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Thursday, December 20, 2007
Sunday, September 16, 2007
Real Estate is changing
Much has been written about the changes coming to the real estate industry as a result of the slowing market. But aside from the possibilities of a handful fewer brokerages, what you’ll see at the end of this lull likely will look quite a bit like what you saw at the beginning.
Maybe it shouldn’t be that way. But that’s the way things seem to turn out.
This is the time when there should be a premium on training, but many of the brokerages who will look most attractive to new agents (read: higher splits of the commission) offer limited training. Here’s a hint … if your broker doesn’t offer a class where you go through the contract line by line, find one who does. The contract is your lifeblood and that of your clients, and if you don’t know it you and they are better off with you not being in business.
This is the time when there should be a premium on mentoring, but most of the mentoring programs are financially weighted heavily in favor of the brokers, chasing many agents off to seemingly greener pastures.
This is the time when pricing should be the key consideration for sellers. But the influx of new agents blinded by dollar signs and oblivious to the market realities means sellers always will be able to find an agent for their listing regardless of the price.
This is the time when many observers believe technology and the Internet will put enough pressure on real estate commissions to drive down what agents charge, whatever amount that may be. But the reality is commissions likely will rise as only a smaller segment of the agent population proves able to successfully sell a home. The idea of disintermediation loses some of its sway in a slower market, where it’s not enough to plant a sign in your front yard and wait for the buyers to come.
When there were more transactions taking place, formal training often could give way (to some degree, at least) to on-the-job learning. But it’s all but impossible to gain the needed skills and maintain those skills with one transaction every few months. And experience has shown few agents make the effort to extend themselves and stay current on changes in the market.
There’s a fanciful notion that the slower market will clear out all the marginal agents - those with little ability, little motivative, little knowledge, etc. And true, many agents who entered the market in 2004 now are seeking full-time employment elsewhere (assuming they didn’t get their license to practice real estate part-time on the side.)
But the ranks keep refilling like sharks’ teeth … another row of brand new agents stands ready to start writing checks as those in front of them fall out of the industry. The supply of those ready to make their fortunes as real estate agents is nearly endless.
If anything changes, it will be a return to the historic failure rates of new agents. It’s often said 90% of new agents never make it through their first year. That figure dropped back in 2005 when even Tobey could have sold a house without my assistance, assuming he had passed the licensing exams.
These days, however, many who enter soon will realize they likely shouldn’t have done so.
Maybe it shouldn’t be that way. But that’s the way things seem to turn out.
This is the time when there should be a premium on training, but many of the brokerages who will look most attractive to new agents (read: higher splits of the commission) offer limited training. Here’s a hint … if your broker doesn’t offer a class where you go through the contract line by line, find one who does. The contract is your lifeblood and that of your clients, and if you don’t know it you and they are better off with you not being in business.
This is the time when there should be a premium on mentoring, but most of the mentoring programs are financially weighted heavily in favor of the brokers, chasing many agents off to seemingly greener pastures.
This is the time when pricing should be the key consideration for sellers. But the influx of new agents blinded by dollar signs and oblivious to the market realities means sellers always will be able to find an agent for their listing regardless of the price.
This is the time when many observers believe technology and the Internet will put enough pressure on real estate commissions to drive down what agents charge, whatever amount that may be. But the reality is commissions likely will rise as only a smaller segment of the agent population proves able to successfully sell a home. The idea of disintermediation loses some of its sway in a slower market, where it’s not enough to plant a sign in your front yard and wait for the buyers to come.
When there were more transactions taking place, formal training often could give way (to some degree, at least) to on-the-job learning. But it’s all but impossible to gain the needed skills and maintain those skills with one transaction every few months. And experience has shown few agents make the effort to extend themselves and stay current on changes in the market.
There’s a fanciful notion that the slower market will clear out all the marginal agents - those with little ability, little motivative, little knowledge, etc. And true, many agents who entered the market in 2004 now are seeking full-time employment elsewhere (assuming they didn’t get their license to practice real estate part-time on the side.)
But the ranks keep refilling like sharks’ teeth … another row of brand new agents stands ready to start writing checks as those in front of them fall out of the industry. The supply of those ready to make their fortunes as real estate agents is nearly endless.
