Monthly Archives: June 2013

Under the Real Estate Dome

DomeIt was real estate stat time in the Sentinel this week.  Stats not tats.
Yes, there was also a big article about a Santa Cruz tattoo artist on Reality TV – but that’s another story.

I’m talking about the real estate sales data for the month of May that was published on Wednesday, June 26th – google it.  Average and median sales figures, unsold inventory index, year-over-year and month-to-month price comparisons etc.

Helpful in some ways.   Info that’s behind the curve in other ways.  But all in all, a great starting place for further discussion.

Since information presented in these monthly articles references transactions that closed a month earlier and were originally entered into by willing buyers and willing sellers at least another 30 – 60 days prior to that (in some cases longer)  we should all be cautious about making any hard and fast judgments or real time decisions based on loose interpretations of trailing indicators.

Like all news – old or new – aggregate data is fair game and great fodder for spin. It can be doctored up in all kinds of ways.  Used to provoke wildly different perspectives or prove all four sides of the exact same coin.

To create context and lend some interesting narrative to the calculus… the Sentinel reporter wove the numbers into a touching story about a young couple who have made 15 offers and received 15 rejections on 15 different properties.  The subheading read:  First time homebuyers feel rejected.

You think? To hear their story was excruciating.  Won’t someone please start a social media campaign? Issue a mayday distress call and general plea on their behalf? We should find them a house!

Isn’t there some nice seller out there, with lots of equity, willing to forgo squeezing every last dollar out of a sale?  Couldn’t they offer this deserving couple first dibs? No competitive offers? No overbids? No multiple-offer mania?

I was trying to imagine how many people I’ve worked with could have made it through 15 different offers without imploding.  Folding up the tent and going…going, well I guess not home. Not unless their future home was in Boise.

How much time and effort has this couple expended?  How many trips up and down the emotional rollercoaster can anyone take?  Usually after 2 or 3 rejected offers – the average person feels crushed and has to take an extended if not permanent vacation from the process.

I was wondering how their agent must feel.  Run through the ringer? Dispirited? Or heroically strengthened in their resolve?  Determined to see it through to the bitter end?  Perhaps there’s some crucial piece missing in their approach to the multiple offer puzzle? Or perhaps it’s just a cautionary tale for our times.

The story of a dedicated young couple trying not to lower their standards too much while suffering the slings and arrows and outrageous fortunes that an uncaring marketplace is commanding.  A market that is bigger than all of us.  That refuses to bend to any one individual’s will.

It amazes me that the couple could even find 15 properties suitable enough to make offers on. For most people looking at single family homes between $500k and $600k there’s not a lot out there that looks palatable or habitable let alone even close to a sliver of a termite ridden doug fir deck like that vision of their much-anticipated dream home.

The numbers from the story that stuck in my head?  Median Price of $625k.  A jump of more than 20% in a year.  Less lower-priced distress properties available. Fewer listings overall 633 – with 229 of those already pending.  Only 41 properties on the market in the entire County between $500 – $600k.  More than 150 active listings over a million bucks and way out of reach.

Here’s the thing … if you are trying to purchase anywhere in the $500 – $750k range  today – you might has well jump into the way-back machine because it’s 2005 all over again.   That’s the range almost all of you want to purchase in.

Looking at homes priced higher than$800k?  Now that’s a whole different story.

A fascinating glass-ceiling has settled over our local marketplace.  Like the mysterious one that just landed on the small town in that new TV show called Under the Dome.   Next week we’ll explore what the market looks like from the other side. Up there in the higher altitudes where the air is a lot thinner.

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Walking Like a Duck in Real Estate

DuckLet’s take a break.  Turn our attention away from immediate concerns – like rising interest rates and the FEDs move away from Quantitative Easing.  We’ll give those issues another few weeks to incubate.

Today,  let’s expend a little newsprint musing about more philosophical questions that arise while working in Real Estate.  Realtors, I just want to say, even on bad days, we should consider ourselves lucky to be in a profession that intimately involves us in the huge life transitions our clients go through.

Seeing real people wrestle with their trials and tribulations around marriage, divorce, birth, death, aging, sickness, success – all the “biggies”  that inevitably revolve around home sales/purchases gives us a chance to experience the good, the bad and the ironic of human nature.  It’s a gift and a golden opportunity to learn more about ourselves too.  Doesn’t get any better than that. What the hell else are we here for?

