Home buyers… receive the gift!  Right now we’re looking at historically low interest rates, the most affordable home prices in years, what looks fast approaching bottom of the real estate market in general, improved buyer confidence, an $8000 first time buyer tax credit, and now buyers can even get “Layoff Insurance”. These incentives are stacking up like gifts under a christmas tree!

Last week was filled with news reporting that the market bottom seems to have arrived in some areas of the country and forecasting that all parts of the country will have bottomed by the 1st quarter of 2010.  It seems that the free-fall is ending and that’s good news!

We’re still hearing negative news as well.  The most troubling is our country’s high unemployment numbers.  Nearly 8.5% of Americans are currently unemployed. Over 20% are classified as “underemployed”.  We’ve been told for some time that during a recession we can expect unemployment to skyrocket.  We’ve also been told that an improvement in employment numbers will signal the end of the recession so we’d like to see that happen as soon as possible.  Forecasts by the “experts” estimate that we’ll see the signs we’re looking for later this year.

In the mean time, it’s a MEAN time for workers.  People are concerned about losing their jobs and it’s a fear that keeps many from taking advantage of purchasing a home today.  So… how do you convince someone who’s sitting on the fence because of employment concerns to make a decision to buy?  Eliminate that concern by offering them “Layoff Insurance”!

That’s just what several home builders including Lennar Corp., Pulte Homes Inc., The Ryland Group Inc. and Toll Brothers Inc. are doing.  For between $450 and $900 a buyer can be insured against loss of employment within 2 years of the purchase.  The insurance will cover payments (including taxes, interest and insurance) up to $2500 per month for 6 months.

It seems to me that just about every day there’s another reason to jump in and make a real estate purchase.  I believe that those who take advantage of these unprecedented opportunities will be happy they did.  Those who don’t pull the trigger may have some major regrets a few years from now.

Buyers certainly don’t have to buy “today” but in my opinion they should be looking and they should be getting things in order so they are well positioned to obtain a mortgage.  Prices aren’t going to skyrocket this year and neither are interest rates.  There’s no big rush, but this looks like the year to buy in most parts of the country, especially for 1st time buyers.

Of course the increase in market activity is great news for real estate agents and brokers! I’ve been monitoring hundreds of them via Twitter and it’s amazing to hear reports of “multiple offers” and even “bidding wars”.  Mostly though, these people are simply reporting that they have suddenly become very busy after a long period of quiet.

Many readers of this blog are considering a career in real estate and are waiting for the perfect time to jump in.  I’m not sure that the timing could  get much better than it is right now.  I read a couple articles last week about what the real estate market recovery will look like.  In the past we’ve seen fast steep recoveries (sometimes referred to as “V” shaped) after market downturns,  but experts today are thinking this recovery will be more gradual (referring to it as a “U” shaped recovery).  So for someone who’s looking for a career that has excellent near and long term potential, real estate fits the bill.  Here’s where to learn how to get your real estate license!

Hopefully we get some more good news this week - I expect we will!

David Goldstein

There’s an episode of Dr. House where his team is arguing over some test result and whether or not a change of one percentage point is statically valid. In order to underscore his point that this 1% was very significant, the loquacious Dr. House said this classic line:

“If her DNA was off by just one percentage point she’d be a dolphin.”

What I love about the character of Dr. House is his uncanny ability to see signs of life or hope in otherwise dark, hopeless circumstances. And his belief that small changes in a patient’s test results can indicate big changes in the future. Of course in that episode, the one percent change portended the difference between life and death for the patient.

Dr. House saw it. The others didn’t.

Two recent reports about housing are worth noting and celebrating this week, even if the media doesn’t see them, or is ignoring them.

The NAR just reported that:

1. Existing home sales rose 5.1 percent in February, the largest increase in nearly six years; and
2. Sales of new homes, meanwhile, rose 4.7 percent that month nationwide as well.

As confirmation of this amazing new construction sales turn, Lennart CEO Stuart Miller also reported this week that sales of new homes for this nationwide builder in the month of March were up significantly.

Think about it…Last month heavy with news about foreclosure sales, high inventories, and a supposedly dead construction market, it turns out that new homes were selling almost as well as existing home sales! And that both categories were up by around 5%.

Disappointingly, many news outlets chose to dilute this good news, with the usual caveats and discounting that pervades reporting today.

HUD secretary Shaun Donovan for example, famous for his pro-government philosophy that “the private sector, left to its own devices, is never the best possible solution”, speaking for HUD said today that:

“…the number of troubled loans backed by the federal mortgage insurance program is on the rise as economic troubles continue to mount.”