If anything changes, it will be a return to the historic failure rates of new agents. It’s often said 90% of new agents never make it through their first year. That figure dropped back in 2005 when even Tobey could have sold a house without my assistance, assuming he had passed the licensing exams.
These days, however, many who enter soon will realize they likely shouldn’t have done so.
Friday, August 10, 2007
Mortgage meltdown contagion
Mortgage meltdown contagion
A grim forecast has economists more pessimistic over how far the collapse will spread to the rest of the economy.
By Les Christie, CNNMoney.com staff writer
August 10 2007: 1:52 PM EDT
NEW YORK (CNNMoney.com) -- The outlook for the housing market looks even bleaker than it did a week ago. Last Friday we reported that foreclosures were skyrocketing, home prices falling and recovery forecasts were being scaled back.
And now this week, the mortgage meltdown spread to the financial markets with ebola-like speed, sparking fears that tighter credit will have a broader impact on consumers, markets and the economy.
The U.S. government continues to downplay the danger. When the Federal Reserve met this week, the central bank said that inflation is the greatest threat to the economy, not the mortgage crisis.
Yet, Countrywide Financial, the nation's largest mortgage lender by volume, reported Thursday that "unprecedented disruptions" in the mortgage market were forcing it to cut way back on the number of loans it was securitizing and selling in the secondary markets.
In the financial markets, credit, including corporate bonds, has become harder to get. Mark Zandi, chief economist of Moody's Economy.com, had been loath to call it a "credit crunch." Instead, he called it a "liquidity squeeze," that had spread to corporate bond and other financial markets. The difference: In a crunch, nobody can get a loan; in a squeeze, only the riskier borrowers are cut out.
"I think it's still a liquidity squeeze," Zandi now says, "but it has elements of a credit crunch, affecting much of the mortgage market."
It has yet to severely disrupt the prime loan market, however, according to Zandi. The situation will continue until financial institutions revalue their mortgage-backed securities to what they're actually worth.
"They're faced with redemptions and margin calls, and they have to value their securities to their market prices because they have to sell them," said Zandi. That will determine how hard a hit the investment community will take.
Peter Schiff, president of Euro Pacific Capital Inc. and author of "Crash Proof: How to Profit from the Coming Economic Collapse," has said the problem goes way beyond subprime.
"It's a mortgage problem," he said. "Subprime is like a little leak where the underlying problem is the integrity of the dam itself. Most of the mortgages taken out during the past few years will fail."
Schiff expects huge losses in the housing market with home prices falling by half in some areas, which he said has to affect the overall economy. He said he'd been expecting the financial markets to start taking hits long before this week's drop.
"This week is making more sense," he said. "The economy is a basket case."
Most economists are nowhere near as pessimistic. Standard and Poor's chief economist, David Wyss, and Moody's Economy.com's chief economist, Mark Zandi, have forecast 8 percent price drops in the housing market, peak to trough.
Zandi does not believe a consumer spending slowdown is enough to trigger a recession, but he hasn't counted it out. What it will do, he said, is "ensure that the economy grows at a pace below its potential. I wouldn't dismiss the possibility of a recession. I put the possibility at one in five."
Ken Goldstein, an economist for the Conference Board, has said he doesn't believe the subprime contagion is enough to send the economy off-track, and that "the idea that average consumers are quaking over the prospects of losing their homes or much of their equity is wrong."
Your Home: When to cash out
The mortgage market adds up to about $10 trillion, according to Goldstein, with about 10 percent to 15 percent of that in subprime. Of that, some 15 percent or so is imperiled, he said.
"It's big, but not the tipping point that will bring the whole housing market down."
But on Friday Goldstein did concede that "The panic and concern over credit is even spreading across the pond to European markets."
On Friday the European Central Bank (ECB) pumped extra cash into the system for a second day in a row, as a means of calming nervous traders. The ECB added $83 billion in liquidity Friday.
The Federal Reserve followed suit, adding $19 billion in temporary reserves. The move was the biggest single temporary open market operation in four years, the New York Federal Reserve said, according to Reuters.
Subprime problems have not, so far, slowed consumption down much. The pace of consumer spending is still brisk, although growth slowed in June. And the Conference Board reported last week that consumer confidence is at a six-year high. Steady job growth and low unemployment (between 4.4 percent and 4.6 percent since September) have kept it that way.
Consumers don't really care much about changes in housing prices or, for that matter, in the stock market, according to Goldstein.
