Spring 2009 has arrived, and real estate has the sound of a bee hive. You can hear it and see it. Realtor® bees are busy making stuff happen. After the long dormant housing winter, the hive is active and Realtors® are making honey.
This is a nectar that all of us live off of — economic activity. The road to recovery in every major recession of the last century began with a revival in housing. We Realtors® are doing our part to lead now.
We have had to temper our message from it is the right time to buy; to it may be the right time to buy. The preface to our message is that you need to have good credit, a job, and realistic expectations before you can sincerely realize the American Dream.
With lower housing prices, historically low interest rates, strong income, and the $8,000 first-time home buyer tax credit, this is the best time to buy since NAR began keeping records on housing affordability 39 years ago. All of the elements converged to make this a superior time to purchase.
Sometimes this call to action sounds self serving because Realtors® earn a fee from completed transactions. While this is true, it is not the compelling factor in the argument to encourage people to buy now.
There is a more important message: in the long run, home ownership is a great choice for families, for communities, this country, and the global economy. For individual families who own, they are 38 TIMES wealthier than families who rent. When you look at the multiplying effect of this wealth, you will see it generates lots more economic activity. In the long run, the equity that one ‘earns’ by paying off their mortgage reduces their need for government assistance as one ages and gives one an asset to use to pay for life expenses. As you can see, long term home ownership is superior.
As Realtors®, our challenge is to encourage people to own, and acquire, but with appropriate prudence. Encourage your clients to buy and own something that they can afford. That’s the best way to make honey this spring! – Ron Phipps, 2009 NAR First Vice President
Typically, legislative issues aren’t thought of as part of the Treasurer’s job. While I might agree with this philosophy if we concentrate on the column labeled “job description” I really think we all have an obligation to watch proposed law and regulatory changes. As part of the Leadership Team I am involved in lots of issues that are non-financial in nature. In fact, this this week, I represented the NAR at the Real Estate Roundtable meetings in Washington, DC.
In a perfect world it would be easy to surmise that we would all have the same objectives – at least in the sense of our long term thoughts. I’ve attended several of these meetings and I find each meeting to be filled with a diversity of thoughts.
We spent time talking about the Foreign Investment in Real Property Tax Act, or FIRPTA. Foreign investment in U.S. real property has gone from more than $25 billion down to $7 billion annually. The infusion of foreign capital into U.S. real estate markets, on the surface, seems like a good idea. How could it do anything but help our markets? But, FIRPTA assures foreign interests pay capital gains tax (among other things) on income connected to investments. When off shore money purchases real property in the United States it would gain an unfair advantage over U.S. citizens (in the economic analysis and in real dollars earned) if it didn’t have to account for capital gains tax treatment at the time of sale. In a sense, it is a “level playing field” issue. On the other hand, wouldn’t foreign capital into our real estate market help, especially now when capital markets are frozen?
FIRPTA came into being because foreign investors were beginning to significantly increase their real estate holdings in the United States. If these same investors enjoy the ability to purchase, hold, and realize the increase (through appreciation and equity build up) in value of their investments in U.S. properties when they sell that property – then shouldn’t they be required to pay the same taxes that U.S. citizens must?
NAR has no position on this matter but this type of dialogue should continue. I’m not sure our Association can easily take a position on matters of this nature. This easily becomes an emotional issue that can be more powerful than the economic matters involved. As the world economy continues to affect each of us more and more we will be forced to deal with issues like this on a regular basis. Interesting stuff!!
Spring is finally here (in the East). I have tulips and daffodils blooming outside of my window. Life is getting better!! Best to you all. Jim Helsel, 2009 NAR Treasurer.
On Tuesday, I held a tour for one of my current listings for fellow REALTORS®. It’s a Tuscan villa, valued at $2.575 million. This is not my run-of-the-mill transaction. My average listing runs at a modest $600,000 or so. Honestly, I had no idea what to expect, and I admit that I was more than a little nervous about it.
