Jan

31

Real Estate Market: Supply Vs. Demand

Filed Under Sellers | 2 Comments

One of the statistics that seems to elude most homeowners when attempting to price their home is the simple, yet important, supply vs. demand economic factor. Going back to economics 101 (and this may hurt your brain a little bit), if you can remember the simple equations that follow, you’ll have a better understanding of how the market is impacting your home’s value.

1. When Supply of a Product (your home) is low and demand (buyers) is high, home values will increase (2002 through 2005).

2. When Supply of a Product (your home) is high and demand (buyers) is low, home values will decrease (2006 through ?).

Below is a thumbnail of a graph that we’re using to show the national averages of these two important factors.
Supply Vs. Demand

Click here to enlarge this graph.

As you can see, the red line represents the months of supply that are currently on the market. Months of supply represents how long it would take to sell all the listings (on a national average) if all activity stopped today. The graph shows 11 months of supply. And the bad news for Long Island homeowners, the average is nearly 20 months (and higher in Suffolk). The blue lines represent the number of sales for each year and month.

It’s very obvious that the two are headed in opposite directions. The separation between the two is what’s causing the further decline of home values. This graph demonstrates the need for homeowners and Realtors to come together and price the product (your home) correctly. Prices right now, are too high for the demand.

There are buyers out there right now. There’s just not enough to match the amount of homes on the market. As new construction homes continue to decline, this will help homeowners (resales) because it will effect inventory (the less homes going on the market the better for everyone). Additionally, as FHA loans become increasingly available to buyers, the buyer pool, which was hurt by the expansion of sub-prime lending, will begin to level off and most likely will raise the amount of demand (more buyers able to get affordable fixed loans).

Through all of this, homeowners must continue to adjust prices in a downward trend to match the demand. It’s also up to real estate professionals like me to help homeowners price their homes correctly.

For a free comprehensive market analysis of your home’s value, please call me at 631.587.1700, ext. 51. If you are located outside of Long Island, call me and I will use the largest network of qualified professional Realtors in the Coldwell Banker database to find you the expert you need.

(c) Copyright 2007, www.tommcgiveron.com

By Tom McGiveron

Jan

29

Neighbor Foreclosure? How To Help

Filed Under Mortgage Matters, Sellers | Comments Off

In my last article entitled, Long Island Real Estate Market: How the Subprime is Impacting You, I talked a little about helping a neighbor who you suspect may be having a difficult time paying their mortgage bill. Neighbors have a way of finding these sorts of things out. However, finding out who’s having the trouble is one thing, helping them is another.

Afterall, you really just can’t walk up to their door and start talking about it. It’s a personal matter and most people would feel “funny” being that forward, not to mention that you may offend your neighbor and we don’t want to do that.

So, how do we help? First of all, using the USPS or United States Postal Service is a good start. I can remember back in grade school, mailing love letters to a girl up the block, “anonymously” of course (I blew my cover one day when I rode my bicycle up and down her block to make sure she got the jewelry box I put next to her mailbox). But seriously, mailing typed letters with resources is a good start. Another way is to actually print up pages from online resources and just send them in the mail.

Some great resources are located at www.hud.gov/foreclosure/index.cfm. Hud.gov is a fair and honest resource for homeowners. It allows the reader to feel secure and confident about their options. It’s a government resource filled with good basic information.

Another great resource is www.fha.gov/foreclosure/index.cfm. Here you will be able to print up some great information on how someone might obtain counseling from a HUD approved housing specialist.

These are just two simple ways you might be able to help someone in your neighbhorhood who is facing difficult times. As a full-time Real Estate Agent, I meet about ten people/families a month that are having one heck of a time managing all their expenses and most are in the fight of their financial lives to stay afloat. Sitting down with a real estate professional can be helpful, as long as that “professional” has their best interests in mind.

