Monday, December 10, 2007

Trade group lifts outlook for 2008 home sales,
insists US housing market is stabilizing
WASHINGTON (AP) -- Bucking conventional wisdom, a trade group for real-estate agents on Monday said the battered housing market is on the verge of stabilizing and inched-up its outlook for 2007 and 2008 home sales.
The revised monthly forecast from the National Association of Realtors, which followed nine straight months of downward revisions, calls for U.S. existing home sales to fall 12.5 percent this year to 5.67 million -- the lowest level since 2002. Last month, the association predicted 5.66 million existing homes would be sold this year, down from 6.48 million last year.
The Realtors' group also forecast sales will rise slightly in 2008 to 5.7 million, up from last month's prediction of 5.69 million.

Thursday, December 06, 2007

21 Rules That Will Bring Good Karma to Your Life,
And Make you Happier.
  1. Give people more than they expect and do it cheerfully.
  2. Marry a man/woman you love to talk to. As you get older, their conversational skills will be as important as any other.
  3. Don't believe all you hear, spend all you have or sleep all you want.
  4. When you say, 'I love you,' mean it.
  5. When you say, 'I'm sorry,' look the person in the eye.
  6. Be engaged at least six months before you get married.
  7. Believe in love at first sight.
  8. Never laugh at anyone's dreams. People who don't have dreams don't have much.
  9. Love deeply and passionately. You might get hurt but it's the only way to live life completely.
  10. In disagreements, fight fairly. No name calling.
  11. Don't judge people by their relatives.
  12. Talk slowly but think quickly.
  13. When someone asks you a question you don't want to answer, smile and ask, 'Why do you want to know?
  14. Remember that great love and great achievements involve great risk.
  15. Say 'bless you' when you hear someone sneeze.
  16. When you lose, don't lose the lesson.
  17. Remember the three R's: Respect for self; Respect for others; and Responsibility for all your actions.
  18. Don't let a little dispute injure a great friendship.
  19. When you realize you've made a mistake, take immediate steps to correct it.
  20. Smile when picking up the phone. The caller will hear it in your voice.
  21. Spend some time alone.

Thursday, November 08, 2007

How Much Do Real Estate Agents Earn?

Many people think real estate agents make huge amounts of money. Some do. Most don't. But lots of consumers want to know "how much"? Because agents are so easy to poke fun at, the media often try to present the figure in a way that indicates real estate agents are overpaid.
Maybe we'll bust a myth about that. Maybe not. During the writing of this blog, we'll calculate how much agents earn in commissions. Right now, as we write the blog, we don't know what the answer will be except that commissions are down from last year. We intend to calculate the figure as we go.

So let's start.

The median average sales price in America right now is $211,000 and we're currently on a pace to sell 5 million homes. Simple multiplication provides a dollar number on which the total real estate commissions will be based. Over 1 trillion dollars worth of homes sold. That's a lot.

Most of those sales will pay a real estate commission. Folks think that the typical commission is 6%, but it varies and by law is negotiable. Some "full service" agents charge seven percent. There are "discount brokers," too - and sellers will make different kinds of deals with companies offering different levels of services.

Combining all that together, the average commission charged per deal is between 5% and 5.5% depending on the region. Although the national average is probably around 5.14%, we'll go with a figure of 5.25%, just to play on the safe side. (In eastern Massachusetts, it is typically lower)

That comes out to a total of $55 billion. The number is probably high because the estimate for 2006 was a total of $61 billion. Sales are much slower this year and prices are down. But we'll go with $55 billion. According to estimates, between 22% and 27% of the total goes to the company. That leaves between 78% to 73% for the agents. Sure, some experienced agents have higher splits. Some have lower splits. Some even get paid a flat fee or a salary. To make it easy, let's assume that the higher end applies - 78%. That leaves $43 billion for the agents.

How many agents are there?

Though it is hard to put a number on it, states like California estimate they have one licensed agent for every 52 citizens. The Wall Street Journal estimates there is one real estate agent for every 75 people in America. That would be over 4 million agents! Though that many might be licensed in their individual states, most of those aren't actively selling homes. We won't use that number.
The National Association of Realtors claims 1.3 million Realtor members. Most of those are agents, but not all are actively involved in the business. At the same time, not everyone selling real estate is a member of the National Association of Realtors, either. They are still real estate agents, just not Realtors. Even lenders and appraisers are selling real estate nowadays.
So how many folks are actively working to sell real estate? Approximately 1.25 million says the Journal.

That sounds about right.

The average agent, then, would earn about $34,400 based on current values at the current sales pace. Some more. Most less.
Less an average 14% in expenses that the agent will incur. Total? $29,584. And that's only if they earn the full commission on the sale. The fact is, most sales involve 2 agents that split the commission equally.
How do we check the figures? According to independent sources, the average commission charged per house in the USA in 2007 is $11,000. With 5 million sales, that would be...(we promise we didn't check this in advance...)

Total commissions of $55 billion.

