Thursday, February 26, 2009
Hope springs anew for 2009, but the Denver housing market will be looking further into the year for good news. December ended with a 36% decline year-over-year decline in home sales. While November sold a little over 1,000 homes, December could only muster results in the mid-900’s. The average units sold for this time of ye ar has been easily twice that over the past six years.
The median price is down 8% and the average down 15% from the marks set 1 year ago. You should expect to see final accounts showing the median price around $254,000. At the peak of the market, the median topped $302,000.
January isn’t shaping up to be much better, due to slow December performance. Only a little over 600 homes went sale pending for the month. Two to three times that number is the December tradition. Complete results will be out around the 15th and some of these numbers could shift some. We must keep in mind however, the Denver real estate market is not nearly as bad as other areas in the U.S.
Nevertheless, I’m looking forward to 2009 and will be making some changes and announcements at re:PDX this year.
1. Big Discount - Home buyers want a big discount from list price. If the market value of a home is $400,000 and you price it at $375,000 to sell it quickly, buyers still want a large discount from list price.
2. Sellers Pain - If the home seller does not appear to be in pain many buyers won’t feel like they are getting a good enough deal. Even, if they are getting a heck of a price for the home.
3. Foreclosures - Buyers tend to think that all foreclosures are a sweet deal. That is not always the case.
4. Short Sales - Many banks still stink at getting a short sale approved quickly. A friend of mine recently had a short sale close and said the bank had 17 different people touch the file. No wonder the banks are in trouble.
5. Bad News - Sellers are quick to ignore the bad real estate news but very quick to latch on to the good news.
6. Good News - Buyers are quick to ignore the good real estate news but very quick to latch on to the bad news.
7. Time to spare - Many home buyers feel like they have all of the time in the world.
8. Lost opportunity - Recently, one of my listings went under contract. I had three Realtors contact me to let me know that their buyer was about to put in an offer. All three buyers had ample time to put in an offer. People want what they cannot have.
9. Wholesale - I get contacted several times a week by people who want to buy property at a wholesale price. Finding buyers for a property selling at wholesale is not difficult. Finding a property selling at wholesale is another story.
10. Acceptance - More and more sellers have accepted the fact that their property is worth less than what it was worth two and three years ago.
11. Crazy sales - The real estate news is bad, there are lots of foreclosures, the buyers are skiddish and home prices are dropping but every now and then a home sells for way more than it should.
12. Oversupply? - I have a list of buyers wanting to buy homes in Sarasota, Florida. Yet, with all of the properties out there for sale I have a hard time finding them a viable property. When you discard the junk and overpriced properties there isn’t as much to choose from as everyone thinks.
13. Exit - We have been in a declining real estate market for four years now. Fewer Realtors got out of the business than I expected.
14. Money Can Be Made - Realtors can make money when the market is declining. People still want to own homes. Those people are just harder to find today than three years ago.
15. Wisdom - Times are tough. Not too many people can deny that. When the country pulls out of this mess we will all be a little wiser from it. The next time you see back to back years of 25%+ increases in home prices start selling your real estate.
Let me share an example. My father had open-heart surgery. He was blessed to have an excellent heart surgeon. That was exactly what this doctor did – heart surgery and only heart surgery. There was an anesthesiologist who put my father to sleep. There was another surgeon who retrieved a vein out of my father’s leg and prepared it for by-pass. There was another surgeon who opened the chest cavity and readied the heart. After all those functions were complete, the heart surgeon stepped in for his part. He completed his bypass section of the surgery and left the others to complete the operation. Do you have the skills and the systems to run your business that way? What would your production look like if you did? How balanced would your life be with this type of a business?
If you had that level of sales skills and consultation skills, you would be paid better than that heart surgeon is paid. There are more people who truly need your services than there are who need a heart surgeon. You have a bigger market to sell your service in today than the heart surgeon has. The question is whether you are truly taking advantage of it and preparing yourself to win.
Abe Lincoln said, “If I had six hours to chop down a tree, I’d spend the first four hours sharpening the axe.” He would spend two thirds of his time improving the tools that make him effective at work. What would your business look like if you spent time sharpening your axe?
What do we normally do? We start right in trying to chop down the tree. We don’t evaluate how best to do it. We just start chopping and hope that the tree will eventually fall. We keep swinging the axe until the sweat is pouring down before we evaluate if this is the best approach.
Most of us work to make progress in our life. By working hard, we make good time. But we are often making good time in the opposite direction of our desires in life. The problem is we don’t know where we are going. Many of us have not clearly defined what we want. We also haven’t spent the time to sharpen our skills, so our efforts can produce much fruit.
Many speakers talk about being efficient. When your efficiency increases, they say, you have won the game. It is true that there is value in increasing your efficiency. Efficiency is great, as long as we are effective as well. But being highly effective is more important than being highly efficient. Let me give you an example. Being efficient is having the skills to drive at 70 mph versus being able to control a car only up to 55 mph. Being effective is taking the most direct route to drive from Denver to Chicago. If you are not focused on effectiveness, you may drive from Denver to Dallas to get to Chicago. The goal is Chicago; even if you can drive at 70 mph the whole way, going to Dallas first wipes out all of your efficiency gains. Take the time to ensure that you are heading directly in the direction you desire; that you are not taking a wrong turn; that you are not stuck on the turnpike of life with no exit for hundreds of miles.
