Indications are, after yesterday’s Fed rate cut, that they’re trying to make it easier to buy a home in the next few months.  Barbara Corcoran (sp?) indicated them morning on the TV that a huge amount of people are looking at adjustments  on their arms in the next year (70% as I remember) .  The next 30 -90 days should show us what direction we’re heading.  Probably will be a great time to refinance or consider a purchase.

 Highligts of his presentation:

We talked a lot about what factors got us to where we are and what changes are coming down the pipelines from Fannie Mae, HUD, and other government agencies.   A few years ago we gave loans to people with no money down, no credit scores minimums, no verification of income or assets, and people fresh out of bankruptcy – basically anyone who could “fog a mirror” bought homes.  That is all changing in the mortgage industry and it’ll be harder to get a loan.  Countrywide has started “pre approving” some of the buyers.  (good for them)

 NOW is a good time to buy.  Interest rates are in the low 6′s to 7%.  Rates are expected to creep into the high 5% range by around late spring or early summer 08.  Prices have fallen 3-5% in the metro area.  Some more, some less.  The forecast is for housing figures to pick back up around May of 08. 

 Atlanta has been “dragged down” the 3-5% in prices, this is not bad considering the Florida, California and Utah markets are down as much as 30% drops in prices.  I currently have two buyers from San Francisco, one from Las Vegas, one from NY, and one from Philadelphia who want to transfer to Atlanta, but aren’t willing to sell their homes in those other markets for the price they’ll get.   They don’t have to sell, so they’ll all wait till they can and them move.

DC said most buyers are in a mentality of it’s going to be cheaper to buy later so “I’ll wait”.

DC is expecting a turn in our market in Atlanta around May 08.

We’re experiencing 11-12 months of current supply of homes for sale based on absorption rates from current buyers.   This echos the figures in my other blogs from August figures.

Large track, new home, builders are “in touble”.  They rely on low margin high volume sales to generate profits, and the units aren’t selling fast enough.  Custom builders have higher profit margins 25% vs 9% for the large track builders and will survive the market better because they have bigger margins and can better take the “hit” on the fallin prices.

175 major lenders have gone out of business in the last year.  Georgia’s largest – Homebanc was one of them.  They couldn’t sell their paper in the market even though it was A and B paper.

Section 8 rental payments from the government have been reduced.  This is squeazing the margins on rental property owners.  Investors had it good for so long, they’re stepping back from purchases.

DC expects the Dow to be around 12,000-12,200  by end of this year.  (not sure I agree on this one)  He feels the Dow is over valued (I do agree on this statement)  I would agree it might fall back into the high 12,000 range.  One good “shock” could temporarily send it back down.

We’re in a market being driven by peoples “mentality” and until this mentality has a paradign shift, it’ll linger.  The indicators are good, but the press keeps selling the “dirty laundry” to quote the old Don Henley lyric.

Where’s the bottom of the weak market.  DC says he does not know, but feels it not far away.  I hope he’s right.  Homebanc Stock prices kept falling from $6.50 a share ( I got out at $5.50) and I watched it go to $0.22 a share before they “quit” trading it.  Some people have advocated we’re heading for a recession.  I heard “a recession is when yourneighbor is out of work, and a depression is when you’re out of work”.  

DC feels were currently dealing with “a herd mentality.”

He expects the FED to lower the (banks’s) discount rate another .25% at the end of Nov 07.  Unfortunately, the discount rate and the mortgage rates do not have a direct correlation of 1 to 1 in up and down movements.

Check back for future updates on our blog.

Scott

Excerpts of an email to a Seller Client in July 2007.

"Executive summary version below.  I'll forward a copy of

 the report from NAR via separate email with all the facts.  

(open houses only sell houses less than 1% of the time

 - worse than the 3% I remembered)  The agents,

the internet, mls listing services, and 

yard signs are The Way!

