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I just discovered a wonderful video on You Tube which explains the mortgage melt-down in terms that everyone can understand. It's very clear, and there's also part 2 to continue the explanation.
Click below to see part 1.
http://www.youtube.com/watch?v=Q0zEXdDO5JU
It applies to the current situation in NW Arkansas Real Estate in that in this area we are victim to what happened in the mortgage meltdown. In addition, there were some contributing factors.
For example, back a number of years ago, the stock market tanked. Local people (who maybe lost money in the stock market) started looking at real estate investment rather than the stock market. A piece of land or a house is a tangible entity after all. They invested in single-family rentals and other multi-family real estate.
Then in 2004 the Fayetteville-Springdale-Rogers MSA (Metropolitan Statistical Area--i.e. basically NW Arkansas) ranked #1 for the Millkin report on the economy for all of the US, ahead of Las Vegas. All of a sudden the vultures started circling. Investors from all over the country were trying to purchase the same homes that first time home buyers were trying to purchase. Prices skyrocketed on the low end as demand far exceeded supply. Builders were not constructing new homes on the low end, because land prices were too high.
The result was that it became almost impossible to purchase an affordable home in NW Arkansas.
Then the mortgage melt-down happened and the investors from elsewhere disappeared. Inventory in NW Arkansas was high (i.e. lots of homes on the market in all aprice ranges).
Now we have a lot of homes on the market including affordable homes. Prices have declined precipitously. Of course, it all depends on price range.
The bottom line is that now is a terrific time to purchase a home. There are a lot of homes on the market in all price ranges. The low end is showing homes for less than $100K, a phenomenon not seen in many years. Lots of foreclosures, but also lots of good deals.
If you want to purchase a home, give me a call. I can help. I mostly help buyers, but my knowledge of the market also helps sellers.
See my home search website: http://www.NWArkansasHomeSearch.com or my regular informational website at http://www.Judyluna.com
Showing posts with label real estate. Show all posts
Showing posts with label real estate. Show all posts
Tuesday, March 10, 2009
Sunday, June 22, 2008
Now is a Great Time to Purchase a Home in NW Arkansas
It is a great time to purchase a home in NW Arkansas and here’s why:
The median home price in Northwest Arkansas is approximately $155,000 and there are well over 1,000 homes for sale for less than that. New homes, resale homes, condos, country settings, subdivisions close to work, and everything in between are available.
Prices have come down but may not come down much more. No one can accurately predict when prices will hit bottom and begin to climb upward again.
Interest rates are extremely low -- 6% or below for fixed-rate 30-year mortgages. Rates on 15-year mortgages are even lower.
Interest rates and sales prices of homes do not go up and down together so waiting to see if home prices will go lower could cost you more in the long run. For example, say you waited for the purchase price of a home to drop $10,000 but interest rates moved up by as little as one half of one point during this period. You would end up losing money because of the higher monthly mortgage payment you would be making over the life of the loan.
Rent payments can change substantially from year-to-year but a fixed-rate mortgage offers unbeatable stability.
A wide range of financing options is available for consumers in all price ranges. Lenders have plenty of money to loan to credit worthy homebuyers.
Many sellers are offering incentives to buy, such as help with closing costs or allowances for repairs.
Although local housing markets adjust periodically according to overall economic conditions, over the long term real estate has consistently appreciated.
Homeownership is a stepping-stone to personal financial security and is the single largest creator of wealth for Americans. Historically, home appreciation has risen 5-6% annually. At that rate, the value of a home doubles every 13 years.
Income tax incentives are considerable. The interest you pay on your mortgage and property taxes are deductible at income tax time.
Even better than the annual income tax deductions for interest and taxes is tax-free profit when you sell your home. Couples who own and live in their home for two years and then sell can keep up to $500,000 of the profit tax-free. (An unmarried owner can keep $250,000 profit tax-free.)
Tax-free profit can be repeated over and over. If the person or couple buys another home and lives in it home for at least two years, the same rules hold true when they sell again.
The intangible benefits of homeownership are considerable. Overall, homeownership strengthens communities. Homeowners tend to be active in charities, churches and neighborhood activities. Homeownership inspires civic responsibility, and homeowners are more likely to vote and get involved with local issues. Children of homeowners are generally better students, due in part to the stability in their lives.
All the above, plus the personal satisfaction of owning your own home should be more than enough to take action now. Homeownership is truly the cornerstone of the American way of life, and the fulfillment of the American dream.
For more information:
http://www.buynwanow.com/
The median home price in Northwest Arkansas is approximately $155,000 and there are well over 1,000 homes for sale for less than that. New homes, resale homes, condos, country settings, subdivisions close to work, and everything in between are available.
Prices have come down but may not come down much more. No one can accurately predict when prices will hit bottom and begin to climb upward again.
Interest rates are extremely low -- 6% or below for fixed-rate 30-year mortgages. Rates on 15-year mortgages are even lower.
Interest rates and sales prices of homes do not go up and down together so waiting to see if home prices will go lower could cost you more in the long run. For example, say you waited for the purchase price of a home to drop $10,000 but interest rates moved up by as little as one half of one point during this period. You would end up losing money because of the higher monthly mortgage payment you would be making over the life of the loan.
Rent payments can change substantially from year-to-year but a fixed-rate mortgage offers unbeatable stability.
A wide range of financing options is available for consumers in all price ranges. Lenders have plenty of money to loan to credit worthy homebuyers.
Many sellers are offering incentives to buy, such as help with closing costs or allowances for repairs.
Although local housing markets adjust periodically according to overall economic conditions, over the long term real estate has consistently appreciated.
Homeownership is a stepping-stone to personal financial security and is the single largest creator of wealth for Americans. Historically, home appreciation has risen 5-6% annually. At that rate, the value of a home doubles every 13 years.
Income tax incentives are considerable. The interest you pay on your mortgage and property taxes are deductible at income tax time.
Even better than the annual income tax deductions for interest and taxes is tax-free profit when you sell your home. Couples who own and live in their home for two years and then sell can keep up to $500,000 of the profit tax-free. (An unmarried owner can keep $250,000 profit tax-free.)
Tax-free profit can be repeated over and over. If the person or couple buys another home and lives in it home for at least two years, the same rules hold true when they sell again.
The intangible benefits of homeownership are considerable. Overall, homeownership strengthens communities. Homeowners tend to be active in charities, churches and neighborhood activities. Homeownership inspires civic responsibility, and homeowners are more likely to vote and get involved with local issues. Children of homeowners are generally better students, due in part to the stability in their lives.
All the above, plus the personal satisfaction of owning your own home should be more than enough to take action now. Homeownership is truly the cornerstone of the American way of life, and the fulfillment of the American dream.
For more information:
http://www.buynwanow.com/
Tuesday, October 16, 2007
NW Arkansas Real Estate Market Looking Up
The market in NW Arkansas is at or very near the bottom according to a local expert. And it’s a good thing—the recent doom and gloom in the media seems to be a self-fulfilling prophecy, especially with regard to NW Arkansas, where conditions are really not that bad when compared to other parts of the nation.
Here’s a brief summary with regard to the residential housing market which I heard at a recent breakfast meeting at the Springdale Holiday Inn, hosted by Jeff Collins and Tom Reed of Streetsmart Data Service of Fayetteville. Collins used to be the head of the Center for Business and Economic Research at the U of A (responsible for the Skyline report) before heading into the private sector to provide economic and other research related to the housing market in NW Arkansas. Streetsmart also analyzes commercial and multi-family real estate conditions.
Consumer confidence on a national level and banker confidence on a local level are two major factors affecting the market. Until recently, an aggressive lending environment existed where almost any developer could get a loan for a new project. Now that bankers have suffered some major losses, almost no one is being approved. We have gone from one extreme to another and in order to create a healthy market, a viable middle ground must be found.
One of the bright spots in the NW Arkansas market is that almost 7,000 new jobs have been created every year since 2003 and data indicates that trend will continue for at least the next five years. Obviously, new jobs bring new residents to the area and that helps fuel the demand for residential housing.
Sales of new homes in both Washington and Benton Counties during the second quarter of this year increased over second quarter 2006 new-home sales - but sales of existing homes declined from 2006 numbers.
