Does Houston Have Another Problem Brewing?

Whether you live in Houston or not, this rather disturbing story has surfaced by way of the Houston City Council, indicating the possibility of local officials raising property taxes, increasing the fees for garbage pickup, and a host of other costly plans:


http://blog.chron.com/houstonpolitics/2012/04/city-could-study-tax-and-fee-increases/


Of course, we can all understand that city budgets are suffering just about everywhere. But to further penalize home owners would prove to be an absurd move. It was only a few weeks ago when I address some of the problems with the housing market in Houston, and how foreclosure sales are so prominent.

Perhaps instead of pumping out the negative statistics about the current market, the local realty associations should be lobbying and protesting these actions on behalf of the home owners they represent.

If these increases do go through in Houston, it will make it even more difficult for sellers than it already is. And, of course, as politicians go, if it passes in Houston then other big cities will implement it, and the real estate market will be further set back.

Does Houston Have A Problem?

It's the next round of home sales and pricing releases around the country. The newest chance to see if the various realty associations have cut down on adding to the negative publicity about the current real estate market.

This one from the Houston Association of Realtors is attempting to show a positive spin:


http://www.har.com/mls/dispPressRelease_print.cfm?month=02&year=12


However, they have a few too many statistics included. Serious real estate market observers will see right through this, and that's not good.

This story builds up the so-called rise in home sales and relative steadyness of home prices for January and the months prior.

But it also shoots itself right back down. The real reason for this is right there in the story. As in the part about the increase in foreclosures, and how they now account for a much bigger percentage of home sales.

Why is the home sales market "up"? Because more and more former home owners have been foreclosed upon. Take away those statistics, and, well, it sheds a different light on the current marketplace.

This is where Houston has a problem. As well as other cities. The current market isn't really "up". If fewer people were losing their homes due to financial reasons beyond their control, it would not appear as if home sales are up.

It is really foreign investors, flippers, and a few speculators who are buying the homes out there, and doing so because in many cases they get a below market deal by acquiring a foreclosure.

That even more people are being foreclosed on in the Houston area, while many other parts of the country are "reporting" that the number of foreclosures has dipped, certainly should not be treated as the "positive" news the HAR is doing in this story.

Never mind the real estate statistics

Why do the realty associations continue to cook their own goose? The members have no right to blame the "media reporting" for negative public perception about the current real estate market.

Let's use Texas as an example. The Texas Multiple Listing Services just published residential real estate statistics for the month of August, 2010. When compared with 2009, they show home sales for Dallas as "down 19%", Houston as "down 16%", and Ft. Worth as "down 14%". As for the "median price", this same period shows Dallas as ""up 5%" Houston as "down 1%", and Ft. Worth as "up 1%". One would likely conclude that fewer homes are selling even with sale prices holding steady.

Meanwhile, within 24 hours, the Houston Business Journal published a story about how Texas is expected to well regarding the appreciation of home prices over the next 12 months. It specifically refers to the Houston area as the market with the expected largest appreciation of home prices over any other city in the country. The same article includes the Dallas area with an expected rise of nearly 3%. This story compares with areas such as Florida which are expected to show continued depreciation among home prices over the next year.

Heck, here is the story:

http://houston.bizjournals.com/houston/stories/2010/09/27/daily6.html?surround=lfn


The information in both of these reports are not that much different. However, the irony of the Texas MLS "reporting" the negative home sale comparison while a business publication with no stake in the real estate market gives the information a positive local slant.

Real estate, like most commodities, is about today and the near future. What happened more than a year ago shouldn't have a bearing. Yet, like way too many of the realty associations and industry organizations, the negatives continue to be reported.

Suppose the Texas MLS had simply released the story about how home prices are beginning to appreciate in many areas when compared with last year, and not paraded the sales comparison. They could have given buyers and sellers some hope.

Meanwhile, the last I saw, apartment rental occupancy was way up in these same areas, especially in Ft. Worth, over the past year. At least the realty associations didn't report on that, too.

Home sales are down - and the realty associations brag about it??

This week I have probably had more mortgage lenders tell me they are too busy to look at improving their advertising campaign because of the increase in loan activity than in the past two years. By my count, mortgage rates have dropped at least once during 10 of the past 12 weeks, at one point reaching levels not seen in more than 5 years.

