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The Crossland Team
Sylvia Crossland, Broker Steve Crossland, MPM (512) 301-5811 |
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Austin Housing Starts Are Up
July 31, 2006
Austin continues its counter-cyclical real estate market. While National News is about increasing inventories, slower new home starts and slumping prices, we continue to march ahead with a very robust real estate market.
This news clip below is from today’s Austin Business Journal.
Source: Austin Business Journal
Housing starts in the Austin market increased 24 percent in the second quarter of 2006, according to the Austin office of Residential Strategies Inc.The quarter saw 4,171 new starts. Annual starts climbed to almost 17,000 units.
Most of the growth came from homes priced above $200,000, a sector of the market that increased 55 percent. Starts under $150,000 fell by more than 5 percent. Starts in the $150,000 to $200,000 price point increased by about 20 percent.
The firm also reported that Austin had an 18-month lot supply. The median new home price for the local market was almost $190,000 for the year ending in second quarter 2006.
Overpriced Listings and Discount Brokers
July 31, 2006
I’ve encountered this scenario on repeated occasions now. My Buyer is interested in an over-priced listing. It’s WAY over-priced – by about $20 per square foot, or about 15%. I am unable to find sales comps that even come close to justifying the list price, but my Buyer likes the place so I try to obtain further information from the listing agent. The property is listed by a Discount Broker. Over-priced listings are, in my experienced, disproportionately represented by Discount Brokers. That seems counter-intuitive to me, but it’s what I’ve observed. You’d think the Seller would use some of the “commission savings” to set a competitive price, but that’s not what we commonly see.
I email the listing agent and the conversation goes exactly as follows:
More About Austin Discount Realtors and How Commissions Work
July 27, 2006
Sylvia received a call today from an Austin home owner she met with last week. He called to thank her for coming out to discuss selling his house, and told her he has decided to go with another agent – one who is going to list the home for a 1% commission and offer a 2% commission to Buyer’s agents via the MLS.
For this Seller, a discounted commission was important, and he was up front about that requirement when he met with Sylvia. We don’t offer a discount program, so we did not win the assignment. Are we angry at the Seller or at the Discount Agent? No. Would we discount our commission to this Seller if we had it to do over again and could obtain the listing? No. That isn’t our business model.
We only know full service, full tilt real estate and we are good at that level of service. We don’t know how to give anything less. For example, there is no way I could bring myself to place only 1 photo in an MLS listing and charge extra for additional photos, as many of the Discount Brokers do via their “Unbundled Services” or “Ala Carte” programs. I’d actually be embarrassed to have my listings show only 1 photo. Photos are very important, as are virtual tours, because of the number of out of town buyers who select candidate properties online. We are simply not mentally oriented toward a partial, or limited service approach, and we are willing to leave that segment of the market to those agents who see value in this approach.
Do we think this Seller made a mistake by hiring a Discount Realtor? No. Well, we hope not. We wish for nothing other than a fast sale at top dollar for his home. We are not offended or hurt that he chose a Discount Broker over us. We understand that he wanted a service product that we don’t sell, and that’s ok. Real Estate customers do have choices, regardless of what we read in the news media and hear from consumer groups.
But this scenario provides a perfect opportunity to further discuss how real estate commissions work, and what might happen with this listing when it hits the Austin MLS with a 2% Buyer Agent commission instead of the more commonly seen 3%. Will the 2% Buyer Agent commission make the home harder to sell? Maybe – but not for the reasons most people assume.
The Discount Realtor Debate
July 27, 2006
Below is an article I saw on CNN/Money. The debate is whether Realtors fix commissions and lobby for laws that make it harder for Discount Brokers to offer services. I’m not happy to see politicians involved in this debate. It is humorous that politicians, who perform shameful funny-business with money more than any other class of people, feel qualified to scrutinize the appropriateness of the compensation structure of the highly competitive real estate industry. The real estate industry is already very highly regulated by laws designed to protect the public, and the real estate business is extremely competitive. Ask any of the thousands of agents who wash out of the business each year.
The current system works well. Buyers and Sellers can, with little difficulty, find Realtors who are willing to negotiate lower commissions, or offer Limited Service arrangements, if that is what the Seller or Buyer deems most important with the agent they hire. There is no price fixing. We don’t blacklist Discount Broker listings as some suggest. (I’m going to write a separate blog article on the fallacy of this assertion)
We have several Discount Realtors in Austin (search Google for “Austin Discount Realtor” if you’d like to consider hiring one). These companies and agents have captured little market share in Austin though. For example, the most visible Discount Broker in Austin, One Percent Realty, ironically, has 1% Market Share in Austin. This despite massive media advertising by One Percent, including a barrage of radio ads that disparage traditional full service Realtors and portray us as sleazy, greedy money-grubbers who drive BMWs and own Power Boats. See the One Percent TV ads on the One Percent Website. Their marketing stategy seems to be a combination of stirring ill will toward traditional Realtors, and promising big savings to potential customers.
The owner of any business must decide what his unique selling proposition will be. Realtors are no different. Some attract customers with lower fees; some with exceptional service; some with unique and specialized market knowledge; others have very effective brand identity and marketing campaigns. Some industries do limit competition and create barriers to entry (the medical profession for example), but there is perhaps no business easier to enter than real estate. In Texas, two to six weeks of classes will qualify most people to take the real estate exam. More than half of those who take the test flunk the first try, but most pass by the third attempt.
Real Estate customers are free to select from a vast sea of agents who want to earn your business. I’m going to write more about this subject later on, but for now, the article below does a pretty good job of outlining what people are saying about this topic.
July 26 2006:
NEW YORK (CNNMoney.com) — The fight over competition in the real estate industry went to a new battlefield this week as representatives of consumer groups, brokers and government agencies clashed before a House subcommittee.Few participants pulled any punches.
