The Sweet and Sour Spot?

Just a quick thank you to the pros at Michael’s on Main Restaurant for letting me take a wok on the wild side and a stroll down memory lane this past week. Indulging me with a guest-chef gig in their ongoing series of Tuesday food and wine events. After reprising a few of my old chops, I think I’ve got it out of my system now. Time to put the cleaver down and get back to food for thought…

 

Where did we leave off? Oh yeah. Talking about the “sweet spot” of the market. The erogenous zone of price where buying activity is really stirring. Where mounting excitement and the heady thrust of demand is firing on all cylinders.

 

When I returned to real estate from my culinary sojourn there were ten anxious voice mails waiting for me. Seven from different people – talking about almost the same exact thing. Coincidence? I think not.

 

See if any of this sounds familiar: “We’ve been holding off buying. Now we’re ready to get serious and take the plunge.”

 

Or: “We’re looking for a 3/2 in a great neighborhood between $550 -$650k.”

 

Or: “We definitely need 3 bedrooms or 2 with an office. Walking distance to a few restaurants.”

 

Or: “We could spend up to $750k but we really want to keep payments low. We’d like to stay closer to $650”

 

Or: “We’re first time buyers but we think now is the time. We can stretch as high as $500k with interest rates so low.”

 

Or: “We’re getting a gift from the folks. One of the condos in our complex finally sold. We can get out of this place whole and finally afford a real house with a real yard.”

 

Or: “We’ve been looking for something in the $600 – $650 range for a year now and there just isn’t anything available.”

 

Or: “Every time something decent comes on, it’s gone in a couple of days with multiple offers!”

 

Or: “We’re first time buyers. All we are competing with are rich investors. Every time we find something below $500k – someone throws a cash offer in.”

 

Or: “When are more places going to come on? How long do we have to wait??”

 

I’m guessing that for seven out of ten buyers reading this, some of the above resonates strongly with your own situation.

 

You figure: Market’s past bottom. Prices going up. Interest rates won’t stay low. Rents will get higher. Economy is more hopeful. Life goes on despite the distress of the downturn. A home is a great thing. You’re ready to get back in the game. Not in a crazy way. In a smart way. Buying below your means rather than way above.

 

Odds are: You’re looking for something in the “Sweet Spot” – $500 to $650ish. Three bedrooms – if possible. Two baths. Safe neighborhood. Yard. Not a fixer. Pride of ownership. Potential for appreciation down the road.

 

Simple right? Reasonable thoughts and desires. But what happens when everyone wants the same thing? And there’s not enough to go around? The Sweet Spot starts to develop a Sweet and Sour taste. A buyers market doesn’t always feel like a buyers market.

 

Will the $650k’s start pushing up towards $750? Will $850 places come down closer to where demand is? Will more high end homes drop below the magic million mark in search of buyers?

 

By the way, the other three calls on the machine were from Sellers wondering whether they should wait till spring to put their homes on the market. What should we tell them?

 

Better Across the Board?

How does the average person really know when “things” are better? The economy. The real estate market. Life in general. Where’s the tipping point? How much evidence has to be gleaned from the world around us, before our internal compass shifts and we cross over from the dark side to brighter days ahead?

Do we simply think things are better in our heads? Is that enough? Or do we just feel like the cumulative balance of life is better – for no one specific reason we can name. Just sort of a collection of little things?

There are all kinds of economic indicators that offer glimpses into the hidden processes going on in our collective hearts and minds. Indexes that try to measure the subtle, changing orientations of our belief systems that in turn regulate our participation in the world’s consensual reality.

Old standbys like Consumer Price Index, Gross National Product, Durable Goods, Trade Deficit, Housing Starts. Not to mention a slew of slightly more esoteric gauges like: Unclaimed Corpse Indicator, Men’s Underwear Index, Baby Diaper Rash Indicator, Mosquito Bite Indicator and the Latvian Hooker Index.

Since Santa Cruz has more “I Like Dogs and I Vote” bumper stickers per capita than anywhere else in the world, it’s comforting to know there’s even a Dog Index based on the theory that when things get better more people get dogs.

