(Mish, cont.)
â2006-04-30
Most of you know by now that my âday jobâ is real estate. My wife and I practice real estate north of Atlanta up in Roswell and Alpharetta. As Mish continues to pound away trying to make the point that residential real estate is doomed or worse, I feel honor-bound to jump in every now and then and remind everyone that real estate is local, local, local. That means that even if real estate is in trouble in, say, Florida, it's still, according to my sister, doing extremely well in Houston and very well, I would say, in Atlanta. We have 12 deals closed or pending through April, which is about where we were this time last year. It's looking like a 25-deal year, which is fine.â
â2006-06-10
This year is quickly becoming what might euphemistically be called a character-building experience. We are off to the slowest start in the 12 years we have been in business. Here's a taste of what we are up against. Two months ago, we took a great listing in Alpharetta, just to the north of us. It's a beautiful three-sides brick, full-finished basement in a cul-de-sac. They listed at $550,000, which was actually a little below what we recommended. They are definitely motivated to sell. When we had lots of looks, but no offers, they agreed to drop the price to $535,000. I e-mailed all agents who had previously shown the house, to advise of the price drop, and sure enough, one agent brought his buyers back for a second, then third, look. They offered $495,000. We countered at $530,000. Our sellers said they really did not want to go that much lower. I was not too concerned. I expected a counter from the buyers, then another counter from my sellers, and we would eventually get there. The next morning, when I did not hear back from the buyer's agent, I gave him a call. Did I get a shock: They were done, that was it, no higher offer. So what we have are buyers who just don't want to pay too much, who are really skittish, and sellers who are having trouble accepting that things are slowing down. Two years ago, or even last summer, we would have that house under contract. But not this year. We now have a total of six listings, five of which have reduced, the other is brand new. Only one really active buyer, plus two of the listings who will buy locally if they can first sell. If things don't pick up fairly quickly, this will be our slowest year ever. We have closed or have pending a total of only 12 transactions year to date. We have booked only one contract since May 1, which is really slow. Our business plan was 30 transactions; I would have been OK with 26, but at this rate, we will not reach 20. This is normally our peak season. If Atlanta, which has been a solid market with no speculative price run-ups, is faltering, then I suspect that this slowdown has become national at last, no longer just local.
âThe economy is slowing and is doing so rather quickly. In my opinion, at least, the chances of a recession starting no later than the first quarter have increased significantly.â
â2006-07-20
Most of the regulars here know that my wife and I are a REALTOR team associated with one of the major national firms here on Atlanta's north side, out in Roswell and Alpharetta. It's been a character-building year, as another agent in our office put it the other day. What makes it more stunning, at least to me, is that it started out so well. We ended the first quarter with nine deals pending or closed, which is a very solid start. Then we hit a brick wall with only three deals in the second quarter and that would make it our worst second quarter ever in our 12 years.
âThen it got worse. Normally, over the years, about 1 in 15 deals falls out -- that is, they fail to close. Usually, it's over the inspection contingency amendment, but not always. At any rate, two of our three second-quarter contracts failed to close. Unbelievably, we booked and closed only one contract in the second quarter. So here we are, July 20, with only 10 deals for the year. What a mess.
âHow those two contracts failed just might tell a story about this yearâs market and the economy in general. First, one of them was, indeed, over the inspection amendment. Most of you understand that after going under contract, the buyer is entitled to have a qualified home inspector do an inspection. The buyer then presents a copy of the inspection to the seller, along with an amendment to the contract asking for the repair of defects affecting safety or the structural integrity of the home. In this instance, the buyer went far beyond that, asking for, at least in my opinion, cosmetic items and home improvements. Our sellers' response, I thought, was more than fair, but the buyer would not yield. Normally, we can work these differences out, but not this time. Looking back, it is clear that the buyer was determined to wring additional concessions out of the seller or not close. We had a failed agreement, and both parties signed a termination and release, as required. That listing is back on the market.
âThen, the other failed contract was even more unusual. We had been working with relocation buyers from Cincinnati for several months. We found them a great house and went under contract. Ten days before closing, they called to say they had decided they did not want to move. [Instead,] he is leaving the company [that was] trying to move him to Atlanta. My take on this is he was afraid they would move him down here and then let him go. His company is facing a management reshuffle. But who knows? At any rate, it cost him $5,500, his forfeited earnest money.
âSo here we are with 10 deals and needing a total of about 20 to meet our cash flow needs: personal and business, plus taxes. The last year we failed to âmake a living,â so to speak, in real estate was about 1994. Without a strong finish, we just may be looking at that again. What are our chances of pulling it out? It's still possible. We have several buyer prospects, plus we have 10 listings, and listings are the lifeblood of any real estate business. We will, with certainty, get one more listing by month's end. On the other hand, we have a listing that expires at midnight Monday and we don't expect them to renew. They have had two lowball offers and have refused both. My take is that they can't reduce without going underwater.
âWhat do you do if you owe more on your home than you can sell it for? Apparently, you just decide to sit on it and hope for a better market, at least for now.â
Mish Says:
For one reason or other, REALTORS across the country thought, "It's different here." "We are unique." "Real estate is local." "It won't happen here." "There is no bubble."