As it turns out, about 150 REALTORS® came through the house, and every single one recognized me for my involvement in the national association. They each thanked me for my work on behalf of our industry. And, many of them promised that they would call me first if they had other clients looking for homes in the area. One lady immediately went out to the back yard and called a client to say she had “the perfect house.”
We often talk about the value of being involved in the organization – you are the first to receive information on new laws and policies, industry trends, and the market. Not to mention, you have access to outstanding resources. But, from my perspective, the most valuable part of being involved in the REALTOR® association is the connections you make with other professionals. When people see you serving the industry, they know you have the knowledge, information and passion required to close deals in ANY market. They want to work with you first, and that means more business.
I have always said that I have received more in return than I have ever given to the association. I encourage you to get involved, and experience for yourself, just how much you can reap when you give a little to your local, state and national association.
Take the time to volunteer today, and you’ll see your business opportunities grow well into the future. – Dick Gaylord, 2009 NAR Immediate Past President
Scientist Hugh Miller said: “Problems are only opportunities with thorns on them.”
We have a great opportunity right now to get the housing market back on track. Affordability is at an all-time high, thanks to low prices and record low interest rates. And, for the first time in a long time, consumers are actually returning to the market. With Spring home-buying season around the corner, we have a real chance to increase momentum in the market.
Yet, standing between us and this great opportunity for business are a few remaining thorns. Perhaps the biggest one is mortgage credit.
Sure, Congress raised the loan limits, purchased troubled loans from big lenders, and we even handed money to financial institutions and encouraged them to dole it out. One might say that large banks are awash in government money and support. So, why isn’t that money making it into consumers’ pockets?
We know that many banks have made underwriting so restrictive that good-credit buyers can’t get a loan. In many cases, they also have shut down their warehouse lending arms, making it all but impossible for small and mid-sized lenders to access funds. And, some of the largest banks are using pricing and market power to limit the flow of funds. In other words, while REALTORS® are working to help the economy, lenders are doing everything they can to boost revenue and avoid the costs of increasing capacity.
A couple of weeks ago I sent a letter to Treasury Secretary Geithner, Federal Reserve Chairman Bernanke, FHFA Director Lockhart, and FDIC Chairman Bair, asking that they get together and resolve this problem now. Our message is clear: The “buck” should not stop with big banks. – Charles McMillan, 2009 NAR President
FHA plays a key role in stabilizing housing. It now holds over a 30 percent share of the mortgage market (that’s four times greater than its share in 2007). However, it needs to be running more efficiently and allow for more people to take advantage of FHA financing.
My friend Lennox Scott, the CEO of John L. Scott Real Estate in Bellevue, Washington, did a stellar job testifying before the Senate Transportation-HUD Subcommittee last Thursday on behalf of NAR. He urged Congress to strengthen FHA and to tighten up housing incentives so we can really get the housing market going.
He asked Congress to consider $65 million in FHA software upgrades and new staff hires. The FHA upgrades would save taxpayers tens of millions of dollars per year in the long-run and result in a more effective program.
Lennox asked that Congress monetize the $8,000 tax credit so buyers using FHA financing can use it for a down payment. NAR estimates that if Congress did that, hundreds of thousands of more buyers would get into the market.
He also urged that the 2008 FHA loan limits be made permanent and that the loan limits in communities that have prices higher than their surrounding counties be increased. He requested that Congress clarify provisions related to the environmental review of condominiums to allow for easier financing. Lastly, he asked that FHA reduce the 51 percent occupancy ratio to a number below 50 for all condominium developments.
The housing victories NAR won with the economic stimulus package were tremendous. But we can’t be complacent. We need to reach for a new level of success and make sure all of the legislation regarding housing is the best that it can be to get the market really moving.
We’re seeing some good signs. February Existing-Home Sales and
Pending-Home Sales both showed increases. January housing-starts were up. The $8,000 first-time homebuyer tax credit seems to be energizing the market. But there’s much more we could do to fine-tune housing legislation and get the motor in the housing market going from a purr to a roar.