(Just in case you dog-likers are wondering, India had the fastest growing canine population in the world between 2007-2012 at the same time the number of man’s best friends in Switzerland dropped a whopping 10%.)

Me? I confess I’m a skeptic. A contrarian’s contrarian prepared to tilt at any paradigm propped up in the way. I can never quite justify the results of the Consumer Confidence Index with those of the Misery Index to my own satisfaction. I know that the Case Schiller Index says real estate prices were up nationwide 3% in September but am I better off now than I was four years ago? Yes and no. Four weeks ago? No and yes. Biorhythms are tricky things to pin down with algorithms.

But I do have my own personal Real Estate Index I’ve developed over the years. It’s a bit informal and I haven’t gotten around writing the computer program yet. I call it The Car Wash/Grocery Store/Cocktail Party Chat Index. A seat of the pants meets gut instinct ball park yard stick.

Here’s how it works. As I make the rounds each week I keep track of how many people approach me and volunteer something like: “The market’s up, right Tom?”

It’s not really a question. It’s an invitation. It’s code that says folks want to engage and talk about real estate. And to do that they must be feeling better about little things they are hearing and seeing about real estate. And the balance of the bigger picture must be shifting a little further towards the light at the end of the tunnel.

More people wanting to talk about real estate is a great sign. Talking is one of real estate’s most positive leading indicators. It always precedes doing something that’s real – like buying or selling a home.

There were a number of years there where subjects like real estate and those great rates and that latest refi and what the house down the street sold for and how many offers that listing got and should I remodel or buy another home never came up. They weren’t part of the conversation.

But without question, the Chat Index numbers are way up. Right along with the Random Phone -E mail-Search Engine Inquiry Index. The market is stirring.

Does that mean that the whole market is better? Straight across the Monopoly Board? Well…not quite. I think it’s safe to say that demand for the Baltics and Connecticut Avenues and St Charles Places of the marketplace is running high. The biggest question is: How do we get a little more action going on those Indiana Avenues and Marvin Gardens not to mention North Carolinas and Park Places?

Next week we’ll talk about the “sweet spot” in the current marketplace and what needs to happen to ratchet it up a few more notches into the higher rent districts.

Armchair Quarterbacking the Real Estate Market

Stay where you are. Don’t get up. Ride the mellow wave of that Turkey-induced, tryptophan high for a couple more days. In the meantime…relax and raise the footrest on the ol’ Barcalounger. Let’s look at the big picture – as real estate rounds into the homestretch of 2012.

Reclining is much better than declining. And real estate has earned a few days off for good behavior while racking up some very positive stats the past few months.

Spoiler Alert: Anyone looking for proof that the market is speeding back towards the heyday of 2005-07 is setting themselves up for disappointment. Take things for what they are – better. Let go of that other dream.

Median Price: We’ve been consistently in the $500,000 range most of this year – after hovering closer to $450,000 last year. The median peaked out well above $750,000 between 2005-2007.

Average Price: Running in the high $500,000s to low $600s recently. Compared to the low to mid $500s last year. Still a far cry from the lofty $800 to mid $900s range Santa Cruz County averaged at the peak.

Number Sold: Sales in 2012 are up over last year – close to 25% more. Not shabby. We may reach 1800 + single family sales this year – not far off from the combined average annual sales between 2005-07.

Surprise Stats: The average and median price of condos has risen dramatically in the last few months – close to $410,000 in both categories in October. Both up more than $100,000 from October of 2011. Go condos.

Corresponding Data: The percentage of short sales and REOs was down significantly in the condo/townhome sector which has absorbed more than it’s share of distress since the downturn. Continued improvement in the condo market will be a sign of better things to come – first time buyers, more organic listings, upward price pressure in at least the lower price ranges of the market. Go condos.

Translation – Organic Sales: Regular people selling regular houses under relatively normal conditions. Not bank-controlled short sales or REOs because banks aren’t people too. Getting back to a more normal market dynamic in the future is predicated on having more organic listings. The catch? We still have huge vaults of unsold distress properties casting their long shadow.