From Armstrong Field Real Estate's November 2007 Real Estate & Mortgage Newsletter

Monday, November 05, 2007

It's A Buyer's Market....So When Are You Going to Buy?

A buyer's market is technically defined as: "A market condition characterized by an abundance of goods available for sale."

The in-depth definition from the same source is: "When a buyer's market exists in commodities, the buyer is able to be selective in purchasing contracts, as there are many individuals wishing to sell. Furthermore, these buyers will generally be able to purchase contracts at lower prices than those that were previously prevalent."

The simple version is: when no one else wants a product of value -- buy it, because the price will be lower whereby you'll be able to maximize your investment for future gain. In essence -- buy low, sell high.

When it comes to purchasing real estate, it's not as easy as investing in your 401K or savings account. Those are simple. You can select as little as $1 to invest each month or as high as the law will allow -- thousands per year.

Most people really don't worry about how the stock market ebbs and flows as they are using the practice of dollar cost averaging to invest: "Dollar cost averaging is the practice of investing or saving money at specific times, regardless of market conditions or your personal financial outlook," according to a beginners guide to investing from The idea is that if you keep investing over the market levels (low and high) you will, through the law of averages, make money in the long haul.

The challenge with that type practice in real estate is that you can't slip into real estate investing. We don't buy our housing investments month after month with prices up and down. Instead, we slap down the down payment when it's time to buy. And wherever the market is, is where we start.

The best strategy for real estate and the best way to make money in real estate is to buy low, when the conditions are in the favor of the buyer to buy. Your start-up purchase is where you "begin" your investment growth -- and that's why I submit to my buyer friends the above headline question, again: "It's a buyers market. So when are you going to buy?"

Today in many markets you can buy a house for 5 to 10 percent below asking price. For a $300,000 purchase, that's between $15,000 and $30,000 off your mortgage. On a 30-year fixed rate mortgage at 6 percent, that reduction in mortgage amount would save about $180 per month (more than $2,000 per year).

In addition, many sellers are willing to help with closing costs just to sell their house. For example, in Fairfax County, Virginia (just outside the Washington, D.C. area) half of the 3 bedroom 2 bath single-family homes sold in the last 30 days included a seller subsidy ranging from $500 to $15,000 (the average seller subsidy was $8,790).

Then there are the prices. While they have been flat over the last couple years, they are starting to increase. This is where your research on the housing market must turn local. The national numbers mean nothing to you when it comes to investing in real estate. Where are your average prices? Are they flat, deflating or appreciating?

Nevertheless, there are hot pocket markets. In the DC area, there are several zip codes that, when looking at the numbers, are technically in sellers markets. In these areas, homes are selling in under 60 days, prices are up, unit sales have outpaced the level from a year earlier and total sales volume is expanding. The thing is, though, the pressure from surrounding zip code markets keep the prices from escalating as fast as their potential.

Let's review -- you have plenty of housing inventory from which to choose. Sales are slow, so sellers are offering thousands of dollars in incentives to tempt you to buy. Prices are flat. Interest rates are still historically low. Sounds to me like the buyer who has been waiting on the sidelines needs to get off the fence and pull out his checkbook.

From the November 2007 Armstrong Field Real Estate online newsletter - Real Estate Update

Thursday, August 30, 2007

The Natural Cycle of the Real Estate Market
As the real estate market was rising nationally the last few years the media went hog wild over the frenzy and everywhere you looked there was someone or something telling you that real estate was HOT HOT HOT! Prices were going through the roof and there was unprecedented growth and people were becoming multi-millionaires from selling their homes. It was craziness.
Now the “national market” is going through a correction because it has to- there was too much too fast. In many areas prices and inventory levels are decreasing. Is that a good thing? Yes, it is. It’s healthy for each market to go through it’s cycle. This ebb and flow is good and allows each market to grow and then collect itself and catch up, and then eventually grow again.

Often when an area does go through a slowing or correction, the prices do not actually go down, but rather just don’t go up as fast. Usually the decline of a market is actually just a decline in it’s growth rate.

Areas can see rapid appreciation for different reasons. Usually it’s because of either speculatory (investment) buying or a major influx of people in a short amount of time. When an area has too many properties being bought and sold solely for investment purposes, the market values rise quickly, but this can create hollow values, because the values rise faster than the populations ability to afford them.

When an investor buys a home for $200,000, puts $70,000 into remodeling and then sells that home two months later for $400,000, that home gained 100 percent appreciation in two months. No worries. But if that happens to 20% of the homes being sold in an area over a year, and the prices are now growing exponentially while the area wages are staying the same, you have trouble.

Eventually this can catch up to the market when people are no longer able to pay the prices of the homes. The other thing that happens during this time is people begin to notice how much these neighboring homes are being sold for and they want in on the action. When a market heats up and prices begin to rise quickly everybody starts throwing their homes on the market and the market becomes flooded with property.

