September 7, 2006
Just Quotes: A Rough Day For Realtors
“[David] Lereah said home prices typically appreciate at the rate of inflation, plus one or two percentage points. Buyers who plan to stay in their homes should see those gains, but "people who purchased last year with the intent of flipping are likely to get burned," he said.” (Realtors expect home prices to fall)
""The shift we've seen lately results from psychological factors with buyers on the sidelines trying to time the market," NAR President Thomas Stevens said in explaining the sharp shift in the group's forecast." (Realtors slash home sales forecast)
First Published: September 7, 2006 2:24 PM
Comments from "Plugged In" Readers
Yes, the normal period of ownership. Let's see. Carry the 7. Yep, 30 years should just about do it.
Posted by: godzillow at September 7, 2006 3:27 PM
This is a great site; with a great read on the SF real estate market, but it must be hard to resist posting about all of crazy bad press going on in the RE market right now. I suspect its more than the 1 year buyers that are in for hard times. Keep up the great work.
Posted by: eddy at September 7, 2006 4:08 PM
What started out as a "rough day for realtors" will soon turn into a tsunami. The RE downturn will be prolonged and by the time any 'normalcy' has returned to the market, realtors would have woken up from the fairy tale land of 2.5-3% commissions on each side into a new world where more transactions being done by buyers and sellers directly (facilitated by title companies whose fat fees would have been trimmed down by Sac'to) and a new wave of online tools (Zip was first, Redfin came next and others like Google are licking their chops in the wings). Adios Realtors(R)
Posted by: changeORdie at September 7, 2006 6:40 PM
That's total nonsense. The travel agents are abolutely necessary to negotiate the complexities of the travel market and consumers, and the airlines, will never be able to buy and sell airline tickets without the absolutely necessary services of the travel agents. Oh wait, did I just say travel agents? I meant realtors. Oh crap. I just realized the realtors are probably soon to be history.
Posted by: tipster at September 7, 2006 8:37 PM
"A Rough Day for Realtors" has invited the "economists" that respond to Socketsite to give credit to Realtors for the future & past of real estate.
With the planet having 6 billion people on it in 2006 and 20% being of an age to have saved enough money to own real estate, what are the 60% aged 0-40 going to do, when they can afford a home?
For those of you that want to blame realtors for the demand for real estate throughout the world, you give those professionals a little too much credit. A funny thing called capitalism seems to have become popular, not only in Europe and America, but, recently in China, India and the Eastern Bloc. I wonder why real estate values are increasing at over 20% annually in those parts of the world. Ahh, it must be the realtors!!
If the world would just stop making profits and giving raises, then, maybe, the real estate markets would all adjust to the excess money that encourages buyers to pay increasingly higher prices.
As to predicting an adjustment to the
continued demand and an increase in prices, one should look in the rear view mirror to the last recession or economic slowdown in the US or Bay Area (2000-2001; 1989-91; 1981-83). You would note a 5% to 15% reduction in median selling prices during those periods. And a significant rebound shortly thereafter.
A recent review of the Wall St Journal would note the US has enjoyed 19 consecutive quarters of positive economic growth. It must be those Realtors!!
A recession seems to be right around the corner!!
The last recession was in 1974.
I suppose that the 20% annual GNP in China and 10+% in India is because of all the realtors in those countries.
Thomas Friedman’s viewpoint in "The World is Flat" also gives credit to the realtors as well as some fairly intelligent and hard working Americans, Indians, Chinese and many other participants who have created the places to build factories, universities, cities, telecom industries, airports and the myriad of other incredible inventions that continue to power the World's growth (and also a few homes for those 6 Billion inhabitants). 2006 and or 2007 may see a slowdown from the historically high sales activity in 2004 & 2005. But, if you want to bet the real estate market is over, tell the next 4 Billion that will want their own home soon!!
A summation, the future is in front of you, go enjoy it and blame it all on the realtors.
Posted by: Frederick at September 7, 2006 9:35 PM
Thank god Frederick! I would comment further but you pretty much said it all.
Posted by: Meredith at September 7, 2006 10:15 PM
The Japanese like to own their homes too, but ask anyone there if it was a good idea to buy in 1990. 16 years and counting and people are still under water. Don't think it can't happen here.