Where to start?  How about the Real Estate of Mind Email Bag?

I received this note from a colleague after a recent column suggesting Realtors would benefit from doing Pro Bono work on occasion.  Google Brezsny’s Real Estate of Mind to read it.

Hi Tom,  While I admire the spirit of your intentions in your article of June 8th, I think it’s important to remind agents that if you walk like a duck and quack like a duck, people can logically assume and litigate that you ARE a duck.  At least we should find out if our E&O insurance would cover us even though we don’t have a signed contract.  It’s complicated!    –   C

Complicated indeed C.   On so many levels.

Wouldn’t it be the ultimate “bummer”  to help someone buy or sell a house without charging for the service only to get sued for “talking them into” something they had a huge case of  “buyers remorse” over?  I guess it would give added meaning to the phrase: No good (grant) deed shall go unpunished.

In real estate we are constantly reminded that liability lurks right around every corner.  On every street. Through every door. Hidden in every closet.

We are warned ad infinitum ad nauseum not to give financial advice about the biggest financial move our clients will make. Not to give legal advice when their hands freeze up while signing a scary contract. Not to give insurance advice about the vagaries of homeowners insurance. Not to counsel them how to take title after they’ve lapsed into a vegetative state after reviewing 100s of pages of legalese and butt-protecting paper issued by the office of cosmic redundancy during their escrow sign-offs.

God forbid we should be accused of practicing Real Estate Therapy without a license after trying to coax someone off the ledge during one of their home buying or selling meltdowns.

There’s a much deeper thread in all of this.  All we can do is touch the surface here.

So what do Realtors do if they shouldn’t do any of the above?  Are Realtors simply salespeople?  Look up the word “sell” in Merriam-Websters. You’ll see things like:  To give up in violation of trust for personal gain. To exact a price. To foolishly give up in return for something. To deliver into slavery for money.  To impose on.

Apparently the word “sell”  derives some of its origin from the Greek word “helein” which means “to take.”

Those aren’t the first notions that come to my mind when I think about what I do for a living.  But then, real estate exists in the larger context of what’s called our “consumer culture”.   Just for kicks, google the word consume on the Visual Thesaurus. Note its Jeckyl & Hyde personality. On one hand consume means ingest, take in, engage.  On the other it means destroy, use up, deplete.

Which returns us to the subject of pro bono.  Is it possible to figure out a way in Real Estate to give generously without getting sued? There’s always the “safe” type of giving that involves doing something nice in order to generate a publicity photo and a press release that encourages people to do more business with you.  I certainly don’t want to pooh-pooh giving with expectation.  It’s way better than not giving at all.

But giving with expectation seems more like lending than giving. It’s really predicated on getting paid back by someone or something else.  And wouldn’t real pro bono giving that’s really good for the soul be without any expectation of return?

I’m just hoping that someday I can walk like a duck and quack like a duck without having to worry about ducking and covering my ass.
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Real Soul Work No Agenda. No Strings Attached. No Moolah…

ETS Logo Hi Res3This might sound like anathema to some colleagues,  but I’m going to say it anyway.  Nothing better for a Realtor’s soul on occasion than to do a little pro bono work.

I’m not talking about all the charitable things Realtors do.  Making donations.  Serving on Boards. Putting in volunteer hours.  I think the real estate community ranks right up there in terms of its commitment to the larger community we live in.

When I say pro bono… I really do mean donating free time, free advice and perhaps even an occasional free transaction to someone in need of real estate help. No strings attached. No agenda. No moolah.

And this is where we get into the grey area.   For some Agents it crosses a line.  Spending an afternoon pouring wine at a fundraising event is one thing.  Spending an afternoon giving away for free, the same advice that usually earns Agents their livelihood and allows them to buy groceries, pay college tuition and make their own mortgage payments – is quite another.

It can feel like a violation of professional integrity.  Something that undercuts the way the average person views Realtors and the value of their work (largely misunderstood concepts in the public domain.)  If it’s available for free, why value it at all?

The thought of free work pushes emotional buttons for many Agents.  Mostly due to memories like:

That time they drove buyers around for months looking at every new property. Sacrificing weekends and evenings. Then out of the blue the clients stopped into an open house, wrote up an offer with the Agent there because somehow they thought they’d save a few thousand bucks.