Yet, once again, I checked a few sources for home sales news, waiting to see some positive reflecting in the marketplace. But no. More of the same. It's getting worse. Hundreds of thousands of realty agents paying hundreds of dollars in dues and fees again this year. The realty associations make a big deal about spending money on lobbyists and working the marketplace.

What comes up in today's news? Realty associations issuing negative statistics about the local marketplaces. Does today's potential home buyer give a you-know-what about how many homes sold a year ago or five years ago? Yet..........

From Houston:
http://www.chron.com/disp/story.mpl/business/6220879.html

From Kansas City:
http://www.bizjournals.com/kansascity/stories/2009/01/19/daily12.html?ana=from_rss

From Austin:
http://www.bizjournals.com/austin/stories/2009/01/19/daily16.html?ana=from_rss

And just so you don't think it is only the largest markets that constantly do this, here's the report from Raleigh-Durham NC:
http://www.bizjournals.com/triangle/stories/2009/01/19/daily18.html?ana=from_rss

Did you notice how the local realty association is prominently mentioned for issuing these statistics?

I'll tell you what. If I were advertising and/or marketing for a FSBO company, I would be pointing out all of these articles to potential sellers who are looking at doing it themselves vs. hiring a realty agent. If the company's FSBO assisted sales were UP in the past year, I would do a comparison.

I'd like your feedback on this, whether you are a realty professional or an investor.

Looking ahead to 2009

I'm looking for things to pick up very soon in the real estate marketplace. Maybe, just maybe, all of this will weed out the "I'll sell only if I can get a high enough price" sellers and have the serious sellers with properties on the market at fair value.

On the mortgage lender side, I see a need for the lenders to increase their role and become more of a consultant or advisor to home owners and first time buyers. Too many lenders, which frankly includes some of my clients around the country, have gone to a "today" mentality and not thinking long term. Whether or not this is really the case, some come across with the attitude of "If I can't do this deal right now, I don't care about later on". And this will hurt them in the long run.

Even as some lenders have closed their doors, there are still plenty out there. Don't ever forget this. The lower mortgage rates are prompting some home owners to check with their previous lender about the possibility of refinancing. However, their home might not currently be worth enough to make a refinance worthwhile, such as when the market value of the home drops to the point where it goes below the current equity. I already know of lenders who make this discovery and then fail to handle it properly.

"Properly" means addressing this head on with the potential client, letting him/her/them know that you will be watching the marketplace and area property values and rates with an eye toward the first available opportunity to make it worthwhile. Make a note to follow up with them every 45 days or so no matter what.

Chances are that homeowner will start watching on his/her/their own. And if you have not indicated a responsible follow up, chances are they won't feel obligated. Do not overlook how today's work can produce benefits months from now instead of thinking it won't help you next week and forgetting a once solid potential deal. Six months from now you could be "that guy who never called back and couldn't do it" OR you could be the "guy who we used before and told us last month this could be the time". Some lenders think that "we get referral business", but a negative referral doesn't count.

If you are a home owner (consumer), you can and should do your homework. You already know what rate you are now paying. A rate lowering even 3/4 of a percentage point could mean a $150 or more per month decrease in your monthly mortgage. If the last mortgage lender you used hasn't been in contact with you, do your homework. Start checking area sales for property values. If your home is still worth close to or more than its original value, you have a great opportunity to shop for the true best deal out there that fits your needs. You do have a choice.

And if you are a realty agent, a consumer interested in a refinance who maybe can't get one just might be a candidate to move to a "better" property for the same or less on their mortgage. You can certainly help to keep your previous clients posted on trends in their area for very much the same purpose. If you are not keeping in contact, you add to the negative beliefs about the current marketplace.

Speaking of which, one more gripe session for this year about how the real estate industry is, unfortunately, helping to fuel the negative publicity about the marketplace. This time with more proof to make my point.