Posted by: Bozo the Pope at September 7, 2006 10:32 PM
I totally disagree with peoples comments saying that realtors are soon to be history.
First of all, let's take it from the point of view of the buyer. If you are looking to buy a home, what do you do? You ask a realtor to help you find one that fits your needs. The cost to you as a buyer is nothing and the realtor can take care of a lot of the legal mumbo jumbo. Granted, I'm sure there are a lot of sophisticated people on this website that can very well handle this transaction themselves, but the vast majority of the population would not have a clue as to what to do when buying a home. On top of that, many hard working realtors are spending their days looking at various houses around the city based on their clients needs. If you have a full time job, that task is not realistic by yourself.
Now in terms of the seller, good luck trying to stage your home and setting up open houses and all the other crap you have to go through. I recently sold my home in Emeryville (moved to SF!!) and did not have the time, nor the patience to try and save 5% doing the transaction myself. What would happen if I forgot to disclose something unintentially, or forgot to sign something. Luckily, my realtor took care of all of that and staged my home so well that I sold my home in 2 weeks (I think the average days in Emeryville is over a month to sell). Thank you very much and take my 5%.
Don't get me wrong, I'm sure there are a lot of lousy realtors that doesn't know the difference between their left and right foot. I work in the financial services industry, and when the market was hot, there was an oversupply of brokers that had no idea how to diversify a portfolio and standard concepts like beta, standard deviation, duration, etc. Now that we have seen a relatively flat stock market over the past 6 years (based on S&P), there has been a huge shakeout of bad brokers in the financial services industry. The good brokers that add value to their client will never lose their clients to the discount brokerages that can virtually do trades for free now.
People are probably correct by saying times will be tougher for realtors in the future. As prices decline for home sales, so do their commissions. But there will always be market so long as people are buying and selling, even at reduced prices. My guess is that this down market will scare away the lousy agents and strengthen the value added agents. In the long run, this should hopefully increase the quality of realtors in SF.
Who knows, if I'm wrong and there are no more real estate agents in the future, then my apologies for disagreeing.
Posted by: Disagree at September 7, 2006 10:35 PM
For those who may want to read more: http://www.iht.com/articles/2005/12/25/business/bubble.php
By many measures, California Residential Real Estate is as inflated as Japan was then. Bear in mind how absolutely inconceivable a 64% correction would have been to the average Japanese a year before their bubble burst. Still, it happened.
Posted by: Bozo The Pope at September 7, 2006 10:39 PM
Yeah, I guess all the real estate agents will go away just like ALL the mortgage brokers went away with the advent of online loan sites. That was predicted say oh 1999 as I recall. Last I checked the mortgage brokers were alive and kicking.
What's with all the realtor haters?
There are always going to be those people who want to use limited online services for a bargain. Hello For Sale By Owners, happening since the beginning...doesn't mean everyone wants to do sell the home themselves or is good at it.
As far as Zip Realty goes - great training ground for new agents...which means you work with them and you are their guinea pig. Average agent there has less than 2 years experience. Dont believe me? Go to www.dre.ca.gov and look up Zip Realty...it shows all their licencees and their original license date. Enjoy.
Posted by: changeorwhat? at September 7, 2006 10:50 PM
Not SF specific, but this graph certainly gives food for thought:
Posted by: Amen Corner at September 7, 2006 10:55 PM
Unrealistic to think that Realtors(tm) will go away entirely, but many are upset because of the low level of professionalism/regulation in the industry. Let's face it - realtors are essentially overpaid car salesmen, willing to say or do anything to make a deal and get a commission. Selling? Good, because it's a total sellers' market. Unless you're buying, then it's a total buyers' market. NAR skewing statistics and redefining their indices to present data the way they want it, etc. Obviously this is a generalization, and not all realtors are like this, but the actions of a few have affected the credibility of this profession. In the next 12-18 months I believe a large portion of Americans stand to lose sizable wealth on speculative real estate decisions. Who will they blame? Can't be THEIR fault, so it's realtors for telling them real estate never loses value, and mortgage lenders for having no standards in lending.
