Where Do We Go From Here???

March 11, 2008

Last week I attended two insightful meetings. One was put on by the Home Builders Association of Central Arizona (HBACA) and the other was put on by Fannie Mae.

Both of these groups said two things need to happen, we need to re-establish confidence in the market and in doing so, banks need to loosen guidelines. Let examine the first statement about confidence. As Real Estate Professionals need to be out there preaching the "good word" of the Real Estate market. I know I am preaching to the choir, but they said in order for the market to even BEGIN to make a comeback, we re-establish confidence in buyers to come out and buy. We need to be stressing that Interest rates are STILL LOW and home prices have fallen significantly! Until we get these messages out to the public, we aren't going to make a significance impact on the inventory we have on hand. Due to this excess inventory, sellers and builders alike are going to continue to cut prices until their homes start selling. However, they forewarned of the potential hazards of doing this. As builders cut prices, that may have a short term affect (3-5mos) in moving homes, the market will adjust to these lower prices and thus cause the market to contract further, the same goes with resale "fire sales."

In the Fannie Mae meeting, they echoed what the HBACA said in that until the banks have assurance that there is confidence in the market, big banks are going to continue to tighten the lending guidelines. I once heard Wayne Stutzer from RBC Dain Raucher state, what is happening with the banks and the Fed "is equivalent to driving a "stick shift" car going 60mph, then putting it into first gear. The car over revs and the wheels lock up." As a result, home sales "lock up" and since buyers complaining they can't qualify, "the engine roars." If you add to the mix, the rapid increase of foreclosures, banks seem to have painted themselves into a corner. For instance, in the month of January alone, there were over 5,300 Notices of Pending Foreclosures filed in Maricopa County! With this staggering number of foreclosures, NOW is a perfect time for people to be buying homes. If ever there was a "buyer's market" this is it! One thing that was constantly being repeated was that we need to "get back to basics" and to transition away from risky, aggressive loan programs. "Back to basics," includes doing more Full Doc, Fannie/Freddy/Gov't Loans. With the addition of the High LTV/Lender Paid MI programs like "My Community" programs plus an increase in FHA limits, we can now help buyers get into the home they REALLY want and better yet...can afford!

Here are some recommendations that were given:

SELLERS:

Know who the target market of your buyers and plan on selling below "fair market value." We need to stress to sellers, that if they want to sell their home they need to be realistic in price. As Real Estate professionals, we are cautioned not to cut prices too low that will have negative impact on market.

BUYERS:

Buyers, be a local player or at least partner up with someone who is local. Locals know the areas and how they can differentiate one block from the next and where area of growth are heading. With this in mind, I have seen a HUGE influx of Canadian investors! But be cautious, many banks have since gotten rid of their Non-Resident Alien programs, so this may be difficult to get them financing. I work with 3 banks that can still get these loans done.

THE REST OF US:

Keep head down and forge forward! Now is the time to be working "ON" our business, building vital relationships for when the market does return.

Keep costs down. With the uncertainty of business, now is the time to keep our expenses low and making sure we are getting the most out of our dollar.

Increase versatility. For those "cave dwellers" who have been order takers for the past few years, we need to get out of our comfort zones and be out meeting new people and being open to NEW business opportunities.

Know competition. See what others are doing. See what is working and what isn't. Success always leaves clues!

Network...Network...Network!!!

Lastly, get paid for your work! Make sure the things you are doing are making you money to cover your expenses. We need to make sure we don't fall victim to overloading ourselves in low paying, "busy" work.

Continued Success and Significance!