Tuesday, January 8, 2008
2007 Report from our President...
The questions we are most asked are “Just how bad is the market?” and “What will happen in 2008 and beyond?” Let’s start with the first question which is answered at two levels, the raw numbers and the underlying activity and energy behind those numbers. The raw numbers do not look that bad, showing our markets down overall by 5-11% in terms of unit sales. And in fact the market shows somewhat better in terms of units if you add leases into the count. In many markets, with leases added in, there were actually more unit sales in 2007 vs. 2006. (In our local market we have been running at about 30% leases for at least the last half of 2007 – Ed.)
It is the energy it took to put those sales together and the home value shift which generates the second part to the “just how bad is the market” question. This downturn is the most significant in the past 30 years, not because the market is off so much (the unit drops where as big or bigger in 1991 and 1981) but that homeowners are in a different position. With higher leverage and less equity, negotiations become tighter and foreclosures more frequent, which cause home values to fall more, resulting in a downward value cycle we have not seen before. In spite of this downward value pressure, there are more buyers than in prior downturns (but more listings as well) and the buying opportunities are also at a level most of us have never seen before.
Another core reason for the feeling that the market is way off is the draw of bank owned homes. We are still running over 30% of pending sales from bank owned listings (but only 15% or so of total listings). The result is the non-bank owned home market is actually off 30% or more. Combine that with the number of unmarketable homes for sale (Sellers are unable or unwilling to move to the price point required to sell their home). (Remember, also that the bank-owned houses; though they may represent 30% of the pending sales in this market, still only represent .66% of the overall housing market in Michigan – Ed.)
The market has also supercharged the significance of the Internet in home marketing. It has become the ultimate sorting process to help buyers through the inventory choices. Curb Appeal has to a major degree been replaced by Web Appeal. (Thus my new motto - “Leveraging the power of the Internet to sell your house.” – Ed.)
What about 2008? The positive trends are, 1) after nearly three years, sellers do understand the market and either are pricing for the market or in many cases taking their home off the market. 2) We are all much better at working with the market, handling short sales, using the web to display our properties and setting an effective pricing strategy, 3) the word is getting out that, if you can find a way, buy a home now. There are two main negative trends, our economic climate and home values. Our economy will not change dramatically in 2008, but beyond it will move from being a drag to a positive influence (abet a slow growing one). Prices will continue to fall this year and most likely into 2009. Does this mean as a buyer you should wait until 2010 to buy? Attempting to time the market has never worked well in stocks or real estate. In spite of the choices, houses are not like stocks and bonds. Each is unique so there is no guarantee that perfect home will be there when the market is “perfect”.
What is the best advice for a Seller for 2008? Foreclosures are your competition. Be aware of those that compete with yours and remember you have an advantage. In general foreclosures do not compare on condition and “user friendliness” in terms of offers and negotiations. However you will still need to price within the same range as the competing foreclosure homes. Overall, regardless of condition, you should be pricing your home as one of the five lowest in your competing market.
What is the best advice for a Buyer in 2008? Don’t forget about the other 80% of the market. Foreclosures may offer the best price, but a non-foreclosure may offer the best value in terms of condition and price. Look for those homes with recent price reductions, they indicate a flexible seller. Also, with mortgage credit issues still lingering, make sure you have a solid pre-approval before you start shopping.
Real Estate One continued to be the Number 1 real estate broker in Michigan in 2007, for the 40th year in a row. Our numbers for the year -
Full Year 2007
Sales Volume for 2007 (Closed Transactions): $2.45 Billion
Number of Homes Sold/Leased: 14,025
Number of Unique Visitors to our Web Sites: 1.15 Million
Number of Buyers visiting our Open Houses: 48,498
Number of Showing Appointments for our Listings: 169,710
(Editor’s Note – Dan Elsea is President of the Real Estate Brokerage portion of the Real Estate One family of companies, which includes Real Estate One, Max Broock Realtors and Johnstone & Johnstone. His brother Stuart Elsea is the President of the non-brokerage portions, which include John Adams Mortgage, Capital Title, InsuranceOne and several other entities that are related to the real estate business. The company Chairman is Dick Elsea, son of the founder Staunton Elsea. Real Estate One is the largest real estate brokerage in Michigan and one of the largest in the United States.)