Saturday, September 29, 2007
Fed's rate reduction hasn't made a difference in real estate market
Sept. 2007
By Sue Thompson
"Have you seen any changes in the real estate market since the Feds lowered the rate?"
Everyone seems to be asking that question. I interviewed several people in the real estate industry from developers to escrow officers to get their answers to this question.
I also asked what their current challenges are in this market.
Sheryl Holben, Auburn's branch manager and escrow officer for Old Republic Title Corporation (ORTC), feels that buyers are waiting for the "great deal."
"We are in a market where very few sellers are willing to give that great deal. My biggest challenge today is receiving money from lenders. It is difficult getting loans to fund because lenders are constantly changing their lending criteria," she said.
"We have to do a better job of educating buyers. Buyers need to go back to the basics. Those basics include good credit, verifiable income and a 20 percent down payment, or be willing to pay for private mortgage insurance, PMI."
Holben said the ORTC analysts are predicting a significant change in market conditions by the end of 2008 and the beginning of 2009. The agents she works with think that it will be spring of 2008 before we start to see an upswing in transactions.
Another thing Holben has observed is that sellers are feeling very anxious about whether or not their existing escrows will really close while buyers are feeling very positive.
"It is a great time for buyers ... and me? I remain very optimistic," Holben said.
Ryan Rivera, a lender with Goldmine Mortgage, has seen the 30-year fixed rate drop to 6.25 percent with no points.
"It is phenomenal that prices and rates are down at the same time. It doesn't get any better than that," Rivera said.
"I see this time in the market as opportunity. It is especially good for the buyers. This is the time to get into low, long-term fixed rates on purchases as well as refinances.
"The more I think about it, this market offers more opportunity for everybody, even sellers. Sellers may be selling lower but they are buying lower as well. A lot of people tend to forget that. They don't like to say they sold low, but they sure are happy to say they bought low."
Steve Carpenter, developer and real estate broker, has several low-end properties on the market. He hasn't seen any changes at the entry level. He has however experienced great delight when the interest rates on his personal loans went down a half percent.
"The rate change has had an effect on my planning. It has changed the pro-formas on future projects," Carpenter said.
"I think the biggest challenge is the public's perception of the market and where it is at today. We have a great market. Interest rates are extremely low, inventory is high, so buyers have a lot to choose from, and employment is good."
Carpenter believes the prices will stay low until some of the inventory is absorbed and we get through some upcoming foreclosures.
"There is no reason buyers shouldn't be buying. I think we should see an upturn in spring of 2009. I don't see it going up as fast as it went down."
Carpenter has a lot of projects in the works right now.
"The long-range-thinking people are working around the clock to ramp up for the next peak in the market," Carpenter said.
Bud Richardson, senior consultant for ORTC, said Carpenter hit the nail right on the head.
"Carpenter is right about the market," Richardson said. "We may already be at the bottom of the market. I can't emphasize strongly enough that buyers need to get into the marketplace now. I truly believe that buyers will be paying more for properties in 2009."
Richardson thinks that the public doesn't know that 30 percent of all homes in the U.S. are owned free and clear. That's a lot of equity. The rest of the homes in the country have seven trillion dollars in mortgages on them. Only 11 percent are considered subprime. Only 10 percent of those mortgages are in trouble. The thing that makes it so scary is that though the number is relatively low, they are all in trouble at the same time!
Eric Whaley, a veteran Lyon Real Estate agent, said he received three phone calls yesterday from clients wanting to get their homes on the market. But he has seen no change in buyer activity.
"I have more people looking to sell and fewer people looking to buy," he said. "I think that the biggest market challenge is with sellers' unwillingness to price their homes competitively. Years ago the sellers would price high and wait for the market to catch up. Now we as agents need to get the message across to sellers that they need to price their homes beneath the market value and let the market meet them - not chase the market down. It is a very tough message to get across. We've seen some change, but not enough."
It sounds as though there haven't been any significant changes in the market since the Feds lowered the rate. Maybe we need more time or maybe nothing will change unless the rate goes even lower.
In any case we have no control over what the Federal Reserve Board does or doesn't do. We do however have control over how we price the homes on the market.
The market is defined by what buyers are willing to pay and what sellers are willing to take. If buyers aren't willing to pay what sellers are asking, sellers need to adjust by being more aggressive in their offering prices.