Or the last time Sellers of an overpriced listing refused to lower the price while demanding bigger ads and more open houses.  Then, after the listing period expired they relisted the property $200,000 lower with another Agent who put it into escrow in a week.

When an Agent gets a few of these crushing experiences under his belt he often locks his boundaries down tighter. Becomes almost unyielding in the way he spends his time or allows his clients to spend his time.  And in an ironic way, it reinforces the stereotype of the real estate agent as salesperson.  They: “Don’t want to do anything unless they get paid.”

Real estate agents sell time.  Time is their currency.  They don’t own the homes being sold. It isn’t their money getting exchanged for grant deeds.  They receive commissions for time spent – assuming something actually transacts.  Realtors broker homes .Realtors market homes.  Sellers sell homes.

The word “sell” is so charged with baggage that it’s almost impossible to un-tether it from all the veiled assumptions, hidden expectations and loaded suspicions that precede it into an actual relationship between real people.

Sometimes the first month I spend with clients is mostly about convincing them that I‘m not trying to “sell” them something  they don’t want to buy.
The stigma attached to “selling”  never completely goes away. It’s painful when clients reject your best advice. Not because it isn’t good advice. But because they think you are trying to push your own agenda rather than speaking to theirs.

Agents often become hyper-conscious about how clients perceive their motives.  They temper their advice. Sugarcoat it.  Spin it with vague, diplomatic reasonings.  Worry obsessively about blurting out what they really think before editing it into some pallid version of real estate lite.

So Agents,  I’m extolling the virtues of pro bono work.  For your sake as much as anyone elses’.  Go ahead. Try it. You might like it.

You may find it’s an incredibly liberating experience to sit down with someone and tell them what you really think without worrying that somewhere in the front or the back of their heads they are assuming you are saying what you are saying because you want to make a sale.  Like I said – Good for the soul.

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 Less Fluffing Of Real Estate’s Invincible Aura

lessfluffingA couple of weeks ago, I was scratching my real estate of mind out loud.  Wondering whether our market might actually be shifting gears.  Taking a breather? A little less wind billowing out those sails (sales)? Less collective fluffing of real estate’s recently invincible aura going on?

DESPITE ALL THOSE HEADLINES WE KEEP READING.  Median price jumps.  How hot San Francisco is.  All-cash Chinese Investors buying bazillion dollar places sight unseen.

This of course, after four sad years of doom and gloom and a steady diet of after-the-end-of-the-world real estate woe up until…well… just an incredibly short time ago!  Talk about Mr. Toad’s Wild Ride!  Sometimes it’s hard to tell whether the market is coming or going.

I’ve been trying to share some of the quizzical and very equivocal observations I’ve been collecting in my daily travels .  In the here and now.  In Santa Cruz. Not anywhere else. In real time. Not tape-delayed.

As some pundits point out:  There is no such thing as a National Real Estate Market.  Only a local one. Or at best a regional one. What may be true in Las Vegas or Phoenix real estate-wise isn’t necessary the case here in Tree and Sea Paradise.  North Dakota may be en fuego in terms of jobs and rising home prices.  But I’m not feeling a lot of warm and fuzzy connection with whatever the nitty gritty is in the heart of the great plain states.

Fact is,  Santa Cruz median prices blow most of the rest of the country away.  And our average rents would easily service the mortgage on most mansions in Mississippi.  We’re different than most other places.  But we kinda knew that already didn’t we?

A few columns back,  I tossed out some random ideas for your consideration. I also made a pledge not to try to tie them all up in a neat little package for you.   Our brains love to make little stories out of everything.  Beginning. Middle. End.  We crave certainty.  We want it all to make sense.  All the time.

From my vantage point the only way to navigate gracefully through real estate is to embrace its ambiguity.  Accept the fact that it’s going to push and pull us in a dozen different directions at once. From a buyers perspective. From a sellers perspective.  From someone trying to do both at the same time’s perspective.

There’s no one truth.  No such thing as a good market. Or a bad market.  Only the market.  When prices were falling – was that bad for buyers?   When prices were running through the roof was that good for buyers?

F. Scott Fitzgerald said: “The test of a first-rate intelligence is the ability to hold two opposing ideas in the mind at the same time, and still retain the ability to function.”

Welcome to Real Estate!  Whether we embrace its ambiguity or not, we still need to live with it.  And keep functioning.

