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Archive | November, 2010

This is Good News for Housing, Not Bad News

We found it interesting to see how some media outlets reported on the latest Fannie Mae National Housing Survey. It is true that the number of people who believe that now is a good time to buy a home dipped 2% since the June report. However, the report also showed that 68% of people still believe it is a good time to buy. That is more than two out of every three people surveyed.

Yet, the headlines seemed to concentrate exclusively on the negative:

Survey: Americans Growing More Cautious on Housing – Wall Street Journal 11/24

Housing Drop: More Bad News for the Economy – Time 11/24

Is the fact that 68% of the people think now is the time to buy bad news? Shouldn’t it be great news? We elect the president of this country with barely 50% of the voters agreeing. A senate ‘supermajority’ only demands 60% to bring out a vote of cloture or to end a filibuster. Over two thirds believing now is the time to buy is fabulous news.

There were two other very revealing findings in the report:

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House Prices: The Impact of Supply and Demand

For some time now, we have attempted to shed light on the fact that pricing in today’s real estate market will be determined by the concept of ‘supply and demand’. If supply continues to increase and demand softens (or even remains constant) prices will continue to fall. Even the National Association of Realtors (NAR) has acknowledged this to be true.

The supply of inventory in the real estate industry is defined by the current months’ supply of homes that is available for sale. There are no steadfast rules that will apply to every category of housing. However, here is a great guideline by which to go:

  • 1-4 months’ supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
  • 5-6 months’ supply creates a balanced market where historically home values appreciate at a rate a little greater than inflation.
  • 7-8 months’ supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.

Where do we stand today?

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Let’s Give Thanks for All We Have!

See you on Monday!

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FSBOs Get More Money! We Don’t Think So

We hold the Kellogg School of Management at Northwestern University in very high esteem. They are without question one of the finest research institutions in America. Their work on the psychology of strategic defaulters has been mentioned in this blog on several occasions. That being said, we want to take a close look at an interesting paper they highlighted this month.

Kellogg looked at a study that took on the question of whether or not it makes financial sense to hire a real estate professional when selling your home. Some have reported that the paper shows that sellers actually sell their homes for more if they DO NOT USE AN AGENT.

What did the paper actually say?

According to the summation page for the report, the researchers found:

Our key finding is that Realtors do not offset the cost of their commission; they do not get you a higher price. Your cost for the Realtor is your full commission.

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Why You MUST NOT WAIT to Sell Your House

The best real estate professionals are trying to convince anyone thinking of selling in the near future to correct the price on their home and sell now before the home loses even further value. Some cynical homeowners think the agent is just trying to create fear in order to make a quick sale. Some sellers are waiting until after the holidays. Some sellers are waiting until the ‘spring selling season’. Today, we want to say that your agent is giving you great advice – Sell Now!

We want to prove this is the best thing for you and your family. The most complete data available is usually generated by the local and national real estate associations. We realize that this data is sometimes considered suspect by the consumer (especially the cynics). For that reason, we will make our point without using any industry data generated by these associations. Instead, we will use the government agency Fannie Mae’s November Economics and Mortgage Market Analysis Report.

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