Predictable Equilibium
Everybody wants to know when the depreciation will finally stop. Truth is, that you can ask 10 different real estate professionals where the bottom of the market is, or whether we're perhaps there already, and you'll get 11 different answers. So for the already skiddish consumer, the seemingly contradicting advice that they're getting from us further contributes to their anxiousness about buying or selling real estate. Furthermore, the mass media with their all-too-common "sky is falling" reporting now has many consumers in a state of sheer panic.
From 1980 to 2000 real estate prices in The United States appreciated at a rate of roughly 5% per year. From 2000 to 2006 real estate prices in The United States appreciated a total of 89%! This makes absolutely no sense, and it's easy to see why prices have come down so much from their highs in 2006. The market today is simply finding the predictable equilibrium that it enjoyed up until 2000.
Generallyspeaking. price levels today are what they were in 2001-2002; or in other words where they were before the craziness took over. The predictable equilibrium is all but upon us. Lending standards have once again returned to normal, and real estate aappreciation will soon return to a normal rate of 5% per year.
I 've had many a home seller say to me that if they can't get the price that they want for their property today, that they'll simply wait for the market to recover in 12-18 months. While it is true that we'll be well into recovery mode within that time span, and considering that the market will have found it's predictable equilibrium by then. procuring those 2005 price levels in 18 months will not be possible. In short, if one needs or wants to sell my recommendation would be to sell at today's price and then reap the benefits of a buyer's market on the other end.
Sunday, July 19, 2009
Monday, July 13, 2009
The "Real" real estate market-Part II
Unfortunately, in real estate we rarely, if ever, give commodity markets any thought. If we understand what real estate really is, and by contrast what it is not, then we will be well on our way to understanding what motivates the market, and how to use it to our advantage as home sellers, regardless of market conditions. Real estate is a commodity. Real estate is a commodity. Real estate is a commodity. However, we consistently treat it like a product, expecting our marketing to be able to sell it. It never has, and never will. Two important attributes of any commodity marketplace are:
•· Consistent Buyer Pool-Every commodity marketplace has a built-in buyer pool that remains relatively constant regardless of market conditions. The preceding statement has been underlined because it is one of the most important principles that would-be home sellers must accept in order to successfully sell their properties, and maximize their profit in this marketplace. Yes, the two can coexist. In other words, we have relatively the same number of prospective buyers in 2008 than there were in 2003-05. In light of stagnant sales and an overabundance or inventory, this is a hard pill to swallow. After all, if properties are not selling, than an apparent lack of buyers is a logical assumption. Right? The truth is quite the contrary. In a commodity environment, prospective buyers will always be stimulated into action if they perceive that what the market is offering them is worth having. The general consensus today is that it is not.
•· No marketing required-This one likely scares the pants off of my industry. After all, we spend an inordinate amount of time and resources telling homeowners that because our marketing is so extensive, effective, and cutting edge, that we can sell their homes quickly and at the highest possible price. The truth is that having the most extensive of marketing resources is absolutely essential, especially in light of the thousands of home sellers competing for buyers. However, it is not for the reason that most of us think. The only thing that marketing can do is to build awareness. It cannot sell real estate. Wheat futures, for example, are a commodity that trade every single business day. However, you will never see a single ad of any kind marketing wheat futures. Marketing sells products; marketing cannot sell real estate, because real estate is a commodity! And in any commodity situation, unlike a product, there is no direct relationship between the marketing and the final results.
Yet real estate is more than just a commodity; it is an emotional commodity. This is the primary reason why properties, in certain situations, are sold at above their asking prices. After all, does it really make any logical sense to pay someone more money for something than what they are asking? However, in the recent past, we often did just that! We became emotionally involved in the process, and logic fell by the wayside as a result. If a home seller can get prospective buyers emotionally involved in the process, they will frequently pay more than they would otherwise pay. I can personally attest that this type of scenario is still playing out today for the few and far between home sellers that choose to accept, and play by the rules of, The "Real" real estate market.
•· Consistent Buyer Pool-Every commodity marketplace has a built-in buyer pool that remains relatively constant regardless of market conditions. The preceding statement has been underlined because it is one of the most important principles that would-be home sellers must accept in order to successfully sell their properties, and maximize their profit in this marketplace. Yes, the two can coexist. In other words, we have relatively the same number of prospective buyers in 2008 than there were in 2003-05. In light of stagnant sales and an overabundance or inventory, this is a hard pill to swallow. After all, if properties are not selling, than an apparent lack of buyers is a logical assumption. Right? The truth is quite the contrary. In a commodity environment, prospective buyers will always be stimulated into action if they perceive that what the market is offering them is worth having. The general consensus today is that it is not.
