Monday, September 26, 2011

Location vs. Price

A suburban Chicago seller has only one other property competing against it. Is this a good thing or a bad thing? From an advertising and marketing standpoint, I would say some of both. The idea is to find the “good” and use that as the marketing approach.

First, let me point out that I found out about this from a local newspaper story and am not familiar with the home or its seller, nor is the listing agent a current or past client of mine.

It seems that until the past few days, there was only one million dollar home officially on the market in Lombard, a western suburb of Chicago. Now there is another. This made the newspaper because the selling family is a former lottery winner who had this home built from the winnings, and now has listed the 14 room, 4,000+ square foot home at $1.1 million.

From what I have seen, the home appears to have all of the amenities of a million dollar home. Meanwhile, the other million dollar home currently listed in Lombard (as of this writing) is much larger and is listed for more than double the price (around $2.5 million). It means that this home stands alone for being listed in this price range within this suburb.

Rather than focus on the amenities, the advertising and marketing for this listing should be focused on why a potential buyer in this price range should relocate to Lombard, whether from nearby or from a distance.

There are people with enough money to purchase a home in this price range who would probably enjoy being the “big fish in the little pond”. Unfortunately for me, I’m not an expert on living in million dollar plus homes, but find it safe to say that being in a neighborhood of them leads to some decisions being made by other homeowners and the community. Being the only one of this type would likely afford some flexibility that an owner of such a property may not be able to have in other nearby communities. The story states that the home is on one of the largest lots in the community as well.

Lombard happens to be within a half hour of other suburbs which are more affluent and have sections with million dollar homes and estates. Thus, there are factors within the general area that have proven to attract such high caliber buyers.

If I was the agent and seller, I would be researching the current reasons why buyers and residents of million dollar homes within a reasonable distance of Lombard have moved in or remained in the area. The next step is to find the benefits of Lombard in comparison. Maybe it is at least part of the school system, proximity to upscale shopping, and so forth. The most positive result(s) should be the grabber for marketing this home. A “Million dollar living even closer to xyz” type of headline. Or “The biggest lot in town is ready”.

If I was a potential buyer of a million dollar home in the suburbs of Chicago, I just might want to be made aware of a unique property in this price range, even if the location is all which is unique. If I’m interested in the specific area where the house is located, then there is likely no competition. It becomes this house, or waiting for something else to come on the market.

Of course, this property has the endless rooms, full finished basement, a movie theatre, and much more that comes with a recently built million dollar property. These are features that can be found in other communities, but is not the biggest part of the story in Lombard.

Granted, it’s still going to be a challenge to find a buyer for a house in this price range. But if marketed with a unique approach for a unique property, there is more hope.

Thursday, September 22, 2011

Solving New Hampshire and Maine

The demographic makeup of the populations of both New Hampshire and Maine appears to be getting older rather than younger according to recent studies. How might this effect the real estate market?

At a recent meeting of the Business & Industry Association of New Hampshire, Peter Francese, Director of Demographic Forecasts for the New England Economic Partnership, presented the latest trends in population swing. His statistics show that households with residents aged 65+ are expected to almost double in New Hampshire within the next 10 years, making NH the second “fastest aging” state, behind neighboring Maine, in this category. The same study projects a drop of about 30,000 NH households among the 35 – 44 age group.

This information is, or should be considered, significant information for the real estate community. Instead, so far it is lumped in with other negative statistics, and without going for solutions. It’s time for some aggressive planning and thinking in response to this.

From my viewpoint, this is potentially devastating to New Hampshire and Maine. Putting this information out there that the middle age groups are leaving these states is harmful to everyone there who owns a family style home, whether they are looking to sell right now or not. A 4-bedroom home on the same block as a school won’t sell to a retired couple in their 70’s needing to be near a care facility.

Frankly, the next study to be done should be one to determine how this came to be. Seniors have been moving to Florida, Arizona, California, and other year-round sunny and warm climates for many years. Were it not for this study, I would not have had any idea that Maine and New Hampshire are places where senior living is on the rise.

Granted, I’m not looking at senior housing, but from constantly seeing real estate advertising and marketing around the country day after day, I can tell you that I don’t recall seeing anything targeting the senior market for these areas. This tells me that people entering their 60’s or 70’s have not been made aware of this either. Instead, the years of seeing and hearing about how many people retire and move (or take over their second home) in FL, CA, AZ, and others, will keep the senior mindset in that direction.

Maine and New Hampshire’s Chambers of Commerce, developers, and real estate companies would have to spend and produce a ton of publicity to attract the attention of seniors in the Midwest and the north thinking about retiring and moving to an area with good senior care and facilities in a big hurry. Otherwise, as the seniors currently occupying these homes pass on, it’s going to be difficult to find potential buyers.

Francese’s comments to the Economic Partnership included his saying that these states need more families to move there or stay there.

This puts the challenge in the hands of the real estate professionals in those states as much as the builders and developers. And it’s not an easy challenge, especially after reading the CoreLogic report earlier this month that showed an increase in the number of “under water” homes in New Hampshire for the 2nd quarter of 2011 to more than 40,000. That amounts to about 19% of all mortgaged properties in the state.

My first step would be to look closely at the schools and the attractions in New Hampshire and Maine. Find the achievement statistics and use publicity and social marketing to promote success for students attending schools in as many areas as the statistics will make favorable. Determine which attractions, activities, and shopping areas have the most appeal to the 25 to 54 age group. Research which businesses in these areas have the most employees within that age range and promote their successes.