Rental Market Irony: Bubble bursts. Prices go down. People lose their homes. Fewer people can qualify to buy. There are suddenly lots more renters competing for fewer rentals. Demand exceeds supply. Rents rise significantly.

Buyers’ Irony: The perfect buyers market? Historically low interest rates. Prices down 30- 40% from the peak. Distress sales on every block. The catch? Nothing to buy. Short sales take too long. REOs are almost always awful. Lack of choices means competing offers on the few good listings that do come on. And – it’s still not easy to get through the loan qualifying process to access those great rates.

Sellers’ Irony: If you have a decent home listed in the sweet spot – $550,000 – $750,000 – chances are you’ll see multiple offers in the first week. Eager buyers who may drive the price up and cooperate on inspection issues. What’s wrong with this picture? That same sweet zone would have been 40% higher in 2005-07.

Dead Zone: Check it out. How many listings are there on the market between $800,000 and $1,000,000? Very few. How many are selling? Fewer. Call it the market’s designated no man’s land.

Elephant in the Marketplace: Lack of Inventory. There are only 400 listings available in the County. The fewest I’ve ever seen. Until mo’ better homes come on the market – the number of sales and the prices can’t/won’t increase dramatically beyond current levels. But prices have to rise to convince more Sellers to list.

Question: If you were a Seller – wouldn’t you want to be on the market when there was the least amount of competition? Supply and demand? Remember? Perhaps it’s time to make that New Year’s Resolution.

Light at the End of the Carpal Tunnel?

Catch a grizzled old Real estate veteran on the street and he might regale you with stories about the good old days when he bought his first house for $19,000 and the whole process consisted of a firm handshake and a contract written on a cocktail napkin at the old Catalyst happy hour.

Catch a glimpse of a modern millennial Realtor armed with iPhone, Bluetooth, e Fax, Docusign, Zip Forms, Cloud Computing and Apps galore – all available at the touch of a finger and he probably doesn’t have time to talk – much less regale you.

Even with all the  “labor-saving” paperless options tech keeps inventing,  most of us are still fumbling with armfuls of escrow files – thicker than War and Peace and the Urantia Book combined. Tomes of real paper so heavy that a chronic new disability syndrome – Realtor’s Elbow – has become the leading cause of increased chiropractic visits in the State of California.

Catch a buyer coming out of an escrow sign-off and you’ll likely be met by a hypnogogic stare and a few unintelligible mumblings about loan documents, escrow provisions and supplemental tax installments. Perhaps you’ll notice a bit of drool trailing down his chin as he clutches his closing file in one hand like a 10 pound dumbbell while his other “writing hand” looks like it’s frozen into the kind of fetal position that can only be achieved by squeezing a cheap plastic pen too tightly for more than an hour.

I suspect we won’t be returning to the good old days of napkin methodology any time soon. My how things have and haven’t changed.

I’ve seen it hundreds of times. Buyers arrive for their sign-offs in good spirits. Convinced they have already slogged through the hard part of buying a home. Ready for the birth-like catharsis of home ownership sealed by their own official John Hancocks (a.k.a. wet signatures).

Ten minutes into the sign-off, as mind-numbing page-after-page is placed before them to read, understand and sign in rapid succession, their eyes begin to glaze over. Their signatures grow erratic. Their guilty consciences begin to nag them: “Should I actually read all these documents that have to do with one of the most important things I’ll ever do in my life? Am I signing my future away without knowing it? Who comes up with all this stuff – the Center for Cosmic Redundancy?”

Slowly, inexorably, most buyers succumb to the glacial onslaught of paperwork. First they take on the likeness of a burned-out bureaucrat in an Anton Chekov short story. Then they plunge into the puddle-like, helpless state of one of Kafka’s characters – cast in a maze-like, myopic nightmare.  In the end their tunnel vision simply gives up and becomes one with their carpal tunnel syndrome.

