Home buying today versus back in the day…the evolving pursuit of the American Dream

March 1st, 2011

In 1995 Realtor.com went live, posting multiple listing information (MLS) from around the country in one database with public access. Before that, MLS information was proprietary. You couldn’t ‘see’ all the inventory of available homes without an agent / member of the MLS. Would-be buyers would drive neighborhoods looking for ‘for sale’ signs, or circle ads in the Sunday paper at the local coffee shop. But when they wanted more information on a home with that ‘for sale’ sign in front of it, or that ad in the paper, they had to call the phone number on the sign or ad. The real estate agent was the gate keeper.
Today you can see that same for sale sign, but now it may have a bar code-like ‘tag’ on it. Focus on the tag with the tag reader app on your smart phone and the next thing you know you’re looking at the home online, complete with a virtual tour of all the rooms. And if you don’t like what you see, another GPS powered phone app can immediately identify any other listed property in the area. In fact, by 2012, 20% of home searches will be done on a mobile device. The gatekeeper is nowhere in sight.

Things have changed a bit…but not the fundamentals.

For example, the common denominator in the above scenarios is that buyers typically initiate the home-buying process on their own. They rarely contact a real estate agent as their first step. What was true back in the day is still true today–buyers quite frequently find their agent through what we might call ‘the back door’ of agent inventory. However, now they can do it with a great deal of precision.
One reason for the delay in talking with a professional is the temporal factor. That is, from inception of the idea of making a move (‘honey, we’re pregnant’) until the actual move into the larger home (with at least one more bedroom for little Johnny) is statistically a 6-month to 2-year process.
This also explains why the classified ad in the paper or magazine typically doesn’t sell the house (only about 1% of the time). Similarly, the odds are against the ‘sign call’ turning into a purchase (about 12% of the time).
The common denominator that explains the low correspondence between marketing and advertising venues and selling the house is that when buyers are looking at the ad or the sign they tend to be early in that 6-month to 2-year process…they are not ready.
Rather than drive through neighborhoods, today’s buyers surf the web. 90%+ of today’s homebuyers will do at least some of their home searching online.
But the stunning statistic today comes from a large survey by the National Association of Realtors of homebuyers and sellers released 6 months ago. When buyers were asked where they first learned about the home they ended up purchasing, 38% report they saw it first online! This percentage has grown dramatically over the past decade and will likely continue…and why not. Purchasers like being empowered with both information and anonymity.

Has the importance of the role of the REALTOR diminished?

Ironically, internet savvy buyers find that in spite of and indeed because of literally millions of pages of online content, the local agent cannot be trumped by the web as the ultimate source for information. It is information overload within a minefield of legitimate risk management concerns.
Real estate will never be like buying an e-ticket or a stock online. It is fundamentally a local enterprise, where the idiosyncrasies of neighborhoods and individual properties can only be parsed by the professional who has lived and worked in those neighborhoods; who is familiar with those individual properties; and who knows how to maneuver the minefield of inherent risks. The online listing information won’t tell you if the property backs up to a landfill!
And when it comes to the decision-making process, the real estate agent / local specialist understands the many tradeoffs that every buyer must manage–like vintage versus proximity; square footage versus premium location, etc. There are always tradeoffs. Even the 2 million dollar buyer wants the 3 million dollar home!

Bottom line:

In the evolving pursuit of the American Dream technology will continue to redefine the home-buying process. Yet as true today as back in the day, one factor remains a constant—the local professional REALTOR is center stage. Only today, instead of carrying around a catalog of homes, they distribute free GPS enabled smart phone apps that track all the housing inventory in your area!

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Mortgage delinquencies lowest in 2 years

MBA economist: U.S. has 'turned the corner' in foreclosure crisis

By Inman News, Friday, February 18, 2011.

Inman News™

The percentage of mortgage holders who were behind on their payments dropped to the lowest level in two years during the fourth quarter of 2010, the Mortgage Bankers Association said in a report today.
At 8.22 percent, the seasonally adjusted delinquency rate was down from 9.13 percent during the third quarter and 9.47 percent from a year ago.
The percentage of mortgages in foreclosure climbed from 4.39 percent during the third quarter to 4.63 percent during the last three months of the year, matching an all-time high.
Fewer loans are entering the foreclosure pipeline: the percentage of loans only one payment past due -- 3.25 percent -- was at the lowest level since 2007, and the foreclosure start rate fell from 1.34 percent during the third quarter to 1.27 percent.
The percentage of loans three payments or more past due was down from an all-time high of 5.02 percent at the end of the first quarter of 2010 to 3.63 percent at the end of the fourth quarter of 2010 -- a drop of almost 28 percent over the course of the year. All but two states saw a drop in the 90-plus-day delinquency rate, and the increases in those states were "negligible."
"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner" in the foreclosure crisis, MBA Chief Economist Jay Brinkmann said in a statement.

While unemployment remains high, the economy added more than 1.2 million private-sector jobs during 2010 and first-time unemployment claims fell during the second half of the year, Brinkmann said. Absent a significant economic reversal, he said, "the delinquency picture should continue to improve during 2011."
The MBA National Delinquency survey covers 43.6 million loans -- about 88 percent of all outstanding first-lien mortgages. If the survey's results are extrapolated, about 4.1 million homeowners were 30, 60 or 90 days or more behind on their mortgage payments during the fourth quarter, and another 2.3 million were in the foreclosure process.

