Real Estate News

Out of adversity comes opportunity. Despite the turmoil on Wall Street and rising unemployment statistics, the news is not all bad. There are still plenty of buyers in the marketplace with purchasing power. Low housing prices and low interest rates are stimulating aggressive buyers to seek bargains in virtually every market.

Are there really bargains out there? You bet! Consider this. Properties in even the most desirable areas such as Bloomfield Village and the lakes area can be purchased for about half of what they were fetching just a few years ago. Many newly constructed spec homes could not be duplicated at today’s asking prices. And, the cost of owning a home in many areas is now lower than the cost to rent!

It is important that consumers are able to put the market in perspective. They must redirect their focus from the loss in value of their present property to the difference in value between their current home and the home they may desire.
Regardless of the paper loss in value of one’s current home, would it be better that the cost to move up to the next home is, say, $300,000, as it may have been a few years ago, or only $150,000 as it is today?

The point is that many people’s perception that they can’t sell their home and move to another is predicated upon the unwillingness to “take a loss on sale”. That thinking masks the ability to recognize the true opportunity to move in this market. In many, if not most cases, when both the sell and the buy sides of the move transaction are considered, buyers are better off moving in this market than they would be in one that is rapidly appreciating.

In the wake of last week’s bailout of Fannie and Freddie, news of restructuring at Lehman Brothers and Merrill Lynch surfaced last week. Then, the US Treasury stepped in and funded the AIG bailout averting the collapse of the “company that was too big to let fail.”

Amidst all this turmoil, it is important to understand that we are better off today than we were yesterday. Our national economy is now moving past the apex of the worst that could occur, according to most Wall Street analysts. Those that were going to fail have either done so or have been saved. The sub-prime mortgage crisis, which is at the root of all of this, continues to evolve and take its toll, but the casualties in terms of the largest financial institutions seems to be over.

The turmoil in the financial markets will mean a flight to quality investments, particularly US Treasuries, as a result, long term interest rates, including mortgage rates, are now predicted to go lower. This is all part of the natural evolution of the financial crisis and the excesses enabled by credit that was too easy to obtain. The problems stemmed from lack of financial self discipline by many consumers, at best, to outright mortgage fraud, at worst. It’s pretty safe to now say that the pendulum has swung in the other direction and safeguards will be emplaced to preclude such abuses in the future.

Local real estate markets will continue to feel stressed until consumer confidence and new jobs grow. For those that can shed the negative emotion, this market continues to offer buying opportunities with tremendous upside potential.

Last week the US Treasury placed Fannie Mae and Freddie Mac under conservatorship. These entities are government sponsored enterprises which buy mortgage loans from banks, repackage them as securities and then re-sell them to investors. In doing so, this system frees up considerable local capital which, in turn, powers local real estate lending.

This development is yet another piece of shrapnel from the sub prime mortgage bomb which exploded last year. It should not be viewed as another major economic blow or something new and terrible that’s occurred, but rather another step in the process of correcting the sub prime problem.

The move was necessary due to the lack of investor demand for Freddie and Fannie securities due to concerns about the quality of the mortgages in the underlying portfolios. That lack of demand translated into higher interest rates, which were necessary to attract investors due to the perceived risk. That, then, translated into higher mortgage rates on the street over the past several months.

Now, with the government’s infusion of $5 billion in the form of mortgage-backed securities purchases, rates have fallen about one-half percent at the time of this writing. Rates are projected to fall a bit more in the near future as the credit markets for mortgage money ease.

Longer term consequences will include an overhaul the system to prevent another such crisis in the future. In the wake of the subprime crisis which surfaced last year, the pendulum has swung from credit that was far too easy to acquire to an extremely tight mortgage market that has further crippled real estate activity and prices. This is a step in the right direction which proffers a return to sane lending practices and reasonably available credit.

Technology has not eliminated the need for real estate agents as predicted by some in the past, but it has changed the dynamics of our relationships with the consumer.

Today’s market sends waves of information at consumers, a confusing bath of foreclosures, fluctuating values and changing lending rules. With all this information at our fingertips, it becomes clear that access to data alone will not enable the average consumer to find or sell homes. There is much information available but it is not standardized for easy comparison. That is why the consumer is seeking the advice and guidance of a knowledgeable trusted advisor.

“Data transparency”, which gives everyone access to total information via the Internet, has done its part by enabling consumers to become better educated. New public portals have given them confidence that they are not being manipulated by an agent who doesn’t know what he’s doing or doesn’t have their best interests at heart.
Many thought that data transparency would end the work of agents. But it hasn’t. In fact, the opposite has occurred. And the reason is simple: people need someone with a professional background and deep understanding of what that data means, along with other real estate skill and expertise to guide them through a transaction.

When consumers are in a stressful state of mind, which describes just about every single real estate transaction, our profession has a great opportunity to leverage our real value. But we have to create solutions, not problems. That process begins with an understanding of what is truly important to consumers today: effective communication and effective representation based on knowledge, experience and skill. That is a value proposition that consumers will always be willing to pay for.

At a recent sales meeting I shared some statistics with you that indicated that Weir Manuel Realtors sells 12% more of the listings we take than our closest competitor and 61% more than our weakest competitor. These statistics clearly demonstrate something that we have internally known for quite a long time: that the attention we pay to our clients results in consistently achieving their goals.

There is a very important distinction between “listing more homes” and “selling more of the homes we list”. Some of our competitors with more agents may be able to list or sell a few more houses. But do their clients really care about that if their homes remain unsold on the market? In this case, bigger is clearly not better.
But bigger can be better as long as a company’s core values are not compromised as part of growth. Weir Manuel Realtors has a long term strategy to take advantage of corrections in the brokerage marketplace when opportunities arise. Such opportunities are being evaluated on an ongoing basis. Be assured that when the right one comes along, we will grow bigger but retain the distinction of being better.

With proper planning and execution, we can be bigger and better at the same time.