What I Learned in Class: Part I

The purpose of the class I attended last week was to help agents price their client's listings according to the market they are in using classic economic supply and demand logic. When inventory trends downward, consumers push prices up. Which means the opposite is true or when inventory trends up, consumers push prices down. Eric Celeste over at Frontburner blogged this earlier today by way of the DMN and Steve Brown which is a prime example of real estate "experts" not giving the full picture. Here are a couple graphs taken from Trendgraphix using NTREIS statistics from all North Texas areas to form charts and graphs so people like me can look at pretty pictures and learn at the same time.






So what market are we in here in North Texas? According to these graphs the number of home sales is down from the previous year (6,583 in 11/06 to 5,157 in 11/07) but sales prices are up from $184K in November '06 to $204K in November '07. That is approximately a 10% rate of appreciation. Not too bad. But how can inventory be up AND prices rise? Hmmmm. So what does this mean and where are we headed? How do we interpret the fact that less homes are selling than the previous year, inventory is rising slightly yet home values are increasing?

No, we're not defying the laws of economics. I believe we are at a tipping point of sorts. The laws of economics do apply to our market but we don't fluctuate as much as other states including the outlandish California and Flordia real estate markets. With that said, inventory will continue to increase and prices may drop in certain areas due to overbuilding, short sales, foreclosures in the subprime market, etc. But I believe we will simply see a flattening market meaning prices won't go up, but they won't go down either. Inventory will not reach astronomical levels like the 29 months worth of inventory in some California cities.

In closing, these numbers are for ALL OF NORTH TEXAS AND NOT YOUR NEIGHBORHOOD! Many areas in North Texas will see price appreciation and will always see price appreciation no matter what regional statistics say. So talk with a local Realtor who knows your neighborhood before you start spreading doom and gloom to your friends.

Real Estate Stats You Need to Know

Recently, the President of my company, Sue Meyer, wrote a letter to the Dallas Morning News and the Star Telegram encouraging them to write more positive articles about our local real estate market. In this letter she uses statistics that some people will find startling. As you all know, I have been a consistent advocate for our local real estate market trying to make sure people understand Dallas/Ft. Worth is doing fine amidst all of the doom and gloom real estate markets around the country. “Real estate is local” has been my mantra for many months. What is happening in Florida has no effect on your home’s sales price. The only effect these stories have had is only on our psyche. So now it’s time to put my money where my mouth is, so to speak, and show you those statistics Sue Meyer showed all 1,300 agents with Coldwell Banker Dallas/Ft. Worth.

2006 was the best year for real estate sales ever in the North Texas region with a sales volume of $18.2 billion dollars. If North Texas sales continue at their current pace (5% appreciation overall), even with the slight dip in sales numbers we have seen recently, we are still going to have the second best year for real estate sales ever! These are very impressive statistics but I have yet to see any of our local newspapers put these numbers in writing and into perspective. It is true our sales have declined. But is that really a bad thing when compared to the best year in the history of real estate? I don’t think so.

So now that you are adequately armed with knowledge, go tell your friends and family. The more people think our real estate market is doing poorly, it is only a matter of time before we make that a reality. We are our own worst enemy. So the next time someone tells you real estate in North Texas is headed South, quote these numbers taken straight for the North Texas Real Estate Information System. Not only will they be impressed, your local real estate market will thank you.

Dallas Thinks; Therefore It Is

I admittedly don’t keep track of mortgage rates regularly. (I let my client’s lenders handle that part of the transaction) But while having lunch with a lender friend yesterday he said he is closing deals at interest rates under 6%! Yet people still want to perpetuate what a terrible real estate market we are in? It is getting more and more frustrating to repeat the same information to my clients here in Dallas trying to educate them about the real estate market. I guess I’ll continue to sound like a broken record by repeating the 2 main reasons why it’s a good time to buy.

1. Rates are amazingly low.
2. Inventory is great meaning buyers have a lot of homes to choose from. If you don’t want to get into a multiple offer situation then you don’t have to. There’s plenty of fish in the sea.

So I ask my buyers, “What exactly are you waiting for?” and here’s what some of them are saying followed by my official response.

“Rates might go down!” – Uh, like to what? 4.5%? I doubt it. Some people might be able to get a 5.5% interest rate but if it goes any lower than that I will very surprised. But think about the opposite. If you wait too long you might be looking at a 7% interest rate. If you want to play the wait and see game then you might get burned.