Ok, so maybe I’m exaggerating a bit. But you get the point. Real estate is one of those strange post-post-modern intersections (like medicine, insurance, the law) where well-meaning consumer protection, obsessive litigious tendencies and paranoid
cover-your-ass-props all meet in one inglorious orgy of time and paperwork.

The ultimate irony of our infinitely less than perfect system is exactly this: The more documents there are to read, the less people actually do read and understand for themselves. The more we try to protect ourselves from ourselves, the more likely it becomes that we’ll catch ourselves inside Joseph Heller’s Catch-22.

But don’t give up hope. Call me or e mail and I might be able to give you a few tips on
how to get through the sign off process a little more gracefully while you discern more of the right stuff from all the written stuff you are going to get inundated with soon enough.

Synapse Crackle Pop

Synapse! Crackle! Pop!   Rice Krispies!!   Or Rice “Bubbles” as they are known in Australia.  The cereal, serial and surreal breakfast of champions.  There’s been no lack of neurons firing this week here at real estate of mind central – with the election and all.  Tough to decide what to pick out of my own brain.  I’ll just give you a few quick cliffs notes rather than the full fiscal cliff version.

Does this sound familiar? From CNN Money: “Buyers were snapping up homes faster than developers could build them. Investors grabbing two, three, four each, hoping to cash in on skyrocketing prices.”

“But then the music ended. Prices started to slide. Developers were stuck with empty buildings. Homeowners saw their wealth begin to slip away.“

Buying frenzy?  A dangerous game of musical chairs?  United States – 2007?

Dystopian ghost-tracts littering the landscapes of Florida,  Las Vegas and the Central Valley?

Nope. Been there. Done that.

Now, I’m not going to beat the drum too loudly here folks, being the cautious real estate soul that I am,  but it finally does seems like housing markets around the U.S. are rounding the corner.  Passed the bottom. Beginning to head slowly-but-not-so-surely back up that I recommend wishful Sellers start looking for 2006 Median Price Points anytime soon. (Think 5 years down the line – maybe – the pendulum has a long way to swing. )

But how about China – circa 2012?  What goes around comes around? Karma?  Deja Vu all over again as Yogi Berra would say?

Perhaps this could qualify as a weird remake of The China Syndrome.  Jack Lemmon, Jane Fonda and Michael Douglas hook-up with Tim Geithner, Hank Paulsen, the gang at Lehman Brothers and the 25 member ruling politburo of the Chinese Central Committee?

Goes something like this:  The world’s run-away economy overheats. The global financial meltdown reaches critical mass.  It all begins to burn a hole through the middle class  – inexorably heading down, deeper and deeper towards China – where all those cheap exports to the US are starting to dry up.

Faced with a rapidly cooling economy the Chinese government does what so many others have done before – they drink the Kool-aid.

Lending restrictions are loosened.  Billions are encouraged to borrow trillions. Real estate and housing are pushed to the forefront.  Creating jobs. Increasing demand for steel, coal and construction equipment.  Keeping the economy moving ahead at an overheated, unsustainable pace.

A massive house of cards built on ballooning debt, financial speculation, officially sanctioned greed and the prevailing belief that “real estate never goes down.”   Sow the wind and reap the whirlwind.    It always comes full circle.

The solution?  Tighten credit. Crack down on speculators. Enact more regulation to limit the opportunities for the middle class to jump on the gravy train.  Cut off the flow of free money, in the form of debt, that’s being handed out like Halloween Candy. Then charge the Catch 22 off – back to the people.

Now that things are getting better here – perhaps the U.S. can start exporting boatloads of short sale negotiators, foreclosure experts, customer service reps, collection agencies and loan modification processors to China.  We won’t be needing them much longer.  We can do our part to help China bailout out of its own underwater real estate market while we help equalize the trade balance at the same time.

Are Realtors People Too?

We spend the majority of our headspace at Real Estate of Mind musing about  Realtors and the interesting relationships they develop with that vast sea of  clients  swimming around in the infinite milieu of  “the marketplace.”

