As Good As It Gets?
Many conversations are going on around the purchase market and most seem to be focused on low inventory and the hope that the markets will get back to €normal€ sometime soon. What if this is the new normal? What if the housing market is no longer built around large numbers of listed properties? What if the housing market is going to look more like the real time retail markets?
In times gone by, a store would be 25% showroom and 75% stockroom. Merchants would buy large volumes of goods at a good price, then; offer them to the public at a profit. As inventory would deplete, the merchant would lower his prices to spark interest in the remaining goods, then he would go back and order again and the cycle would continue. Today, bulk purchases are no longer needed as we can now rely on €real time€ supply-systems. Stores are now 75% showroom and 25% stockroom. Goods are ordered at an already low price and a minimal quantity of inventory is needed because as each item is sold, the system just orders its replacement. The supply chain is faster and more efficient.
So what if the housing market is following that trend? What if we aren't going back to large supplies of listed homes? What if every transaction is a multiple offer situation? How do we teach our clients to evaluate this new era in home sales? How do we get them ready to know what they want and be prepared to make a fair offer as the property becomes available? How do we change the thinking about making low offers and then negotiating toward a final price? What if there isn't negotiation and the home just gets sold to the highest bidder in real time?
For those of you that think this may be just crazy talk, please think about the following information. Remember in 2010 when there was almost a panic around €shadow inventory€? €Experts€ were convinced the housing market was in for another free fall because the banks were going to flood the market with all of these foreclosures and short sales? At the time, there were estimates of more than 3,000,000 homes that needed to be disposed of, and that this inventory was going to just crush the market. Well, it's 2014, and there are an estimated 600,000 homes lurking in the shadows. Anybody scared? Heck, let them loose, we have buyers waiting!
It seems those homes were out on the market and sold. They sold but not many people were sellers looking to buy, because many were forced to rent. Now we are beginning to see the more traditional transactions. The old, €domino€ system of buyer - seller - buyer - seller - buyer - seller, and so on from the past. Now we have people buying AND selling. Not investors, but people to people transaction of people moving because they want to and because they CAN! How about getting that extra bedroom and bathroom for less than the cost of you cable bill each month?
It's possible you will read about the new big fear of the markets, the dreaded €Modification Reset€. Oh my, sounds terrible! What will happen when all of these loan modifications now turn to recast? Well, those that are back on their feet will get a new, still low payment. For those that can't afford the new payments, many of those people will be able to SELL into an improving market! Yes, sell into an improving housing market! So you mean people will just sell their homes? Yes, that will be EXACTLY what they will do!
The other negative information out there is how loan volume is down. Well, that is true. Both purchase and refinance activity are down year to date, but what those numbers don't show is that there is an elevated number of people who are already pre-approved out looking as we speak. The awful weather is past us and spring is on the way. Each weekend of nicer weather is bringing more and more houses into the market and the buyers are ready to offer and buy them.
So please don't panic or feed into the fear. You have nothing to worry about if you are out WORKING each day and sharing the news. Homes and the money to buy them are right now likely to be far less in cost than what we are likely to see in the months to come. This may just be as good as it gets! If you are struggling now to find you audience, you need to change your activities or think seriously about whether or not you want to stay in the business? Many will leave the industry this year and that is as it should be. For those committed to our industry, we all must adapt to the new realities and gather up the business that is left behind by those who refused to make adjustments.
Questions or comments: Mike@IMTcoaching.com or visit us online at http://www.improvemytomorrowcoaching.com
In times gone by, a store would be 25% showroom and 75% stockroom. Merchants would buy large volumes of goods at a good price, then; offer them to the public at a profit. As inventory would deplete, the merchant would lower his prices to spark interest in the remaining goods, then he would go back and order again and the cycle would continue. Today, bulk purchases are no longer needed as we can now rely on €real time€ supply-systems. Stores are now 75% showroom and 25% stockroom. Goods are ordered at an already low price and a minimal quantity of inventory is needed because as each item is sold, the system just orders its replacement. The supply chain is faster and more efficient.
So what if the housing market is following that trend? What if we aren't going back to large supplies of listed homes? What if every transaction is a multiple offer situation? How do we teach our clients to evaluate this new era in home sales? How do we get them ready to know what they want and be prepared to make a fair offer as the property becomes available? How do we change the thinking about making low offers and then negotiating toward a final price? What if there isn't negotiation and the home just gets sold to the highest bidder in real time?
For those of you that think this may be just crazy talk, please think about the following information. Remember in 2010 when there was almost a panic around €shadow inventory€? €Experts€ were convinced the housing market was in for another free fall because the banks were going to flood the market with all of these foreclosures and short sales? At the time, there were estimates of more than 3,000,000 homes that needed to be disposed of, and that this inventory was going to just crush the market. Well, it's 2014, and there are an estimated 600,000 homes lurking in the shadows. Anybody scared? Heck, let them loose, we have buyers waiting!
It seems those homes were out on the market and sold. They sold but not many people were sellers looking to buy, because many were forced to rent. Now we are beginning to see the more traditional transactions. The old, €domino€ system of buyer - seller - buyer - seller - buyer - seller, and so on from the past. Now we have people buying AND selling. Not investors, but people to people transaction of people moving because they want to and because they CAN! How about getting that extra bedroom and bathroom for less than the cost of you cable bill each month?
It's possible you will read about the new big fear of the markets, the dreaded €Modification Reset€. Oh my, sounds terrible! What will happen when all of these loan modifications now turn to recast? Well, those that are back on their feet will get a new, still low payment. For those that can't afford the new payments, many of those people will be able to SELL into an improving market! Yes, sell into an improving housing market! So you mean people will just sell their homes? Yes, that will be EXACTLY what they will do!
The other negative information out there is how loan volume is down. Well, that is true. Both purchase and refinance activity are down year to date, but what those numbers don't show is that there is an elevated number of people who are already pre-approved out looking as we speak. The awful weather is past us and spring is on the way. Each weekend of nicer weather is bringing more and more houses into the market and the buyers are ready to offer and buy them.
So please don't panic or feed into the fear. You have nothing to worry about if you are out WORKING each day and sharing the news. Homes and the money to buy them are right now likely to be far less in cost than what we are likely to see in the months to come. This may just be as good as it gets! If you are struggling now to find you audience, you need to change your activities or think seriously about whether or not you want to stay in the business? Many will leave the industry this year and that is as it should be. For those committed to our industry, we all must adapt to the new realities and gather up the business that is left behind by those who refused to make adjustments.
Questions or comments: Mike@IMTcoaching.com or visit us online at http://www.improvemytomorrowcoaching.com
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