Both counties have seen a significant decline in the number of building permits issued during the first 6 months of 2007 compared to the same period of 2006. It appears developers are acutely aware of market saturation and have decided to postpone building more units until existing homes are sold.
The price point for the majority of lots sold during the second quarter was approximately $40,000 and new home construction is now approximately $100 per square foot.
The decreased number of new single- and multi-family housing permits coupled with declining vacancies in multi-family housing are two major indicators that the market is very close to the bottom.
When you’re down, the only direction is up! It’s still a buyer’s market and many opportunities still exist so you may not want to hold out much longer. It’s actually a great time to buy a home.
For more information:
http://www.nwaonline.net/articles/2007/09/27/business/092807reinsight.txt
Here’s a brief summary with regard to the residential housing market which I heard at a recent breakfast meeting at the Springdale Holiday Inn, hosted by Jeff Collins and Tom Reed of Streetsmart Data Service of Fayetteville. Collins used to be the head of the Center for Business and Economic Research at the U of A (responsible for the Skyline report) before heading into the private sector to provide economic and other research related to the housing market in NW Arkansas. Streetsmart also analyzes commercial and multi-family real estate conditions.
Consumer confidence on a national level and banker confidence on a local level are two major factors affecting the market. Until recently, an aggressive lending environment existed where almost any developer could get a loan for a new project. Now that bankers have suffered some major losses, almost no one is being approved. We have gone from one extreme to another and in order to create a healthy market, a viable middle ground must be found.
One of the bright spots in the NW Arkansas market is that almost 7,000 new jobs have been created every year since 2003 and data indicates that trend will continue for at least the next five years. Obviously, new jobs bring new residents to the area and that helps fuel the demand for residential housing.
Sales of new homes in both Washington and Benton Counties during the second quarter of this year increased over second quarter 2006 new-home sales - but sales of existing homes declined from 2006 numbers.
Both counties have seen a significant decline in the number of building permits issued during the first 6 months of 2007 compared to the same period of 2006. It appears developers are acutely aware of market saturation and have decided to postpone building more units until existing homes are sold.
The price point for the majority of lots sold during the second quarter was approximately $40,000 and new home construction is now approximately $100 per square foot.
The decreased number of new single- and multi-family housing permits coupled with declining vacancies in multi-family housing are two major indicators that the market is very close to the bottom.
When you’re down, the only direction is up! It’s still a buyer’s market and many opportunities still exist so you may not want to hold out much longer. It’s actually a great time to buy a home.
For more information:
http://www.nwaonline.net/articles/2007/09/27/business/092807reinsight.txt
Saturday, May 19, 2007
60 Minutes—A big disappointment
I’ve always been a fan of 60 Minutes on CBS. Their stories are usually interesting and they usually bring to light facts that one doesn’t usually hear on the nightly news shows.
But a week ago, the piece they did about real estate was a big disappointment, to say the least. It was extremely slanted and wasn’t even accurate. There are many objections I could talk about, but I will focus on only a couple of the more important issues raised.
The introduction to the segment began: "For realtors, the six percent commission is sacrosanct. It's remained in place, even as the price of homes has quadrupled over the past 25 years," goes the set-up. "But as correspondent Lesley Stahl reports, things are beginning to change. What happened to travel agents, stock brokers and book sellers -- the encroachment of the Internet -- is beginning to affect real estate agents. And the sacred six percent is under assault from online discounters."
As Blanche Evans of the Realty Times notes: “the six percent commission is not sacrosanct. In some areas it's seven percent, but in most areas it's less, because competition -- brought on by the swelling of agents into an already highly competitive business -- has reduced commissions and gross incomes for most Realtors.”
She goes on to refer to an internal report from the National Association of Realtors® (NAR), which found that commissions typically range from 4.3% and 5.3% as of 2005. And income for real estate agents generally has steadily declined as membership in NAR has skyrocketed during the past couple of boom years. According to NAR’s 2007 member profile, the median gross income for all Realtors in 2006 was $47,700, down slightly from 2004 when median gross income was $49,300. And that’s before expenses, which are significant
These are hardly incomes to write home about as the cost of living has increased. Many students just graduating from college are offered jobs with higher starting salaries than that and the only deductions they have are taxes--not business expenses, such as advertising for listings, internet websites, MLS dues, license fees, gasoline for showing properties, increased FICA deductions for being self-employed, to mention just a few.
In addition, the average agent does not receive the entire commission. Whatever commission the seller is paying is divided 4 ways—listing agent and listing company, selling agent and selling company. The result is that the agent usually gets about 1.5% or less of the sales price of any property, unless the listing agent sells the home. The implicit theme in the 60 Minutes story of Realtors gouging the public is just not accurate.
Another topic alluded to was the fact that many states have minimum service laws. Stahl’s interpretation of these laws was that they constituted a restraint of trade and prevented discount brokerages from existing in the states where they exist. What is not mentioned is that these laws were put into place to protect the public after many complaints from the public to licensing entities in the states where they exist.
Allyson Hoffman, a Realtor in Illinois, explains in her blog response to the 60 Minutes segment that the minimum service law in her state was one such law—there were so many complaints that legislators felt that consumers needed an assurance that at least basic real estate services were being provided by the discounters. In addition, Hoffman notes that full service real estate firms provided their sellers with more money in their pockets than did discount firms and sold their homes in less time, another fact that Stahl ignored. The issue is not really whether there is a 6% commission or something less, but rather what puts more money in the consumer’s pocket at the end of the transaction. Studies from NAR have supported Hoffman’s assertion.
A major problem with the 60 Minutes piece is that it was totally one-sided. Most of the people interviewed were from high-tech companies or discount brokerages. NAR worked with the producers of the piece for almost a year, and yet they declined to interview anyone from the organization to provide a balanced report. Instead NAR got the so-called “empty chair” treatment, a throw-away line that NAR disputed some of the claims of those interviewed. The absence of a NAR spokesperson gave the opposing views presented more weight to further the biased point of view of the piece. And the real estate agent they did interview was not articulate or capable of speaking to the issues raised.
I could go on and on. Ultimately the piece was a promotion for discount and internet companies who provide little or no fiduciary counsel to their clients and fed the current realtor-bashing debate. The bottom line for me is that I really don’t understand why people think that Realtors make too much money for what they do. I guess it’s because most people don’t really understand what we do.
How many people would work hours and hours without being paid for it? Real estate agents do it all the time—the sale that doesn’t close because of unresolvable problems or because the buyer was not approved for the loan, buyers who occupy hours (even days) of an agent’s time (and gasoline) and then go purchase a “for sale by owner”, sellers who change to a different agent when the listing period is up because they priced their home too high (contrary to the advice of their agent) after the agent has spent hours and hours on the sellers’ behalf and paid for numerous newspaper and magazine ads, internet advertising, etc.
The current commission system is antiquated, based on a system where the real estate agent takes all of the risk and assumes all of the expenses with the hope that the transaction will close so that the agent will finally get paid for all of the work he or she has done. Some of these tasks can indeed be done by the home seller (i.e. flyers, open houses, etc.). However, the most important services of real estate agents are to provide fiduciary advice and counsel to their clients, based on their experience and expertise, as well as to trouble-shoot problems that may arise in a transaction, provide a “buffer” between buyer and seller, and negotiate on behalf of their client. These are services which merit payment whether there is a sale or not.
There are new models being developed for payment of real estate agents, but they are not yet widely used in the industry. One is a consultant model, whereby Realtors would be paid by the hour or by the job, much like lawyers, doctors and others. The goal is to provide choices based on the client’s needs and actually get paid for the services provided, whether there is a sale or not—a much more logical approach. More on this in a future post.
Yes, Stahl was right on one thing--technology is assuming more importance in the industry, but there is no substitute for an experienced professional. I provide MLS listings and other on-line services to assist my clients and potential customers and provide better service. But the internet is just one of many tools in my toolbox. Real estate is still about relationships and people-to-people contact, so I value my clients, especially those who wish to have me serve them in the sale of the property I helped them buy and those who thought I did a good job for them and recommend me to their friends and colleagues. As Mollie Wasserman, an agent in Massachusetts, states in her internet warning:
REAL ESTATE INTERNET WARNING: Despite advertising claims to the contrary, the internet is not an experienced Real Estate Professional. It cannot consult, counsel, advise, have knowledge of local laws and market conditions, make judgments, “own” the result, or most importantly, understand your individual goals and needs and care about you as a Client.