Instead of sitting back and letting the demographics change and further damage the economy in these areas, take action to change the trend. If those involved continue to sit back and let this happen, the area may eventually be known as “Old Hampshire”.

Monday, September 12, 2011

Build It So That They Will Come

The battle to solve the real estate market crisis continues with one of the few interesting ideas I have seen. This story is from the Milwaukee Journal. It’s about a builder who is building homes in the range of just 1,000 square feet, albeit with a garage, which would result in owning a home with cruise ship or dorm room style living. The builder’s idea is to price them at less than $100,000 new.

Granted, the story is a newspaper story and not from a realty association or by anyone directly connected with the real estate industry. Yet, this is (or should be) a positive spin on a solution. I’d like to believe there are plenty of people out there who don’t want or need a lot of space and would welcome the chance to be a home owner within that price range. It might make the difference of a family or individual being able to afford a mortgage instead of renting.

Some of these homes would have multiple bedrooms, supposedly at 6 x 9 which could sleep 2 in each room.

However, this story wraps up with less than positive vibes. It goes on to say that the builder is only building two, which will go in one neighborhood in the Milwaukee area, and how the builder wants to see “if” there would be a positive response. (The opening already took place, and I do not have an indication as to whether or not it was successful.)

Even if the unveiling of these homes was successful, it is yet another instance of the “less than positive” marketing that continues throughout the real estate community. If I were marketing for Miracle homes, I would have been certain to point out that these “are the only the first two homes for this neighborhood”, and how “further expansion plans” are now in the works.

You have to act like you have a winner on your hands. That’s the first rule of promotion of a unique idea that fits a need. This isn’t just to pick on Miracle Homes, as this is the common problem with real estate marketing. Taking the “if anybody buys it, we will come” approach tells the public that you aren’t certain either. In a market where so much is uncertain in real estate.

The “wait and see if” attitude brought out in this story is way too typical, although it’s not the fault of the writer of the story. He was given the information and the interview. Sounds like the builder has been listening to too many realty agents or reading the negative statistics the agents and associations keep putting out there.

My point is that this is another version of the “Homes didn’t sell in this area last year after the tax credit ended, so they didn’t sell well again this year and we don’t know if they will next year” stuff the realty professionals have been dumping on us for a couple of years.

But in this case, it’s a solid idea. Builders across the country should be reading this story and feeling like they could expand upon the theory in most markets around the country and create a buzz. Realty agents should be lined up with potential buyers waiting to tour these smaller homes and asking about pre-ordering for their clients. Renters within 20 miles of these “first” homes should also be lining up to compare with their current apartment or unit and see if they could save money while being able to own. You have to start somewhere.

If you don’t use the opportunity to “build up” a buzz about a new property, there won’t be any reason to build up more new properties. And the market will be stuck the way it is.

Friday, September 9, 2011

Let's Appraise The Real Estate Market

Just within the past two weeks I have had some mortgage lenders from different parts of the country tell me that they are not able to close loans or refinances because of low appraisals, even after miles of paperwork had been executed. Yet, none of them could explain it in detail.

Certainly, I’m not here to attack real estate appraisers. They have a job to do, and I don’t know the first thing about how to do the hard work they do. However, it looks like they (appraisers) are just as caught up in this mess of a real estate market as the realty agents, hopeful sellers, and frustrated buyers.

My displeasure with how the realty associations and many agents continue to toss out negative statistics by comparing home sales figures is well documented over the past two years. Many of the banks contributed to the fallout on the mortgage side. And so it goes.

Sure, the appraisers have to go buy comps and other local market information. But wait a minute. A home sold via foreclosure is, or maybe I make that “should be”, considered a special circumstance and not a determining factor.

Suppose there is a development of 10 homes which sold more than two years ago for an average of $300,000. Then suppose two of those homes went into foreclosure and sold for an average of $200,000 within the past six months. I would prefer to think that since the only two homes in that development which sold were due to foreclosure, that it would NOT mean that the other eight homes are no longer valued at $300,000. Yet, that’s what’s happening.

Yet, it’s not only the appraisers taking this path, although it appears that this is what is causing purchases and refinances to be blocked. The realty agents and associations are going along with this trend. And many potential buyers and sellers, along with mortgage lenders and those related to a transaction, are being, well, screwed, because of it.

Here is my solution. Stop the madness. Why can’t the National Assn. of Realtors create a separate category for “Non-foreclosed homes”?

Using the ten home development as an example, comps would show that the eight “Non-foreclosed homes” are valued at an average of $300,000. The fact that two homes sold for a lot less due to special circumstances should not impact the value of the others.

Even if the “special circumstance” properties were factored in for “weighted” statistics, the impact would not be as draining for all concerned. If the $300,000 homes development was only reduced to a value of $280,000 due to “special circumstances”, it would most likely open up for more loans than appraisers coming in closer to $200,000 (based on current comps) and the realty professionals going along with that.

Let me put this another way. Suppose another national electronics retailer is about to go under and has a “Going Out of Business” sale including laptops. Let’s say they have an inventory of 5,000 laptops which retail for $800 each. And, due to court order, they sell them all for $450 as a final sale.

Would that mean that every comparable laptop for sale via other retailers still in business would now be priced at $450 permanently? After all, 5,000 people bought that brand and model for $450!!

A foreclosure is a court order. The property owner(s) could not or did not pay their money, and lost the property, and it was sold in this manner.

How are these situations different?

Instead of coming up with more negative statistics to show why people aren’t buying and selling homes in most cities, it would be nice to have the people who shape the industry working on some serious and immediate solutions to this crisis. Before it's too late and thousands more hard working people lose their homes, too.