Windermere Woodinville Blog

Book of Business. In the real estate of the future, there will be a different system for selling the “book of business.”

Today, when an agent leaves real estate practice they often choose to sell their business.  This is a business they have built up over the years by faithful and competent service to their clients. 

The agent leaving the business may try to pass on to another agent a client list or client base.  The retiring agent may also have systems, forms, and special marketing tools.  These, too, the retiring agent may want to pass on to a succeeding agent, an agent willing to “buy” the book of business.

Down Load Brain - With Science of the Future. In the future, science will allow us to sell more than a client list, business goodwill and a form file.  The science of the future will allow us to “down load” our brain into the brain of another agent so that the new person starting out in the business has the benefit of all our hard-earned knowledge. 

The new agent will get more than a client list they will get decades of practical experience with negotiations, forms, Multiple rules, and all the ins-and-outs gleaned from those countless seminars, clock hour classes, and legal updates.

Appraise the Brain. To value what’s in the retiring agents head, science will require a new appraisal tool.  Not all agents are created equal and the value of their noggin’s will vary. 

The retiring agent will be hooked up to a monitor … let’s call it the Appraise-a-Noggin …that will evaluate it’s worth to a buyer.  In the future, Standard and Poor’s may get in this business.   Your brain will be either standard or poor.

Wipe Brain Clean. To prevent multiple sales to different buyers, the brain of the retiring agent will be wiped clean of all this real estate knowledge.  No copies will be allowed or possible.  The agent buying the book of business will have exclusive rights.

Retire Without Worries. Now that the retiring agent has emptied its brain into the brain of the new agent, the retiree can head for that beach home on the Washington Coast.  There will be no waking up in the middle of the night worrying about a deadline missed, a form left out, a CMA botched. 

The retiring agent, with clam gun in hand, will have that sweet smile of the lobotomized patient.

God bless the science of the future and God bless you.

Thanks for considering our essay.

Congress may consider a second economic stimulus bill this month.  If they do, the National Association of Realtors suggests a number of changes that the Association says could help to provide more stability to the nation’s real estate markets.

NAR has urged Congress to include the following provisions in any future legislation:

• Make the $7500 tax credit available to all purchasers and eliminate the repayment requirement.  The credit’s limited availability and required repayment terms have severely limited the credit’s appeal to potential homebuyers.  As a result, the credit has not been widely used or proven effective at stimulating sales.
• Make the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent.  New rules for 2009 would significantly reduce the FHA, Fannie Mae and Freddie Mac loan limit from their 2008 levels. Now is not the time to limit the availability of affordable mortgages.
• Get the Emergency Treasury bank relief program back on track by targeting more funds to mortgage relief efforts and increasing efforts to mitigate foreclosures.  Don’t just give the banks unrestricted cash. Make the program work to improve mortgage and housing markets as it was originally intended.
• Permanently bar banks and banking conglomerates from engaging in real estate brokerage and management.  The banks have proven they have enough to do to simply properly manage their current lines of business.  Do we really want them to manage the home buying process?  Imagine what could have been the situation now if they already had the added ability to engage in real estate sales.

Thanks for reading this blog.  Much appreciated.

During the month of November, Washington REALTORS participated in a 1,200 member study with Oregon, Idaho, Montana and Alaska to determine how agents were dealing with the current real estate market. This comprehensive survey gives an insight into what agents are thinking right now. We offer a summary of some of primary points raised in this survey.

NOT THAT MANY LEAVING. Overall, the numbers of REALTORS leaving the industry or planning to do so are extremely low given the current pressures on REALTORS.

MOST EXIT BECAUSE OF AGE. The number of REALTORS who have left compared to the number that have remained is very small, and those who have left did so quite recently. Of this relatively small number, most current REALTORS will be exiting the real estate industry, at least on a full-time basis, due to age. Nearly one in five REALTORS is at least sixty years old.

REAL ESTATE CONSIDERED A PROFESSION. Results indicate that real estate is regarded as a career, providing sustainable incomes in the past. The problem facing the industry currently is that:

• Risk to incomes has increased,
• Control over future income has decreased, and
• Demands for time investment have increased.