Realtors go about their work.   People go about their lives.  Occasionally that work and those lives intersect.  Overlap for brief, intense periods of time while humans navigate the large transitions that inevitably accompany the process,  when the places they sleep, eat, make love and otherwise “live” in,  go through profound changes of address.

But what about Realtors and the relationships they develop with other Realtors?  What fascinating world of exploration does that notion conjure?

Is real estate just business? Done strictly by the book? What book?

Aren’t Realtors people too? Humans with their own lives? Navigating their own way?  Who talks to and about Realtors more than other Realtors?  Can someone who isn’t a Realtor really understand what it’s like to be a Realtor?  In the immortal words of the ten year old that resides inside me:  “Doesn’t it take one to know one?”

I always have to be a little careful around these sensitive subjects  - having once been charged with a serious breach of ethics, when another Realtor took offense because I suggested, kinda humorously but kinda seriously, that all Realtors ought to carry a moral compass wherever the go.

But…here I go…once more into the breach dear friends… mind wandering in the wilderness looking for true north.

Realtors are an incredibly interesting species.  We’re part of a fraternity. Or sorority. Or a co-ed fraternity sorority.  We’re intense competitors and we’re willing or unwilling colleagues at the same time. No two relationships between Realtors is ever the same.

We negotiate with each other. We exercise professional courtesy. We sniff each other out.  We facilitate solutions.  We pee in corners. We occasionally behave badly just as we rise to occasional gracious heights with the help of our better angels.

Some Realtors are grinders. Some are giving.  Some are pleasant. Some always sound like their dog just died.  Some like to blame everyone else. Some seem convinced the “glass is half empty” – that neither life or real estate were meant to be happy occupations.  Some always seem to be surfing a perpetual wave of inexhaustible optimism – good or bad market –  you couldn’t tell if it was 2005 or 2009 by listening to them.

There are some wonderful Realtors I’ve had 20 successful escrows with over the years.  Others?  Well, let’s just say – I cringe at the thought of a few that might show one of my listings and actually write an offer – necessitating a prolonged period of close interaction on behalf of our respective clients.

And yes, our code of ethics says you shouldn’t say anything bad about another Realtor but that doesn’t mean there aren’t other forms of expression available. I  confess I’ve heard Realtors hum the Wicked Witch of the West theme or the first few telltale bars of “Jaws” when another Realtor’s name came up in conversation.

When those competitive juices really get going – Realtors can dig deep into their private bag of tricks trying to out-do, out-manuever, out-posture and in some cases out-spend each other – searching for new and better ways to monetize the Machievellian urges welling up from within.

How do Realtors diss other Realtors – both subtly and not so subtly? Here are a few of my favorite ways:  They try to out-car them.  Out-cool tech headset them.  Out-paperwork them. Out-award them. Out-real estate jargon them. Out-client name-drop them. Out-Realtor designation them. Out-my time is more valuable than yours them.  Out-I don’t work on weekends them.  Out-my brokerage is bigger than your brokerage them. Out-don’t bother to return a phone call them.  Out-sales volume them. Out-I’ve been doing this longer than you’ve been doing this them.  Out-success guru them.  Out-data base them. Out-go on vacation in the middle of a transaction them.

There are a thousand ways to try to out-Realtor other Realtors. But the very worst thing you can say? The harshest criticism you can hurl in another Agent’s direction?  Simply say: “You don’t have any client control.”

Client control. An interesting concept. Fraught with implication. We’ll explore the subject further next week.

Of Two Minds: Getting Your Yah-Yah’s and Your No-No’s Out

Dear Tom:

We’ve been back to the same house a few times and we think we want to make an offer. Every time we visit though, we notice a strange feeling that’s difficult to describe. The house doesn’t show very well. The Sellers don’t seem interested in giving it any curb appeal or cleaning it up. They act like they don’t really care if it sells. Why put a house on the market if you don’t want to sell it? This has given us pause and we can’t quite get over the hump. There’s something invisible holding us back. Any thoughts?

ON HOLD

DEAR HOLD:
Hang on a second… I know I’ve experienced the same nagging voices in my head dozens of times. What exactly are those Sellers trying to tell us anyhow?