OK, Mr. Secretary of Gloom, we get it. It’s bad out there. Housing is in a crisis. We copy. But what about this jump in new and existing home sales? Can’t you at least mention that, and inject a little hope into the mix? I mean 5% is nothing to sneeze at, right?

Yet most of the media chose to ignore the signs of life that this 5% represented. One reporter even indicated that this kind of statistical improvement amounted to “next to nothing” in comparison to prior years.

Next to nothing? Come on!

Time for a Dr. House line:

“I was never that great at math, but ‘next to nothing’ is higher than nothing, right?” Dr. Gregory House Season 3.

When it comes to looking at housing, and our industry, I prefer a Dr. House approach, rather than a Dr. Gloom and Doom approach, don’t you? Especially when the statistics support it.

The media sees a jump in home sales of 5% and they consider it an anomaly, a false-positive, a blip on the MRI scan that should be ignored. I see it as a giant sign of life for our industry.

There are more signs that the worst is over. Next posting I’ll report on some more amazing statistics that forecast better months ahead. In the meantime, tell me what you think, by posting a comment here. I don’t care if you agree with me or not, just let me know what you think. As Dr. House said:

“You could think I’m wrong, but that’s no reason to stop thinking.” Dr. Gregory House. Season 4

Geoffrey Thompson

Is your real estate business top-heavy? Are you as lean as you need to be to run the race to win in these tight times?

How often have you looked at yourself in the mirror and declared“I have to do something about my weight” and decided to go on a personal diet plan, but never apply the same critical eye to your business?

I was in a real estate office recently in Florida that clearly needed a “makeover.” It was as if I had been transported to a real estate office in 1976. Journey was playing in the background, they still had literally scores of listing sheets taped to every window that existed in the strip-mall office, and of the five or six employees I observed, only one was working the phones. The rest were taping listings to windows, hoping for the next Bee Gees song.

What a waste of time! What a waste of salaries! Who searches for homes today by going to a strip mall and reading listings taped to the glass?

Today most real estate professionals would agree that their business model has to change, but few have taken any major steps to affect that transformation.

I’d like to suggest you look at your organization today with a critical eye towards “fat”, and consider putting your business on a radical diet.

Fat is defined as the accumulation of substances designed to “store” fuel to convert to energy in the future. This is good for polar bears, Eskimos, and whales, all of which have to survive frigid temperatures for months at a time. But it does no good for marathon runners, Iron Man competitors, or anyone over the age of 18 who is looking for a date. And it also is not good for our businesses.

Fat kills, and keeping “fat” in our businesses as a way to save up or to wait for a day in the future when we’ll “need it” is a formula for disaster in today’s new housing market.

A couple of friends of mine are trying to lose weight and get into shape for the coming summer season, and they’ve opted for the “Atkins” plan. For those of you who haven’t tried this popular diet program, it is basically a “low-carb” dietary plan that allows you to eat protein and fat, with a limitation on carbohydrates. Whether it’s called the “skiers diet”, the “sugar busters” diet, or any other variation on the theme, its success is based on the scientific property known as ketosis.

This is the diet that you start out thinking, “Oh, I can eat all the protein and fat I want, but no carbos? That should be a slam dunk!” Then around day nine with our cravings for carbos through the roof, you can hear us all say such absurd statements as “Pass the butter please, I need to spread more fat on my two bricks of cheese. I’m going to eat it like an icecream sandwich!”

As ridiculous as that sounds, that diet, because of ketosis, actually works. And it can work on your business too.

During ketosis, the body switches from using glucose for energy to using fat, and you lose weight as a result. It is as if our bodies recognize the change of state in our eating, and in order to make up for the lack of one, (carbos) it burns the others. I’ve lost twenty pounds many different times in my life on this plan, and if done rationally, can really get you in shape.

We can apply the same to our businesses, too. By eliminating just one thing that “we’ve always done in the past”, and perhaps overboarding on the two others that remain, you can get your office in to shape as well.

What do I mean? I mean stop doing certain things immediately, and start innovating. For example:

• Instead of “training” new agents in our offices by giving them a notebook, a logo, and classes on “How to get Listings” held in a stuffy classroom, why not train them on the street? Don’t waste time having them work with paper, they need to learn how to deal with people! Put them with your most seasoned agent, and have them spend an entire week with the expert, learning how to “sell themselves” rather than “getting listings.” The future is all about super agents who have lifelong relationships, not about “getting listings.” How antiquated.

