Housing Stats for 11/20/2005

Watching stats like these will help you determine what kind of a market you are in.

For Kitsap County Washington as of 11/20/2005

953Active Listings
72 Homes went Pending last week
52 Average Days on Market
$278,189 Average List Price
$275,704 Average Sale Price
99% List price to sale price ratio
13.23 weeks of inventory

Learn more about Defining Your Market

Helping Home Sellers With The Square Footage Question

Your client is ready to buy their dream house, but they question the square footage listed on your flyer and want to know how exactly is was determined. What do you do? And what if it’s inaccurate?

Due to lack of well-defined standards, and always-evolving definitions of square footage, agents typically rely on a previously calculated assessment figure which may have come from a county tax authority, a private appraiser, the seller, or a builder’s blueprints. However, often times, these figures don’t agree.

Due to discrepancies between county, seller and appraiser square footage figures, you should always indicate that the square footage represented in any advertising materials is “approximate” or “deemed reliable but not guaranteed.” If a discrepancy in square footage figures does arise, a buyer should be advised to investigate the sources, and seek advice from a qualified appraiser.

Redmond, Washington real estate appraiser Alan Pope says “square footage is often broken down into “finished” and “unfinished” living space. “Finished” living areas are described as “covered with sheetrock and wallpaper or paint.” A heated area is also a good indicator of finished space. Areas like attics or basements, which are “potentially liveable” are classified as “unfinished.” Finished and unfinished areas are added together for the listed square footage total.”

Square footage is calculated by using the home’s exterior measurements to the
smallest even foot. An appraiser measures the entire perimeter, noting all measurements on a sketch. Many assessors now use a laser measuring device. The appraiser starts with making a sketch of the entire perimeter, delineating “finished” versus “unfinished” at the end of the process.

To calculate area data, the home is broken down into the basic shapes of rectangle, triangle, or circle. The analysis can take fifteen minutes for a rectangular ranch house, or up to three hours for more intricate homes. A conscientious appraiser then adds his or her calculations together to ensure they “compute.” Alan likens square footage calculation to “building a puzzle – from the outside in.”

A few general notes—which may differ by county or state:

• A split-level entry way is only counted once.

• Though potentially it could be divided into upstairs and downstairs space, a two-story cathedral ceiling living room is counted once.

• Areas not directly accessible from finished living space such as storage sheds, breeze-ways, covered patios and detached cottages are never included in the square footage total.

• Garages are generally not included in square footage figures.

• Closets in a finished area are included in “livable space,” whereas a furnace closet in the basement would be calculated as “unfinished.”

• An area with a low ceiling, such as a loft, is measured only where ceiling height is at least four feet.

• For an attached dwelling such as a condominium, square footage measurements can be made from the inside surface of the wall, with an extra six inches added to compensate.

As an agent, it is important that you do not take a square footage stance. However, if the issue is important to your buyers, they need to make it a condition of purchase, and seek a professional to determine measurements.