“Inventory is high and I keep hearing how bad the real estate market is so sellers should be negotiating down off their asking price!” – Do you know the sellers financial situation? In all price ranges sellers move for different reasons. If you happen to get lucky and make an offer on a home where the owners are getting a divorce and want to ditch the home for next to nothing then congrats. But just because there is an abundance of inventory don’t expect EVERY seller to give away their home to you because YOU think the real estate market is bad. And what’s the alternative? Wait until there is a small amount inventory on the market? That means multiple offers and paying top dollar. So let me know how that works out for you.

“I keep hearing about all of the foreclosures and pending foreclosures. Find me one of those!” – This is my pet peeve and I could spend an hour answering this but the quick answer is that there are literally THOUSANDS of investors combing the Dallas real estate market for foreclosure deals. So when a true foreclosure deal comes on the market there are multiple offers on the property for over list price and the investors are paying in cash which means they can close quickly. But your typical buyer doesn’t want to pay list price (they want to negotiate) and are financing their loan thus needing at least 20 days to close the loan. Which offer do you think the banks are going to accept? My advice is get over the foreclosures and look for a home you want to live in, not the deal of the century.

People don’t realize real estate is local and not dependant on other states. North Texas has been and is doing just fine. But the national media attention has crept into our minds and we can’t shake it. While pondering the phenomenon we are experiencing with everyone and their dog believing the real estate market is bad, I thought of a real estate analogy. There is a house in your neighborhood. Just your average home and the owners keep to themselves. Not many neighbors have seen the inside of the home but it looks to be in average condition. So one day the neighborhood gossip sees the For Sale sign in the yard and the owners packing outside. She skips over to offer her goodbyes and they politely invite her into their home. Meanwhile she sees a couple stress cracks over a few door and window jambs. “The home obviously has serious foundation problems and I think I smelled mold too!” she says to anyone who will listen. Then they tell someone who tells someone else – you get the point. Even when people are looking at the home neighbors feel the need to tell them about the problems the home has and therefore the home lingers on the market and sells for pennies. But guess what? They actually just brought down their own property values by spreading these untruths.

Dallas has bought into the woes of California, Las Vegas and Florida and is actually hurting itself by perpetuating the bad real estate market story. Our city does NOT have foundation or mold problems yet the terrible rumors persist and only time will tell how our own foolish beliefs will affect our real estate market. In the end we only have ourselves to blame.

Is it really all "Doom & Gloom" for Dallas Real Estate?

This is an email I sent out to my friends and past clients and thought it blogworthy…

A few years ago it seemed the whole nation began to show concern that real estate bubbles throughout the country were about to burst and I tried my best to keep my friends and past clients informed by letting them know Dallas is not directly affected by the decline in home prices in locations such as Miami, Las Vegas and California. Ever since that time negative real estate statistics continued to be published in the media about the declining national real estate market and I continued to defend our local real estate market. I am frequently asked, “Jeff, how is your business doing with the real estate market doing as poorly as it is?” So let me—yet again—answer that question and hopefully quell your fears.

First of all, my business has never been better and thanks to all of you I finished 2006 as the 63rd most productive agent in my company out of 1,300 other agents. This equates to ranking in the Top 7% of Realtors nationwide. Again, a sincere thank you for your support and confidence in my abilities as a real estate professional. I hope to continue that success in 2007...so keep the referrals coming! :)

Second, I would like to address our “poor real estate market”. Brace yourself for this mind boggling statement I am about to make. Many of the doom and gloom real estate reports that are published address NATIONAL real estate statistics and not LOCAL real estate statistics. The average Joe in Dallas reads one of these reports in the Wall Street Journal and thinks his home in North Dallas is immediately worth less. This is ridiculous and I question their intellectual fortitude. Furthermore, the real estate numbers Dallas is producing this year when compared with 2006 might come up short by 2% here and 3% there. (Note: Number of sales are down in many areas but prices are going up!) But remember, 2006 year was the 3rd best year for real estate EVER in our country’s history. So by those standards, 2007 might end up in the top 10 best years for real estate EVER. That doesn’t sound so bad, does it? Which leads me to this recent report from CNNMoney.com. Out of the 100 largest markets in the country Dallas ranks 9th in projected appreciation (3.6%) from April 2007 to April 2008. Our worst one-year decline of –7.7% occurred in ‘87-’88. Dallas does not see 20% fluctuations which allows our growth to remain strong and steady.

So the next time someone starts telling you how bad our Dallas real estate market is, you can tell them with confidence that Dallas is one of the strongest real estate markets in the country. And if they’re looking to buy or sell you can tell them to call me!