Eventually when the demand slows, but people are still wanting to sell for more and more, those home-sellers (who are always the last to accept the end of a growth period) will need to adjust for this and the market can correct itself. Historically this has happened through a period of prices staying relatively flat and growth slowing for a period of time until the demand increases again.

When both factors happen at the same time (investors flipping homes and people throwing their homes on the market to get the high prices), and when new homes are built rapidly in the area because of the demand and the construction brings jobs related to that construction it can really make things interesting. Because these jobs are created by, and sustained by, the real estate market.

This is what happened in Vegas between 2001 and 2005- people began to move into the area, then investors starting buying and flipping homes, and then home builders began building homes as fast as humanly possible and they were hiring people to help build all of these homes and to staff the expanding casinos and the market appreciated over 50% in a year. When the market reached the point where the demand was no longer there (everyone had bought a new home?) and all of these builders no longer needed the help and the construction crews needed to sell but couldn’t and the prices had been artificially driven up by the investors, what happened to the market? It’s now in a period of decline.

According to Marc Garrison, founder of The National Association of Real Estate Investors (NAREI), there are four main components of the real estate cycle every area experiences. These are Expansion, Equilibrium, Decline and Absorption. It’s important to note that this cycle not only applies to large geographic areas, but also applies to cities and even neighborhoods.

Expansion brings job growth, population growth and a high demand on the infrastructure of an area. Roads need to be built, restaurants open, hospitals expand and prices rise.
Equilibrium is when things begin to slow and settle. Prices have reached their limits, or beyond, and this period of time brings high prices and as a natural consequence less businesses move into, or expand in, the area. Governments are less likely to offer incentives to businesses to move into the area and job growth slows.

Decline then occurs as the job growth stops and businesses begin to relocate to save money and the demand for housing decreases. During this time, prices become stagnant or even decline as rents and occupancy go down. Usually this decline is merely a slowing of the growth rate, but in markets where the rise was too fast the decline must result in a correction (decline) of prices.
Absorption occurs as the lower prices and occupancy fall below the national averages and/or the area becomes attractive again to businesses looking to relocate. Governments again begin to incentivize business to move into the area and the population begins to grow again.
These four periods of time are all necessary and this is why real estate is so local. One market may be in a period of decline, which pushes another market into expansion.
Just as nature has it’s seasons, real estate markets have a healthy way of transitioning from period to period. Experiencing these transitions and understanding them can give home buyers and sellers not only an understanding around them, but hopefully, more peace while trying to navigate through the moving process.

Monday, April 30, 2007

If you are looking for a bargain in real estate, you have to keep your eyes open, check your email for updates at least once a day (you are receiving daily updates of new listings, aren't you?), and move quickly when you see the right property.
The property to the left has a 1 bedroom condominium that just came on the market today at $129,900, well below the city assessed value of $271,000. I took a walk through it, and through it needs a little bit of work (new carpets, paint)
Located on Lynde Street in downtown Salem, it is a few minute walk to the commuter rail station, and to some of the best restaurants on the north shore. I bet it won't last more than a couple of days on the market.
Many of the bank owned properties aren't bargains because the bank is owed more money than the property is worth. Most of the properties that were foreclosed on recently were purchased with 100% financing, and the real estate market has seen some lowering of values over the last year. The market seems to be pretty stable right now, and by most accounts will be flat for the next year or so.

Tuesday, March 27, 2007

It's been a while since I posted an entry in my blog, but I'm going to do my best to keep it updated. The real estate market has been very busy. I had 2 new single family listings that received multiple offers after the first open house this month. The phone is ringing, and we are doing plenty of showings. I hear from other Realtors that their business is slow, so the only thing I can attribute our full schedules is that we have a huge internet presence, and work with closely with the hundreds of buyer clients registered with us.

The National Association of Realtors® released their existing home sales report today. The report indicated that existing Single-family home sales rose 3.7 percent from the month prior.

David Lereah, NAR’s chief economist, said the strong gain is a bit of a surprise. “Some of the rise in home sales may be from mild weather that brought out shoppers in December, but fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers,” he said. “Even so, winter storms last month discouraged shopping, and buyers were chilled with the third coldest February on record. These unusual weather patterns mean home sales that close in March may decline before rebounding later this spring.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.16 percent in the last week, down from an average of 6.29 percent in February. The 30-year fixed was 6.22 percent in January, and 6.25 percent in February 2006.

Regionally, existing-home sales in the Northeast surged 14.2 percent to a level of 1.21 million in February, and are 3.4 percent higher than February 2006. The median existing-home price in the Northeast was $265,900, down only 1.4 percent from a year earlier.
Single family homes are doing the best right now, with many homes going under agreement in under a week if they are priced right. That is the key - pricing. If a home is not overpriced, and in a desirable neighborhood, it will sell fast. If you are a homebuyer, that means getting an offer in as soon as possible after you see a home you really like. Do not low-ball properties that are priced right. If you are working with a buyer agent (and you should be!), he or she can advise you on the amount you should offer.