It's on the web

I quit advertising in newspapers three years ago. I have nothing against newspapers. I read three of them most days of the week and I write a weekly column in one, but I don’t advertise in any. The reason is that nobody looks for homes for sale in their local paper.
Tradition has been turned on its head. The Internet buyer has become the "typical" home buyer over the last few years, according to the just-released California Association of Realtors'® "2006 Internet Versus Traditional Buyer Survey."
This is a significant finding as one out of six American homeowners lives in California. How California homebuyers shop for homes will become the way the nation shops for homes.
Since 2000, the share of homebuyers using the Internet has grown from 28 percent to 70 percent in 2006. Internet buyers are younger, wealthier, better educated and more likely to be married than traditional buyers. Internet buyers also reported greater satisfaction with the home-buying process compared with traditional buyers.
Lucky for Realtors, most buyers consider the Internet an information source -- not a substitute for hiring a Realtor. In fact, nine out of 10 Internet buyers hired a Realtor to help them in the homebuying process. They were generally more satisfied with their agents because of their responsiveness. According to the survey, more than nine out of 10 Internet buyers indicated that the Internet helped them better understand the process of buying a home.
My web site allows homebuyers and the curious to access all MLS information on any property listed for sale in the Capital Region. Using specific search fields, I also have the ability to program the MLS computer to e-mail every new listing meeting a client’s specific criteria to them within minutes of the property being listed for sale. That’s better than waiting for the morning paper to arrive.
Enjoy your weekend. Vicki is off to “Chester” (someplace past Truckee and turn left) for an art show and I will be working on her list of projects she has left for me to keep busy and stay out of trouble.

Too Many Choices

The California Department of Real Estate announced yesterday that there are about 500,000 real estate licensees in the state – which means that one in every 52 adults in California has a real estate license.
In 2005, the number of licensees grew 14 percent over the previous year to a then-record 476,000 licensees. That total represented a 57 percent increase compared to the number of California real estate licensees in 2000. The number of licensees reached 495,000 as of April 2006.
Jeff Davi, commissioner for the Department of Real Estate, said in a statement, "The level of interest in real estate licensure is unprecedented. With so many new licensees, the DRE has also increased its consumer protection efforts."
The department’s idea of increased “protection efforts” is to increase their presence on the Internet. It is available on the Department of Real Estate's Web site at http://www.dre.ca.gov/licinfo.htm. At this site, consumers can check the license status of real estate agents, mortgage brokers and others involved in the processes of purchasing or refinancing their homes.
Unfortunately there is no competency evaluation on the DRE ‘s web site. The problem that consumers have is not determining if someone has a real estate license or not but determining who is competent and trustworthy, a rating that the DRE will never develop.
One rating system that consumers can use is Realtor membership. Not all of the 500,000 agents are members of the California Association of Realtors. There is a difference between a state licensee and a Realtor. Realtors must swear to abide to a professional code of conduct not found on the state’s web site. Doctors may not don’t need to belong to the American Medical Association but I am assured that mine does and at a minimum subscribes to their monthly magazine featuring the latest in procedures and treatments for sick patients. Of the 500,000 state licensed agents, 150,000 are Realtors.
Another rating system for competency that the state does recognize is “Brokers”. A licensed real estate broker has meet more stringent testing, educational and experience requirements not found in salespeople. In California of the 500,000 licensed agents 35,000 are brokers. State law requires that licensed agents only work for brokers not other licensed agents.
There are good licensed agents who are not Realtors and there are brokers who know less than the agents for who they are responsible. But when it comes to money why take any chances?

"It's about diversification"

