David Lereah's Recent Report for NAR

NAR's top economist recently reported on the state of the real estate market. His article is posted on NAR's website, but I'm posting it here in it's entirety for your convenience.

Home Prices Correcting, Buyers Returning to the Market
WASHINGTON, October 11, 2006 - Home sales appear to be bottoming out with lower home prices attracting buyers in many areas of the country, according to the National Association of Realtors.

David Lereah, NAR’s chief economist, said the housing market is showing signs of life and that sales may be leveling out. “Many potential home buyers who have been taking a wait-and-see attitude or taking their time and being methodical in the search process are being enticed by lower home prices,” he said. “Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year.”

Existing-home sales are forecast to be fairly stable in the fourth quarter and sales for all of 2006 are expected to drop 8.9 percent to 6.45 million – still the third strongest year after consecutive records in 2004 and 2005. New-home sales are forecast to fall 17.3 percent this year to 1.06 million, the fourth highest year on record. Housing starts should be down 10.9 percent to 1.84 million in 2006.

With a recent correction in the market, the national median existing-home price is likely to rise 1.6 percent to $223,000 for all of 2006; it’s anticipated prices will remain slightly below year-ago levels before gaining positive traction in the first quarter of 2007. The median new-home price is projected to decline 0.2 percent to $240,500 – largely the result of builder price cuts to move unsold inventory.

NAR President Thomas M. Stevens from Vienna, Va., said this presents a unique opportunity for buyers. “The supply of homes on the market is the highest we’ve seen in over 13 years, and mortgage interest rates are experiencing an unexpected decline,” said Stevens, senior vice president of NRT Inc. “The 30-year fixed rate is hovering around 6.3 percent, and sellers in most of the country are now showing a willingness to negotiate. While this changing market is a great time to buy, it’s become increasing important for parties on both sides of the real estate transaction process to have professional representation.”

The 30-year fixed-rate mortgage will probably average 6.5 percent in the fourth quarter but will trend up modestly in 2007.

The unemployment rate should average 4.8 percent in the fourth quarter. Inflation, as measured by the Consumer Price Index, is expected to be 3.4 percent for all of 2006, while growth in the U.S. gross domestic product is forecast at 3.3 percent. Inflation-adjusted disposable personal income is likely to grow 3.4 percent for 2006.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Lender Fraud Frustrations!!!

I don't know about you, but this sticky subject has come up in converstation frequently over the last several months, and I'm guessing it has affected many local agents out there trying to serve our clients and customers. Whether you work with Buyers or Sellers, this practise can affect you and your client. The frightening part is that you may not even be aware that it is going on in your transaction! I recently spoke with an agent who had such a story. Agent X was representing a Buyer, and the Buyer's loan had received a fully underwritten loan approval for a 90%LTV and 3% Seller credit for closing costs. Well there's nothing strange about this scenario that would give you cause for concern....right? So loan docs get drawn, Buyers and Sellers sign closing papers, and all await a seemless funding. But word comes from the funding department that they will only allow part of the credits, not the full 3%, leaving the Buyer short several thousand dollars! Upon further questioning of the loan agent, Agent X learns that part of the closing costs were being used to supplement the Buyer's downpayment. The loan agent explained that this practise had been used successfully before, but now it was being subjected to a "crack down". Surprise! No one saw that coming! (This one doesn't fit the scenario we've all been warned about of asking for excessive credits and giving the Buyer cash out at closing or upping the price and asking the Seller to pay the Buyer cash outside of the escrow, but it is nonetheless a legal action waiting to happen!) So how do we avoid being entangled in these situations that can at best cause our transaction to crumble and at worst not only put our license in jeopardy but possibly leave us doing time and paying significant fines? And what if it is going on right under our nose and we are not aware of it? Can we still be held accountable for something we didn't know? Is ignorance a valid defense? Or should we being doing something differently in the way we deal with all of our transactions that involve Seller credits (probably 90% of our closings these days)? Perhaps we should consider obtaining a disclosure from the loan agent stating that all the credits being sought by the Buyer are for legitimate closing costs. And maybe we should make it a standard of practise to have every Buyer sign an authorization for the loan agent to be able to discuss their loan information candidly with all agents involved in the transaction so that very direct questions can be asked of the loan agent before offers are written or accepted. What are your thoughts on this issue? Please take a moment to post a response.

1-800-CALL CAPTURE REPORT CARD

Calling all CALL CAPTURE customers......are you getting any CALLS to capture? I'm just curious to know if any agents out there are using an 800 Call Capture system, and if so what kind of results are you getting? I currently use a system and include 800 #'s on my listing flyers and postcards, but I've had zero results. I thought about trying some classified ads for "Free Reports", but before investing in advertising, I thought I'd see if anyone else has had some good results using an 800 system. Please take 5 minutes to post your experience or insights on this question. I'm hoping that your responses will save me and other blog visitors time and money or will help us employ a new strategy to get our money's worth! Thanks for your valuable insights!

WHERE HAVE ALL THE BUYERS GONE....?

A 60's ballad comes to mind..."Where have all the flowers gone..." But we're all wondering about the Buyers. They surely are out there somewhere. Why aren't they calling on our signs or ads? Why aren't they visiting our open homes? Why aren't they walking through our office doors with a Good Faith Deposit check in one hand and a loan approval letter in the other? The California Association of Realtors recently had an article available on their website that talked about our history making market. For the first time in California history, the economy is still going strong, but real estate sales are sputtering. Their economists could only come up with one conclusion.....FEAR. Buyers are afraid. Thank our friends in the media for their role in spooking our Buyers. And while you're at it, ask yourself if you might also be responsible in contributing to those fears. Do you believe this is a great time to buy property? If you do, then are you trumpeting that to everyone in your sphere of influence? If you don't, then I suggest you do some market research. Inventories have never been this high, and many Sellers are highly motivated right now. The conditions for Buyers are ideal, and even interest rates are still very reasonable. Since the media seems bent on spewing gloom and doom, we have to shout all the louder so that would be buyers hear the truth about the market. Let me know what you think!