Here are few of the fascinating push-pulls our real estate market has wrestled with in recent times and some we will undoubtedly continue to scratch our heads and wonder aboutt:

– A buyers’ market with almost nothing to buy.  No inventory.

– Buyers competing with multiple-offers in what was supposed to be a buyers’ market.

– Historically low interest rates stifled by full documentation loan regs and a credit crunch.

– Multiple-Offer Price Overbids jumping too far ahead of the trailing appraisal curve.

– Sellers who would like to sell but can’t quite figure out where to go. Or how to get there.

– Rising interest rates that will either scare more buyers off the fence or inhibit their ability to purchase altogether.

– Rising interest rates and full doc loan regs that limit how much buyers can afford and how high prices can go.

– Rising prices that refuse to trickle up into the higher price ranges. The heat of the marketplace stuck below a glass ceiling around $800k.

– A general economy that can’t quite seem to decide whether it is over the hump or not. Alternately insisting that it is and it isn’t.
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Bread Crumbs and Sins of Commission

BreadcrumbsToday’s premise?  The real estate market isn’t always what it’s cracked up to be. What people think or hope it is. Or what people like me lead you to believe it is on occasion.

Pause.

Do we Realtors make it up as we go? Do we selectively parse and present information in ways designed to “sell” a story-version of the marketplace to create more sale opportunities?   Do we coax you on with little sins of omission like bread crumbs leading to the bigger sins of our own commissions?

Do we just tell you what we want you to hear? Using some special super-duper-power to ferret out and push willy-nilly buttons of fear and greed?  Is it all about stoking the market to burn bigger and brighter for as long as it possibly can?  Turning busts into bubbles.  And bubbles back into busts again?

Well, I can’t speak for the innermost thoughts and motives of all my colleagues, but I think perhaps Agents,  like everyone else,  get caught up in the heat of the market’s moments at times.  Ask me how the market is doing on a week I’ve closed 3 escrows,  and I  might wax over-optimistically about the future.  Catch me towards the end of a dry spell and I might lapse into a litany of doom and gloom citing all the reasons why the end of real estate as we know it is rapidly approaching.

We’re human.  We’re fallible.  We’re subject to the vagaries of our own biorhythms.  We’re occasionally discerning and astute but we’re certainly capable of losing sight of the nose that’s sitting plain as day, right in front of our faces (although for reasons mostly genetic in nature,  I don’t seem to have that problem).

Today’s experiment?  I’m going to share some observations culled from recent experience.  I’ll make them as honest and off-the-cuff as I can. I’m not going to try to weave them into a storyline for you.  I think it’s better for you to think about them first. Formulate a story of your own.  Then, we can compare stories. Talk about what all these things might mean.  See if we can put the pieces of the puzzle together in a way that makes sense.

Here goes:

So far this year, real estate has had a remarkable run.  The speed and extent to which things seem to have recovered has been stunning.

There were properties in March that I knew I’d have at least 10 offers on in the first week.  I don’t have that same level of confidence right now.

The market seems to have hit a lull. Taken a bit of a breather.  It’s doesn’t appear to be losing ground. Just not gaining as much ground as fast.

I’m not overly worried about where the market is going – just not irrationally exuberant about it’s future.

Title Companies apochryphally report that newly opened escrows have slowed in the last three weeks.  Some mortgage lenders have said that the number of new purchase loans has fallen off.

Seems like each new listing coming on the market has tried to push the price point  another $25,000 – $50,000.

Buyers seem to be pushing back.  More of them seem to be taking a pass and sitting out situations involving too many multiple offers.

Most of the run-up in prices and the vast majority of the transaction activity has been in the $400k to $750K range for single family residences.  And in the $300 – $450k range for condos.

Listings and Sales in the $800k to $1.2k zone are nowhere near what they were in the heyday of 2005 – 2006. The move-up market of the past is conspicuously absent.

There are a whole lot of active listings above $2.25 million that are not getting a lot of showings. Several over $10 million. Nothing has sold above $2.2 million in 2013. There is nothing in escrow above that amount either.

Facebook was a bust.  Apple isn’t perfect anymore. There wasn’t a wave of other IPOs. The nature of the rebound in Silicon Valley seems to be fundamentally different than it was in the past.

Interest rates have jumped a half point recently. The DOW remains in record territory.  It’s still a full documentation loan lending environment.

I’m going to leave it there for now.  Munch on those things for a while. Next week – I’ll toss some more your way.
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