Look at it this way: If you consider real estate an investment vehicle, then shouldn't realtors and lenders be regulated, tested, and licensed just like the people who sell other investments like stocks and bonds? Shouldn't there be laws against self-dealing for realtors, skewing appraisals, publishing newsletters and random statistics?
Posted by: Dude at September 8, 2006 8:58 AM
Check out NYT article, specifically pertaining to Redfin:
Posted by: etslee at September 8, 2006 10:06 AM
"Bozo," the article to which you linked does not say that US (or California) real estate is as inflated as Japan's before its bubble burst. It says that the value of all of the real estate in the US (when the article was published) is still less than the value of the real estate in Japan before its crash. At its peak, Japan's real estate was valued 4 times greater than all the land in the US, although Japan is much smaller.
Demographics are different in the US and Japan, too. Japan's population is aging and shrinking. The US, thanks to its much more liberal immigration policies, has a younger, still growing population.
There are important lessons to Japan's bubble, though. The article points out that Japanese who bought in distant suburbs were the most badly burned. Risky loans are unwise. Don't buy a primary residence thinking you can sell at a quick profit-- you may have to live there a while.
Posted by: Dan at September 8, 2006 10:19 AM
I'm all for discount brokerages - Redfin, Zip, whomever. There is something for everyone that way. Some people really want to handle every aspect of their transaction, feel agents are overpaid, and that is a great option for them.
I believe competition only makes everyone step up their game.
If you are a real estate lay person, watch it continually, and feel like you can handle pricing your property, the disclosures, negotiating the transaction, showings, objections, re-negotiations while you're in contract - all while maximising you're marketing dollars - I say go for it. Redfin is an awesome choice for you. I personally have seen people succeed that way and I applaud them.
However there's a reason 79% of For Sale By Owners end up using an agent after they've given it a shot on their own. For the rest of the 21% congratulations. You shouldn't be paying someone to do something you can easily do on you're own.
Trick is it isn't nearly as easy as it looks - or realtors really would already be out of their jobs - several years ago when the internet first started predicting it.
As for Zillow - I love it - since that cold number crunching cant take into account what a property actually will sell for in the open market it only makes me more valuable. I have a stockpile of Zillow values on homes that did not hold up in the open market sales. Some of which were $400,000 off market value.
I dont slam people who use a contractor to build a deck, when everyone knows it's a simple procedure and nails and hammers aren't that expensive - anyone can do it if they set their mind to it. Why waste $12,000 on a contractor when you can do it in a couple of weeks for $4000 in building costs all on your own?
Posted by: Meredith at September 8, 2006 12:38 PM
I am a technologist. I earned the first of my two technology degrees in 1982. My CS class was the first to move from punch cards for writing programs to magnetic tape on a 16 bit Prime mini computer running Unix - ugh. I have seen a lot from a technology point of view. Beware of technology as a replacement for good old-fashioned legwork. Technology is a tool, just like a hammer. It can be used properly or improperly with varying degrees of success.
For example, I find Zillow intriguing, but still half-baked. When I “Zillow” my home, I get a price (plus a range value). When I then edit my home facts based on what I know as well as on information on my home from my county assessor’s office with “My Zestimator” to get a more actuate description of my home, my “refined value” jumps 30.4%. As a matter of fact, the “refined value” is 15.1% greater than the maximum range value of the original “zestimate” of my home…
Physically touring an area of about one mile in diameter around my home to see what else of similar style to my home is for sale, there is no way in hell I could ever list my home for what Zillow thinks its worth, based on its “refined value.”
Bottom line – realtors will not be replaced by technology any time soon, so don’t get your hopes up that technology will replace anybody. Technology for the real estate market is still undergoing refinement, but has obvious possibilities as it matures. Both will eventually coexist and leverage each other, hopefully to the buyers and sellers advantage. The eventual maturity of real estate-based technologies will allow those who have mastered the hammer to build great businesses and create satisfied customers. Those that can’t master the hammer will continue to bang their thumb until they decide the pain is not worth it and leave.
Posted by: Anonymous at September 9, 2006 8:29 AM
great point, anonymous -- you are absolutely right.
Posted by: movingback at September 20, 2007 11:33 PM
another great point, disagree -- you are absolutely correct, as well.
Posted by: movingback at September 20, 2007 11:37 PM