WAYNESWORD FALL 2008
Changes in the Air… How Last Month Started
The first day of September dawned grayish, with silvery light, instead of the stark crystalline, pristine brightness of the last day in August. That was a blessed Sunday during which I sunbathed while sitting shirtless in the backyard, reading and writing all day, very much enjoying not having to go anywhere. But on Labor Day, the first, I was ready to get right back to work, though one of the two appointments I had arranged for that day cancelled, for reasons I’ll get into later.
Each day, before sunrise, I saw heavy dew condensing everywhere, before the sun got high enough to dry out the lawn, the hanging plant petals, the tall-standing black-eyed-susans and purple echinacea in the gardens. All the vegetation looked drenched, though it had not rained.
This is typical of fall’s approach in upstate New York, although the mid-days became as hot as any this summer. The chill air in the clear, starry overnights will not only trigger the dew, but will spur the primordial nesting instinct in people, at least subconsciously. September is often the best month of the real estate business, and I was glad to see it arrive. Seasonal tourists, much as we love them in a resort area like Saratoga, have returned home, and the town’s population thins out, for the most part, to those who are serious about sticking around for fall and winter, and all that those seasons bring. The casual, fleeting partyers of summer move on; the rest of us remain.
SUBTLE CHANGES IN THE MARKET YOU SENSE
If you are working with a variety of Buyers, as I do at any given moment, you noticed a subtle difference when you call to set other real estate offices for appointments—“That one is under contract…”
“We just marked that one as Pending…”
“Sorry, we had two offers come in on that one recently…”
Even though it is frustrating to the Buyer Agent who is looking for the right bargain for his or her own client, it is a good sign for the local market as a whole. Things are moving again, albeit still in slow motion compared to a few years ago. But this is more reassuring than the stagnant summer of a few months ago, when receptionists or appointment-setting agents would say things like: “That one hasn’t been shown in a while…” or “I’m surprised that one is still available…”
This phenomenon is selective, of course, not across the board. The good listings, the unique ones, go first in each price range. There are still plenty of raised ranches and 30 or 40 year old ranches for sale, and in certain neighborhoods with tract houses there are often many to choose from, at prices still considerably above what the original owners paid, whether that optimism is justified or not.
In Saratoga Springs and neighborhood Ballston Spa, the MLS availability is similar in the “affordable” price ranges—between $200K and 300K, there are easily 60 or 70 homes to choose from, and as you go up the scale to search $300K-400K homes, there are in excess of 80 or 90. Many of them are quite appealing in the pictures, with healthy sized lots (I was only looking at those with 1 acre-plus, come to think of it), but many had been on the market for the whole summer already, which I suppose is not a long time relative to some areas of the country, though it must feel like a marathon for the would-be home sellers involved…. So even though active Buyer Agents may bump into each other trying to get into the truly unique or rare well-priced offering, there are plenty of others to choose from—but are they less appealing, or still over-priced?
In any case, the biggest category on the daily Hotsheet is now
“Price Changes” as the disillusioned sellers and listing agents try to correct, according to the market, sometimes belatedly.
Even for someone who deals largely with Buyers rather than pursuing unreasonable listings, this market is frustrating because there seems to be such a huge gap between what the qualified Buyers want to offer for a property and what the Sellers are looking for as acceptable. Unlike the stock market, which daily finds its own level, the real estate equilibrium of prices takes much longer to work itself out.
Let me give one small example, going back to Labor Day…
well before the shock waves that occurred later in the month on
Wall Street—
The couple I was supposed to meet that day had been patiently searching the market for a couple of years with me. (That is, they were being patient; I’m not saying I was.) I thought I had found them a great home in one of their desired areas that would work: it had the acreage, the roominess, the condition, and style they were after, and was in one of their desired school districts, though not their first choice. Most importantly, it was in their stated price range, while most of the homes they had seen and liked, or inquired about, were often out-of-reach for them. They had a large down-payment but only one source of income, as the wife was home with three children between 1 and 4 years of age. They were understandably cautious about getting in over their heads. We had written two prior offers that did not go together, for different reasons, but mostly due to stubbornness on the part of sellers, who eventually sold for the price that my people were willing to offer, but not at the right time. The third time is often the charm, so I was psyched to proceed with an offer, even though it was Labor Day and other people were preparing barbecues—I had had enough of those backyard picnics, I was itching for productive work writing up a contract.