Rest assured, NAR will continue to appeal to lawmakers until we hear the roar that REALTORS® and the nation are looking for. — Gary Thomas, 2009 Vice President and Liaison to Government Affairs
Late last week, NAR Chief Economist Lawrence Yun was in Dayton, Ohio for an economic summit at the University of Dayton. That afternoon, Lawrence met with about 200 of my agents at the Dayton Area Board of REALTORS® to talk to them about the economy, the fixes that are now in place to improve it, and the near and long term outlook.
Lawrence gave an in-depth presentation supported with comprehensive statistics. One stat was, for a brief moment breathtaking – and not necessarily in a good way. Lawrence explained that the Dayton area has seen a loss of jobs for the last seven consecutive years. Of course, everyone in the room witnessed the closing of the last GM plant in the area over the summer, and we are all aware of the potential loss of a major DHL transport center. While both closures account for thousands of job losses, none of us realized how many years we had been watching as jobs left our area. And, of course, when people lose jobs, fewer of them can afford to buy and keep their homes.
I was sitting in the front row when Lawrence’s slide hit the screen. For a moment, all of the Blackberry email scanning stopped. A rush of thoughts went through my mind, among which was “Oh no, I want my agents to be encouraged by this presentation, not discouraged.” Yet, the reaction of my agents was, in fact, very different than I thought it would be. They paused, but they did not blink. Instead, they pressed Lawrence on the issues and questioned the rationale of recent legislative moves.
Such an amazing energy rose up in the room. Instead of leaving the presentation depressed, the audience was determined to survive and plan for a better future. Shortly after the meeting, my managers met to plan an in-house education session on what it takes to succeed in this market. Next week, we are going to meet with all of our agents over a four-day period to talk about what we can do to help them, and what they can do to help themselves. We already are reviewing the Right Tools, Right Now offerings from NAR, and we are partnering with the national association on solutions, like we have never done before.
The point is this: If you need some reassurance that REALTORS® will get through this cycle, I encourage you to talk with some of the agents in my company. This positive energy is not just here in Dayton. I witnessed it first-hand in the people of NAR. The staff has the exact same determination as I now see in my agents.
So, I am genuinely optimistic. I love my job, I have great agents and a great national association. I don’t just believe that we will get through the current cycle and be stronger for it – I know it. Steve Brown, Vice President & Liaison to Committees
I’m no different than any other REALTOR®. Like you, I’ve had some very tough moments during the past several months. I’m used to handling twice the number of transactions and listings. After returning to my business full time this past fall, I thought to myself, “What’s going on here??”
It was in December that I realized that I was part of the problem. I had a condo on the market for several months and nothing was happening. I was discouraged, and I wasn’t doing much to move the property. Part of the problem was that I was exhausted from all of the travel during the previous year. The other part was hearing so many sad stories from REALTORS® who have been struggling in their businesses.
Then, during the holidays – when we don’t expect anything to sell – three other condos in the same building sold. I decided to take my own advice, which I had been giving REALTORS® all year long. I re-tooled the listing brochure, as if it had just been put on the market, and I even worked with the seller to lower the price. Not only did we get a good offer, but we managed to get a loan, and the property sold and closed within a short time.
For a while, there, I wondered if I would be OK – if I would be able to make enough to survive in the business. Now that my attitude has improved, I am seeing a BIG difference in my prospects. In fact, I just landed a $2,575,000 listing, and I heard from one former congressman who wants me to help him find a home in Long Beach.
When I am up and moving, I know nothing can stop me, but I am the one who has to move. I can’t wait for someone else to do the work for me.
As I have said before, real estate is like fishing – you have to be out there every day. Some days, you won’t catch any fish; other days, you’ll catch small fish; and sometimes you get the really big fish. Thanks to our hard work, the fish are coming back. Will you be there to catch them? — Dick Gaylord, 2009 NAR Immediate Past President
