Snowball Effect Continues To Negatively Affect The Housing Market
We might be in for a bumpier ride than previously thought. I believe in optimism – but I am a realist, first. As I look closer at the stats, talk to other brokers and agents, and peruse the news and blogs – it’s getting downright scary.
Last week here in Atlanta, Century 21 Dwellings closed five of its six offices. Dwellings President Chris Ballard said, “It was a financial decision. I was losing money at every location.” With red ink flowing at the rate of $75K a month – you can appreciate his decision.
I recently discovered that a few of Atlanta’s top agents were getting killed, as well. Agents that had done hundreds of sales per year no longer able to hit a hundred sales in the last 12 months.
Speaking with a few builders has been interesting, too. My first inclination is that the availability of labor must be plentiful and cheap – but that’s not necessarily the case. Many of the illegal aliens have returned to Mexico. One Mexican contractor – with six trucks – now only has one in service at any given time… and even that one isn’t always in service.
The dirty little secret is that many of these illegal aliens were able to purchase homes – but with no work, they are simply leaving the house behind as they go back to Mexico. It’s not like they are out a lot of money, either. Many of them were financed with “no money down” mortgage products, including option ARM’s.
Atlanta has seen an average of 3000+ foreclosures per month for several years now – but last month we had just under 7000 foreclosures… and the storm is still coming.
Foreclosures are the lion’s share of the Atlanta resale residential market right now, and with the onslaught that is coming – that fact won’t be changing anytime soon in this writer’s mind.
So I am into the bunker mentality right now. I haven’t taken on any clients that I am not convinced that I have a better than 50-50 chance of earning my fee – and I am assisting fewer agents in their marketing under a split-commission scenario. It’s just not worth it. I am also looking at other investments to keep me afloat in this current sea of real estate misery.
I have seen the light, my friends. And it’s not the end of the tunnel.
Brian Brady says:
“I haven’t taken on any clients that I am not convinced that I have a better than 50-50 chance of earning my fee”
I completely understand; I had to do the same last October after “counseling” everyone who was stuck in a bad loan. It sucks because I enjoy trying to help but, unfortunately, the electric bill has to be paid
February 18, 2008 — 1:25 pm
Mark Madsen says:
I’ll feel your pain as well. Try starting and self funding an online social network for RE Pros, while still trying to make a living as a loan officer. I guess we could always sell out to a lead gen company. LOL, just kidding, it won’t happen.
Doug, if that light you are talking about is actually a train, my wife will be pissed.
February 18, 2008 — 2:06 pm
Greg Tracy says:
Important to note:
You are speaking of a specific location and market. Each market is different from the next.
February 18, 2008 — 3:47 pm
Benn says:
@Greg & Doug
What I appreciate most is that Doug was specific. I want to read specifics when it comes to market conditions- More of this is certainly needed. Class act.
I can also appreciate what your plans are for the moment into the future- although I can see it around the country, I can feel exactly what you’re trying to convey.
February 18, 2008 — 4:12 pm
Robert Kerr says:
I haven’t taken on any clients that I am not convinced that I have a better than 50-50 chance of earning my fee
Two close friends are agents in the northeast and about 12 mos ago they both, independently of each other, began limiting their listings only to those houses priced to move immediately.
Focusing and limiting their resources has been effective for them. In fact, they’ve become the niche players in their respective areas, known for turning fast sales.
Good luck. I hope it works out for you, too.
February 18, 2008 — 5:31 pm
Tim Theiss says:
Real estate IS market specific and in Metro Phoenix, the market is down to the subdivision level. Some neighborhoods are holding while most are showing a valuation decrease of over 12%, and a few have lost more than 30%.
The real problem as I see it, is supply exceeding demand fueled by foreclosures. With only 3500 homes getting sold per month lately, and 40% of those homes are REOs or short sales which drive the values down, which leads to more foreclosures, which fuels the supply, and so it goes.
Now, add to that on-coming train the fact that appraisers are marking the box on their appraisal that indicates “Declining Market” and the buying public has to dig another 5% out of their pocket just to qualify, which reduces demand which puts pressure on price reduction and so it goes.
As a young cowboy in Texas I thought riding broncs in the rodeo would have no value to my future self – but learning how to hang on during a wild ride is currently a good skill to have.
February 19, 2008 — 9:06 am
Matt Scoggins says:
Great post, Doug. While I agree that the market in Metro Atlanta is down, especially if your focus is on listings, those that have focused on buyers are doing quite well. At least the ones I know…
February 19, 2008 — 10:16 am
Matt Scoggins says:
Also, that’s the first I’ve heard about C21 Dwellings closing five of their offices. Definitely not a good sign!
February 19, 2008 — 10:20 am
Dave Shafer says:
Your analysis mimics mine. Here in the Tampa/St. Pete area we are in the second year of a vicious down market. Foreclosures, short sells, great homes languishing on the market for over a year even though the pricing has dropped 20%! What’s a mortgage planner to do?
Even the January rate swoon only produced a couple of loans because of increased credit standards and decreasing equity. I can’t tell you how many people I have talked to over the last 6 months asking for help that had to be told there is nothing I can do for you.
My solution, bunker down, start a new business “www.shaferwealthacademy.com” and start fund raising for a New England Land Developer I invest with. So far, it looks promising but that doesn’t solve an immediate cash flow crisis. Well at least I have acquired enough wealth to outlast it!
Good Luck
February 19, 2008 — 12:32 pm
Spencer Barron says:
I love the honesty of this post. Denver’s not that different. I try to be an optimist but find that reality hits you in the face everyday. You just can’t ignore the facts.
I am moving on to my contingency plans at least as far as personal marketing goes. Maybe I’ll be revisiting Jeff Brown’s post. 🙂 I guess you could call it ‘bunker’ mode. It’s a no brainer. If the bottom end market can’t buy homes, there are no ‘move up’ buyers. At that point, it’s just a matter of time until the market stagnates.
I’m hoping to dodge the train as it passes. I don’t know if that’s true optimism but planning for success can’t hurt.
February 19, 2008 — 7:22 pm
Mark Hendriks says:
As a fellow Atlanta real estate agent, I can attest that this market is going through some sserious pain. In the metro region I had a listing appointment on the 21st, with owners who bought in a subdivision 2 years ago and wanted me to list their house. I couldn’t take the listing because, in their subdivision the builder still has inventory and he is selling an identical model for $20k less than what my propects payed in 2006 and offering a high co-op commission
February 23, 2008 — 2:48 pm