Realtor Ethics, Dilemmas and Screw-ups
July 26, 2006
When representing a Buyer or a Seller in a real estate transaction, REALTORS® must, among other things, abide by the Realtor Code of Ethics and Standards of Practice. Article I of the code begins with:
“When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly.”
A common challenge we have as agents is deciding what to do when we know that the agent on the other side of the deal is committing a screw-up that might cost the other agent’s client money, but doesn’t necessarily jeapordize the deal. This happens quite often in fact. Agents we’ve dealt with in transactions often misinterpret the language of the contract, don’t fully understand what their client is agreeing to, miscount the days in an Option Period, and, in general, commit errors or omissions in their representation of the other party that benefit our client.
Does Article I of the Code of Ethics say that we have to point these things out to the other agent? No. Article I says we have to treat all parties honestly, but we do not have to educate and train the other agent on how to best represent their client, nor do we have to ask if they understand what they are doing, or determine if they are competent. Sometimes, however, the lines become very difficult to draw. Let me give you some examples.
Staging an Austin Home for Sale – Sylvia’s Tips
July 21, 2006
In the mid-1980’s I worked as an Interior Designer. Every once in awhile I run into designers I knew when I was in that business. Last week I decided to add a few window treatments to my home and called a designer that was referred to me by a sales agent at a model home. I called the designer and set an appointment and sure enough when I saw her face I knew her! It was Jeannine from my past life as a designer.
As we were looking at my windows she asked me some tips on “staging homes for sale” because she has been asked to help people stage homes for sale but has never done this. As I rattled off the list of things I do, Steve – who was standing there – said “you should write a blog on that!” He’s been encouraging me to start adding blog articles to our website, so here we go – my first blog ever!
Austin Family Restaurants and Men Fighting in Underwear
July 20, 2006
My oldest daughter and I were out running errands a few days ago and decided to stop and eat dinner at the Green Mesquite restaurant in Oak Hill, near our home. Green Mesquite has always been a good place to grab a quick meal, and we’ve eaten there as a family many times over the years, often with friends and their kids too. It’s always been a kid-friendly place, and the food is consistently mediocre, which is good enough for us. We’ve always liked the causal atmosphere and good service.
We’ve gone less frequently though since a new owner took over the Oak Hill location earlier this year and installed TVs that are on all the time. We choose to limit media in our household and our kids don’t even watch TV. It’s become harder to go out and eat in Austin (or to the doctor, or to get an oil change, or a haircut, etc.) without having TV be front and center nowadays. Do we need this much TV?
Aggie Real Estate Expert Shares His Thoughts
July 20, 2006
Source: The Dallas Morning News, 07/19/06
Mark Dotzour, chief economist at the Texas A&M Real Estate Center, is celebrating his 10th year on the job.
Here are two of his opinions on the real estate market:
On housing appreciation: “The average rate of annual appreciation nationwide is still running at 12 1/2 percent. It’s unbelievable that the Fed has been tightening for over two years and home prices are still going up by that much. That tells me that there is intense demand in the United States to buy a home, in part driven by the basic need for shelter, but also by investors’ lack of trust in Wall Street. That is part of the Fed’s dilemma few talk about — the need to create an alternative investment, something else for people to invest in besides real estate.”
Why investors worldwide are buying U.S. real estate: “The big theme that’s affected everything has been a global oversupply of capital, which was largely engineered by the Fed and the Bank of Japan. And even though the global economy is pretty solid, most of the growth is occurring in countries where investors aren’t as comfortable putting their money. Think about it — if India was a state in the U.S., all of the developers in the nation would be fighting each other for a piece of land. If for no other reason than lack of opportunities, many investors — American and international alike — have stayed focused on the U.S. market. As a result, America has been hit with a tsunami of investment capital from all over the globe.”
The full interview is below.
Read more
Real Estate Speculation vs. Investing – Does Cash Flow Matter?
July 19, 2006
There is debate among real estate investors regarding the difference between “Investing” and “Speculating” in real estate. Generally, the tone and context in which the word “speculation” is used tends to be negative. i.e. “That’s not investing in real estate, it’s {sneer – with furrowed eyebrow and spittle flying from lips} SPECULATING in real estate”. OK, I’m exaggerating a little bit.
The most common dividing line used in making the distinction between speculating vs. investing in real estate is whether or not a real estate investment property returns a positive cash flow. If the rental property does not provide cash flow sufficient to cover the monthly carrying costs of the investment property, and the investor is betting largely on future value appreciation to provide the eventual return on investment, many consider this to be speculating. And they consider speculating to be an inferior, less desirable and more risky form of real estate investment than “positive cash flow investing”.
Wealth can indeed be built owning negative cash flow rental homes. We would all prefer positive cash flow properties, but focusing too much on monthly cash flow ignores other important factors. Let’s take a closer look at this question of cash inflow/outflow and the labelling of positive or negative cash flow as ‘good’ or ‘bad’.
Austin Homes Sales Continue Rise in June
July 19, 2006
Austin Residential Home Sales continue to be very strong. The number of homes sold increased 21% from 2,462 last June to 2,980 June 2006. At the same time, the number of active listings fell 2% from 8,637 to 8,477. The number of Pending Sales in June is up 31% from a year ago, from 2,506 to 3,286. This continued increase in demand along with reduced inventory is driving healthy value appreciation despite rising interest rates.
Average Sales Price is up 12% from a year ago, from $219,196 in June 2005 to $245,655 June 2006.
Median Sales Price is up 8% from a year ago from $168,500 to $182,000 (a new Austin record high)
note: the graph below has the wrong median amount on the chart, it’s $168,500 not $165,800.
