Is the normal market dead? What about the regular Realtor?

There was an article in the Sunday Oakland Press quoting a local Realtor as stating that the "owner occupied" housing resale market is dead. That owner-occupied market is what I would call the "normal market" - the market for homes that aren't in distress or foreclosed already. These are owned by the regular bill-paying folks who didn't get in over their heads, who didn't get behind and default and who didn't abandon their houses to the banks. These are folks who, for perfectly valid reasons, just want to sell their current homes.

It may be that they have retired and want to downsize or move to a retirement home that they might already own. Maybe they have an opportunity for a better job and need to sell their current home so that they can move to accept that position. Maybe they are some of the few lucky workers who are getting promotions and raises in companies that are not associated with the automotive industry. Whoever they are, and for whatever reason that now wish to sell their homes, is the market dead to them? Are there no buyers for anything else, other than foreclosed homes?

Sometimes it feels that way. I track weekly sales in my little patch of the real estate market - the Townships of Milford, Highland, White Lake, Commerce and Lyon. In that market the sales of non-foreclosed homes has recently been only about 30% of the total sales. This past week there were only 12 sales, ranging in price from$70,000 up to $453,000 and not a single sale was not distressed - 100% of the sales were foreclosures. I've seen that a couple of time before. Now keep in mind that in that market there were about 1200 homes for sale, so that means that only 1% of the houses on the market sold during the week and all of them were foreclosures. If the rest of the market - the non-foreclosure, owner-occupied homes - isn't dead, it sure is super slow. January is always slow, but a year ago there were 16 homes sold in the same markets and only half half were foreclosures.

The average time it takes to sell a normal house was already about a year or more and it is getting worse. Until we get rid of the overhang of foreclosed houses and re-instill some consumer confidence in the economy overall that trend is likely to continue. That also means that Realtors who didn't make the jump into foreclosure homes are hurting big time. Many have stopped taking normal listings, because they see them as just money pits, with lots of marketing costs and little chance for a return within a reasonable time frame. Many are leaving the business, unable to make a living off the piece of the listing side of the market that is left for them, especially with the stretched out time to sell.

And remember from a few weeks back that the buyer-side of the market has actually shifted much further that what I just reported. The Owner-Occupied aka.Traditional Retail Sales homes actually make up only 16% of the overall sales, with foreclosures, short-sales and leases now making up the bulk of all sales. So, on the buyer side of the business, agents have to be out selling foreclosures and short-sales, or doing leases, which generally take more time and result in less income.

There is a shakeout underway in the listing side of the business that may end up leaving a few large brokers/teams at one end of the spectrum and a few part-timers hanging on at the other end, with little in between. The big brokers and teams that made the jump to foreclosures are doing OK, albeit at a greatly reduced commission rate per sale, since many banks insisted on a volume-driven wholesale business model for that business. Many of the part-time hangers-on have a spouse working full time to provide the primary income, so real estate is just a supplemental income source for them.

And what about the rest of us - the "regular", full-time Realtors who somehow missed the foreclosure boat but who are still trying to make a living from this job. I'm not sure that most will survive in the business, if this mess isn't turned around soon. One can, after all, only cut back on the cost side so much. There are still bills to be paid to live, food to buy, our own mortgages to be met, kids in school and medical coverages to be considered. After a while going 2-3 months between sales and commission checks catches up to even the best cost cutters and you realize that you need to generate an income somehow. Thus the rise of what is euphemistically called the dual-career Realtor - the agent who has a part-time or full-time job doing something else to make ends meet, but who keeps an active real estate license and still tries to do real estate in the evenings and on weekends.

I'm not ready to throw in the towel on real estate, yet. I've got some good listings, albeit most are regular, owner-occupied homes; and I have a few buyer clients with whom I'm looking (ironically most of them are looking for foreclosures). I have a supportive wife at home and of course there's Little Mary Sunshine at the office. I don't see a way to break in to the foreclosure listing business and I'm not sure that I'd want to if I could. What I've got to figure out is how to make most of what I need make off listings from that little slice of the market for regular homes. As Paul Harvey might say - stay tuned for the rest of the story.