For November, 1100 homes sold in the Columbus OH area. As a stand-alone, that is actually an impressive statistic. Yet, here's how the member based realty association presents it:

http://www.bizjournals.com/columbus/stories/2008/12/22/daily2.html?ana=from_rss

In the Pittsburgh PA area, 1,800 homes sold during November, but here is how it was reported:

http://pittsburghlive.com/x/valleyindependent/news/s_604041.html?source=rss&feed=30

In Houston, 3,900 properties sold in the one month period, but it comes out like this:

http://www.bizjournals.com/houston/stories/2008/12/22/focus5.html?ana=from_rss

Nearly 1,000 homes sold in Austin TX, yet it is made to look like nothing:

http://www.statesman.com/news/content/business/stories/realestate/12/19/1219homesales.html?cxtype=rss&cxsvc=7&cxcat=3

And don't think this is only for bigger cities. Almost 300 properties sold last month in Erie PA. That's an average of 10 a day including weekends in a smaller market, and that is impressive. Until you read it this way:

http://www.goerie.com/apps/pbcs.dll/article?AID=/20081221/NEWS02/312219878

And I could go on.............

If I were paying dues to any of these (and other) realty associations, I'd be strongly suggesting that some of my dues money go toward a publicity writer.

Have a great holiday !!

Aggressive Marketing for 2009

Here it is late November of a challenging year for realty professionals and mortgage lenders. And here I am continuing to contact more than 250 different realty and mortgage offices every week about making themselves known and stand out at such a crucial time.

Just today, I had 3 lenders tell me that they are or will no longer be in the mortgage business come Jan. 1, 2009. But the ones that are planning on staying and being in the business for next year need to rise to the occasion.

Recent research by the likes of McGraw Hill and PWC showed that businesses which increased, or at the very least maintained, their ad spending during the previous recession period enjoyed noticeable sales growth over the following 3 years - when compared with companies that reduced or eliminated advertising during the same period.

To put it into a sports term, don't let the other team back into the game when you have a lead.

This article puts it even better than I can:

http://www.managesmarter.com/msg/content_display/marketing/e3i4f5a5225e24b60e0f289cef3344b80eb?imw=Y

Granted, I complain a lot in this blog about the negative publicity which is mistakenly generated from within the industry. But I will admit that negative pub, such as mortgage rates rising and fewer homes being sold, does generate a significant increase in the number of consumers who will check for themselves.

http://www.comscore.com/press/release.asp?press=2516

Put it together, and I'm here to tell you that this is the time to increase or start advertising as much as possible. If consumers STOP seeing your name and/or your company name in the midst of the negative publicity, two things will likely happen:

1) Consumers will remember the advertisers keeping their name out there during tough times as soon as things pick up. If the rates dropped significantly this afternoon, they are not going to say "I'll wait until after the first of the year to see what happens!". They will say "I'm going to look right now and see which lenders and realty firms can help me!".

2) If you have reduced or eliminated your advertising and marketing presence, consumers could easily think that your office or company is among those which have closed their doors. You would have to spend double your previous budget to merely try to get those impressions back. And if you aren't spending now, I wouldn't count on having double the money and manpower available when the time comes.

Meanwhile, I'm pleased to learn that there are some positive efforts coming from some companies within the industry to reach consumers.

Kudos to Coldwell Banker corporate in New Jersey for compiling a list of "Major college football towns by home affordability". Great idea! This is the sort of list which will attract alumni of the more popular colleges across the country, who will want to see where their school ranks. Especially those whose football teams are having a subpar year. Gives 'em something to brag about. Of course, many are home owners.

If you are wondering, Akron, Ohio (University of Akron), was the most affordable market with an average price of $135,780. At the other end of the field ios Palo Alto, CA (Stanford University), with a $1.7 million average home price. Texas wound up with 3 of the "top" 11 areas on the list, by the way. Ft. Worth came in #6, Houston came in sixth with an average home price of $158,412, and Lubbock TX came in at #11.

Houston is a major example of the benefits of a story like this. All I have been reading and hearing about the Houston real estate market over the past six months is language not suitable to print here. If I were a CB agent or lender in the Houston area, I'd be all over this story. Finally, a positive and a fun slant.

Finally, there is the recent N.Y. Times story about the J.D. Power study of 4,300 mortgage loan applicants and their positive spin about the loan application process. Considering all of the funding and loan issues of late, this is a ray of hope.

Personally, I am already planning ways to make 2009 even more successful for my clients. But if they are not going to plan, and not planning to spend to establish or maintain a market share, the only way I can help them will probably be as a job reference in some other line of work.

Happy Turkey!!