Ah, bingo! Thanks for waiting. I think I’ve got it now. Hopefully I can explain “it” in a way that makes sense.

You are intuitively picking up on hidden clues the Sellers have left littered around their house like brightly colored Easter eggs. And your own sense of disconnect is rising in direct proportion to their heightened state of ambi-valence. (Note that I’m using a hyphenated “ambi-valence” here to illustrate the concept a little better.  Think flip-flop, push-pull or yes-no-maybe.)

The definition of ambivalence is: ” simultaneous and contradictory attitudes or feelings towards an object or action.”  Ambi-valence expressed in the most basic fundamental real estate terms sounds something like this: “Yes! I really want to sell my house!! But to tell you the honest truth, there’s something in me that doesn’t want to let it go!!!”  And I’m going to make sure that Buyers get the message!!!! One way or another!!!!!”

Ambi-valence comes part and parcel with lots of big life changes and home sales.  Sometimes the underlying cause is obvious – like divorce situations where one spouse still lives in the house and doesn’t want to leave. The house is really only half for sale. The other half may see it as a demonstration lab for all the unresolved emotions still roiling around on the ex-homefront.

Often,  Sellers are uncomfortably unaware of their own deeper feelings. The ones that are silently shouting behind closed doors. All walled and balled and locked-down inside them. Perhaps they aren’t in touch with their own grief about leaving a place they’ve loved and nurtured. Or their own fear about life’s scary changes. Or their anger about the unfairness that’s forcing such an unexpected passage. Perhaps they are having trouble packing up and organizing all their old baggage.

Offering a home for sale and putting it on display to the world affords Sellers all kinds of creative opportunities to express subtle emotions and mis-directions they might not even know they are entertaining.  There are plenty of ways they can get their yah-yah’s and no-no’s out.  The ambi-valence list is legendary.

Mysteriously there’s never any time to wash the dishes or make the beds.  Somehow, the lawnmower broke and I can’t find anyone to fix it.  I really did mean to change that old kitty litter box but somehow I forgot.  And let me just say that I don’t care whether anyone likes my antique doll collection. Or the black paint in the bedroom. And why should I get up off the couch while Wheel of Fortune is on, just because someone wants to come through the house?  If they really like it, they can see past it all. If they really want it, they can make an offer.

HOLD, it is almost impossible to separate the sale of a home from the larger changes Sellers are going through. If Sellers aren’t dealing with their transition issues gracefully or if they are ignoring them altogether, you are probably going to find yourself on the receiving end of some ambi-valence.

What can you do about it?  You have to become a little ambi-dextrous and go through a few mental gymnastics to dodge the stumbling blocks they toss in your way.  Start by checking their emotions at their door next time you walk through the house.  And don’t forget to check-in with your own while you are at it.

Heading Down The Home Stretch for 2012

Here we are. Almost Thanksgiving.  Heading down the home stretch of Real Estate 2012.  My how time flies when we are having…having…whatever this is that we’ve been having.

Still doesn’t have a name that quite captures its strange essence does it?  Kind of a recovery that’s still in recovery.   But at least we can use the word recovery now.  We’re making progress.  That’s something to be thankful for even if we haven’t gotten completely past the point of worrying about a relapse.

Has it really been five years, going on six, since the market peaked, the bubble burst and we all began the long, drawn out process of erasing everything we thought we knew about real estate?

Redrawing the boundary lines. Gerrymandering the process.  Reinventing the real.  On the fly.  In full-tilt, pendulum-swinging boogie.  Rube Goldberg and his Merry Band of Tinkerers continuing to madly tweak the cogs and levers and gears of the economy’s perpetual motion machine because it can’t stop long enough to be intelligently rebuilt from the ground up.

We’ve been busy looking for all those illusive long term quick fixes.  Or at least some way to punt the can far enough down the road so everyone has time to suck in a big cleansing breath and issue a huge sigh of relief, before having to head back out, trekking toward the far country of a decidedly uncertain future again.