Housing Bubble Questions and Answers

In past posts we've discussed the housing bubble. Here is an article I ran accross from the National Association of Realtors. What is a housing bubble? As broadly interpreted, a housing bubble refers to an unsustainable gain in home prices. The premise is that a price bubble is at risk of “popping,” resulting in a loss of equity. Has there ever been a national housing price bubble? No, not since good recordkeeping began in 1968. There was a national decline in the 1930s during the Great Depression; however, home prices were not a prime concern in that era. The greatest issues were essentials such as food, clothing, employment and shelter of any kind. Declining home prices were a natural result of a general economic collapse caused by the stock market crash in 1929. What is the “normal” rate of home price growth over time? Since 1968, the national median existing-home price has increased an average of 6.4 percent per year. However, that includes a period of high inflation. A better frame of reference is in relation to the overall rate of inflation. Home prices typically have increased 1.5 percentage points faster than the rate of inflation, as measured by the Consumer Price Index. What are the biggest factors that drive home prices? In simple terms, it gets down to supply and demand. The inventory of homes available for sale has been historically low since 2001, which is why home prices have been rising at above normal rates. In a balanced market between home buyers and sellers, there typically is a six-month supply of homes on the market. Over the last four years, the supply has hovered around 4.5 months. By contrast, in the recessionary period of 1990-1991, there was in excess of a 9-month supply. What conditions are necessary for home prices to soften or decline? Generally, two conditions are necessary for price softness in a given area: an oversupply of homes available for sale, and adverse economic conditions – generally a weak local job market. Sometimes these conditions occur against a backdrop of overall economic weakness, recession or high interest rates. Where and when have home prices declined in the past? What were the general market conditions? Most metropolitan areas, especially in the Midwest and South, have not experienced price declines in the era of modern recordkeeping. In the period from the mid-1980s though the early 1990s, many metros in the Northeast and on the West coast saw localized declines. Typically, this occurred in large population centers with very little capacity for growth. When housing shortages developed during a period of high demand, prices grew at sharp double-digit rates – often over 20 percent per year – for several consecutive years. After local economic conditions declined in those areas, home sales stalled and the inventory of unsold homes rose, which eventually led to price softness or decline. How long have home prices declined in the past? Although there are exceptions to any general finding, most metro areas that experienced price declines were relatively short lived (several years). Most homeowners who went through such downturns -- but stayed in their home for a normal period of homeownership -- still netted healthy gains when they sold. People view homeownership as a long-term investment as opposed to the kind of quick-in, quick out investment that Wall Street is fond of. Unlike stocks, homeowners don’t panic sell simply because a home down the street sold for less. Home prices tend to be sticky on the downside -- usually a single digit decline in any given year following a sustained period of double digit gains. Very few people buy at the top of a market and then sell in a short timeframe. After several years, home prices level and return to normal appreciation patterns. Should we be concerned that home prices are rising faster than family income? No. There are three components to housing affordability: home prices, income, and financing costs – the latter are historically low. During the last four-and-a-half years of record home sales, there has been a shortage of homes available for sale. As a result, home prices during this period have risen faster than family income. However, in much of the 1980s and 1990s, the reverse was true – incomes rose faster than home prices. On a national basis, according to the Housing Affordability Index published by the National Association of Realtors, a median income family who purchases a median-priced existing home is spending a little over 20 percent of gross income for the mortgage principal and interest payment. In the early 1990s, a typical mortgage payment was in the low 20s as a percent of income, and in the early 1980s it was as high as 36 percent. Overall housing affordability remains favorable in historic terms. What are the prospects of a housing bubble? There is virtually no risk of a national housing price bubble, based on the fundamental demand for housing and predictable economic factors. It is possible for local bubbles to surface under the right circumstances, but that also is unlikely in the current environment. There are tight supplies of homes available for sale in most of the country, and labor markets have been improving. In other words, the two conditions necessary for price softness do not exist in most of the country. The strong underlying demand for homes results from the simple fact that the population is growing faster than the supply of homes. In addition, it is highly unlikely that the cost of construction will decline. In fact, construction material shortages are expected to continue and the cost of building and development is trending up. Baby boomers remain in their peak earning years. Echo boomers – the children of the baby boom generation – are just entering the period of life in which people typically buy their first home. The echo boom is the second largest generation in U.S. history. Considering the median age of a first-time buyer is 32, echo-boomers will be a big factor over the next decade. In addition, immigration has been strong for many years. Census data shows that immigrants eventually achieve homeownership rates higher than do native born Americans – this also will be a strong factor in housing demand in the future. Also, minority ownership rates have been trending up. All this means the demand for housing is historically high and is one of the reasons 2005 will be the fifth consecutive year of record home sales. Even in an economic downturn, the demand remains. If conditions become unfavorable, home buying may be postponed, but a general price decline remains highly unlikely. What is likely to happen with home prices? The forecast is for mortgage interest rates to rise slowly over the next year, which will have a minor breaking effect on home sales. The good news is that will help inventory levels to recover and allow the market to come into a closer balance between buyers and sellers. In other words, a general slowing in the rate of price growth can be expected, but in many areas inventory shortages will persist and home prices are likely to continue to rise above historic norms.

Real Estate Stats for Kitsap County WA 11/6/2005

Watching stats like these will help you determine what kind of a market you are in.

For Kitsap County Washington as of 11/6/2005

935 Active Listings
50 Homes went Pending last week
52 Average Days on Market
$276,924 Average List Price
$274,861 Average Sale Price
99% List price to sale price ratio
18.7 weeks of inventory

Learn more about Defining Your Market.

Are you Prepared for a Downturn in the Real Estate Market?

We have become spoiled. Whether real estate agent or real estate seller we have come to rely, even become lazy with this fast paced market. Well times could be changing! Over the past few months, in Kitsap County Washington I’ve noticed the inventory begin to grow. Nothing drastic yet, just a small dust cloud on the horizon. It could be that we are just going into the winter months, could be that interest rates have been moving upward, could be gas prices are high, could be the ¼ hike in prime yesterday……could be a little of a lot of things. None the less a few of the signs are there.
So…..how does this affect me?