• Instead of pasting listing sheets to windows, for no one to see, how about handing out one-page flyers that use terms the public is familiar with today? “Foreclosure Bargains and How to Cash In.” or “Don’t miss the next Foreclosure Auction!” If you put these in a little POP display in local restaurants, hotels, and your local Walmart, you will get callers. Fat agencies will be pasting listings to office windows until their business dies of arterial blockage. Lean agencies will be running fast to keep up with current trends. http://www.discountedproperties.com/

• Instead of “farming” a neighborhood, try niche-marketing a segment. Jason Gokei was a nobody a few years ago. Then he trimmed down his staff, changed his focus, and put the pedal to the medal by announcing that he was the “Condo King!” By focusing solely on this segment, he has become California’s number one agent in this niche. http://www.californiacondoking.com/

• Instead of driving clients around individually, why not have group showings, group events, and group tours? Marc Joseph birthed “Foreclosure Boat Tours” in Coral Gables Florida to abandon his old “fatty” marketing, and start something new. His business is booming because he cut the fat out of his old operation, and started being lean and efficient. Last week was featured on over a dozen news outlets. http://www.foreclosuretoursrus.com/

What else could you do to trim the fat in your organization, and make it leaner for the times? Send me your suggestions and we’ll post them.

The good news about all diets is this: Once you start trimming and leaning out, it gets easier and easier by the day!

Geoffrey Thompson

Things that are rising…

1. The National Association of Realtors says February existing home sales rose 5.1% over January (The largest sales jump since July 2003)
2. February’s median home sale price rose a bit from January (which showed the lowest median price since September 2002)
3. The DOW has risen back over 7700 pts (a gigantic upward move of nearly 500 pts just today)

Things that are falling…

1. Mortgage rates have fallen back below 5%
2. The number of existing homes in inventory is beginning to fall (most notably in Florida and California)
3. Prices (although rising slightly in some of the hardest hit areas) have fallen dramatically mainly as a result of foreclosures.

All of the above are from today’s news. I’ve been waiting to see a combination of news stories like these for months. One thing that would have made today better would have been some improving employment news but that will come.  Yes, we’re far from being out of the woods but these positive signs deliver hope to our super distressed real estate market. Today’s news was good!

David Goldstein

It’s been a tough couple years for real estate professionals in Florida.  Very tough.  Like California, Florida has taken some of the biggest hits in home values and home sales.  But recently, agents and brokers are reporting that things are looking much better.  Not long ago, buyers were hard if not impossible to come by.  And few of the buyers that were showing interest were really buying.  Even those who made decisions to buy were finding that lenders weren’t being cooperative which resulted in some disappointments.  Today, Florida real estate professionals have something to smile about.  And in the coming weeks and months they’re going to be even happier!

In one Florida county alone (Lee County) January saw $125.1 million worth of homes sold.  That’s almost as much as the $126.8 million sold there in January of 2008. This, in a market that was pronounced “practically dead” only a few short months ago.

Let’s think about this for a minute.  We all know that home prices in Florida have dropped dramatically over the past 12 months.  So in order for Jan ‘09 sales to almost match those of Jan ‘08 it’s likely that it took significantly more transactions to get there.  More transactions at lower prices equals smaller commission checks.  That may not sound all that fantastic but it’s what has to happen in order to help clean up the remaining mess.  But you won’t hear these agents and broker complaining.  They know that this is a necessary phase in the recovery.  They are working hard to help reduce the existing inventory which in turn will help prices stabilize.  It takes a little more work to earn a living right now but what they are doing is helping the market recover.  You’ve got to respect these professionals for hanging in there through the hard times.  They will see huge benefits soon.

So, things are already looking up, but they are about to get even better! The stimulus bill that will likely pass this week includes more incentives for buyers that will help them say “yes” and in turn will reduce the inventory glut.  The $15,000 tax credit will be key in this process.  The number of visitors to real estate websites like Zillow, Realtor.com and Trulia is way up over the last several weeks.   Zillow had it’s busiest day ever just last week.  Potential buyers are getting excited and they are busy making plans for a purchase.

Tomorrow (Tuesday) we’ll hear more news from the White House regarding plans to help slow the foreclosure rate and encourage lending.  Less foreclosures equals fewer homes coming onto the market.  Again, helping keep the inventories from growing further.

There’s a lot coming together right now - a lot of “Good News”.  Let’s see what Geithner has to add tomorrow!