•· No marketing required-This one likely scares the pants off of my industry. After all, we spend an inordinate amount of time and resources telling homeowners that because our marketing is so extensive, effective, and cutting edge, that we can sell their homes quickly and at the highest possible price. The truth is that having the most extensive of marketing resources is absolutely essential, especially in light of the thousands of home sellers competing for buyers. However, it is not for the reason that most of us think. The only thing that marketing can do is to build awareness. It cannot sell real estate. Wheat futures, for example, are a commodity that trade every single business day. However, you will never see a single ad of any kind marketing wheat futures. Marketing sells products; marketing cannot sell real estate, because real estate is a commodity! And in any commodity situation, unlike a product, there is no direct relationship between the marketing and the final results.
Yet real estate is more than just a commodity; it is an emotional commodity. This is the primary reason why properties, in certain situations, are sold at above their asking prices. After all, does it really make any logical sense to pay someone more money for something than what they are asking? However, in the recent past, we often did just that! We became emotionally involved in the process, and logic fell by the wayside as a result. If a home seller can get prospective buyers emotionally involved in the process, they will frequently pay more than they would otherwise pay. I can personally attest that this type of scenario is still playing out today for the few and far between home sellers that choose to accept, and play by the rules of, The "Real" real estate market.
The "Real" real estate market-Part I
The real estate business is perhaps one of the most competitive service industries there is. I clearly remember my first day in real estate school when the instructor said "he/she who controls the inventory, controls the market". We're conditioned from day one to do three things; get listings, get listings, and get listings! There's nothing about this notion that is necessarily untrue, and as a matter of fact I have benefited personally by concentrating on building up an inventory of properties in a certain subdivision. Some of my most successful colleagues are indeed those who have been able to carve niches for themselves, whether it be in a neighborhood, or in a specific type of property.
This intense competition for properties often leads to real estate agents and their brokerages making certain statements and claims, that I've concluded as a result of both training by Jay Shweppe and personal experience, are simply not true. Don't get me wrong; I'm not implying that there is any intended deception on the part of any real estate professional. We, as an industry, are simply passing on to consumers what we've been taught. Subsequently, we make statements like this, "Our marketing is so effective, that we'll sell your home quickly, and at the highest possible price". The implication being, that marketing can sell real estate. I humbly beg to differ. If this were true then the top three or four brokerages with the most marketing resources would be selling the vast majority of the properties. Even the top dogs in their own markets can muster, at most, a 10% market share at best. There is no doubt that having a far reaching, comprehensive marketing mix is absolutely essential. However, not for the reason that most of us think.
The not-so-evident truth is that marketing never has, and never will sell a single piece of real estate. Marketing can sell products; marketing can sell services. Real estate is neither a product nor a service; it is a commodity! And by loooking at commodity markets, how they work, and what motivates buyers in commodity situations, we will go a long way to understanding, and further educating home owners on how to maximize profit from the sale of their homes-regardless of market conditions!
This intense competition for properties often leads to real estate agents and their brokerages making certain statements and claims, that I've concluded as a result of both training by Jay Shweppe and personal experience, are simply not true. Don't get me wrong; I'm not implying that there is any intended deception on the part of any real estate professional. We, as an industry, are simply passing on to consumers what we've been taught. Subsequently, we make statements like this, "Our marketing is so effective, that we'll sell your home quickly, and at the highest possible price". The implication being, that marketing can sell real estate. I humbly beg to differ. If this were true then the top three or four brokerages with the most marketing resources would be selling the vast majority of the properties. Even the top dogs in their own markets can muster, at most, a 10% market share at best. There is no doubt that having a far reaching, comprehensive marketing mix is absolutely essential. However, not for the reason that most of us think.
The not-so-evident truth is that marketing never has, and never will sell a single piece of real estate. Marketing can sell products; marketing can sell services. Real estate is neither a product nor a service; it is a commodity! And by loooking at commodity markets, how they work, and what motivates buyers in commodity situations, we will go a long way to understanding, and further educating home owners on how to maximize profit from the sale of their homes-regardless of market conditions!
Saturday, July 11, 2009
Real estate as a commodity
The real estate business is perhaps one of the most competitive service industries there is. I clearly remember my first day in real estate school when the instructor said "he/she who controls the inventory, controls the market". We're conditioned from day one to do three things; get listings, get listings, and get listings! There's nothing about this notion that is necessarily untrue, and as a matter of fact I have benefited personally by concentrating on building up an inventory of properties in a certain subdivision. Some of my most successful ccolleagues are indeed those who have been able to carve niches for themselves, whether it be in a neighborhood, or in a specific type of property.
This intense competition for properties often leads to real estate agents and their brokerages making certain statements and claims, that I've concluded as a result of both training and experience, are simply not true. Don't get me wrong; I'm not implying that there is any intended deception on the part of any real estate professional. We, as an industry, are simply passing on to consumers what we've been taught. Subsequently, we make statements like this, "Our marketing is so effective, that we'll sell your home quickly, and at the highest possible price". The implication being, that marketing can sell real estate. I humbly beg to differ. If this were true then the top three or four brokerages with the most marketing resources would be selling the vast majority of the properties. Even the top dogs in their own markets can muster, a most, a 10% market share at best. There is no doubt that having a far reaching, comprehensive marketing mix is absolutely essential. However, not for the reason that most of us think.