*For a free comprehensive and accurate market analysis of your home, call me at (631)587-1700, ext. 51*

(c) Copyright 2007

By Thomas McGiveron

Jan

19

Consumer Warning

Filed Under Sellers | Comments Off

So you’re considering paying $500 for a full year to be on the Multiple Listing Service? You’re actually going to pay only $500 to get on the websites that Realtors use to sell homes. Good for you. You’re going to “save” $1000’s of dollars in real estate commissions right?

WRONG!

Think about this for a second. Why do BMW’s cost four times as much as an economy car? Both get you to the same place right? Sure. But which one will get you from point A to point B faster, safer, with more fuel efficiency, not to mention with more style. More people will notice the BMW.

That’s the difference between internet companies that offer to list For Sale By Owner homes on Multiple Listing Services and full service real estate professional brokerages. When you pay a real estate broker to sell your home, you’re paying for faster, safer and more efficient service.

Now of course not every real estate broker office is built the same. Not every agent who works at the brokerage works the same, puts in the same amount of time and effort. But this article is not about those differences. This article is for the homeowner who is actually considering using an internet company to list their home for a fee on their website and have it uploaded to the multiple listing service.

Now I’m going to list just a few of the responsibilities that a full service real estate agent provides. Then we’ll compare this to the low cost internet company.

These are just the basic explanations of what I know I do when I get hired for the job of selling someone home – and it’s not even half of what goes into making a deal close. Most importantly, think about this, if professional real estate agents didn’t sell homes, the business wouldn’t exist. We sell homes, move families, and can be a great source of information.

Now the “low cost” internet company that puts your ad on their site and the local Multiple Listing Service.

That’s it.

Okay so you, the homeowner, must take over all the responsibilities above. And if you say to yourself, “well I’d rather do that then pay someone else $20,000 to do it,” that is certainly a valid point. However, statisics show that 8 in 10 (average) homeowners who try to sell their home on their own, end up listing with a real estate broker in order to actually sell their home. That’s 80%. Selling a home is not like selling a used car.

In my professional opinion, listing your home on the multiple listing service via a “low cost” internet company posing themselves as the “ultimate alternative to big real estate commissions” is a waste of time and huge amounts of money. How? In this market – if you list your house with one of these “low cost” internet companies and then you don’t sell it for 6 months to a year, you’ve already lost about 12% equity in your home and over the course of the next year (2008), you’re going to lose another 12% to 20%.

I’m not smiling. I’m a homeowner myself. So you’re not necessarily spending just $500 to get your house on MLS or on some silly For Sale By Owner website, you’re actually losing 10′s of 1000′s of dollars in selling margins as the value of your home drops out from under you. So these online “low cost” websites are not “low cost” at all. They’re costing you thousands of dollars!

The next thing many sellers will do after they’ve tried these “low cost” internet companies out for a while is, list with a “low cost” or “1.5% commission” real estate brokerage. Sigh….

That’s another article. Bottom line, remember the old saying, “You get what you pay for.”

WARNING: Beware of the “low cost” internet company posing as a viable alternative to full service real estate brokerage services. The Coldwell Banker business has been around for over 100 years. We must be doing something right!

For a Comprehensive Market Analysis of your home’s value, please call me at (631)587-1700, ext. 51. If you live in another state and have just read this article and want to get in touch with a qualified real estate professional in your area, please call me as well – Coldwell Banker has the larget referral network of qualified and reputable real estate brokerages in the world!

(c) Copyright 2008

By Tom McGiveron

Jan

10

Long Island Real Estate Market: How The Subprime Is Impacting You

Filed Under Sellers, Sellers & Buyers | 1 Comment

On Long Island, it doesn’t take a brain surgeon to figure out that the prices of homes are really high. In comparison to the national average of single family homes, the average asking price for a home on Long Island is basically double the national average. As of October, 2007, the average home price nationwide was about $205,000 or so. In order for a bank to finance a residential home purchase here on Long Island, they’ve got to lay out quite a bit of money.

When a bank lends money, it takes time to get that money back. If a bank sets aside $100,000,000 to lend on real estate mortgages, on Long Island, that’s 250 homes (at an average of $400,000 per loan). Liquid assets of any banking institution is a vital aspect which keeps any financial institution on its feet.