I work hard for my money, and I strive to provide the best service possible to help my clients either buy or sell what is (for most folks) the largest purchase they will ever make. Buying or selling a home is not a simple thing that can be done on the internet. And I’m sick and tired of the general public’s perception that I don’t DO anything to earn my paychecks. Realtor bashing may be in style, but it’s not fair to hard-working agents all over the country who put clients’ needs above their own, solve innumerable problems, and work long hours (including evenings and weekends) to assure that the transaction will close, just so we can finally take home a paycheck. We deserve to earn a living wage too.
To view the NAR response:
http://www.realtor.org/about_nar/60_minutes/NARRespondsToSixtyMinutesMain.html
For additional commentary about the program and the issues:
http://realtytimes.com/rtapages/20070515_sixtybiased.htm
http://realtytimes.com/rtapages/20070518_narresponds.htm
http://tinyurl.com/2cz22o
http://www.realestatenorthernillinois.com/blog_post.asp?post=2182
http://realtytimes.com/rtapages/20060621_banksnewspapers.htm
http://www.realtor.org/home_buyers_and_sellers/nar_works_for_you.html
But a week ago, the piece they did about real estate was a big disappointment, to say the least. It was extremely slanted and wasn’t even accurate. There are many objections I could talk about, but I will focus on only a couple of the more important issues raised.
The introduction to the segment began: "For realtors, the six percent commission is sacrosanct. It's remained in place, even as the price of homes has quadrupled over the past 25 years," goes the set-up. "But as correspondent Lesley Stahl reports, things are beginning to change. What happened to travel agents, stock brokers and book sellers -- the encroachment of the Internet -- is beginning to affect real estate agents. And the sacred six percent is under assault from online discounters."
As Blanche Evans of the Realty Times notes: “the six percent commission is not sacrosanct. In some areas it's seven percent, but in most areas it's less, because competition -- brought on by the swelling of agents into an already highly competitive business -- has reduced commissions and gross incomes for most Realtors.”
She goes on to refer to an internal report from the National Association of Realtors® (NAR), which found that commissions typically range from 4.3% and 5.3% as of 2005. And income for real estate agents generally has steadily declined as membership in NAR has skyrocketed during the past couple of boom years. According to NAR’s 2007 member profile, the median gross income for all Realtors in 2006 was $47,700, down slightly from 2004 when median gross income was $49,300. And that’s before expenses, which are significant
These are hardly incomes to write home about as the cost of living has increased. Many students just graduating from college are offered jobs with higher starting salaries than that and the only deductions they have are taxes--not business expenses, such as advertising for listings, internet websites, MLS dues, license fees, gasoline for showing properties, increased FICA deductions for being self-employed, to mention just a few.
In addition, the average agent does not receive the entire commission. Whatever commission the seller is paying is divided 4 ways—listing agent and listing company, selling agent and selling company. The result is that the agent usually gets about 1.5% or less of the sales price of any property, unless the listing agent sells the home. The implicit theme in the 60 Minutes story of Realtors gouging the public is just not accurate.
Another topic alluded to was the fact that many states have minimum service laws. Stahl’s interpretation of these laws was that they constituted a restraint of trade and prevented discount brokerages from existing in the states where they exist. What is not mentioned is that these laws were put into place to protect the public after many complaints from the public to licensing entities in the states where they exist.
Allyson Hoffman, a Realtor in Illinois, explains in her blog response to the 60 Minutes segment that the minimum service law in her state was one such law—there were so many complaints that legislators felt that consumers needed an assurance that at least basic real estate services were being provided by the discounters. In addition, Hoffman notes that full service real estate firms provided their sellers with more money in their pockets than did discount firms and sold their homes in less time, another fact that Stahl ignored. The issue is not really whether there is a 6% commission or something less, but rather what puts more money in the consumer’s pocket at the end of the transaction. Studies from NAR have supported Hoffman’s assertion.
A major problem with the 60 Minutes piece is that it was totally one-sided. Most of the people interviewed were from high-tech companies or discount brokerages. NAR worked with the producers of the piece for almost a year, and yet they declined to interview anyone from the organization to provide a balanced report. Instead NAR got the so-called “empty chair” treatment, a throw-away line that NAR disputed some of the claims of those interviewed. The absence of a NAR spokesperson gave the opposing views presented more weight to further the biased point of view of the piece. And the real estate agent they did interview was not articulate or capable of speaking to the issues raised.
I could go on and on. Ultimately the piece was a promotion for discount and internet companies who provide little or no fiduciary counsel to their clients and fed the current realtor-bashing debate. The bottom line for me is that I really don’t understand why people think that Realtors make too much money for what they do. I guess it’s because most people don’t really understand what we do.
How many people would work hours and hours without being paid for it? Real estate agents do it all the time—the sale that doesn’t close because of unresolvable problems or because the buyer was not approved for the loan, buyers who occupy hours (even days) of an agent’s time (and gasoline) and then go purchase a “for sale by owner”, sellers who change to a different agent when the listing period is up because they priced their home too high (contrary to the advice of their agent) after the agent has spent hours and hours on the sellers’ behalf and paid for numerous newspaper and magazine ads, internet advertising, etc.
The current commission system is antiquated, based on a system where the real estate agent takes all of the risk and assumes all of the expenses with the hope that the transaction will close so that the agent will finally get paid for all of the work he or she has done. Some of these tasks can indeed be done by the home seller (i.e. flyers, open houses, etc.). However, the most important services of real estate agents are to provide fiduciary advice and counsel to their clients, based on their experience and expertise, as well as to trouble-shoot problems that may arise in a transaction, provide a “buffer” between buyer and seller, and negotiate on behalf of their client. These are services which merit payment whether there is a sale or not.
There are new models being developed for payment of real estate agents, but they are not yet widely used in the industry. One is a consultant model, whereby Realtors would be paid by the hour or by the job, much like lawyers, doctors and others. The goal is to provide choices based on the client’s needs and actually get paid for the services provided, whether there is a sale or not—a much more logical approach. More on this in a future post.
Yes, Stahl was right on one thing--technology is assuming more importance in the industry, but there is no substitute for an experienced professional. I provide MLS listings and other on-line services to assist my clients and potential customers and provide better service. But the internet is just one of many tools in my toolbox. Real estate is still about relationships and people-to-people contact, so I value my clients, especially those who wish to have me serve them in the sale of the property I helped them buy and those who thought I did a good job for them and recommend me to their friends and colleagues. As Mollie Wasserman, an agent in Massachusetts, states in her internet warning:
REAL ESTATE INTERNET WARNING: Despite advertising claims to the contrary, the internet is not an experienced Real Estate Professional. It cannot consult, counsel, advise, have knowledge of local laws and market conditions, make judgments, “own” the result, or most importantly, understand your individual goals and needs and care about you as a Client.
I work hard for my money, and I strive to provide the best service possible to help my clients either buy or sell what is (for most folks) the largest purchase they will ever make. Buying or selling a home is not a simple thing that can be done on the internet. And I’m sick and tired of the general public’s perception that I don’t DO anything to earn my paychecks. Realtor bashing may be in style, but it’s not fair to hard-working agents all over the country who put clients’ needs above their own, solve innumerable problems, and work long hours (including evenings and weekends) to assure that the transaction will close, just so we can finally take home a paycheck. We deserve to earn a living wage too.
To view the NAR response:
http://www.realtor.org/about_nar/60_minutes/NARRespondsToSixtyMinutesMain.html
For additional commentary about the program and the issues:
http://realtytimes.com/rtapages/20070515_sixtybiased.htm
http://realtytimes.com/rtapages/20070518_narresponds.htm
http://tinyurl.com/2cz22o
http://www.realestatenorthernillinois.com/blog_post.asp?post=2182
http://realtytimes.com/rtapages/20060621_banksnewspapers.htm
http://www.realtor.org/home_buyers_and_sellers/nar_works_for_you.html
Thursday, March 22, 2007
2006 NW Arkansas Housing Market Report
I have just finished a marketing report for 2006 for NW Arkansas. It gives conditions of the housing market, absorption rate, the number of homes for sale by price range, and much more. The towns covered are Bentonville, Fayetteville, Rogers, Springdale, and Bella Vista. See what home prices have been doing in the past years to help understand what is happening in the market now as the needed "adjustment" is also occurring here. To view this report, visit my main website at http://www.judyluna.com and click on 2006 Market Report under Articles and Links on the left of the home page.