"If you really want to screw up consumer confidence," he said, "go for the jugular - the labor market."
Schiff, however, said, "What [the optimists] don't realize is that consumer spending has been a function of easy credit and the high housing market. The idea that Americans will keep spending is wrong. With [lower home equity and less access to credit] where're they going to get the money?"
According to Goldstein, though, as long as employment stays strong and workers' earnings grow substantially (4 percent annually, according to him), confidence - and spending - will remain high and the economy will chug along.
"Consumers can continue to stay resilient in the face of lower stock and home prices," he said. "Not only is the economy strong enough to survive the crisis, it's strong enough to quiet it."
A grim forecast has economists more pessimistic over how far the collapse will spread to the rest of the economy.
By Les Christie, CNNMoney.com staff writer
August 10 2007: 1:52 PM EDT
NEW YORK (CNNMoney.com) -- The outlook for the housing market looks even bleaker than it did a week ago. Last Friday we reported that foreclosures were skyrocketing, home prices falling and recovery forecasts were being scaled back.
And now this week, the mortgage meltdown spread to the financial markets with ebola-like speed, sparking fears that tighter credit will have a broader impact on consumers, markets and the economy.
The U.S. government continues to downplay the danger. When the Federal Reserve met this week, the central bank said that inflation is the greatest threat to the economy, not the mortgage crisis.
Yet, Countrywide Financial, the nation's largest mortgage lender by volume, reported Thursday that "unprecedented disruptions" in the mortgage market were forcing it to cut way back on the number of loans it was securitizing and selling in the secondary markets.
In the financial markets, credit, including corporate bonds, has become harder to get. Mark Zandi, chief economist of Moody's Economy.com, had been loath to call it a "credit crunch." Instead, he called it a "liquidity squeeze," that had spread to corporate bond and other financial markets. The difference: In a crunch, nobody can get a loan; in a squeeze, only the riskier borrowers are cut out.
"I think it's still a liquidity squeeze," Zandi now says, "but it has elements of a credit crunch, affecting much of the mortgage market."
It has yet to severely disrupt the prime loan market, however, according to Zandi. The situation will continue until financial institutions revalue their mortgage-backed securities to what they're actually worth.
"They're faced with redemptions and margin calls, and they have to value their securities to their market prices because they have to sell them," said Zandi. That will determine how hard a hit the investment community will take.
Peter Schiff, president of Euro Pacific Capital Inc. and author of "Crash Proof: How to Profit from the Coming Economic Collapse," has said the problem goes way beyond subprime.
"It's a mortgage problem," he said. "Subprime is like a little leak where the underlying problem is the integrity of the dam itself. Most of the mortgages taken out during the past few years will fail."
Schiff expects huge losses in the housing market with home prices falling by half in some areas, which he said has to affect the overall economy. He said he'd been expecting the financial markets to start taking hits long before this week's drop.
"This week is making more sense," he said. "The economy is a basket case."
Most economists are nowhere near as pessimistic. Standard and Poor's chief economist, David Wyss, and Moody's Economy.com's chief economist, Mark Zandi, have forecast 8 percent price drops in the housing market, peak to trough.
Zandi does not believe a consumer spending slowdown is enough to trigger a recession, but he hasn't counted it out. What it will do, he said, is "ensure that the economy grows at a pace below its potential. I wouldn't dismiss the possibility of a recession. I put the possibility at one in five."
Ken Goldstein, an economist for the Conference Board, has said he doesn't believe the subprime contagion is enough to send the economy off-track, and that "the idea that average consumers are quaking over the prospects of losing their homes or much of their equity is wrong."
Your Home: When to cash out
The mortgage market adds up to about $10 trillion, according to Goldstein, with about 10 percent to 15 percent of that in subprime. Of that, some 15 percent or so is imperiled, he said.
"It's big, but not the tipping point that will bring the whole housing market down."
But on Friday Goldstein did concede that "The panic and concern over credit is even spreading across the pond to European markets."
On Friday the European Central Bank (ECB) pumped extra cash into the system for a second day in a row, as a means of calming nervous traders. The ECB added $83 billion in liquidity Friday.
The Federal Reserve followed suit, adding $19 billion in temporary reserves. The move was the biggest single temporary open market operation in four years, the New York Federal Reserve said, according to Reuters.