The wife’s voice on my phone machine had been almost euphoric—
This really might be the one!--which is what a Realtor waits for, and delight in—an excited buyer about to clinch their first home deal. But she had also said—We want to make real sure of the taxes before we proceed… this would prove ominous.
The estimated figure in the MLS printout was reasonable. But when the listing agent called me back after checking with the owner, she admitted that, while that figure had been accurate as of two years ago when the owner bought the home, he had checked his tax bills and found that the total figure was now actually about $1500. higher than the original number given. When I cautiously relayed this information to the would-be Buyers, they seemed immediately disheartened and upset. The husband made a certain fixed salary each year, only occasional overtime changed that. They budgeted every dollar he made. His wife did not want to work evenings, disrupting their family life, and was not about to put her kids in daycare to work at this point. They could afford the mortgage and the other household expenses—it was
the taxes, on a monthly basis, which put them out of the ballpark of affordability, in their minds. “If they’re that high now, they’re only going to go up…” she told me. I told them that as a Buyer Agent I could recommend that they could adjust their price offered downward accordingly to make up the monthly different, but the spell of excitement had been broken, or interrupted. I don’t blame the other agent or the seller for an inadvertent mistake—in a hot market, with willing buyers and a fair asking price, it wouldn’t have mattered, but in this case, for Labor Day at least, it was a deal-killer, a deal-breaker, a deal-staller. This is how sensitive people are to the issue of property taxes, and the proportion of household income they consume. It’s a small microcosm of the market at large, but a telling picture of a negotiation that stopped before it even started. The upshot of the story is that someone else bought the property since all this went down, but apparently not everyone is equally sensitive to the combined issues of price and taxes as my clients in question.
And That Was Before All the Bad News on Wall Street…
But the severe agitation of financial and credit markets that were ongoing in late September as I wrote this piece, will, if nothing else, make the crisis much more plain to the minds of would-be Sellers of late 2008. The news about AIG, Merrill Lynch, Lehman Brothers, Freddie Mac, Fannie Mae, and all the other wounded or depleted titans of lower Manhattan followed on the heels of the above episode. The real estate market which showed some faint glowing signs of a rebound as summer was starting to depart, seemed to seize up again as perfectly good buyers mostly retreated to the sidelines to wait out the latest round of bad news in the American, and world, media.
Fortunately, over the years I have cultivated the trust of many fine clients who are savvy investors and/or very circumspect home-buyers who have funds to invest in real estate and are awaiting the right types of property. I have a few good sellers who are neither delusional nor desperate but know that it is not the right time to be stubborn or arrogant, but to move with the market if they want to move their property. There are no magic Warren Buffetts out there to swoop in and salvage the real estate market as a whole with a discounted buy-out, but perhaps there are enough smart would-be buyers who see opportunity in the skewed fields of play right now to keep the local scene from stagnating completely, at least from my point-of-view.
After being in the business for 21 years, I have seen a few bad cycles to go with all the good ones. The early 90’s—during the “first” Persian Gulf War of the “first Bush” administration—real estate came to a complete standstill, which seemed worse to me then than this situation now. Prices were much lower then but interest rates much higher, and the populace was frozen in its economic tracks for a year or two, until a change in the Presidency seemed to inspire movement and spending again. I survived that trying time and plan to survive this as well.
SOME POSITIVES ABOUT THE PRESENT MOMENT…
Certainly we know that highly-leveraged buyers will not be the ones securing mortgages in the near future. But those with decent down-payments tucked away will now be taken more seriously in the marketplace than those who were willing to gamble on no-doc loans, adjustable rates, and stated-income gambits in the recent past. The rock solid buyers will have their way again. Interest rates will still be in their favor… well below 7% for conventional loans as I write this—
mid- to low-6% range has been holding for a while now. Buyers would’ve killed for fixed rates like that in the late-80’s and early 90’s—such numbers seemed mythical back then.
