes under about $500,000 have marketing times that are measured in days in most communities.  This is driving up prices, which hasn't happened here as often yet, although we are seeing it with well-maintained and desirable homes.  Mortgage rates are headed up as well, so time matters for many lookers.

Another big trend is in marketing.  With the exception of certain kinds of direct mail, mostly postcards about homes just listed or recently sold, advertising is going digital at a rapid rate.  We in Greater New Haven spent more on newspaper ads than almost anyone else, and very few did print advertising at all anymore.  Digital ads (SEM) or organic search tools (SEO) dominate the field, along with costs of website improvements and video production. Lead generation is front and center, often focused simply on how to track leads. Some are even spending money to appear in the answers given by Alexa!

Some things haven't changed much.  Personal relationships still account for most agent transactions, and, although people search for an agent on line (and pay a lot of attention to client testimonials), they are often starting with a recommendation from someone they know.  Good agents still generate a lot of repeat business, and good agents are doing more and more of the total transactions.  Real estate is an expensive business to be in for agents and for brokers (lately, even agents might feel sorry for the pressure put on broker returns!), and more is sold by a few top agents than ever before.  As the market improves, more people are going into the business again, and they are more likely to be younger, but the industry as a whole skews old and non-diverse.

Companies are also consolidating, so that megafirms are more and more a dominant force.  Teams have mostly taken the place of small firms,  and are run as companies within companies.  Legal and ethical compliance are big reasons for this tightening of the market, along with cost drivers that favor economies of scale.  One-half of one percent of brokers did a third of all the business in the last year reported.

Buyers haven't varied in their desires as much as most thought they would, given the demographic profiles we see.  Gen Xers and Millennials nationally still favor traditional homes with outdoor space, and in good school districts.  That's good news for sellers, although the younger buyers are much more concerned with maintenance and walkability scores.  Since there hasn't been enough new housing built in many regions, buyers will eventually have to buy what sellers have to sell, at least in the short run.

What are the takeaways here?  Almost everyone thinks that mortgage rates will rise, and prices will rise as well, making now the time to buy.  This is especially true at the high end of the market.  Buyers will still want personal assistance in navigating home ownership, and sellers want that touch as well. Therefore, we will be reaching out to them in new and different ways, but with the same message:  We're here to help.

Quantifying the Qualitative

We spent time this morning in a sales meeting, talking about how to help buyers and sellers evaluate multiple bids or properties.  We are beginning to develop spreadsheets, which we can use to list all the factors important in choosing a property, as a way to help buyers decide when and on what property to make an offer.  There are obvious factors that matter in all real estate decisions, like location. 


So, here's the rub.  Location, which we would weigh very heavily in any purchase decision, is not a black and white criterion, as, say, town/city sewers would be.  It's influenced by a buyer's own opinion about what he/she would like to be near--open space, public transportation, good schools, or other factors.  Then why is it still useful, when someone is using opinion to come up with a weighted number for location?


Because it helps us, and ultimately the buyer, to begin to narrow his/her list of important considerations.  He/she may come in asking for something at a certain price, but decide that, in order to get other benefits, the price range has to increase.  Or, for instance, square footage could matter less than how that square footage is laid out.  Sometimes we even see cases where people end up choosing the exact opposite of what they came in saying that they wanted to buy.  Those people may just have a gut reaction (which is admittedly very hard to pin a number on), which is both persistent and consistent, and that may end up being the tiebreaker.


And what does the agent add to the process?  It ends up being very useful to have seen this played out many, many times.  We begin to develop a sense of what will ultimately prevail, and often long before the buyer sees it.  Also, in the same way that teaching something is the best way to learn it, it's helpful for the buyer to have to explain to us what he/she is thinking, and that explanation frequently crystallizes his/her thinking. 


Where are we going with this?  We're still working on templates for both residential and commercial buyers, plus ones for sellers in multi-offer situations.  Like as not, it will always be a work in process, but will become a valuable timesaving, clarifying tool for our clients.

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.

East Rock, Downtown, Edgehill, St Ronan areas of New Haven and Hamden trends

Please click on image to view graph in full

Statistics from the Region

It's tempting to make you all guess about market trends for 2010, but it would be hard for me to collect the responses in a timely way, so I guess I will just tell you. The latest Commercial Record shows that, for year over year sales from 2009 to 2010, New Haven County as a whole was down almost 8% in the number of sales. For the immediate towns, Guilford, Madison, North Haven, and Bethany had an increase from the prior year. Guilford and Madison were each up 9%, while the other two had smaller increases.

Surprisingly, the median prices were almost identical in 2009 and 2010, with 2010 coming in at 0.8% less. I expect that most of you would have guessed that prices fell about 10%, so the fact that they actually fell less than one percent is very good news. Of course, as I've often pointed out, this is not an apples-to-apples comparison, so it's probably true that only the best houses sold, meaning that most homes would have sold for less in 2010 than in the prior year. As I've discussed in earlier posts, East Rock and Spring Glen did go up in price, showing the "Yale" effect most strongly. North Branford, with 24% fewer sales, had an increase of 10%, and Milford, Wallingford, and Woodbridge had smaller increases. New Haven as a whole crept up 1%.

It is important to recognize, as the issue said in another article, that this is the sixth year in a row that sales have declined. Since prices have also been declining for most of that period, the total decline is larger than what is listed for last year. And, since most homeowners looking to sell haven't been in the market for some time, those yearly decreases can really add up.

However, the fact that we are not in freefall is very good news, and the spring is still ahead of us. Anything could happen, but we're hoping for recovery mode to kick in strongly!