So let’s stop in to see what condition our condition is in.  This week and next, we’ll take mindful inventory (remember that word – inventory) of a few developments that have taken place this year.  Chronicle some of the hits and misses that mingled closely with our hopes and fears.

First, let’s look at the big board that monitors Real Estate’s vital statistics:

Number of Home Sales Up? Check.  Median Prices Up?  Check.  Average Prices Up?  Check.  Average Days on Market Down?  Check.  So far so good.  All sounds pretty healthy doesn’t it?  (See yesterday’s Sentinel Article on local market trends.)

Interest rates?  Still hovering near historic lows.  What’s not to like about that?  Is the credit crunch improving? Loans do seem to be getting easier.  Mortgage Brokers are figuring it out.  Assuming of course, that the entire system doesn’t start making wholesale changes again on a daily basis – knock on wood.

Maybe we are just getting more used to the torture. Resigned to the fact that the loan process is just going to take longer and there are just going to be a lot more hoops to jump through. Maybe the new norm should be harder. That’s ok – as long as we know what to expect and can prepare ourselves.

The distress market?   Becoming less of a shock to the system.  People are less guilty about walking away from their bad debt.  Less worried that they’ll never buy another home.  Less convinced that their credit scores are what defines them as human beings.  Everyone has struggled or knows someone who has struggled mightily.

Short sales are still part of the vernacular and they are still certifiably crazy.  But there have been a few incremental signs of improvement in the last year.  Occasionally it almost seems like there’s a hint of intelligence operating behind the curtain on some short sales.  A collective brain that understands what it is doing – even if it isn’t doing it very well.

REOs?  Yep.  There have been plenty of these odd and ugly ducks in the marketplace this year. There’ll be more in 2013 and beyond. And they’ll keep coming until the huge buried backload of toxic loans has been flushed through the system.

As long as there is a huge shadow inventory hanging out there in the ether, real or imagined, the market can’t improve beyond a certain point.  The spectre of too much potential low-end supply will exert an invisible gravitational pull and hold rising prices in check.

More next week.

Buyers and Agents….The Tipping Point

An Agent called the other day asking about a new listing. A problematic property – failed septic, tree roots pushing up the foundation and well issues – low GPM’s and a high coliform count.

Of course, given all of the above (lying below the surface) I’d priced it accordingly. To the uninitiated, on the receiving end of  all those search engine funnels, the price seemed mighty attractive – at first glance.

So, I was getting lots of calls from Agents with clients looking for one of those proverbial million-to-one-shots. The diamond in the rough that would scratch their champagne itches in spite of their red bull budgets.

The Agent was energetic. Asked the right questions. Wondered if I could e mail 160 pages of inspections, so he could review them.  Said it sounded like something his clients might like and declared he was going to show it.

Standard real estate conversation number #37.  Right out of the Agent’s Handbook.  So far so good.

But before he hung up, there was a long pause.  The timbre of his voice changed. A strange alternate personality seemed to emerge out of nowhere.

Unbeknownst to me, we had reached a tipping point.  Suddenly he confessed that he had shown these same clients 67 properties in the last year and he didn’t have a clue what they wanted.  He said he felt like he was driving them randomly around the County.  Chasing his tail. Hoping to impress them with his willingness to commit lots of time to their increasingly vague cause.

Wow.  My first thought was: This guy’s in trouble.  Not a good sign when an Agent counts the number of properties they’ve shown clients or keeps track of the number of months it’s been.

Something’s seriously out of whack.  Either the clients don’t have a clue what they want,  Or they are trying to work out deep-seeded relationship issues by looking at houses. Or the Agent has drifted into a role as codependent enabler of the dysfunction.  We’ve all been there, done that.

Oddly, my second thought was:  Maybe this is why the traffic on Hwy 1  keeps getting worse even though there are less jobs and a lot less people shopping and spending money. All of those cars are full of Agents driving people around looking at properties they aren’t going to buy!  Mystery solved.