With an estimated 1.8 million subprime mortgages scheduled to reset to higher interest rates during the next 2 years, these same financial institutions that have lent out all this money, will be scrambling to get paid. Many people are focusing on only one aspect of this credit crisis.

The issue that is most talked about is how many mortgage companies have closed down – Over 200 mortgage companies have closed within the last year or so, to give you an idea. This has been counteracted by the banking industry tightening their lending practices. This “tightening” has impacted the buyer pool because banks/lenders have made the process of getting a mortgage more challenging.

However, this is only a part of how the subprime market is impacting homeowners, especially on Long Island. First, if ONE foreclosure occurs in any respective neighborhood, this impacts values of surrounding homes. The more foreclosures that pop up, vacant houses or PUBLIC NOTICE signs calling for an auction of a property, the home values will decline sharply. The average loss of market value from a foreclosure in your neighborhood could cause your home value to drop anywhere from 5% to 20%. They don’t look good, especially when they get boarded up. Buyers see a run-down house close to yours and they drive right by.

Secondly, lack of money is a major issue. Without investors, lenders do not have the capital to close as many loans. In addition to this, with a fluxuating real estate market, lenders may choose not to fund purchase prices. Remember all appraisals are “estimated”. And with prices dropping, a lender may not want to lend $400,000 on a property that will be worth $350,000 8 months from now.

Treasury Secretary Henry Paulson has pointed out the current market correction was inevitable, “After years of unsustainable price appreciation and lax lending practices, a housing correction is inevitable and necessary.”

I don’t know about you, but as a homeowner, when I hear the term, “market correction”, I get a little weary. The important thing to do is know how this will impact you. If you’re sitting there saying, “Well I don’t have one of these crazy loans, so this doesn’t hurt me,” you’re not fully understanding what is happening. Each foreclosed home that’s around your own sells for about 25% less than the actual property value.

Foreclosures are increasing throughout the country. Just open the paper and look in the Legal Notice section and you’ll see lists of auction dates on properties set for foreclosure. Of course this doesn’t include what happens before this, with the property usually falling into disrepair and eventually being vacant.

So what do we do? The mere fact that you’re paying attention is a good thing. I’m not saying to panic. If you’re thinking of selling, consider using a Realtor who can price your home correctly and market it effectively. Prices have dropped so find where you’re homes value will sell at and you will find that it will sell rather quickly while still putting money in your pocket. If you’re not selling, then don’t worry about all this so much. If foreclosures are creeping up in your neighbhorhood, get involved.

The time to be neighbors again, rather than strangers is now. Society has changed over the last three decades. Years ago, towns were different. Neighbors actually knew each other. It’s time for people to come out of their homes and say hello to the people that live around them. Now many people don’t want everyone to know their business. That’s understandable. So don’t go prying into other peoples business. Just be a good neighbor. If you suspect that a neighbor is having trouble, get some information together for them and drop it on their door step, anonymously.

With every “crisis” comes opportunity. There are many attorneys that specialize in real estate. Homeowners having difficulty with their mortgage payments should contact a good real estate attorney. If you know one, discretely broker a meeting between your neighbor and the attorney. There are also new businesses that focus on actually helping homeowners negotiate with lenders to avoid foreclosure. There are a number of steps for any homeowner to follow in order to avoid foreclosure. Get this information to your neighbor. Get involved, just use discretion.

It’s time to wake up and realize there’s more to the world than just the little space we call home. Our homes are a part of a community and right now, perhaps your community needs you! I’ll be the first to say that family and close friends are the first to be tended to, but if their needs are being met, look around and see who else may need some help. Loaning money is not the answer (so don’t do it…like we have it to lend given the taxes and oil prices we’re paying). Information and a helping hand may do the trick and if it doesn’t, you personally will have at least tried to help someone else and this is, in my opinion, what we’re all here to do anyway.

By Tom McGiveron

(c) 2008 tommcgiveron.com