There is more inventory for buyers to choose from than anytime in the current millennium—across all price ranges. The feast of feasible choices, from new to used to vintage, is growing on a daily basis. And while sometimes the initial price level of certain homes seems high, given the times, the astute buyer will watch as the prices slowly tumble, till bargains are waiting to be had. For those sellers who might’ve gotten beat up a bit on their own price but have successfully sold—the reward on the buying side will more than make up the difference.
Regional banks in our area are touting their strength and safety—
Adirondack Trust and Saratoga National on the local scene, Trustco of Schenectady, Ballston Spa National, First Niagara, Pioneer Savings of Troy, to name a few—as they were typically averse to the sub-prime lending mess altogether in the past decade. There are also still nationally-known lenders—KeyBank, JP Morgan CHASE, Bank of America, Wells Fargo, and others—who still project a powerful image in the marketplace and are willing to lend, albeit under tighter scrutiny and tougher standards than in the past. FHA loan limits are much higher than they were in the 90’s so low-down-payment loans for those with excellent credit and secure jobs is still a possibility, though you wouldn’t know that from the current news cycle. Even a company like Countrywide, which suffered big losses nationally in recent years, has
performed admirably in the aftermath, and is still a force in the mortgage world in this area. There still seems to be ample money to be loaned to good, credit-worthy consumers to buy homes.
Looking for Truffles in the Proverbial Mud…
The real challenge is in convincing those worthy buyers that NOW is
the time to find some great bargains—it just takes an alert Buyer Agent
to help “root out” the best possible deal, like looking for truffles in the
proverbial mud of mediocrity. I would be glad to put my specially-trained snout to good use for any such buyer in Saratoga County or the Greater Capital District. I sniff out what I believe to be good deals out there almost every single day.
The hesitation and procrastination on the part of buyers and sellers involved in such a sputtering market is not always easy to deal with, from a full-time professional’s perspective. I’m not going to sugarcoat it. These are the times that try a Realtor’s soul, and test his or her resolve. These are the times when it’s hard not to think about various other possible employment options, dusting off and updating the resume… figuring it was a nice run while it lasted, but it’s not the rewarding game it used to be, there are too many well-meaning novices trying to make a living this way, cluttering up the business and diluting an already thin gruel of subsistence living (I’m exaggerating my metaphors for literary effect) for those of us who’ve been doing it a long time.
Everyone knows about and discusses how bad the economy seems to be,
how skittish both seasoned investors and would-be home purchasers are, how reluctant most people with money are to part with any of it. With an entire empire’s financial credibility hanging in the balance, it’s perhaps not the best time to be in commission sales… or is it? As we approach mid-fall of 2008, just before the impending presidential election, I tell myself it IS worth sticking with it, to help those who value my honest assessments, my perseverance and insight, and my respectful approach to both my loyal and brand new clients.
An Upbeat Cameo Appearance from Colin Cowherd…
Everything I’m reading lately emphasizes the need to give Gratitude for what you already have, and for what you are to receive, as if you’ve received it already. This is Not , however, to emphasize Greed, which is expecting more and more all the time as if it’s automatic, but true Gratitude, really acknowledging the blessings of every day, every present moment.
And in a time period of history when virtually Everyone is bitching and complaining about something, and people are fond of saying, Our society is going to hell in a handbasket…(whatever that means), it’s good to take a contrarian view, and imagine the opposite…. and sometimes you get the insight and emphasis you need from unexpected places, like--
Colin Cowherd’s rant one late morning in September on ESPN Radio:
I’m so sick of hearing about the good ole days, he starts out, adopting his old-coot stage voice: O ya shoulda seen when so-and-so played back in the day…at Notre Dame, or Dodger Stadium on Flatbush, or at the old Madison Square Garden…
But the fact is, he continued… Even though some people will want to tell you that life was w-a-a-y better back in the “simpler times” of the 40’s or 50’s or the 70’s, they’re just flat wrong--
Everything’s better now than it used to be—
In sports: Athletes are better,
Offenses are better, defenses are better,
Training techniques are better,
Food is better, nutrition is better,
Competition is better,
the new Stadiums are better, they just ARE.