PERCEPTION IS TRUMPING FACTS. The critical economic variables that drive the real estate market have, to a large extent, been replaced by those of perception and confidence. The effects of the media, fear, and anxiety are overriding supply, demand, price, and affordability.

We hope this summary help you better understand the state of our profession in today’s market.

Thanks for reading our blog.

While the rest of us enjoy the holidays away from work, others continue to serve.  Let’s recognize those who have to keep their nose-to-the grind stone for our comfort and safety.  The list is long.

Fire fighting personnel stand ready.  Police continue to prowl and help.  The line crews work in miserable conditions to restore our power.

If you land in the emergency room, you’ll notice all sorts of health care workers working on you instead of cutting the turkey with the family.

The retail clerks who slave to keep those stores  open for your last minute shopping deserve our praise.  For that matter, the 7-Eleven clerk seems to never go home.

The folks that put out daily newspapers don’t take a day off.  The television news and weather crews keep bringing us the latest news, traffic, and weather.  Don’t they have a life beyond the station?

Many service stations remain open during the highest of holidays.  The folks who keep our power, water, and sewer systems humming come to work in snow, sleet and rain.

Airport personnel, flight crews, and traffic controllers who toil to get us home for the holidays forsake their own.

How about draw bridge operators down in Ballard and the lighthouse maintenance crews making safe our treacherous waters?  Hats off there.

And of course there’s the military personnel at home and abroad and the Coast Guard ready to lay down the ultimate sacrifice for us even on the sacred days.

Are there astronauts on some space station, even as we write, sending down work traffic to mission control even as Santa does his rounds?

It’s not good to start thanking people by detailed category.  Sure as heck we’ll offend someone by leaving off a name.  Like how about hotel workers and all the fast food places that remain open for our convenience.  The ticket takers and projection people at the movie theaters showing those holiday classics?  Do we take them for granted.  Do we think robots run these places?

Even the NBA plays a couple games on Christmas Day.  Some professional athletes do their job while the family waits.

You know this list of those who must work on the holidays is so long, we’re beginning to wonder if as many people work the holidays as stay home before the fire.

And how about the blog writers? Can’t they take a day off for Pete’s sake?  Many people wish they would.

Thanks for reading our blog on a holiday.

“He gives snow like wool;

He scatters the frost like ashes;

He casts out His hail like morsels;

Who can stand before His cold?

He sends out His word and melts them;

He causes His wind to blow, and the waters flow.”

Psalm 147:16-18

Merry Christmas, Happy Hanukkah, Happy Holidays

Franklin Delano Roosevelt inherited a crisis of devastating losses on Wall Street, an economy frozen by uncertainty, massive layoffs, a government stretching to meet its obligations, the precarious state of millions of families whose savings had been lost in the carnage.

The suffering that President Roosevelt cited was real; the monster that had crushed the American confidence, less so.

“The only thing we have to fear,” Franklin Delano Roosevelt declared in 1933, “is fear itself.”

Today, in 2009, what will it take to restore faith in the markets and our economy?

Two things, regulation and self-regulation.

1. Government must regulate Wall Street tighter.
2. Individuals must develop a new mind-set that says if we don’t have it, we don’t spend it.

American confidence will return, but so will a sense of proportion in a our personal spending habits.

Thanks for reading this blog.

Despite Perceptions that Real Estate is Down - Business Is Being Done. Sales are made.

On the Eastside of Seattle, in Washington State, from Jan. 08 through Nov. 08 there were:

8149 Closed Transactions in residences and condominiums.

That’s 16,298 “sides.” A side means the buy and sell side necessary to make up one “transaction.” On each “side” an agent more-often-than-not represents a party to the transaction. Therefore, some agents have been busy even in this so-called down market.

This 8149 number does not include:

• Land deals,
• Manufactured home transactions,
• City of Seattle sales,
• Unlisted new construction sales.

Business is still being done and real estate agents  are still providing professional services.

It’s also true that many agents are leaving the business and the surviving agents, particularly those working with stronger brands, are doing more-and-more of the business.

Thanks for considering our blog.