Highlights of the report

Information SOURCES buyers use to get info 

(not the reason they buy)

Exhibit 3-4

85% use an agent

80% use the internet

63% use the yard signs

55% use the news paper

47% use open houses (half use open houses, 

but it isn't the reason they buy)

34% home magazines (1/3rd use, but only 1% 

found their home in a home magazine

26% home builders (applies to new homes)

11% television

9% billboards

I interpret this as meaning that buyers use 

lots of sources, but only

certain activities actually get them to buy - see below.

Usefulness of info sources to buyers

Exhibit 3-5

73% internet

69% agent

31% yard sign

22% open house (half of the buyers use 

open houses, but half of the buyers

that attended open houses rated them as 

"not useful", and less than 1% bought a house 

from an open house - They rarely sell a house)

20% newspaper (half of the newspaper users 

also rated them as "not useful")

Internet use

Exhibit 3-6

59% frequently

21% occasionally

20% not at all  (2% of the "don't use the 

internet users found their home

on the internet", Exhibit 3-17 - interesting statistic!

Internet use trends by buyers

Exhibit 3-9

71% used it in 2003

80% used it in 2006

Actions taken by Buyers after gathering info online

Exhibit 3-10

74% drove by the house

61% walked through

23% found the agent they used to buy a home

This next section is critical!!!!

Where the Buyer found the home they purchased 

(open houses less than 1%)

Exhibit 3-11

2006 statistics

36% agent

24% internet

15% yard sign

8% friend or relative

8% builder (new homes)

5% newspaper

3% knew the seller

1% home books/magazines

less than 1% (other sources which total less than 1%)

Please note:  OPEN HOUSES sell less than 1%

100% Total % of above

1997 statistics

50% agent

2% internet

17% yard sign

9% friend or relative

3% builder (new homes)

8% newspaper

4% knew the seller

3% home books/magazines

less than 1% (other sources which total only 4%)

100% Total % of above

Buyers who found their home on the internet 

increased from 2% in 1997 to

24% in 2006 (Exhibit 3-17).  A 1200% increase.  

We started beefing up our

Internet exposure/personal web sites, and 

SEO efforts in 2001.  We spend

$1,000's of dollars and 100's of hours improving 

our sites each year.  I

just purchased the url of http://www.ga-crs.com 

yesterday and have it directed to

one of our active sites.

I'm really glad we had last night's conversation 

and I offered to analyze

our own marketing effectiveness and report to you.  

After reviewing the

NAR statistics, it let me know our marketing activities are

Super-focused on the critical components that 

gets buyers and avoids old

methods that aren't working well in today's market.  

The internet created a

paradigm shift in how people buy real estate.  

We used to print thick

"listing books" and distribute them every week 

or so.  The internet made

them useless!!!!  Caravans were never mentioned 

in the response as reasons

buyers bought a house.  It makes sense.  

They're invitations for agents,

not Real Buyers to take 2-3 hours out of their 

busy schedule to go look at

a house that they could see from their desk 

on the internet in a few

minutes.  All the top agents we know don't 

do them unless the seller

demands it.  Sometimes it's easier to "humor" 

your seller than explain

what works and what doesn't work to them.  

Old marketing habits die slowly

sometimes.  Even Flyers weren't mentioned 

as reasons people buy houses.  I

asked our Regional Owner who over sees 

the activities of 400 plus agents

at Keller Williams if he knew anyone who 

was having success in finding

buyers (using flyers) for their seller's properties.  He thought 

for a few seconds and

said he didn't know anyone. He did agree that 

people think they're "neat",

but mostly just let neighbors who aren't buying 

find out what someone is

asking for their house.  It's more about curiosity 

rather than attracting

a buyer.  The only reason I like the Flyers 

because they (sometimes) generate leads for

buyers, and Sellers still like them.  Even though 

the report shows they

don't generate sales.  Flyers are a good way 

for agents to "show off" to

other prospective seller's in the neighborhood 

and potentially get another

listing.  We belive the best way to get other 

seller to hire us is to SELL

the house!"

11.5 MONTHS (using 12 month moving average)

The last slow period was June or 03, when inventory supply in months was at a high of 8 months.