David Goldstein

I like TV a lot.  Too much.  I’m addicted to 24, Lost, Fringe, The Office and now Lie To Me.  This new show is about a guy who has become a brilliant expert, through years of research, on the way people behave when they tell lies.   He has a firm that serves as consultants to corporations, law enforcement and politicians trying to uncover the truth based on people’s behavior.  He’s looking for the “tells” that indicate when a person is lying or telling the truth - the facial ticks and changes in posture or vocal intonation that are indicators of honesty or dishonesty.  Sounds like it could be a little boring to watch but it’s not.  It’s fascinating and it reminds me of what we’re doing when we read the news and review economic reports searching for the “tells” that say where the real estate market is actually heading.

That’s what the “Good News in Real Estate” blog is about.  We’re looking for the “tells” that can be identified in economic reports, housing news and all that information that’s offered up to us just about every day.  How does the economy behave when it’s telling a lie?  Does it dip it’s shoulder and slouch in its chair?  Does it make grandiose claims about it’s innocence?  Can the economy even tell a lie?  After all, the economy isn’t human - but it is created by humans.

So… with this new interest I’ve gained by watching Lie To Me I’m going to start watching those TV interviews with “experts” much more closely.  I’m going to set my DVR to play them back at 1/8 speed and look for rapid blinking and forehead wrinkling and then I ‘m going to run the audio through the vocal stress analyzer I downloaded for my iPhone.

Just kidding… but seriously, I think we need to be diligent about learning what news and data can be trusted and what is being served up as truth but are actually lies in disguise.

If you’re new to this blog take a look at some of the recent posts where we identify what we see as “tells” that indicate that things are truely looking up for the real estate industry.

We invite your perspective so please feel free to comment on any of our posts.

David Goldstein

The New York-based Conference Board issued its monthly forecast of economic activity yesterday, and the data held some extremely positive signs relative to the “sentiment” about the future. Now I know that consumer sentiment can be nebulous and intangible, but the reality is that this factor directly reflects what housing will do in the near future, and portends a bright future in the relative near term for real estate professionals. Let me explain.

This index by the Conference Board is a short-term view designed to forecast economic activity in the next three to six months based on 10 economic components, including stock prices, building permits, average weekly manufacturing hours and initial claims for unemployment benefits. You can see how the “mix” of these factors can actually reflect the current sentiment about housing in the future, can’t you? So we monitor these data with an eye towards one thing…what is the trend? Are things literally looking up?

Yesterday’s report for the first time in months said, “Yes, things are looking up for housing!” (My interpretation.) Here’s why.

December marked the first time during this crisis, that number for the “future” index exceeded the number for the “present.” It’s as if people were saying “sure it’s bad now. But if you are asking me about 3-6 months in the future, I’m not so pessimistic.” As Bloomberg reported, when this happens, “in the past this has always signaled the bottom of the crisis, and the end of the problem.”

This news builds on the housing data that came out yesterday to give us a super one-two punch of good news. As David Goldstein reported, December’s positive housing figures released yesterday surprised just about everyone, so amazing was the upturn. Think about it. During December when you and I were trying to figure out how to shop for holiday gifts more economically this year, while hearing all the crises coming out of the Fed and Paulson and President-elect Obama (remember? ),  there were thousands more Americans buying a home!

As the Conference Board’s economist Lawrence Yun stated:

“Buyers will continue to have an edge over sellers for the foreseeable future In home sales, buyers took advantage of dramatically lower prices, especially in distressed markets like California, Florida and Nevada…”

Combined with the economic forecast that even includes and assumes an increasing unemployment rate, but still remains positive, and we have the beginnings of the kind of positive “consumer sentiment” that will bring folks back to the market, fast.

Economists were caught this week snoozing, and most got whiplash with these two positive reports, so predisposed were they for more bad news.  Not many forecasted either report to be positive. But this data we report here is accumulating more and more positive sentiment. Can you feel it? Forget whether or not the stock market goes up or down today, this data suggests that things have turned.

Bottom line for real estate professionals like us?  Fasten your seatbelts. Things are turning around – maybe sooner than we all thought!

Geoff Thompson

That things are tough everywhere is not lost on anyone who watches Bloomberg, MSNBC, or a financial news channel. Everyday during this horrendous “earnings season” we hear of Fortune 500 and Dow company pillars reporting reductions in revenues and profits by 20%, 30% and more. I heard the C.O.O. of J.C. Penney’s on Bloomberg yesterday “boasting” that they would be reporting a 1% revenue increase for the past quarter! Like that was big news!