The not-so-evident truth is that marketing never has, and never will sell a single piece of real estate. Marketing can sell products; marketing can sell services. Real estate is neither a product nor a service; it is a commodity! And by loooking at commodity markets, how they work, and what motivates buyers in commodity situations, we will go a long way to understanding, and further educating home owners on how to maximize profit from the sale of their homes-regardless of market conditions!
This intense competition for properties often leads to real estate agents and their brokerages making certain statements and claims, that I've concluded as a result of both training and experience, are simply not true. Don't get me wrong; I'm not implying that there is any intended deception on the part of any real estate professional. We, as an industry, are simply passing on to consumers what we've been taught. Subsequently, we make statements like this, "Our marketing is so effective, that we'll sell your home quickly, and at the highest possible price". The implication being, that marketing can sell real estate. I humbly beg to differ. If this were true then the top three or four brokerages with the most marketing resources would be selling the vast majority of the properties. Even the top dogs in their own markets can muster, a most, a 10% market share at best. There is no doubt that having a far reaching, comprehensive marketing mix is absolutely essential. However, not for the reason that most of us think.
The not-so-evident truth is that marketing never has, and never will sell a single piece of real estate. Marketing can sell products; marketing can sell services. Real estate is neither a product nor a service; it is a commodity! And by loooking at commodity markets, how they work, and what motivates buyers in commodity situations, we will go a long way to understanding, and further educating home owners on how to maximize profit from the sale of their homes-regardless of market conditions!
Wednesday, June 17, 2009
Look before you leap
You've been looking to buy a condo, and what a great time it is to do so. There's never been such a vast selection of attractively priced properties out there. Naturally, you've already had your mortgage pre-approved by a reputable primary lender, you call your agent, they start emailing you properties, and you're set to GO! Right? Not so fast. Chances are if you're a middle class average American you're going to take advantage of the "back by popular demand" FHA loan. Well....the truth of the matter is that not all condo complexes are 'FHA approved' and the last thing you want have happen is to fall in love with a place only to find out later that your lender will not finance it. How can you avoid this? You may ask. Here's the answer:
https://entp.hud.gov/idapp/html/condlook.cfm
And it will make it possible for you to look before you leap!
https://entp.hud.gov/idapp/html/condlook.cfm
And it will make it possible for you to look before you leap!
Tuesday, June 9, 2009
Some positive news about Commercial real estate
Commercial real estate might not go bust
NEW YORK – June 9, 2009 – In spite of all the recent gloomy talk, the U.S. commercial real estate market might not endure the belly flop everyone seems to anticipate.
The reason? More real estate investment trusts (REITs) have been warming to the concept of deleveraging in recent months, raising approximately $12 billion of equity in the stock market to either fortify their cash positions for the months and years to come or simply to pay off debt.
Analysts expect that the ability of high-profile real estate owners like Brandywine Realty Trust, Highwoods Properties Inc., Forest City Enterprises, and others to raise capital in such a difficult lending environment will help the overall stability of the commercial real estate market. As a result, fewer buildings will have to be sold at bargain-basement prices.
Source: Richmond Times-Dispatch, Andrew Little (06/08/09)
NEW YORK – June 9, 2009 – In spite of all the recent gloomy talk, the U.S. commercial real estate market might not endure the belly flop everyone seems to anticipate.
The reason? More real estate investment trusts (REITs) have been warming to the concept of deleveraging in recent months, raising approximately $12 billion of equity in the stock market to either fortify their cash positions for the months and years to come or simply to pay off debt.
Analysts expect that the ability of high-profile real estate owners like Brandywine Realty Trust, Highwoods Properties Inc., Forest City Enterprises, and others to raise capital in such a difficult lending environment will help the overall stability of the commercial real estate market. As a result, fewer buildings will have to be sold at bargain-basement prices.
Source: Richmond Times-Dispatch, Andrew Little (06/08/09)
Tuesday, June 2, 2009
A feeding frenzy
Have you tried to buy a foreclosure in the $100,000 to $150,000 lately in Miami Dade County? Then you know can certainly relate to the "feeding frenzy" that's currently happening with these properties. Homes in this price range are flying off the market in a matter of days and are selling at, or above, list prices. If you plan on going after one of these, and you want to have a fighting chance of getting it, do NOT bid any less than 95% of the asking price. I am currently working with a number of buyers who have lost out on properties for not heeding this advice. Case in point; a property in Hialeah Gardens went on the market last Saturday for $150. The buyer offered $140 on Sunday. Monday was Memorial Day. On Tuesday, the seller had 33 offers! Needless to say, this property will sell for more than the asking price. Unfortunately, many buyers will lose at least three properties by bidding too low. If you want to save yourself a lot of grief, listen to your agent and BID AGGRESSIVELY!!!
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