 For the guys who like simple math and formulas:

Inventory in Units (INV), and Units sold per month (SOLDS)

INV / SOLDS = MONTHS OF SUPPLY

OR

57,500 / 5000 = 11.5 months

Please don’t make me do the formulas for moving averages.  It’s too much like stuff I did in college at Ga Tech and I prefer to get into the details.  Besides I’d need to use subscripts on variables and summation (sigmas) .  YUCKY THINGS!!!!

I only care if MY CLIENTS’ homes sell. 

In Jan 97 there were around 18,000 homes on the market for sale.  Fast forward to July 2007.

There were 71,000 homes for sale.   (where’s my calculator?)

The number of homes for sale in Atlanta has increased 294 percent in 10 years.

Too many houses for sale.  Too few buyers.  Where are all they buyers (I know)

The buyers are telling your Realtor, and you, that there’s too much for sale and they “cherry-picked” a better deal around the corner.

When you house becomes the Cherry.  Yours will sell too.

Expired listings reached NEW HIGHS.  August 2007, about 7,200 homes expired (died on the vine) and were not purchased.  Too high prices and not enough buyers for the supply of homes for sale.

All months of Expireds units in 2007 exceeded 2006 months by a factor of 20% or so with the highest jumps in June, July, and August.  I hope this isn’t the beginning of a BAD TREND in increases in listings expiring.

The problems started in January 06.  Allmonths  of 2006 posted higher levels of Withdrawn (seller removed their home from the market) listings than 2001 to 2005.

THEN THE TIDE TURNED (for the worst).

IN each month of 2007, withdrawn listings were almost DOUBLE the number of withdrawn units in 2005.  ie, in August 2005 there were around 1,900 withdrawn homes for sale.  IN August 2007, this increase 100% to about 3,800 withdrawn homes.

Do you really need to sell your home?

If you don’t, I’d wait.

Are you moving up in Price range? (selling the $200m and getting a $400M)  If so, this is a good time to move up.  You’ll get less for the cheaper house, but save more by trading up.

The average sales time for homes that DO SELL is at an all time high for all of 2007.

We’re seeing that it’s taking an extra 10 days to sell a home in 2007 over the same periods for 2003 to 2006.  THIS ASUMES your home sales.   See my posting on Withdrawn listings and Expired listings.

By comparison, Homes that sold in 2000 took on aveage about 65 days to sell.

 THERE’S JUST TOO MANY HOMES FOR SALE COMPARED TO THE BUYERS IN THE MARKET.

Unit sales ahd been increasing year over year since 2000, with a few blips.  In July 06, units closed reached the July 05 levels.  Since July 06, unit sales levels have been lower than 06 levels.   In March 07, unit sales levels continued their slip and fell to 2004 volume levels.

IT GOT WORSE.

 In June 07 unit sales levels for homes Dipped below 2004 levels.

In July 07 unit sales levels Dipped to 2003 levels.

August 07 posted the worst levels of homes sold in the Atlanta market.

Only about 4,300 sold. 

This is virtually the same amount as what was sold in August 2001.

Everything was moving along nicely until September 06.  Unit sales dropped below the Sept 05 levels and started the beginning of a rocky condo market.   Since Sept 06, only in Jan and Feb 07 did units sold post gains over 06 periods.  March through July showed continuing decrease unit sales figures.  In August the Condo market posted less than 800 units sold versus almost 1,200 in August of 06.  This is a 400 unit decreas of almost a 33% in units sold.

 Ouch!

Historically Units of condo’s sold had generally been increasing year to year until 06.  The recent sales activity is just below the unit sales levels in 2004.

 Some good news.

IF your unit sold, you probably averaged 190,000 to $200,000.  Average sales price of condos has been flat in this range throughout most of 06 and 07.

 I don’t have stats on the average “asking price” of condo’s in Atlanta, but there sure are a lot of building cranes in Buckhead with expensive condo’s being built.  I hope the get absorbed.