Monday, March 12, 2007
January Home Prices Declined in Northwest Arkansas
According to an article in the business section of the Morning News last Monday, home prices began sliding down in Benton County (decrease of almost 6%) in January with a significant drop in sales (down 19.69% from January of 2006). At the same time, while average prices in Washington County also decreased by 11%, the number of sales increased by 8.28% compared to January of last year.
This is a good-news/bad-news scenario for Northwest Arkansas, depending on whether you are a buyer or a seller of a home. For sellers, it means that they may not be able to sell their home at the price they might have hoped had the market continued rising at the same pace as during the past several years. For buyers, it means that with lower prices, they might be able to get a nicer home in their price range, and perhaps more people will now be able to consider purchasing a home.
A positive trend, not mentioned in the article, is that an increasing supply of more modestly-prices homes has contributed to the decrease in the average price of homes sold. This is good news, since it means that builders have finally seen the light and started building more affordable homes. This is also good news for buyers who haven’t been able to afford a new home because prices for such homes were so high. For example, there are now new homes being built in Fayetteville for less than $150K (only 2 subdivisions so far, but hey, it’s a start). This price for a new home hasn’t been seen for several years in Fayetteville. And this trend also exists in other communities in NW Arkansas.
According to Kathy Deck of the U of A Center for Business and Economic Research, the decline in home sales could be the beginning of the kind of corrections which have been occurring elsewhere in the nation. Until recently the NW Arkansas real estate market has largely been immune to these trends.
For more specific data on the January Arkansas Home Sale figures, the Morning News article can be seen at:
http://www.nwaonline.net/articles/2007/03/05/business/030607arrealtors.txt
To view a copy of Judy’s Market Report for 2006, write her an email at judy@judyluna.com
This is a good-news/bad-news scenario for Northwest Arkansas, depending on whether you are a buyer or a seller of a home. For sellers, it means that they may not be able to sell their home at the price they might have hoped had the market continued rising at the same pace as during the past several years. For buyers, it means that with lower prices, they might be able to get a nicer home in their price range, and perhaps more people will now be able to consider purchasing a home.
A positive trend, not mentioned in the article, is that an increasing supply of more modestly-prices homes has contributed to the decrease in the average price of homes sold. This is good news, since it means that builders have finally seen the light and started building more affordable homes. This is also good news for buyers who haven’t been able to afford a new home because prices for such homes were so high. For example, there are now new homes being built in Fayetteville for less than $150K (only 2 subdivisions so far, but hey, it’s a start). This price for a new home hasn’t been seen for several years in Fayetteville. And this trend also exists in other communities in NW Arkansas.
According to Kathy Deck of the U of A Center for Business and Economic Research, the decline in home sales could be the beginning of the kind of corrections which have been occurring elsewhere in the nation. Until recently the NW Arkansas real estate market has largely been immune to these trends.
For more specific data on the January Arkansas Home Sale figures, the Morning News article can be seen at:
http://www.nwaonline.net/articles/2007/03/05/business/030607arrealtors.txt
To view a copy of Judy’s Market Report for 2006, write her an email at judy@judyluna.com
Saturday, October 28, 2006
Baby Boomers Will Continue to Dominate the Housing Market for Many Years
It is probably no surprise that the housing needs of baby boomers are still a hot topic of conversation. The National Association of Realtors (NAR) gives a great deal of thought to this subject and performs studies and surveys to help forecast future needs.
The largest population group in U.S. history, the 78 million baby boomers are just now starting to reach early retirement age. Boomers have tremendous purchasing power. Most live in two-income households, with a median income in 2005 of $64,700. That is 31% higher than the median for all households. This generation makes up 37.5% of U.S. households, but receives nearly 50% of all aggregate household income, which helps to explain why 80% of boomers are homeowners.
One surprising fact did surface in the most recent comprehensive NAR survey: even with the statistics clearly showing financial resources greater than any generation before them, most survey respondents were unsure of their financial future. Seventy-five percent of respondents said they are not financially prepared for retirement and many even expressed anxiety about their ability to retire.
The retirement needs and wants of the boomer generation are as varied as the people themselves. Boomers are sometimes referred to as the “sandwich generation.” Many boomers married later in life than previous generations and therefore may still have children living at home. At the same time, it’s not unusual to find boomers with aging parents to care for.
One cannot simply assume baby boomers will address their retirement years in a pattern similar to older generations. NAR’s study surveyed nearly 2,000 baby boomers from all over the country with some likely results interspersed with a few that may not have been expected:
1. With life expectancy steadily increasing and retirement age for full Social Security benefits gradually increasing to age 67, many boomers are expected to work 5-10 years past age 65. Approximately 27% said they have no intention of ever retiring. Taking this into consideration, it appears they won’t be as interested in downsizing as the generations before them. Indeed, with today’s focus on technology, many people may prefer to have a home office or even two home offices.
2. When asked where they want to retire, 42% said in the South, 32% in the West, 15% in the Midwest and 12% in the Northeast. Consequently the Sunbelt continues to be a desirable destination for retirees.
3. Boomers have traditionally been active in the second home market, owning some 57% of all vacation homes. Forty percent currently plan to convert their vacation home into a primary residence in retirement.
4. The study also showed that 58% of rental properties are owned by baby boomers.
5. Ten percent of boomers indicated they plan to buy some form of real estate within the next year – many are considering a new primary residence, but the rest are thinking about land, second homes or commercial property.
6. Half of boomers who live in an urban area would like to retire in a small town or rural area, primarily because they believe doing so would result in a lower cost of living.
7. Other relocation considerations included being near family, availability of quality health care, and a better climate. Many also cited a desire to live near a body of water.
8. At the same time, more than a third of all baby boomers want to retire in an urban or suburban setting, motivated by quality health care and cultural activities.
9. When asked, half of baby boomers said they would consider living in an age-restricted community.
10. Women head up 20% of households. Their needs are usually different than traditional couples. Indeed, women frequently cited safety as their primary concern.
11. NAR President Thomas M. Stevens, said the survey shows most boomers want professional services when they buy real estate. Not only do they expect professional service and guidance from real estate agents, they place great value on those services. Mr. Stevens also stated “When buying a home, they want agents to represent their interests in the complex transaction process, and when selling they want help to establish the right asking price. Regardless of whether they’re buying or selling, boomers want agents to explain all of the complicated contracts, forms and agreements, to manage the closing process from start to finish, and to negotiate on their behalf.”
There is no doubt in my mind that baby boomers will have significant impact on all aspects of the real estate market for the next twenty years. This is the first time the U.S. has experienced a huge generation of affluent people nearing retirement age. Whether it’s a smaller home near their children and grandchildren or a place in the sun, boomers will be the driving force moving the market.
I stand ready to offer my professional assistance to anyone interested in buying or selling real estate in Northwest Arkansas. As a baby boomer myself, with similar attitudes found by the NAR survey, I can identify strongly with anyone looking for retirement property or a second home. Please call me at 479-966-0435 if you have any questions on this article or any other aspect of home ownership.
For more information:
http://www.rismedia.com/index.php/article/articleview/16337/1/1/
To read a previous article on the effect of baby boomers on the second home market, scroll down to the bottom of my blog and click Archives for June. The article is titled “Baby Boomers Dominate 2nd Home Market” and is dated June 14, 2006.
The largest population group in U.S. history, the 78 million baby boomers are just now starting to reach early retirement age. Boomers have tremendous purchasing power. Most live in two-income households, with a median income in 2005 of $64,700. That is 31% higher than the median for all households. This generation makes up 37.5% of U.S. households, but receives nearly 50% of all aggregate household income, which helps to explain why 80% of boomers are homeowners.
One surprising fact did surface in the most recent comprehensive NAR survey: even with the statistics clearly showing financial resources greater than any generation before them, most survey respondents were unsure of their financial future. Seventy-five percent of respondents said they are not financially prepared for retirement and many even expressed anxiety about their ability to retire.
