On March 9, 2009, HomeGain held a live PR conference call for the national press and for real estate agents to discuss the recent HomeGain home values survey which polled 700 agents around the country about their views on consumer expectations, housing prices and the new Obama stimulus package.
Although there are differences between market areas throughout the country, most agents experience the same level of false expectations on the part of consumers. They also are experiencing varying levels of foreclosures and short sales in their market areas. Their perspective on the stimulus package and how effective it will be is remarkably similar.
Reality To Myth
The situation which real estate agents and brokers confront every day is the high level of false expectations on the part of consumers. This level of false expectations is increased both by the national press and the agents themselves.
A homebuyer feels that they can purchase a home for fifty cents on the dollar because that is what the press has been telling them. When an agent accepts a listing at a price which will never permit the home to sell, they further bolster the consumer’s false expectations.
As Mitch Ribak of Tropical Realty of Suntree in Florida pointed out, the “list to exist” mentality is doing a disservice to consumers by raising their hopes that they will be able to sell their home for an amount which the market will not support.
The Realtor participants of the conference call all agreed that a smart realtor will walk away from a listing if the consumer is adamant on maintaining an unrealistic sale price. They also mentioned that those consumers who are not too embarrassed will, on occasion, come back to the agent who walked away from the listing because they finally understand that this agent was telling them the truth.
Though hardly a surprise, the Realtor participants on the call agreed that home values have decreased anywhere from 10 – 25% depending on the market area. They also confirmed that the rate of appreciation on these homes doubled or tripled in the years preceding the decline in values. This again plays into the false expectations of consumers vis a vis the housing market.
Due to the reduction in home values, homebuyers are able to secure some very good deals through short sales and foreclosures. One would think that a short sale would be disastrous for a homeowner although it is better than being foreclosed.
However, as Karen Breen Elia of RE/MAX Exclusive Properties in Chicago points out, a home seller can survive a short sale if they, in turn, purchase a short sale home or one which has undergone a tremendous devaluation. It can, in fact, be a profitable transaction once both transactions are tallied. She also advises her clients to “look at the bigger picture” in regards to home sales and long-term investments. One of her clients recently fell short $40,000 on the sale of their home, but then bought a home for $140,000 lower than its value a few years ago.
As a bright light in the midst of the gloom, Brian Kinkade of Cherry Creek Professionals Realty in Denver indicated that home values had actually increased by about $7,000 in his market area in Colorado.
The Stimulus Package
The general feeling of our participants is that the stimulus package is a spending or bailout package, not a package which will ultimately stimulate the housing market. The feeling is that providing first time home buyers an $8,000 tax credit is a narrow spectrum solution.
To temper that perspective a bit, Jeffrey Bastress of Startpoint Realty in Massachusetts mentioned that he had “received seven offers this last weekend from buyers who cited the $8,000 tax credit as a primary motivation in initiating a transaction.”
Another controversial side to the stimulus package is the bailout of those homeowners who have been foreclosed. As Louis Cammarosano, General Manager at HomeGain, points out, this approach is reminiscent of the “prodigal son story”.
The people who have been foreclosed, who do bear some of the responsibility for their situation along with the lenders who offered loans which stretch the imagination, are being rewarded with the bailout.
What happens to the individual who accepted the adjustable rate mortgage, adhered to the terms of the reset and is paying out their loan? They are not being rewarded, but should be.
This will set up a situation of opposing perspectives which will ultimately have to be reconciled. Rewarding people for bad behavior, whether it is Wall Street or Main Street is never a good idea.
One of the concepts which the call participants further underscored is that real estate is a local business, not national as some of the press would view it. Each market area is different and there is no uniform approach which is applicable nationwide.
Another point of agreement is that we are still in the early stages of the application of the stimulus package (notice the quotation marks have been excluded). We will have to wait and see how the trickle down of funds actually progresses.
The call terminated with some wise words, “Keep smiling, things will change”.
For upcoming PR calls, visit www.homegain.com/media-center.