And in real life: Cars are better,
Transportation’s better,
Communication’s better,
Computers are better,
Telephones are better,
Televisions are better,
Our houses are better,
Ho-tells are better,
Vacations are better,
Restaurants are better…
In short, there is no better time, in the history of mankind, to be alive than right now…
I’m paraphrasing here, but the point is, Mr. Cowherd was on a positive roll that day. He’s often sarcastic and combative, or sometimes preachy and shrill, like most of talk radio, but on that day he was right on the money. I was impressed, nodding in my car as I drove and listened.
His rant became a mantra in my mind for a day or two…
There IS no perfect time in the past to go back to…when the Dodgers were still in Brooklyn, or Y.A. Tittle was still throwing passes for the Giants, or Johnny Unitas was with Baltimore, or Joe DiMaggio was prowling center field for the Yankees, or Willie Mays for the Giants, or the now-woeful Knicks could win a title with Reed and Frazier and Bradley… when hamburger was still 75 cents a pound and gas was under a dollar a gallon… when men wore fedoras and suit coats and women wore full-length dresses everywhere they went… a history of pure harmony is a myth…
This disruption of the “normal negative” mentality of the present accomplishes a couple of things—it acts as shock treatment for those who are foolishly nostalgic all the time—anyone my age or older, in other words… and it helps validate for the younger people, even those with NO sense of history, that YES, the present tense is the time that matters the most. Be grateful for what you have right now. That cell phone that downloads music, snaps instant pictures, and keeps you in touch with your myriad friends—none of that existed even a decade ago, so appreciate it. I just heard Kid Rock sing a song about his youth, reminding us that there was NO INTERNET as recently as 1989.
There were also no iPods or MP3 players, in fact at that point the personal computer and CDs were not in wide use. There was NO centralized computer database for the MLS system in real estate at that point—we were still subscribing to fat phonebook-sized MLS publications that we fought over when they came out monthly, or else index card files of properties by the office phone. Things were primitive in that sense, believe me, until 1993. There was no MSNBC or Weather Channel or HBO (was there?) or digital TV. The only cell phones in use back then were as big as Walkie-Talkies from World War Two.
There were no cable channels dedicated to featuring Homes for Sale or Home Makeover tips or HGTV. About the only thing in common between the business now and then would be several dozen of us veteran agents and brokers, and the use of yard signs—almost everything else of a technical nature has changed. But that is all for the better. A dozen digital pix of virtually every home for sale, available on-line the same day the listing goes into the MLS—this is a great boon over the old single grainy black-and-white front photos which used to take 2 weeks to show up in those fat bi-weekly books of listings.
Some things don’t change, however—person to person contact, people skills, listening to clients’ needs, and being honest about the houses or properties in question. Responsiveness, promptness of returned calls, being articulate, attentive and respectful—these are some of the timeless qualities Realtors need to maintain, no matter how high-tech the business becomes. Salesmanship, on the other hand, has faded a bit in favor of service, informative support, and guidance in decision-making.
Offering a wide range of options for buyers and sellers alike, and warning them of possible pitfalls in the process, are the kinds of things that good human beings can provide which no inanimate machine will ever be likely to reproduce.
“I will not get to Heaven, unless thee get there before me…”
--Vow of the Bodhisattva
No matter what year it is when you decide to try to climb Mount Everest, a humble but locally knowledgeable sherpa will still, no doubt, be helpful, and well worth the price.
On that note, I return to my tasks, and wish you well for this complicated period in history, and hope to still be writing about real estate when the next season rolls around.
Take care, and thanks for reading…
Copyright Wayne Perras 2008
Posted October 6th 2008