“These are strange times for forecasters and analysts. Are we heading into a market lull? Or are we seeing the beginning of a significant downturn? Many of the fundamentals for housing are at a crossroads: Inflation, interest rates, demand, household incomes, prices, and whether homes are a good investment compared to other investments," said Marshall Prentice, president of La Jolla, CA-based DataQuick Information Systems. To cover oneself it’s good to be diversified.
The National Association of Realtors also recently revealed a slow down in price growth. Nationwide, the median existing single-family home price was $217,900 in the first quarter, up 10.3 percent from a year earlier when the median price was $197,600, but in the fourth quarter of 2005, the annual rate of home-price appreciation was 13.6 percent.
In the nation's priciest market, the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $746,800, prices were up only 1.4 percent in the past year, after years of appreciation as high as 20, 30 percent and more. In another formerly hot market, San Diego, CA, prices rose only 1.9 percent.
Some also speculate that recent slow downs in sales will inevitably push home prices down.
Another recent measure of affluent households -- those with $250,000 to less than $1 million in invested assets -- revealed that, among those looking to make increases in their investment portfolios, nearly 80 percent of them were shying away from real estate.
Much larger shares are going to retirement accounts, deposit accounts, mutual funds and stocks, according to Rhinebeck, NY-based Phoenix Marketing International, a marketing research and consulting firm.
"I'm not surprised that less than a quarter of those surveyed said they'd add to their real estate portfolio. After all, these people have seen very large increases in the value of real estate and, quite logically, probably think the market is overheated, as many do here in the Bay Area," said Romeo Danais, a Silicon Valley real estate investor for years, who says he's now pulling up stakes in Silicon Valley to invest in real estate in Oklahoma, New Hampshire and Texas.
David M. Thompson, vice president of affluent practice at Phoenix, says it's also about diversification. "As wealth increases, there is less percentage-wise in real estate, though not necessarily less in the total dollar amount. As affluent households get wealthier and become more complex, they get advice from professionals about diversification," he said.

Falling new home sales may be good for area homebuyers

Good Morning,

The news that new home starts in the Capital Region dropped 20 percent in April raises two interesting puzzles: Why the decline and what does it mean?
"The declines in starts and permits for April reflect a natural pay-back for the weather-related surge in production earlier in the year, as well as builder adjustments to eroding demand and rising inventories," said David Seiders, chief economist with the National Association of Home Builders. "We continue to believe that the evolving slowdown represents an orderly adjustment toward more sustainable levels of housing production, following the record surge in 2005 that was fueled by extraordinary demand for single-family homes and condo units by investors/speculators."
Separately, Seiders also said the following a few days earlier: "NAHB surveys of builders are documenting a fall off in investor purchases, rising sales cancellations by investors/speculators, and resales of units owned by investors/speculators as the prospects for price appreciation deteriorate. The cancellations and resales are adding supply to markets already experiencing an inventory run-up as demand by prospective owner-occupants cools in the face of deteriorating affordability conditions."
To me, there's a huge difference between a decline in sales because the weather is not as good as it had been earlier in the year and a decline in sales because weak and vulnerable investors are fleeing the market. In an odd way -- eventually, at least those defecting investors are likely to be good for the marketplace.
One of the reasons for 2005's soaring home prices, especially with condos and new-homes, has been the large number of investors who entered the market. If you take natural demand and add hordes of excess investors you simply have more demand. That pushes up prices and those rising prices attract more investors who want to get in on the action. Unfortunately, swiftly rising prices can also freeze out those who "merely" wish to be homeowners.
As investments go, new homes and condos look awfully good because they require little maintenance and until recently the market for them has been largely excellent. You can buy 'em by the bunch and not spend a lot of time with repairs, mowing and such. For investors who see condos and new homes as commodities, something on which to bet instead of pork bellies or Enron futures, such properties are dandy investment vehicles.
They are also risky. If you buy investment real estate the purpose of your purchase should be to gain value (a higher re-sale price or more equity), rent (positive cashflow) or both. That means such properties must either be rented or re-sold. Reduce the market for either tenants or buyers and suddenly investment properties can be vacant, unsold and very expensive to keep.
The recent decision by builders in many markets to sell homes at discount means that investors can no longer flip properties because buyers can get better deals from builders. Worse, such properties can be extremely difficult to rent at anything approaching a positive cashflow because many markets are brimming with look-alike new properties and condos. In such an environment, buyers and renters rule -- and fad investors with little cash will sell, sell at a loss, rent at a loss or will be foreclosed.
The good news is that the marketplace is forever in the process of self-correction. When it tips too far in one direction it begins to tip the other way, always seeking a cosmic sense of balance. It will take time to clear out the inventory now held by weak investors -- and by investors who will weaken under the burden of ongoing monthly costs. This is simply a healthy culling of the investor herd. In some cases, there will be local price declines and price declines by property type, but hopefully the worst result in most areas will be a general slowing of appreciation to something just above the rate of inflation. This would be an ideal situation for both sellers and buyers, a market with reasonably rising prices -- and something largely unseen during the past few years.