Subprime problems have not, so far, slowed consumption down much. The pace of consumer spending is still brisk, although growth slowed in June. And the Conference Board reported last week that consumer confidence is at a six-year high. Steady job growth and low unemployment (between 4.4 percent and 4.6 percent since September) have kept it that way.
Consumers don't really care much about changes in housing prices or, for that matter, in the stock market, according to Goldstein.
"If you really want to screw up consumer confidence," he said, "go for the jugular - the labor market."
Schiff, however, said, "What [the optimists] don't realize is that consumer spending has been a function of easy credit and the high housing market. The idea that Americans will keep spending is wrong. With [lower home equity and less access to credit] where're they going to get the money?"
According to Goldstein, though, as long as employment stays strong and workers' earnings grow substantially (4 percent annually, according to him), confidence - and spending - will remain high and the economy will chug along.
"Consumers can continue to stay resilient in the face of lower stock and home prices," he said. "Not only is the economy strong enough to survive the crisis, it's strong enough to quiet it."
Wednesday, June 27, 2007
Buy and hold in current market?
lot of people these days are preaching about the buying and holding method of gaining wealth with real estate. There indeed may come a time in your life or business when youll want to hang on to a piece of property, although youll only be interested in keeping certain types of property. If youre just starting out, flipping a house may be an ideal way to get started.
Basically, there are three ways that you can flip a house, although each one has its own terms, motivation, and type of property. The first method is known as retailing. What this means, is that you buy a house in bad shape, do the repairs to fix it up, then turn around and sell it. There are a variety of houses in need of repairs out there, and several ways that you can quickly flip a house to net profit. All you need to know are the techniques that will get you the most money in the least amount of time.
The second way you can flip a house is though wholesaling. Wholesaling involves finding a home for sale then flipping it to an investor for a fast, yet small profit. To do this, youll need to know the real estate investors in your area, the types of homes that flip the best, and how to fund your property so you can flip it to them. If you live in a big area or a city, youll find that using the wholesaling method of flipping houses is actually easier to accomplish.
The third way to flip a house is by assigning the purchase. Using this method, youll commit to buy the house. Instead of closing the deal yourself, youll assign it to a real estate investor - of course for a small fee. The investor will take the contract over and close the purchase themselves - flipping the house. This can be very profitable, especially if you invest in the right home. You dont need to have your contract worded any special way to be legal, although you will need to determine the assignment fee.
If youre looking to break into the real estate market and make big bucks, youll need to learn all about flipping houses. Flipping houses is very profitable, especially once you have learned the basics. The first and third methods are the best, although they will both take quite a bit of work on your part. Restoring homes isnt easy, and youll need to have a team qualified to handle any repairs. Assigning the purchase may be difficult when you first start out, although it will get easier with time. If you stay at it and do your best to make a profit - youll be an expert at flipping homes in no time at all.
Basically, there are three ways that you can flip a house, although each one has its own terms, motivation, and type of property. The first method is known as retailing. What this means, is that you buy a house in bad shape, do the repairs to fix it up, then turn around and sell it. There are a variety of houses in need of repairs out there, and several ways that you can quickly flip a house to net profit. All you need to know are the techniques that will get you the most money in the least amount of time.
The second way you can flip a house is though wholesaling. Wholesaling involves finding a home for sale then flipping it to an investor for a fast, yet small profit. To do this, youll need to know the real estate investors in your area, the types of homes that flip the best, and how to fund your property so you can flip it to them. If you live in a big area or a city, youll find that using the wholesaling method of flipping houses is actually easier to accomplish.
The third way to flip a house is by assigning the purchase. Using this method, youll commit to buy the house. Instead of closing the deal yourself, youll assign it to a real estate investor - of course for a small fee. The investor will take the contract over and close the purchase themselves - flipping the house. This can be very profitable, especially if you invest in the right home. You dont need to have your contract worded any special way to be legal, although you will need to determine the assignment fee.
If youre looking to break into the real estate market and make big bucks, youll need to learn all about flipping houses. Flipping houses is very profitable, especially once you have learned the basics. The first and third methods are the best, although they will both take quite a bit of work on your part. Restoring homes isnt easy, and youll need to have a team qualified to handle any repairs. Assigning the purchase may be difficult when you first start out, although it will get easier with time. If you stay at it and do your best to make a profit - youll be an expert at flipping homes in no time at all.
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