The retirement needs and wants of the boomer generation are as varied as the people themselves. Boomers are sometimes referred to as the “sandwich generation.” Many boomers married later in life than previous generations and therefore may still have children living at home. At the same time, it’s not unusual to find boomers with aging parents to care for.
One cannot simply assume baby boomers will address their retirement years in a pattern similar to older generations. NAR’s study surveyed nearly 2,000 baby boomers from all over the country with some likely results interspersed with a few that may not have been expected:
1. With life expectancy steadily increasing and retirement age for full Social Security benefits gradually increasing to age 67, many boomers are expected to work 5-10 years past age 65. Approximately 27% said they have no intention of ever retiring. Taking this into consideration, it appears they won’t be as interested in downsizing as the generations before them. Indeed, with today’s focus on technology, many people may prefer to have a home office or even two home offices.
2. When asked where they want to retire, 42% said in the South, 32% in the West, 15% in the Midwest and 12% in the Northeast. Consequently the Sunbelt continues to be a desirable destination for retirees.
3. Boomers have traditionally been active in the second home market, owning some 57% of all vacation homes. Forty percent currently plan to convert their vacation home into a primary residence in retirement.
4. The study also showed that 58% of rental properties are owned by baby boomers.
5. Ten percent of boomers indicated they plan to buy some form of real estate within the next year – many are considering a new primary residence, but the rest are thinking about land, second homes or commercial property.
6. Half of boomers who live in an urban area would like to retire in a small town or rural area, primarily because they believe doing so would result in a lower cost of living.
7. Other relocation considerations included being near family, availability of quality health care, and a better climate. Many also cited a desire to live near a body of water.
8. At the same time, more than a third of all baby boomers want to retire in an urban or suburban setting, motivated by quality health care and cultural activities.
9. When asked, half of baby boomers said they would consider living in an age-restricted community.
10. Women head up 20% of households. Their needs are usually different than traditional couples. Indeed, women frequently cited safety as their primary concern.
11. NAR President Thomas M. Stevens, said the survey shows most boomers want professional services when they buy real estate. Not only do they expect professional service and guidance from real estate agents, they place great value on those services. Mr. Stevens also stated “When buying a home, they want agents to represent their interests in the complex transaction process, and when selling they want help to establish the right asking price. Regardless of whether they’re buying or selling, boomers want agents to explain all of the complicated contracts, forms and agreements, to manage the closing process from start to finish, and to negotiate on their behalf.”
There is no doubt in my mind that baby boomers will have significant impact on all aspects of the real estate market for the next twenty years. This is the first time the U.S. has experienced a huge generation of affluent people nearing retirement age. Whether it’s a smaller home near their children and grandchildren or a place in the sun, boomers will be the driving force moving the market.
I stand ready to offer my professional assistance to anyone interested in buying or selling real estate in Northwest Arkansas. As a baby boomer myself, with similar attitudes found by the NAR survey, I can identify strongly with anyone looking for retirement property or a second home. Please call me at 479-966-0435 if you have any questions on this article or any other aspect of home ownership.
For more information:
http://www.rismedia.com/index.php/article/articleview/16337/1/1/
To read a previous article on the effect of baby boomers on the second home market, scroll down to the bottom of my blog and click Archives for June. The article is titled “Baby Boomers Dominate 2nd Home Market” and is dated June 14, 2006.
Sunday, August 13, 2006
Existing-Home Sales Flattening, Prices Cooling
It continues to be a buyer’s market. Prices are up only slightly from one year ago and interest rates are still affordable.
Last year sales were at record highs. This year existing home sales (throughout the U.S.) declined 1.3% in June 2006 compared to the previous month. Looking back to June 2005, June sales this year declined 8.9%.
Looking from a different perspective, housing inventory levels nationwide rose 3.8% at the end of June to 3.73 million existing homes available for sale. That represents a 6.8-month supply at the current sales pace. By contrast, in June 2005, there was a tight 4.4-month supply on the market.
It appears to me that the market is stabilizing. I don’t think anyone believed the market could continue sales at the record pace of the past several years.
This is good news for buyers who may have been discouraged by bidding wars during the hot market of the past. Now is a good time for buyers to find the home they want.
When inventories increase, buyers have more choices and more time to comparison shop. Sellers have come to realize they must be more competitive these days.
The above statistical information came from The National Association of Realtors®, report for June 2006.
To read the full report, click on:
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/06JuneEHS
Last year sales were at record highs. This year existing home sales (throughout the U.S.) declined 1.3% in June 2006 compared to the previous month. Looking back to June 2005, June sales this year declined 8.9%.
Looking from a different perspective, housing inventory levels nationwide rose 3.8% at the end of June to 3.73 million existing homes available for sale. That represents a 6.8-month supply at the current sales pace. By contrast, in June 2005, there was a tight 4.4-month supply on the market.
It appears to me that the market is stabilizing. I don’t think anyone believed the market could continue sales at the record pace of the past several years.
This is good news for buyers who may have been discouraged by bidding wars during the hot market of the past. Now is a good time for buyers to find the home they want.
When inventories increase, buyers have more choices and more time to comparison shop. Sellers have come to realize they must be more competitive these days.
The above statistical information came from The National Association of Realtors®, report for June 2006.
To read the full report, click on:
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/06JuneEHS
Wednesday, August 02, 2006
Affordable Housing
Recent studies indicate that the term “affordable housing” is becoming an oxymoron.
The National Association of Realtors® surveyed 1000 people in June 2006. By a 2-1 ratio, respondents believed that high monthly payments were the biggest obstacle to buying a home.
The perception used to be that the down payment and closing costs were the biggest obstacles to home ownership. Now people are worried that monthly income cannot be stretched to meet monthly bills.
In addition to the mortgage payment itself, people worry about the cost of putting gasoline in their car, the ever-increasing price of utilities, rising property taxes, escalating healthcare costs, and higher insurance premiums.
If they have an adjustable rate mortgage, they know that soon that payment will also be higher.
For Middle Americans, home ownership is not only their dream but also the surest way to build wealth. Many feel that dream is no longer reachable.
The hurdles to home ownership are complex. However, Los Angeles Mayor Antonio Villaraigosa succinctly summed up a large part of the problem, “…the fact that wages haven't kept up with the cost of real estate." While average hourly wages have risen about 20% since 2000, the national median home price has soared 55%.
Another large part of the problem is escalating land prices in most of the country, and NW Arkansas is no exception. Even as recently as 3-4 years ago, a few local builders were still building so-called "starter" homes. These were somewhat basic, but usually had about 1000-1200 square feet, 3 bedrooms, 2 baths, and ceramic tile in the wet areas. These were usually available in outlying areas like Elkins and other smaller towns. Even in some of the major towns, there were homes for under $100,000. I can remember some new homes costing even significantly less than that.
Builders are no longer able to build “starter homes.” Because land is so expensive, builders are forced to build a larger home on a smaller lot and charge more for it. The new "affordable" homes start at about $150K to $160K in the major towns of NW Arkansas, although it is possible to purchase a less expensive, smaller home in some of the outlying areas, such as Siloam Springs, Lincoln, and Gravette, etc.
Another reason for higher home prices is the impact fees many communities charge to help pay for everything from roads and sewers to police and fire protection to parks and other municipal facilities. The fees, which amount to several thousands of dollars, are passed on to the homebuyer.
Thus, for people of modest means, increasingly this means they must choose whether to live in their own home farther from their work or pay rent and live closer. But with gas prices so high, living farther away means extra transportation costs and that increases monthly expenses. People who would have purchased a home in the past no longer qualify for these more expensive homes.
In the meantime, the glut of high-end homes continues.
For more information:
http://realtytimes.com/rtmcrcond/Arkansas~Springdale~judyluna
http://www.realtor.org/housopp.nsf/pages/pulsesurvey2006
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/NatlHsgOpPulseSurvey
http://www.usatoday.com/money/economy/housing/2006-06-26-affordable-homes-usat_x.htm
The National Association of Realtors® surveyed 1000 people in June 2006. By a 2-1 ratio, respondents believed that high monthly payments were the biggest obstacle to buying a home.