COME ON FIRST TIME HOME BUYERS

First time home buyers, now in apartments, can jump start the housing market.  All they have to do is buy a home. There are plenty of properties out there at seemingly good prices.  There is low interest mortgage money available. There are first-time home-buyer credits.  A move-up-to-ownership renter  has one advantage: renters don’t have sell a home to buy the one they want.  And once the renter makes the big plunge they send the seller off to acquire a new residence. The buy-sell cycle begins. We begin to see a balanced market with buyers and sellers at equal advantage.  The market returns.

FROZEN BY EQUITY FEAR

So why don’t those renters turn into first-time-home buyers?  The relative merits of owning and renting will be affected by the extent to  which homeowners can accumulate equity. They hesitate because they don’t know how much further home prices might fall. 

The first-time-home-buyer doesn’t want to buy and then two or three years hence have a negative equity where the value of their home is worth less than what they still owe on it.

SURE FIRE INDICATOR OF THE BOTTOM

What indicator might tell them that the bottom has been reached so they don’t risk a negative equity? 

The indicator is in the relationship of rents to house price.

Historically, home prices and rents have moved in line with the economy and with each other. Home prices nationwide have typically risen at approximately the same rate as the overall rate of inflation. 

Here’s the problem.  Home prices and rents have fallen out of lock-step.  An adjustment is needed to signal market bottom.

The textbook premise in economics is that the price of a house, even an owner-occupied house, is the current value of the rent payments that could be earned from renting the property at market prices.  Moreover, the relationship between rent and home prices has shown remarkable stability.

MARKETS OUT OF BALANCE

Right now in many major U.S. markets ratio is out of balance.  Prices far exceed the rent value.  When prices come within the desired “normal” ratio with rent, we’ve reached the bottom of the market.  It should not go lower.  First-time-homebuyers can now feel comfortable to make the leap, enter the market and purchase a home.

THE MAGIC RATIO

What, specifically, is the ratio?  A home price that is 15 times the annual rent  is declared to be in equilibrium.   This historically derived rule of thumb would indicate for example that a balanced market has been reached when the home price is 15 times the annual rent collected.  If you rent a home for $1500 a month, that’s $18,000 a year in rents.  Multiply that annual rent, $18,000, by 15 and you have the price of the home or $270,000.  If history means anything, the price should not go lower.

Contrarily, a bubble market as one in which the ratio of annual rent to price exceeds 18 to 1.  We still have communities with 18 to 1 or better ratios.  They need to come down to signal the bottom of the market.

SEATTLE COMING INTO LINE

While many communities have yet to hit bottom and significant price declines must still be reckoned with in many areas, including Seattle, recent price declines mean that many communities are moving back toward the historical track of modest equity increases for homebuyers.  Seattle adjusts as we write.

We acknowledge the Center for Economic and Policy Research for advancing the “rent-price-bottom” theory.  In October of 2008, the Center published The Changing Prospects for Building Home Equity An Updated Analysis of Rents and the Price of Housing in 100 Metropolitan Areas.  The authors were Hye Jin Rho, Danilo Pelletiere, and Dean Baker

Convincing first-time-homebuyers that the bottom is here will release the palpable tension in the State’s market.  How are we doing on 15 to one?   Certainly, prices are coming down in our market.

Thanks for reading this blog.

The stock market can’t help but influence residential real estate sales.  Today, we see a “bear market.”  We are in a recession. Sales are not as brisk in a recession. It behooves us to know a little history of these bear markets so that we might predict a recession’s depth and length.  When a recession goes away, business picks up.

For instance will this be a long and deep recession like that of 9/3/29 through 7/8/32, that is, the Crash of ‘29? There we saw 810 days of financial draught and a decline from the previous bull market to -89.2%.  Or will this be like that mild downturn of 1/11/73 through 10/3/74 (the Oil Crisis) where the draught lasted only 420 days and the decline from the previous bull market was only -48.2%?

Some economists predict that the current episode still seems to have more in common with the mild downturns of 1990-91 and 2001 than the more serious ones that came before.  In other words it will be longish, but not deep.

Many economists expect the current recession to continue until mid-2009, which would be longer than that of 1973-75. But no expert points to a Crash of ‘29 scenario in terms of a massive decline form the bull market.

Well, there’s some good news out there if we open ourselves to a study of history.  We like the prediction of a mild recession lifting next year.

Please see The Economist, December 6, 2008 issue: “A Thoroughly Modern Recession.”  Thanks for reading this blog.