A few months ago,  I published a list entitled: As a listing agent you know you are in trouble when…

Perhaps it’s time for another.  Here goes. As a Buyer’s Agent, you know you are in trouble when:
- Your client doesn’t want to waste his time getting pre-approved.

- Your clients buy you a case of wine before they’ve actually bought a house.

- Your clients insist you should only show them houses  they want to buy.

- Your clients have been looking at houses for 2 years and now they want to buy land and build for $500k.

- You are only a week into the short sale and your clients are already climbing the walls in frustration.

- Your client is pulling the same properties off the search engine that you looked at together a year ago.

- The husband refuses to look at any properties until the wife finds one she might like.

- The parent providing the downpayment gift lives in Iowa and will make the final decision.

- Your client keeps calling listing agents directly telling them you are too busy to show the house.

- Your client wants to quadruple app and squeeze the lowest interest rates out of an unsuspecting loan broker.

- Your client immediately wants to offer $100k less on any property just reduced by $50k.

- You find the perfect property but your client refuses to enter a multiple offer situation on principle.

- Your clients argue about who is going to sit in front every time they get in the car.

Yogi is My Yogi

I’m wracking my brain. Looking for one simple expression that comes within a few million miles of explaining this “thing” to you.

This thing Realtors know painfully well but can’t quite describe. This thing anyone who has recently bought or sold a house knows but probably wants to forget as quickly as possible.

This odd place real estate has stumbled into. This dream it has woken up in. This brave new world getting more scary all the time. The unintelligible intelligence that has hijacked real estate. The non-process that has absconded with the process and won’t let it go. Or flow.

I don’t mean one transaction. I mean almost all of them. The whole kit and kaboodle. Sucked into the same void that grabs socks between the time they go into the washer and don’t come out of the dryer.

Welcome to escrow. The new and unimproved version. A discombobulated dimension of realty where transactions don’t exactly go to die – just to get stuck in, Drag on, in a bone-numbing, torturous drip of endless delays-without-closure.

What do we call this period between when escrows are supposed to close and when they actually do close? We need a word for it now that these interminable intermezzos are the rule rather than the exception.

Escrow Bardo? The Never-Ending Denouement? Purgatory? FUBAR? Twilight Zone? Extra Innings? Overtime? Real estate held hostage – Day 382. We’re in a sudden death play-off game that doesn’t end.

Honest. The old notion of Close of Escrow (COE in Realtor-speak) was something you could pretty much rely on. It wasn’t liquid. Or gas. It was a solid you held in your head.

There was a contract. Buyer and seller signed it. A point was picked on the horizon. Wheels were put into motion. And voila – the deed would record and money would change hands. The buyer of the house became the owner. And the seller? A former owner.

Now COE is a fuzzy and amorphous concept. A moving target. Constantly moving backwards in time that is. When will a particular escrow really close? That’s usually anybody’s guess. And I mean everyone’s.

We Realtors are trying to have a real estate market here. Escrow officers and loan brokers are on board. Doing their part. What happened?

Apparently the underbelly of the beast known as underwriting didn’t get the memo. Or they got the memo and lost it. Or they got the memo, but the “team” lost their jobs last week. Now we have to send another memo to the new team. Or they got that memo but we need to verify that we’ve insured the memo for the third time. Or we have to certify in a separate memo that it was really us that sent the first memo now lost. And that needs to be a non-faxed, non-scanned memo with wet signatures delivered in person on bended knees, Handed to the processor who will move it along to the closer who will run it by the committee who will assign it to the great decider-er for a really quick turnaround.

The system is in the throes of a grand mal. I’d love to explain it to you but I’m waiting for someone to explain it to me first.

In the meantime all I can do to assuage my own confusion is summon the wisdom of Yogi Berra (Mr. Malaprop) to make sense out of the avalanche of malaproperty-isms we are experiencing. Yogiisms are just about the only things that do make sense in this impasse.

Try this one: “The future ain’t what it used to be.” Or: “If you don’t know where you are going, you might wind up someplace else.” And… “It ain’t over till it’s over.”

Me? I’m sticking with this one: “I wish I had an answer because I’m tired of answering the question.”