Economy in Arizona on the Rise

59 comments by Russ Wiles - Feb. 17, 2011 05:03 PM
The Arizona Republic

It may not seem like much of a recovery for Arizonans hobbled by job losses or falling home values, but the state's economy actually is improving at a solid clip.
So says Nathaniel Karp, chief economist for BBVA Compass and one of the few bank economists who tracks conditions here.
"Arizona's economic recovery is among the fastest in the country," said Karp, speaking to BBVA Compass clients in Phoenix this week. "And we're seeing a faster recovery compared to a few months ago."

Karp acknowledged challenges remain for both Arizona and the nation. Arizona's state budget is in particularly bad shape, including unfunded pension liabilities, he said.
But he also pointed to relatively strong manufacturing gains and exports, especially in software and other technology items. Other positives include an increase in hours worked for Arizonans with jobs and moderating price declines for home values here.
Karp predicted Arizona's economy would grow 3.4 percent in 2011, better than his projected 3 percent expansion for the U.S.
On the national economy, Karp sees continuing mild inflation and moderately rising interest rates, despite sharper price increases for oil and various other commodities.
He doesn't see commercial real estate bottoming until summer, but said confidence among business leaders had risen after Congress extended income-tax laws and signaled greater clarity in regulation.
Another bank economist who spoke in Phoenix recently, Paul Kasriel of Northern Trust, also sees gradual economic improvement for the nation in 2011.
In an interview, Kasriel said he expected the U.S. economy to grow 3.3 percent this year, helped by exports, consumer spending and a gradual uptick in lending. Housing and state/municipal finances will act as drags. He didn't provide a forecast for Arizona's economy.
Kasriel sees mild inflation, along with slightly higher interest rates. He expects the national unemployment rate, currently at 9 percent, to dip to 8.6 percent by year's end.
"I think the worst is over for housing, and it should show improvements by the end of the year," he said. "Housing now is a better buy than it's been in 40 years."
While Kasriel doesn't see a big drop in the unemployment rate, he said the employment picture had stabilized.
"If you've been able to hang onto a job for the last several years, there's an increasing probability you'll stay employed," he said. "We couldn't have said that two years ago."

Read more: http://www.azcentral.com/business/articles/2011/02/17/20110217economy-arizona-rise-expert-says.html#ixzz1EczXXRrE

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Most Say it's a Good Time to Buy

Most Say it's a Good Time to Buy

by Broderick Perkins

Most Americans believe the housing market has hit the bottom and that it's a good time to buy, in part because many also think rents will rise faster than home prices.
Fannie Mae's latest nation housing survey found that 70 percent of Americans think it's a good time to buy a home, up from 64 percent in January.
By an overwhelming majority, 78 percent, also believe home prices will either hold steady or increase over the next year, compared to 85 percent believing the same thing about rental increases.
While Americans expect rents to rise by 3.6 percent on average, home prices are expected to turn up only by 0.9 percent, Fannie Mae found.
"Given the remaining level of shadow inventory, as well as the high number of adjustable rate resets still looming which could in turn lead to further defaults, it is difficult to see the supply of housing falling in an amount sufficient to move prices upwards in many parts of the country," said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.
Also 67 percent believe housing is a safe investment, down three points since January and down 16 percentage points from a similar 2003 survey and the largest drop by far among all investment types tracked since then. Housing ranked second behind putting money into a savings or money market account (76 percent).
"Our survey shows that consumers see a mixed outlook for housing and homeownership," said Doug Duncan, Fannie Mae's vice president and chief economist.
"These findings indicate a return to a more balanced and realistic approach toward housing. While this will likely weigh on the housing recovery in the near-term, it should, over time, help to build a stronger and healthier market focused on sustainable homeownership," he added.
The Fannie Mae National Housing Survey polled homeowners and renters between June 2010 and July 2010 and compared the findings to similar surveys released earlier this year and 2003.
The survey also found:
• Mortgage borrowers (74 percent) and underwater borrowers (69 percent) are more likely to say owning a home is a safe investment than delinquent borrowers (57 percent) and renters (54 percent). However, this measure has fallen among all sub-groups since January, with delinquent borrowers and renters showing the largest declines, down eight and seven points, respectively.
• More than 70 percent of all respondents believe it will be harder for the next generation to buy a home, up three points from the beginning of the year.
• Fifty-four percent think it would be very difficult or somewhat difficult to get a home loan today, down six points since January.
• Thirty-three percent of all Americans said they would be more likely to rent rather than buy if they were going to move, up from 30 percent in January.
• Among renters, 60 percent said they would rent again if they were to move, up from 54 percent in January. However, 69 percent of renters think it makes more sense to buy a home than to rent.
• Mortgage borrowers (83 percent) and underwater borrowers (77 percent) remain bullish on housing and said they are more likely to buy in the future than rent — both groups increased two points from January.
"If you couple this (high inventories and rate resets) with the reality that it is far more difficult to obtain a mortgage as well as a job, when selling a home to someone who presumably needs financing to buy it, housing is still facing a conundrum." Osborne added.