The perception used to be that the down payment and closing costs were the biggest obstacles to home ownership. Now people are worried that monthly income cannot be stretched to meet monthly bills.
In addition to the mortgage payment itself, people worry about the cost of putting gasoline in their car, the ever-increasing price of utilities, rising property taxes, escalating healthcare costs, and higher insurance premiums.
If they have an adjustable rate mortgage, they know that soon that payment will also be higher.
For Middle Americans, home ownership is not only their dream but also the surest way to build wealth. Many feel that dream is no longer reachable.
The hurdles to home ownership are complex. However, Los Angeles Mayor Antonio Villaraigosa succinctly summed up a large part of the problem, “…the fact that wages haven't kept up with the cost of real estate." While average hourly wages have risen about 20% since 2000, the national median home price has soared 55%.
Another large part of the problem is escalating land prices in most of the country, and NW Arkansas is no exception. Even as recently as 3-4 years ago, a few local builders were still building so-called "starter" homes. These were somewhat basic, but usually had about 1000-1200 square feet, 3 bedrooms, 2 baths, and ceramic tile in the wet areas. These were usually available in outlying areas like Elkins and other smaller towns. Even in some of the major towns, there were homes for under $100,000. I can remember some new homes costing even significantly less than that.
Builders are no longer able to build “starter homes.” Because land is so expensive, builders are forced to build a larger home on a smaller lot and charge more for it. The new "affordable" homes start at about $150K to $160K in the major towns of NW Arkansas, although it is possible to purchase a less expensive, smaller home in some of the outlying areas, such as Siloam Springs, Lincoln, and Gravette, etc.
Another reason for higher home prices is the impact fees many communities charge to help pay for everything from roads and sewers to police and fire protection to parks and other municipal facilities. The fees, which amount to several thousands of dollars, are passed on to the homebuyer.
Thus, for people of modest means, increasingly this means they must choose whether to live in their own home farther from their work or pay rent and live closer. But with gas prices so high, living farther away means extra transportation costs and that increases monthly expenses. People who would have purchased a home in the past no longer qualify for these more expensive homes.
In the meantime, the glut of high-end homes continues.
For more information:
http://realtytimes.com/rtmcrcond/Arkansas~Springdale~judyluna
http://www.realtor.org/housopp.nsf/pages/pulsesurvey2006
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/NatlHsgOpPulseSurvey
http://www.usatoday.com/money/economy/housing/2006-06-26-affordable-homes-usat_x.htm
Tuesday, July 04, 2006
Licensed Realtor® vs. For-Sale-By-Owner – Which Would You Rather Do?
A few Arkansas Realtors® have recently begun an effort to introduce legislation that would prohibit property owners from selling a home without contracting with a Realtor®.
I don't necessarily agree with the proposed law. Americans have traditionally been free to make their own decisions, right or wrong, and certainly property ownership is no exception. In fact, property rights were some of the basic rights the founding fathers of our nation valued. An early version of the “Declaration of Independence” stated the rights of the colonists to “life, liberty, and property” instead of the final version of “life, liberty and the pursuit of happiness.”
On the other hand, there are many reasons to use the services of a Realtor®, some of which are so plain to see that I can’t understand why a buyer or seller would even consider trying to go it alone:
1. A person becomes a licensed Realtor® only after studying all the applicable laws, being tested on that knowledge, and continuing his/her education annually. Most Realtors® also seek advanced education resulting in designations such as Accredited Buyer Representative (ABR®), Certified Residential Specialist (CRS) and others. These designations require experience (a minimum number of transactions) as well as many courses to improve their knowledge to better serve their clients.
2. An experienced Realtor® knows the market inside and out and provides valuable advice to both buyers and sellers.
3. Most real estate agents primarily function as problem solvers. They provide a valuable buffer between buyer and seller to negotiate terms and solve problems without acrimony and to achieve a "win-win" situation for both sides. A lot of things can go wrong in a real estate transaction--from problems discovered during the home inspection, to problems with financing, to simple things like seeing that keys are delivered to the new owner. I don’t have enough space here to tell you about all the “fires” I’ve had to put out at the last minute to prevent a sale from collapsing.
4. Realtors® must comply with Fair Housing laws but owners selling their own property are exempt from the same laws.
5. Studies from the National Association of Realtors® have shown that for-sale-by-owners often receive less in net proceeds from the sale of their home than they would have if they had used a Realtor®--even after paying the commission. According to the National Association of Realtors®, in 2005 the median price of FSBO homes was $198,200 while the median price of agent-assisted home sales was $230,000.
6. Having a Realtor® saves a lot of time and trouble for a seller. The real estate professional will market the home, make valuable suggestions on presentation to help the home sell faster, assist with the complicated paperwork, and provide current data on home sales in order to price the home appropriately. Plus, because there will be a lock box on the home, the seller doesn’t have to go rushing home during his lunch hour to show it.
I don't argue with the right of a seller to sell his home himself. But as a buyer, I wouldn't even look at that home without the help of a buyer agent. How could I be sure that the person selling the home knows what he is doing? I would want to be assured of a clear title to the property. Would I know how to negotiate any necessary repairs? What if the seller would not cooperate in having the property inspected or properly repaired? What if the inspection discovers something so drastically wrong with the property that I ultimately don't want to buy it? Will the seller give my earnest money back or will I have to seek legal assistance?
For Sale By Owner (FSBO) sellers often think just getting their home on the Internet, putting a sign in the yard and ads in the paper, as well as having an open house, are all it takes to sell it. That is far from reality because:
1. Most buyers now have buyer representatives. This is especially important in NW Arkansas where many people are being transferred in (or out) because of employment. Most people relocating here do not pick up the newspaper to look for FSBOs or even look at FSBO websites. They get a buyer’s agent who knows the market and neighborhoods which will meet their family’s needs.
2. When the buyer’s agent looks for properties to show his buyer, he looks in the Multiple Listing Service. FSBO homes are not in the MLS.
3. People actively seeking a FSBO are few. According to statistics from NAR (National Association of Realtors®), 77% of homebuyers in 2005 purchased their home with a real estate agent, and 1/3 of For Sale By Owner homes were sold to someone the seller already knew.
4. Buyer’s agents bring qualified buyers to the table. Usually there is an interview process whereby the buyer’s agent assures that the buyer is able to get a loan to purchase the home. Many people who seek For Sale By Owner properties are those who ask for owner financing or other options because their credit is shaky.
5. Most important, the process of buying a home is a complicated one. The purchase of a home is the most important purchase most people will ever make. Until people are actually involved in the process, they sometimes think it won’t be much different than selling a car. Far from it! A home is way more expensive and there is a lot more to buying and selling one than simply signing the back of an automobile title and taking it to the DMV to get ownership transferred. A real estate professional can make sure that their client—the buyer or the seller—is informed of appropriate laws and procedures and handle the paperwork necessary to complete the sale.
6. Homes cost a lot of money and buyers need to be assured that the home is in the best condition possible, as well as being assured that they will receive a clear title to the property. Real estate professionals representing buyers and sellers can assure that the process goes smoothly, relieve much aggravation and potential conflict if there are problems with the sale, and obtain higher net proceeds for sellers, when compared to For Sale By Owners. On the buyer's side, an agent can guide the buyer as to his rights under real estate law and make sure the buyer does not pay too much for the home. In either case, the Realtor® does a lot of handholding.
I have been a real estate professional for many years. I don’t want to say that I’ve seen everything that can go right or wrong with a sale, but certainly I’ve seen most situations. I understand the financial and emotional impact buying and selling a home has on the average family.
What I don't understand is why people resist hiring a real estate professional. If a person is ill, he goes to a professional--his doctor. If he needs legal advice, he goes to his lawyer. There is no question of NOT paying for this type of professional help. Why do people feel that a Realtor® does not merit pay for professional services rendered? According to the National Association of Realtors®, the main reason sellers resist hiring a Realtor® is to save the commission.
Contrary to popular opinion, real estate agents earn every cent they make. They work long hours (including weekends and even holidays) on behalf of their clients and they defer payment until the home is sold. Real estate agents pay up front--out of their own pockets--for advertising, driving prospective buyers around, MLS services, website costs, telephone costs, computers, Internet access and so much more. It takes time, money, and effort to bring buyers and sellers together. Whether the agent represents the buyer or seller, if the transaction doesn't close, the agent receives nothing.