Taking advantage of today's opportunities with aggressive pricing and low interest rates is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com
By Sue Thompson
"Have you seen any changes in the real estate market since the Feds lowered the rate?"
Everyone seems to be asking that question. I interviewed several people in the real estate industry from developers to escrow officers to get their answers to this question.
I also asked what their current challenges are in this market.
Sheryl Holben, Auburn's branch manager and escrow officer for Old Republic Title Corporation (ORTC), feels that buyers are waiting for the "great deal."
"We are in a market where very few sellers are willing to give that great deal. My biggest challenge today is receiving money from lenders. It is difficult getting loans to fund because lenders are constantly changing their lending criteria," she said.
"We have to do a better job of educating buyers. Buyers need to go back to the basics. Those basics include good credit, verifiable income and a 20 percent down payment, or be willing to pay for private mortgage insurance, PMI."
Holben said the ORTC analysts are predicting a significant change in market conditions by the end of 2008 and the beginning of 2009. The agents she works with think that it will be spring of 2008 before we start to see an upswing in transactions.
Another thing Holben has observed is that sellers are feeling very anxious about whether or not their existing escrows will really close while buyers are feeling very positive.
"It is a great time for buyers ... and me? I remain very optimistic," Holben said.
Ryan Rivera, a lender with Goldmine Mortgage, has seen the 30-year fixed rate drop to 6.25 percent with no points.
"It is phenomenal that prices and rates are down at the same time. It doesn't get any better than that," Rivera said.
"I see this time in the market as opportunity. It is especially good for the buyers. This is the time to get into low, long-term fixed rates on purchases as well as refinances.
"The more I think about it, this market offers more opportunity for everybody, even sellers. Sellers may be selling lower but they are buying lower as well. A lot of people tend to forget that. They don't like to say they sold low, but they sure are happy to say they bought low."
Steve Carpenter, developer and real estate broker, has several low-end properties on the market. He hasn't seen any changes at the entry level. He has however experienced great delight when the interest rates on his personal loans went down a half percent.
"The rate change has had an effect on my planning. It has changed the pro-formas on future projects," Carpenter said.
"I think the biggest challenge is the public's perception of the market and where it is at today. We have a great market. Interest rates are extremely low, inventory is high, so buyers have a lot to choose from, and employment is good."
Carpenter believes the prices will stay low until some of the inventory is absorbed and we get through some upcoming foreclosures.
"There is no reason buyers shouldn't be buying. I think we should see an upturn in spring of 2009. I don't see it going up as fast as it went down."
Carpenter has a lot of projects in the works right now.
"The long-range-thinking people are working around the clock to ramp up for the next peak in the market," Carpenter said.
Bud Richardson, senior consultant for ORTC, said Carpenter hit the nail right on the head.
"Carpenter is right about the market," Richardson said. "We may already be at the bottom of the market. I can't emphasize strongly enough that buyers need to get into the marketplace now. I truly believe that buyers will be paying more for properties in 2009."
Richardson thinks that the public doesn't know that 30 percent of all homes in the U.S. are owned free and clear. That's a lot of equity. The rest of the homes in the country have seven trillion dollars in mortgages on them. Only 11 percent are considered subprime. Only 10 percent of those mortgages are in trouble. The thing that makes it so scary is that though the number is relatively low, they are all in trouble at the same time!
Eric Whaley, a veteran Lyon Real Estate agent, said he received three phone calls yesterday from clients wanting to get their homes on the market. But he has seen no change in buyer activity.
"I have more people looking to sell and fewer people looking to buy," he said. "I think that the biggest market challenge is with sellers' unwillingness to price their homes competitively. Years ago the sellers would price high and wait for the market to catch up. Now we as agents need to get the message across to sellers that they need to price their homes beneath the market value and let the market meet them - not chase the market down. It is a very tough message to get across. We've seen some change, but not enough."
It sounds as though there haven't been any significant changes in the market since the Feds lowered the rate. Maybe we need more time or maybe nothing will change unless the rate goes even lower.
In any case we have no control over what the Federal Reserve Board does or doesn't do. We do however have control over how we price the homes on the market.
The market is defined by what buyers are willing to pay and what sellers are willing to take. If buyers aren't willing to pay what sellers are asking, sellers need to adjust by being more aggressive in their offering prices.
Taking advantage of today's opportunities with aggressive pricing and low interest rates is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com
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