With that backdrop, could you imagine a business at the end of 2008 reporting a 21% increase in volume? Yet that’s essentially what The Orlando Regional Realtor Association reported on Monday. According to their PR department, this regional association reported on Monday that its members sold 1,305 homes, town houses and condominium units in December 2008 — 21 percent more than in December 2007, when the market was in the midst of a deep downturn. They also reported that during the four final months of last year, nearly 1,000 more homes changed hands compared with the same period in 2007. Those four consecutive months of year-over-year gains snapped a 27-month string of declines.

So what does that mean in terms of making a living as a realtor? Let’s crunch some numbers. This association has 4300 members. Even though all are not active in real estate anymore, we’ll take the conservative approach and use all 4300 members in our calculation. If we divide the number of units sold in December, (1,305) by the 4300 members of the association, we see that each member “sold” around 1/3rd of one unit. Put another way, based on Decembers sales figures, each member of the association is now seeing one transaction every 3 months in Orlando.

Now there’s no question that one transaction every three months is not enough for any real estate professional in normal markets. (Exception noted for those unique high-priced markets where homes are still in the multimillion dollar range and concomitant commissions still are in the stratosphere.) Most of us have a general rule of thumb that we need at least one “sale” per month to keep the lights on.

But what is interesting about this data from Orlando is not the static numbers, but rather the “rate of increase” reflected in the numbers. Because for the first time in over 2 years, the decline in the number of home transactions in the region was halted in its tracks. But more importantly, the decline not only stopped, but it turned upward in a very dramatic fashion.

For Orlando to see a 21% increase in transactions during the month of December as compared to December 2007 is huge. Whether we are talking about improving our revenues as a business, improving our won-lost record as a sports team, or improving our returns on our investments, to see a 21% improvement in only one year is normally considered a herculean task. Yet Orlando has achieved the almost impossible, and in my view is forecasting the recovery to all our markets in 2009.

Remember, housing usually leads the nation’s recovery, and Florida and California lead the rest of the country. In a time when most U.S. industries are laying off employees due to reductions in volume, housing in Orlando at least, is seeing a rebound. What do you think, is this forecasting the “bounce” for the rest of the country that we’ve all been waiting for?

Geoff Thompson

It’s beginning to look like our dark days in real estate are over. All the natural market forces permeating the housing market today are setting us all up for nice rebound in 2009. And once the buying begins again, watch out. It’s going to happen fast.

The reason I’m bullish on 2009 being our rebound year has to do with three irresistible market forces that are all coming together at once:

1. Low Prices. Home prices in most major DMAs have dropped to the place where average middleclass couples with decent credit can now once again afford the payments on a $350,000 home. (See my previous blog entitled “Surviving and Thriving -Part II).
2. Stimulated Economy. Thanks to Uncle Sam, average Americans in foreclosure are finding out that they may be able to stay in their existing home, with a refinance package that encourages responsible stewardship. Combined with other helps like GMAC lowering credit rating requirements for auto financing, Americans will in 2009 start to get back into the habit of buying things.
3. Mortgage Rates. Mortgage rates are now at the lowest they’ve been in 37 years, which will make credit-worthy buyers and refinancers motivated to get that loan now, before rates go up again.

This third point is seminal. According to the Freddie Mac Primary Mortgage Market Survey announced Wednesday, rates on mortgage loans are the lowest in the 37-year history of, according to a weekly report released Wednesday. The average for a 15-year, fixed rate loan was just 4.83%. Historically, Americans just can’t resist getting home loans when the rate is below 5%. It’s like trying to stop water from flowing downhill. Never in the history of our country, or elsewhere in the world for that matter, has there not been a jump in loans when rates are this low.

The metaphors are abundant. Whether we call it swimming upstream against the current, fighting gravity, or sailing against the wind, most sports enthusiasts know that no matter how skilled, you can’t fight the forces of nature.

The same is true when it comes to business cycles. Every seasoned investor knows that businesses and industries are all cyclical—once the “gravity” of a market event takes hold, as the adage on Wall Street goes, “the trend is your friend.” Which simply means, “don’t fight the natural forces in place.”

I think the housing market and our entire real estate industry is going to find a Tsunami-like feeding frenzy in many markets in 2009, for these reasons. So get ready to get busy!

Bill Riss, C.E.O. of Coldwell Banker Bain, Seattle, said it this way last week:

“I clearly see that, by spring, we’re going to see a significant change in the marketplace. Prices and interest rates are about as low as they can go, people are continuing to move to Seattle and the economy will improve soon,” Riss said.

I love that point about people still “moving to Seattle.” America is all about moving-ever since Lewis and Clark and the gateway to the West was opened, Americans move like no other people in history. So homes will have to be purchased. Like gravity, you can’t stop it. You just have to go with it.

Geoffrey Thompson