But if the transaction does close, the agent receives only a share of the perceived “standard 6%” commission. First, the commission is divided between the buyer agent's company and the listing agent's company. Then, and only then, does the agent get a share of his company's percentage.
If the house doesn't sell and the owner decides to not renew the listing or cancels it before the listing expires, the agent is out a lot of money and doesn't get paid anything at all. How does this square with the misconception that Realtors® "don't do anything?"
Most Realtors® work more than 40-hour weeks. They work when most people have the day off. They are not lazy people, and they put a lot of effort into getting their listings sold. Why do people not want to pay them? I'm still scratching my head.
Note: All real estate agents are not Realtors®. Realtor® is a term to denote a member of the National Association of Realtors®.
For more information:
http://www.realtor.org/publicaffairsweb.nsf/0/a7ca712a7fb7bb7a85256ba70055d57c?OpenDocument
http://www.realtor.org/prodser.nsf/files/2003HBS_sample.pdf/$FILE/2003HBS_sample.pdf
http://www.nwanews.com/adg/Business_Matters/158801
I don't necessarily agree with the proposed law. Americans have traditionally been free to make their own decisions, right or wrong, and certainly property ownership is no exception. In fact, property rights were some of the basic rights the founding fathers of our nation valued. An early version of the “Declaration of Independence” stated the rights of the colonists to “life, liberty, and property” instead of the final version of “life, liberty and the pursuit of happiness.”
On the other hand, there are many reasons to use the services of a Realtor®, some of which are so plain to see that I can’t understand why a buyer or seller would even consider trying to go it alone:
1. A person becomes a licensed Realtor® only after studying all the applicable laws, being tested on that knowledge, and continuing his/her education annually. Most Realtors® also seek advanced education resulting in designations such as Accredited Buyer Representative (ABR®), Certified Residential Specialist (CRS) and others. These designations require experience (a minimum number of transactions) as well as many courses to improve their knowledge to better serve their clients.
2. An experienced Realtor® knows the market inside and out and provides valuable advice to both buyers and sellers.
3. Most real estate agents primarily function as problem solvers. They provide a valuable buffer between buyer and seller to negotiate terms and solve problems without acrimony and to achieve a "win-win" situation for both sides. A lot of things can go wrong in a real estate transaction--from problems discovered during the home inspection, to problems with financing, to simple things like seeing that keys are delivered to the new owner. I don’t have enough space here to tell you about all the “fires” I’ve had to put out at the last minute to prevent a sale from collapsing.
4. Realtors® must comply with Fair Housing laws but owners selling their own property are exempt from the same laws.
5. Studies from the National Association of Realtors® have shown that for-sale-by-owners often receive less in net proceeds from the sale of their home than they would have if they had used a Realtor®--even after paying the commission. According to the National Association of Realtors®, in 2005 the median price of FSBO homes was $198,200 while the median price of agent-assisted home sales was $230,000.
6. Having a Realtor® saves a lot of time and trouble for a seller. The real estate professional will market the home, make valuable suggestions on presentation to help the home sell faster, assist with the complicated paperwork, and provide current data on home sales in order to price the home appropriately. Plus, because there will be a lock box on the home, the seller doesn’t have to go rushing home during his lunch hour to show it.
I don't argue with the right of a seller to sell his home himself. But as a buyer, I wouldn't even look at that home without the help of a buyer agent. How could I be sure that the person selling the home knows what he is doing? I would want to be assured of a clear title to the property. Would I know how to negotiate any necessary repairs? What if the seller would not cooperate in having the property inspected or properly repaired? What if the inspection discovers something so drastically wrong with the property that I ultimately don't want to buy it? Will the seller give my earnest money back or will I have to seek legal assistance?
For Sale By Owner (FSBO) sellers often think just getting their home on the Internet, putting a sign in the yard and ads in the paper, as well as having an open house, are all it takes to sell it. That is far from reality because:
1. Most buyers now have buyer representatives. This is especially important in NW Arkansas where many people are being transferred in (or out) because of employment. Most people relocating here do not pick up the newspaper to look for FSBOs or even look at FSBO websites. They get a buyer’s agent who knows the market and neighborhoods which will meet their family’s needs.
2. When the buyer’s agent looks for properties to show his buyer, he looks in the Multiple Listing Service. FSBO homes are not in the MLS.
3. People actively seeking a FSBO are few. According to statistics from NAR (National Association of Realtors®), 77% of homebuyers in 2005 purchased their home with a real estate agent, and 1/3 of For Sale By Owner homes were sold to someone the seller already knew.
4. Buyer’s agents bring qualified buyers to the table. Usually there is an interview process whereby the buyer’s agent assures that the buyer is able to get a loan to purchase the home. Many people who seek For Sale By Owner properties are those who ask for owner financing or other options because their credit is shaky.
5. Most important, the process of buying a home is a complicated one. The purchase of a home is the most important purchase most people will ever make. Until people are actually involved in the process, they sometimes think it won’t be much different than selling a car. Far from it! A home is way more expensive and there is a lot more to buying and selling one than simply signing the back of an automobile title and taking it to the DMV to get ownership transferred. A real estate professional can make sure that their client—the buyer or the seller—is informed of appropriate laws and procedures and handle the paperwork necessary to complete the sale.
6. Homes cost a lot of money and buyers need to be assured that the home is in the best condition possible, as well as being assured that they will receive a clear title to the property. Real estate professionals representing buyers and sellers can assure that the process goes smoothly, relieve much aggravation and potential conflict if there are problems with the sale, and obtain higher net proceeds for sellers, when compared to For Sale By Owners. On the buyer's side, an agent can guide the buyer as to his rights under real estate law and make sure the buyer does not pay too much for the home. In either case, the Realtor® does a lot of handholding.
I have been a real estate professional for many years. I don’t want to say that I’ve seen everything that can go right or wrong with a sale, but certainly I’ve seen most situations. I understand the financial and emotional impact buying and selling a home has on the average family.
What I don't understand is why people resist hiring a real estate professional. If a person is ill, he goes to a professional--his doctor. If he needs legal advice, he goes to his lawyer. There is no question of NOT paying for this type of professional help. Why do people feel that a Realtor® does not merit pay for professional services rendered? According to the National Association of Realtors®, the main reason sellers resist hiring a Realtor® is to save the commission.
Contrary to popular opinion, real estate agents earn every cent they make. They work long hours (including weekends and even holidays) on behalf of their clients and they defer payment until the home is sold. Real estate agents pay up front--out of their own pockets--for advertising, driving prospective buyers around, MLS services, website costs, telephone costs, computers, Internet access and so much more. It takes time, money, and effort to bring buyers and sellers together. Whether the agent represents the buyer or seller, if the transaction doesn't close, the agent receives nothing.
But if the transaction does close, the agent receives only a share of the perceived “standard 6%” commission. First, the commission is divided between the buyer agent's company and the listing agent's company. Then, and only then, does the agent get a share of his company's percentage.
If the house doesn't sell and the owner decides to not renew the listing or cancels it before the listing expires, the agent is out a lot of money and doesn't get paid anything at all. How does this square with the misconception that Realtors® "don't do anything?"
Most Realtors® work more than 40-hour weeks. They work when most people have the day off. They are not lazy people, and they put a lot of effort into getting their listings sold. Why do people not want to pay them? I'm still scratching my head.
Note: All real estate agents are not Realtors®. Realtor® is a term to denote a member of the National Association of Realtors®.
For more information:
http://www.realtor.org/publicaffairsweb.nsf/0/a7ca712a7fb7bb7a85256ba70055d57c?OpenDocument
http://www.realtor.org/prodser.nsf/files/2003HBS_sample.pdf/$FILE/2003HBS_sample.pdf
http://www.nwanews.com/adg/Business_Matters/158801
Sunday, February 26, 2006
Arkansas Existing Home Sales up 30%
Arkansas continues to experience record growth in existing home sales, outpacing every other state in the country in the fourth quarter, according to a study by the National Association of Realtors. It was the second consecutive quarter that Arkansas’ rate was the best in the country. Arkansas has been among the top 10 states in sales of previously owned homes for each of the past five quarters.
