http://www.showingbeacon.com/

Carver Communications - Index

Carver Communications - 6.1.09 - Index

June 1, 2009 REAL ESTATE NEWSLINE 3
The National Association of REAL-
TORS® has created a program of
resources to help its members in a tough
economy. Named the “Right Tools, Right
Now,” the program offers many items
REALTORS® can use for their business at
a discounted cost or at no cost at all.
Available materials range from education
on sales and marketing to legal issues to
mortgage issues and more. New features
are added monthly, so be sure to visit
www.REALTOR.org/RightTools.
In relation to helping educate
REALTORS® about topics that affect their
everyday business, I ran across an article in
the REALTOR® Magazine from NAR
titled “4 Questions You Need to Answer
Today” that I felt REALTORS® should
read. The article helps REALTORS® put
into perspective the current economy and
market conditions. I’d like to share that
article with you below:
4 Questions You Need to
Answer Today
By Florence Terrell
Chairman, San Antonio Board of REALTORS®
Right Tools, Right Now –
Perspective on the Economy
In one short decade, your role has
changed dramatically.
Ten years ago, people still viewed
real estate brokers and salespeople as information
providers. Today, any person with
an Internet connection can access most of
what they need to know about the real
estate market, including how much their
house is "worth."
Note the quotation marks? That’s
where your new role comes into play.
Although buyers and sellers may have the
information right in front of them, they
don’t always fully understand the meaning.
Your job is to offer the expert insights that
will help them interpret the information.
For example, show what factors
impact value in your market. Explain why
buyers and sellers should be thinking not
just about current value, which is just a
snapshot of a market on a given day, but
also about what the value is likely to be six
months or six years down the road. Here
are some insights you can offer in response
to the questions buyers and sellers are asking
today.
1. Why are the prices of homes
dropping substantially in today’s
market?
Prices are dropping because of the
anomaly that occurred during the market
boom. Professor Karl Case of Wellesley
College and contributing author of the
Case-Schiller Home Prices Indices, a quarterly
nominal housing price report, looked
closely at the appreciation of median home
value over five-year increments dating
back to 1980. His research shows that
home values appreciated 26.5 percent on
average for the 20-year period from 1980
through 2000.
In the six years that followed, average
appreciation was 89 percent. Prices are
now adjusting to the inconsistent and
unsustainable growth that occurred during
the first six years of this decade. In other
words, the market is not on the decline.
Rather, it is moving toward stability, which
will mean healthier markets in the future.
2. How do I determine the direction
of prices in my market?
Although there are no steadfast rules
to determine future pricing, months’ supply
of inventory (total inventory divided by the
number of houses sold per month) is a
great guideline. A normalized or balanced
market has five to six months of inventory.
If 100 houses sell a month, there should be
500 to 600 houses in active inventory.
Based on this principle, if you have
one to two months of inventory, doubledigit
appreciation is likely to occur. Lack of
supply will cause potential buyers to clamor
over the few homes that are for sale,
which in turn drives prices higher. On the
other end of the spectrum—where many
markets are right now—there is a seven- to
eight-month inventory. With this abundance
of supply, there simply aren’t
enough buyers to support the number of
homes for sale.
Current economic conditions will
also have an effect on the direction of pricing,
as pricing is directly connected to average
income. Traditionally, the national
average sales price of a home is two-and-ahalf
times the average household income.
Through the boom years of 2004, 2005,
and even into 2006, that ratio was distorted,
reaching up to four times the average
income. We’re now getting much closer to
the 2.5 ratio. However, with unemployment
rising, prices may have to drop further to
stay in line with the average American family
income.
3. Why should I buy now?
Any investment consideration,
whether it be real estate, gold, or fine art,
follows a predictable cycle with nine
stages. Let’s start with optimism, the period
in which many people are excited about
buying a home. When the market is strong,
people’s purchases quickly increase in
value, which leads to euphoria, which can
lead to rash decision making.
From euphoria starts a downward
cycle. As prices start to fall, buyers go into
denial, with statements such as "I’ll be in
the house a few years, so this won’t be a
challenge." After denial comes fear, as
Continued on page 21