You must spend time to focus on being effective; to “sharpen the axe”. What is your axe in the real estate business? Which tools do you need to spend time sharpening in order to be more effective? Most of us have quite a few things that we need to sharpen in our business. Select one thing that really needs your attention today. Don’t wait until tomorrow – do it now. Then work on, focus on, and improve that one area (even if only for 30 minutes a day) to sharpen your axe. You will be amazed at the ease with which you can fell the big trees of life.
If you need help to really sharpen your skills, give us a call at 1-877-732-4676, or check out our web site at www.RealEstateChampions.com. We have quite a few sharpening stones to get your axe razor sharp.
Wednesday, February 11, 2009
Could the tide be turning for real estate?
It's probably premature to make that call, but you can't ignore the encouraging signs -- especially when they come in multiples.
First we saw a surprising 6.5 percent jump in home sales for December. Now we've just gotten the latest Pending Home Sales Index, and it's up 6.3 percent, thanks to double digit gains of 13 percent in the Midwest and the South.
The index is based on signed contracts for home sales that haven't gone to closing, but that are scheduled to settle in the coming two or three months.
The National Association of Realtors collects the data from Multiple Listing Services around the country, and most economists accept the index as a reliable gauge of where we're headed in housing activity.
Dr. Lawrence Yun, chief economist for the National Association of Realtors, attributed the upward movement to "buyers responding to lower home prices and interest rates" that have improved the affordability equation to its most favorable level in 39 years.
Sales in the coming months might also be powered by something no index can measure: Congress is likely to improve last year's $7,500 home buyer tax credit by turning it into a nonrepayable incentive for new sales this year -- all as part of the stimulus package on Capitol Hill.
Though it's impossible to predict how many more home sales a true credit might stimulate -- one that doesn't have to be paid back to the government like the 2008 version -- industry estimates range anywhere from several hundred thousand upward, provided the expiration date runs through this coming December.
On other economic fronts last week, reports of tens of thousands of industry layoffs definitely won't help housing, but new numbers on inventories of unsold homes just might be a plus. Total homes for sale on the market nationwide dropped nearly 18 percent last month to the lowest level since May of 2007.
Mortgage rates inched up slightly last week, according to the Mortgage Bankers Association, with thirty year fixed rate loans averaging 5.3 percent compared to 5.2 percent the week before. That's up a notch, but it's still close to 40 year historic lows.
As we've said before on this program: Keep your eyes open for the little statistical improvements in the market that often get ignored by the media: Once they start mounting up, month after month, you'll know we're in turnaround mode.
We're not there yet, but we're headed in a promising direction in the real estate market.
Back to Denver Homes
Giffels-Webster Engineers (GWE), a civil engineering firm with a 50-year industry reputation for its vision for today’s market and beyond, revealed its annual list of Top Five Real Estate and Development Trends. According to GWE, the hottest market-growth areas are:
- Infrastructure Rehabilitation
- Energy Generation
- Urban Redevelopment
- Life Sciences
- Healthcare Expansion
Intrinsic to each of the following trends is sustainable design and LEED-certified construction. Green elements will continue to be incorporated into projects as energy efficient, healthy spaces remain a top priority.
There has long been a need for public investment in the nation's aging infrastructure - roads, bridges and utilities. The new presidential administration has expressed a substantial commitment to this investment, which will generate significant work for public agencies, private design consultants and contractors.
Government and private investment in energy generation, particularly of renewable sources, will provide opportunities for developers, construction managers and civil engineers as demand for clean energy grows. Many states, especially in the Midwest, are mandating that higher percentages of electricity come from renewable sources like wind energy, which will require site planning and manufacturing for thousands of new turbines.
Retail and residential re-development opportunities exist in urban areas, where the population and infrastructure foundation is already in place. This year, expect to see an increase in repurposing manufacturing plants and industrial buildings into new mixed-use developments. In addition, public investment to create connected, urban living spaces with walkable and bike-friendly communities are gaining popularity. Creating and improving light rail connections from cities to suburbs will also see investment.
The life sciences industry is positioned for growth as a result of the aging baby-boomer population, increases in prescription drug spending and steady investment trends. Many companies are building or expanding research-and-development facilities, labs and office space for biotechnology, pharmaceuticals and diagnostics. It’s an opportunity to provide facilities that meet these companies’ needs now and can easily be scaled up for future expansion.
Healthcare facilities must stay on top of technology developments and treatment needs to remain competitive; new advancements can quickly outdate existing facilities. An aging baby-boomer generation, coupled with a trend toward single-occupancy rooms, will drive many hospitals, nursing homes and hospice centers to undergo substantial renovations and expansions in 2009.
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