Arkansas’ sales of previously owned homes were up almost 30 percent in the fourth quarter from a year earlier, the study showed. The third quarter of 2005 was also strong, with 32 percent growth. Nationally, existing home sales were flat in the fourth quarter, up just 0.3 percent.
In NW Arkansas, one explanation of these statistics could be the rapid increase in new-home prices, putting most of them beyond many people’s reach. Builders are no longer constructing small “starter” homes due to skyrocketing land costs and increased construction and development costs. As recently as about 3-4 years ago, the typical starter home was about 1000-1200 square feet and could be purchased for under $100K. The new starter home in NWA (particularly in the major towns of Fayetteville, Springdale, Rogers and Bentonville) is larger than that of the past, but prices are also significantly higher, starting at about $180K and going up from there. Salaries are not increasing at the same rate as home prices. Thus for people of modest means who don’t qualify for a new home of this type, the purchase of an existing home or paying rent are their only choices.
Source: Northwest Arkansas Times, February 17, 2006
Arkansas’ sales of previously owned homes were up almost 30 percent in the fourth quarter from a year earlier, the study showed. The third quarter of 2005 was also strong, with 32 percent growth. Nationally, existing home sales were flat in the fourth quarter, up just 0.3 percent.
In NW Arkansas, one explanation of these statistics could be the rapid increase in new-home prices, putting most of them beyond many people’s reach. Builders are no longer constructing small “starter” homes due to skyrocketing land costs and increased construction and development costs. As recently as about 3-4 years ago, the typical starter home was about 1000-1200 square feet and could be purchased for under $100K. The new starter home in NWA (particularly in the major towns of Fayetteville, Springdale, Rogers and Bentonville) is larger than that of the past, but prices are also significantly higher, starting at about $180K and going up from there. Salaries are not increasing at the same rate as home prices. Thus for people of modest means who don’t qualify for a new home of this type, the purchase of an existing home or paying rent are their only choices.
Source: Northwest Arkansas Times, February 17, 2006
Saturday, January 28, 2006
Business Forecast '06
On Friday, January 27, the 12th annual Business Forecast '06 luncheon was held at the Springdale Convention Center. Over 1000 local business people attended. Speakers addressed economic issues affecting not only NW Arkansas, but also the nation and the world.
Sponsored by the Center for Business and Economic Research of the Sam Walton College of Business at the University of Arkansas, the speakers included Dan Worrell, Dean of the Walton College of Business; Thomas "Mack" McLarty (former chief of staff for President Clinton), who introduced the panelists and served as moderator; Ellen Hughes-Cromwick, Chief Economist for Ford Motor Company; James Glassman, Managing Director and Senior Policy Strategist for JPMorgan Chase & Company; and Jeff Collins, Director of the Center for Business and Economic Research.
The general consensus among the panelists with regard to the economic forecast for the coming year was one of "cautious optimism." Ellen Hughes-Cromwick spoke on international trends, James Glassman on the US economy, and Jeff Collins on the state of Arkansas and the northwest region in particular. In response to a question from the audience on "what worries you?" each responded in turn: Hughes-Cromwick--energy markets and political instability in oil producing areas, Glass--the danger of protectionist policies which might be implemented by the US, and Collins--the eroding commitment to US innovation, research and development, which (in the past) has led to wealth creation.
With regard to the state of Arkansas as a whole, Jeff Collins discussed growth in different areas of the state, most of which is occuring in the Little Rock/Central Arkansas area and in NW Arkansas. However, the state is losing manufacturing jobs, which in the past have provided high pay, due to globalization. Although new jobs are being created at a steady pace, the majority of these are low-paying, low-skill jobs. Collins expressed the need for an educated work force which would allow for the creation of high-wage, high-skill jobs. 80% of the new jobs in the state during the past 10 years have been created in Northwest Arkansas and Little Rock--62% in NW Arkansas and 18% in central Arkansas.
Underlying economic trends in NW Arkansas and the central part of the state is increased urbanization, as well as a remarkable rate of population and employment growth. About 1000 people per month are moving to NW Arkansas while about 560 jobs are being created each month. The largest sector for job growth is natural resources, mining and construction.
As a side observation with regard to home construction, he noted that in NW Arkansas in the 2nd quarter of 2005, there were 13,000 lots actively being built upon with 12,000 more platted but not yet active. By the 3rd quarter of the year, there were 16,000 lots being built upon with 15,000 more platted but not yet active. This represents a gain of 5000 lots in only 3 months.
Collins observed that the state economy is dominated by low-wage, low-skill employment, making the current workforce in much of the state ill-equipped to compete in the global marketplace for high-wage, high-skill jobs. The initiative to bring an auto manufacturing plant to Arkansas, which is being discussed in the media, will temporarily forestall the erosion in manufacturing jobs, but he suggested that the auto plant would be like adding a bucket of water to a bathtub with a slow leak.
In summary, Collins stated that the challenge to Northwest Arkansas is to provide state leadership commensurate with the economic power held in the area. Increasingly the whole state depends on the economic development here. But there are obstacles to continued growth--in particular, lack of infrastructure (especially roads, water supply and wastewater treatment). The area must respond with cooperation across governmental organizational boundaries and a unified vision for the future of the area.
Sponsored by the Center for Business and Economic Research of the Sam Walton College of Business at the University of Arkansas, the speakers included Dan Worrell, Dean of the Walton College of Business; Thomas "Mack" McLarty (former chief of staff for President Clinton), who introduced the panelists and served as moderator; Ellen Hughes-Cromwick, Chief Economist for Ford Motor Company; James Glassman, Managing Director and Senior Policy Strategist for JPMorgan Chase & Company; and Jeff Collins, Director of the Center for Business and Economic Research.
The general consensus among the panelists with regard to the economic forecast for the coming year was one of "cautious optimism." Ellen Hughes-Cromwick spoke on international trends, James Glassman on the US economy, and Jeff Collins on the state of Arkansas and the northwest region in particular. In response to a question from the audience on "what worries you?" each responded in turn: Hughes-Cromwick--energy markets and political instability in oil producing areas, Glass--the danger of protectionist policies which might be implemented by the US, and Collins--the eroding commitment to US innovation, research and development, which (in the past) has led to wealth creation.
With regard to the state of Arkansas as a whole, Jeff Collins discussed growth in different areas of the state, most of which is occuring in the Little Rock/Central Arkansas area and in NW Arkansas. However, the state is losing manufacturing jobs, which in the past have provided high pay, due to globalization. Although new jobs are being created at a steady pace, the majority of these are low-paying, low-skill jobs. Collins expressed the need for an educated work force which would allow for the creation of high-wage, high-skill jobs. 80% of the new jobs in the state during the past 10 years have been created in Northwest Arkansas and Little Rock--62% in NW Arkansas and 18% in central Arkansas.
Underlying economic trends in NW Arkansas and the central part of the state is increased urbanization, as well as a remarkable rate of population and employment growth. About 1000 people per month are moving to NW Arkansas while about 560 jobs are being created each month. The largest sector for job growth is natural resources, mining and construction.
As a side observation with regard to home construction, he noted that in NW Arkansas in the 2nd quarter of 2005, there were 13,000 lots actively being built upon with 12,000 more platted but not yet active. By the 3rd quarter of the year, there were 16,000 lots being built upon with 15,000 more platted but not yet active. This represents a gain of 5000 lots in only 3 months.
Collins observed that the state economy is dominated by low-wage, low-skill employment, making the current workforce in much of the state ill-equipped to compete in the global marketplace for high-wage, high-skill jobs. The initiative to bring an auto manufacturing plant to Arkansas, which is being discussed in the media, will temporarily forestall the erosion in manufacturing jobs, but he suggested that the auto plant would be like adding a bucket of water to a bathtub with a slow leak.
In summary, Collins stated that the challenge to Northwest Arkansas is to provide state leadership commensurate with the economic power held in the area. Increasingly the whole state depends on the economic development here. But there are obstacles to continued growth--in particular, lack of infrastructure (especially roads, water supply and wastewater treatment). The area must respond with cooperation across governmental organizational boundaries and a unified vision for the future of the area.
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