If you are a Seller:
You may not sell your home in 4 days. Historically in Kitsap County 60 days was the norm. Only in the past couple of years have we seen such quick sales. You may not want to over price your homes as much as you have grown accustomed to. In fact if the market turns sharply the worst place you can be is to find yourself chasing the market down. Few Sellers have the guts to cut prices fast enough to get ahead of a falling curve. Make sure you’ve covered the basics: Interview and choose the best agent. Don’t base your decision solely on the lowest commission. Many low commission, low service companies have sprung up in this market and they may not have the resources, momentum or tools to market your home or provide you with the personal service a normal market demands.

If you are an Agent:
Pricing - Have the tough love discussion with your seller about pricing. In the past you may have been able to over price a home by 10 to 15% and get away with it. The theory was to just wait…..the market will rise to meet our price. This is dangerous thinking in a changing market.

Marketing – Get back to basics. Priced right. Staged to the 9s. Host Brokers opens…..feed the ones that are working with the buyers. Make sure you have a good web presence. Take lots of pictures. Write three ads and rotate them in the local paper. Identify and work the top selling agents in your market.

Your own business – In a normal market buyers and sellers do not spring up as perhaps they have been. Again…..get back to basics. Return all calls by the end of each day, call 20 people every day, send thank you notes every day, communicate regularly with everyone in your sphere of influence, work un-represented sellers (there will be more of them…aka FSBO), watch your hot sheets and call expired and withdrawn listings, circle prospect every listing, 50 people, 4 mailings, 4 phone calls.

After having read this post you may think I think the market is falling……not true. In Kitsap County we are due to slow, after all anything is slower compared to the crazy market of this past year. Regardless of why it is a little slow now, as professionals we need to keep our ear to the ground for change in the market. We owe it to our selves and most importantly to our clients not to get caught in a falling market without letting them know. Stay tuned……I promise it will change!!!!!

Real Estate Statistics

Watching stats like these will help you determine what kind of a market you are in.

For Kitsap County Washington as of 10/31/2005

933 Active Listings
51 Homes went Pending last week
51 Average Days on Market
$273,723 Average List Price
$274,119Average Sale Price
100+% List price to sale price ratio
18.29 weeks of inventory

Learn more about Defining Your Market.

Books to Recommend

Over the past week I've had several requests for books that I would recommend. Here is a list of books that I've given to our agents over the past few years as Christmas gifts. As with any book, there are going to be some people who love it, a few that hate it and most who enjoy it. I think I've been able to get everyones attention in one way or another over the years with this list.
Please......let me know what you think and if you have any that you would recommend.

Frankly Reading Book List

Housing Stats 10/23/2005

Watching stats like these will help you determine what kind of a market you are in.
For Kitsap County Washington as of 10/23/2005

890 Active Listings
84 Homes went Pending last week
52 Average Days on Market

$273,981 Average List Price
$273,672 Average Sale Price

100-% List price to sale price ratio

10.59 weeks of inventory

Learn more about Defining Your Market.

Focus

I was just cleaning out some old paperwork and found some notes for a class I put on some time ago. Thought I’d share…….

A person’s ability to focus can allow them to accomplish amazing things.

Focus on the right things in the right balance…..Wow!

What sets one real estate agent apart from the others is their ability to focus.

Without your own focus you are just living a life, day to day on someone else’s terms.

So many tasks, so many people, so little time…..it’s all about focus.

Joining a real estate office......a few thoughts.

The Process: Beware of the broker that does not have a process or is winging it. You will want to meet at least 2 or 3 times before you make a hiring decision. Keep in mind that you are hiring the broker just as much as they are hiring you.

Size of the office:
First off let me define size from my perspective.
Less than 15 agents is a small office. (a high percentage of offices in this country fall into this category)
16-30 is a medium small office.
31-60 is a medium office
61- 80 is a medium large office
81+ in my opinion is a large office
125+ is a Mega office

Size is not as important as energy, synergy or momentum. I’ve seen offices that have 75 agents and feel dead. I’ve also been with offices that have 20 agents that feels totally energized and driven. What you want to see is a balanced office. One that has a few new agents as will as some old timers. Within that group you want to see even earnings. An office in which you have a few big hitters and a bunch of low producers will not work for the long term. Even though our industry has 10% of the agents making 90% of the money you want to try to find a balanced office.

Market Share:
Having a strong market share means momentum for the office. It means business is rolling through the office and that you have a better chance of getting into that business stream. The make up of the office is more important then market share it holds. I know of several offices that are number one in their market place but they are no fun to work in. An office may hold market share only because they have more agents. What is more important is the success per agent. If an office you like has the energy, an enthusiastic manager, the tools to help you ramp up your business but is only ranked #2 or #3 in the market, go for it. If an office is full of energy and growing, market share will take care of it self. I’ve always prided my office in being number 2 in market share, but number one in individual agent production.


New agent training:
Understand one thing going in……It is always up to you. A good broker will give you the tools, teach you the concepts and offer support, but they will not do it for you. You are in business for your self, start thinking that way.

The worst of the brokers will welcome you aboard, shake your hand and say here is your desk, here is your phone, here is the phone book, now get busy. What you are looking for is a company that will offer real tangible support ie:
Post licensing classes
Weekly training
Personal time with the broker
Staff advisor or mentor program
Other agents you can model that are successful

Business Models:
Boutique or single office: This model represents one end of the office spectrum. Can be cozy and friendly though may lack support that a larger office might be able to afford. May be better for an experienced agent.

Franchises:
The true sense of this model means the core company is no longer interested in selling real estate on a day to day business. Not unlike McDonalds, their goal is to sell and open new restaurants, then sell all of the products to support the new franchise. It becomes the mission of your local McDonalds owner to sell burgers. This model seems to maximize the best of the two extremes. (OK so I’m biased. I co-own three offices that fall into this category) Offices in this category are usually owned by local owners. They often own their own buildings, they are the decision makers and can implement changes a lot easier then the corporate model.

Corporations:
We are talking the mentality here not the necessarily the business type. This represents the other end of the spectrum. There is one main office with one owner for a group of offices. Managers in each of the offices must get corporate permission to make decisions or implement new ideas. Top down management with new ideas starting at the top and filtering their way down. Though your image may be enhanced by a consistent marketing message and you will tend to have more tools and services available, you give up flexibility and ability to change.

Attractions:
Be aware that different business models seem to attack different agent types. Get an idea what type of agent is being attracted to the office or company you are interviewing with.

Tip:
Talk with local escrow officers to get an idea what agents seem to be the most prepared, most professional and seem to do the best job. This may lead you to a company that matches your ideals.

Click here for a list of 10 questions to ask a potential Broker.

10 Questions you will want to ask a Broker Before You Hire Them.

You have just earned your real estate license and now you are looking for a broker and company to work with. Here are 10 questions to ask

1) How long have you been in the business? (The person, not the company)

2) Why are you still in the business?

3) Why did you choose to work for this office and this company?

4) What do you do to help a new agent get started?

5) Thinking of your last 5 new agents that you’ve hired:
a) How many are still at the office?
b) How much did each of them earn so far?
c) What did they do to become successful?
d) May I talk with two of your new agents?

6) Thinking of the agents you have:
a) How many agents are in your office
b) How many do you want?
c) How many have left in the past year?
d) Why did they leave?
e) May I talk with 2 of your experienced agents?

7) What is your business model? How much does it cost me and what do I receive in return?

8) What makes you different from your competition?

9) What do you look for in an agent? What are your expectations of me?

10) When I have a problem or a challenge how do I get your attention? How do I get guidance from you? Evenings, weekends?

The answers to these questions will help you decide whether or not you want to work with this broker. Don’t forget….while they are interviewing you…..you are interviewing them. You want to make the right decision, the first time.

Now that you have your real estate license.

You have your real estate license……..now what???

In the state of Washington a new licensee must place their license with a Broker in order to practice real estate. This can be a daunting decision. How do you choose a broker or company to work with, what do you look for, how do you choose?

Imagine you want to go swimming. You have found a group of indoor pools. You need to figure out which pool you want to jump into. You don’t want just any pool, you want one that is clean, warm, not too crowded, one that has dry towels and nice showers. Sounds easy right……now you have to choose by looking in the windows you can’t actually go in. If you are lucky you might be able to ask some of the swimmers who are leaving the pool. You ask questions to try to get an idea what its like at that pool. You know that once you make the decision you are going to be jumping into the deep end, so you want to make sure you make the right decision, the first time.

Trying to figure out an office to join can be the same way. If you take the time it can be a little easier in that you will want to interview the manager. You will want to talk with several agents who are working for that office. Talk with a couple of long time agents as well as a couple of new ones.

This is not a time for quick decisions, even though the broker may be pushing you to join. I’ve had agents ask me if it is hard to get a job once you have a license. The challenge is not getting a job offer (many brokers will hire you on the first meeting because they just want to put another license on their wall) the challenge is trying to decide why you might want to work for a broker that is so willing to hire you after only one brief meeting.

Click here for a list of books that I recommend to agents just starting the business.