Over the past two weeks, I have had three separate buyer clients who have decided not to pursue a home (or homes) in a particular neighborhood or town because of the distance it would put them from their place of employment.  All three work in Harrisonburg, and have decided to primarily look at properties located in the City.

These buyer were considering homes in towns roughly 20 miles away, which (if we only examine gas costs, and their work commute to Harrisonburg) would equate to roughly $2,000 of extra fuel costs per year.  (20 miles, 20 mpg, 2 trips/day, 5 days/week, 50 weeks/year, $4/gallon)

This wouldn’t include other increased costs such as:

• fuel costs for other trips (entertainment, recreation, church, etc)
• increased auto maintenance costs
• changes in quality of life based on a longer commute

To put $2k/year in perspective — if these fuel savings were instead used to allow the buyers to afford a larger home, they could increase their loan amount by $26,000! (30 year fixed, 6.5%).

Are others seeing these same sort of fuel-based buying decisions in your parts of the Commonwealth?

When I am representing a seller, I am indeed in a sales role — I am working diligently to sell their house.  But when I am representing a buyer, I view my role a bit differently….

Salesman vs. Consultant
When I am working with buyer clients, looking at homes, I am never trying to convince them to buy a particular home.  I am not trying to sell them on the merits of a particular house.  What I am doing is trying to understand their housing needs and desires and to help them evaluate each home to determine whether it will meet their needs, and fulfill their desires.  I am a real estate consultant, helping them to examine each critical aspect of a home to make a wise buying decision.

And yet sometimes (in retrospect) it would have helped my buyer clients if I were a bit more coercive!
I have now had two clients in the past several weeks who knew what house they were going to buy, but held off (for valid reasons) on making an offer.  Then, in the time that they waited, interest rates went up, the associated monthly payment increased, and they were not comfortable buying anymore.  If they had made an offer sooner, they would have finalized their financing, locked in their rate, and they would have been able to buy the house they had hoped to live in.

I don’t think that rates are likely to go up drastically in the next few weeks or months, but they are increasing — and an increased rate changes your monthly housing costs.

Given this interest rate context — I will likely adjust how I work with my buyer clients to make sure they understand the urgency of making a buying decision expediently.

I showed a property this afternoon in a neighborhood where I have not shown a lot of property — and my buyer clients were not familiar with the neighborhood either. We had a variety of questions in regards to safety, noise levels, etc.

Just as we were about to leave the property, we saw one of the neighbor outside of his house, and we stopped to ask him a few questions. My clients were able to learn, firsthand, from the neighbor:

• the neighborhood is usually very quiet
• he doesn’t remember having very many issues or problems
• a sheriff’s deputy lives just up the street
• a single older woman lives next door
• most people in the immediately surrounding properties have lived there for quite a few years, and generally keep to themselves

This was wonderful information for my clients — and beyond the questions that it answered, it provided them with a general sense of comfort and reassurance that they would likely enjoy life in the neighborhood. AND — if they do buy this house, they already have a friend in one of their new neighbors!

So often I forget how valuable the wisdom and insight of neighbors can be for a buyer. Even in a neighborhood where I have sold many homes in the past, a buyer that is new to the neighborhood is almost always highly appreciative of being able to get first hand knowledge from the neighbor!

A few months ago I discovered MetroPix, where you can design floor plans using their FREE online service.  You can pay a bit more for floor plans with color, or in three-dimensions, or with photos, etc., etc.  Thus far, I have only utilized their free service — and then added some color afterwards.

Do you know of other free floor plan drawing tools?  Let me know!

Driven By Vision

When Dr. Yun took on the leading economist role for NAR, he recognized that it was an opportunity to make the National Association of Realtors the number one source for information about and analysis of the housing sector, as it relates to the larger U.S. economy. He then filled some of the open positions in his research division, and has compiled a team of economists that together provide the multitude of studies and and research papers that can be a great resource for Realtors on the ground.

Fiercely Independent

To accomplish the vision above, Dr. Yun recognized the need for independence in his economic research and analysis, and he has been given the space to do so, and taken the prerogative to do so. Dr. Yun does not pass his economic assessments or outlooks by a panel of NAR leaders to get approval of his analysis. The information and commentary he provides is simply based on the data. Additionally, he doesn’t become preoccupied with what other well known economists might be saying about the housing market or the economy at large. Dr. Yun and his staff of 10 economists look at the data from the housing sector, and all other related economic indicators, and puts forth the forecasts, analysis and commentary as they see it.

Perceptive and Insightful

Dr. Yun loves the opportunity to meet with and talk to Realtors from around the country, as he is at different conferences making presentations, and otherwise. While he can’t necessarily accommodate for all of qualitative data he gathers from these conversations, it definitely helps him to have some additional data points as he analysis the amazing amounts of quantitative data that he works with on a daily basis. The questions he had for us drove this point home even further, as he inquired about market conditions and trends that we have been seeing of late in our respective areas of Virginia. For example, he has spoken with many Realtors lately in the DC area who have started to see an increase in open house activity and showings.

For more insight on Dr. Yun, check out the the following posts:

• Dr. Lawrence Yun - Unplugged (Danilo @ real/diaBlog)
• “Without Forecasts, We Don’t Look Credible” (Jim @ realcentralva.com)
• Dr. Lawrence Yun Is A Zebra (Daniel @ realestatezebra.com)
• No Pandering, Promises or Pretense… The Real Lawrence Yun (Matt Rathbun @ agentgenius.com)

1. creating an opportunity to more fully engage with my current and past clients,
2. creating an open platform for commentary and discussion of our local real estate market, and
3. becoming a trusted adviser on all things real estate in the Central Shenandoah Valley.

As a result of pursing the goals above, I hoped that in the long-term (perhaps after a year or so) I would see:

1. an increase in traffic to my web site
2. an increased sphere of influence
3. an increase in sales

Focusing, for a moment, solely on the web site traffic — here’s what I’m finding after just five months . . .

You’ll see that I had experienced relatively unchanged levels of traffic to my web site for seven straight months — until I began blogging. Furthermore, the increased traffic since I started blogging has been astonishing — certainly beyond my expectations.

A few disclaimers, explanations and miscellaneous thoughts:

• I have a combined web site and blog — and the traffic trend line above is for the traffic to that combined site. Interestingly, the traffic increases have existed not solely in the blog section of my web site, but in the searching section (and others) as well.
• When I began last November, there weren’t any other Realtors in my marketplace blogging. There are several more now, but I imagine being the first one out the gate may have contributed to my growth.
• I have learn a lot from fellow Realtor bloggers around Virginia and beyond about how to promote my blog — commenting on other local blogs, highlighting it in offline printed marketing materials, etc.
• In addition to increased traffic, I have certainly seen an increase in my sphere of influence — I have established many new relationships with people in my local market area.
• I have not yet seen an increase in sales as a result of my blogging activity — but given all the increases in traffic and the increase in my sphere of influence, I imagine that will happen in the coming months or year.

Are you thinking about starting a blog? While I’m certainly not yet an expert on blogging, you are welcome to contact me — I’d be happy to share some of what has worked well and not worked so well for me over the past five months.

In the interview, Jonathan ponders “…are we going to see prices drop, which will encourage buyers to step up to the plate and purchase, or are we going to continue with the standoff, where sellers are reluctant to cut prices and buyers are reluctant to commit?” He then makes some other great observations about selling in today’s market:

• Some sellers look at pricing psychologically — they want to sell their home for what they paid for it plus improvements, or at the price the neighbors sold their house, etc.
• Real estate is an expensive asset to hold, given mortgage principal, interest, taxes, insurance, maintenance, etc.

The interview (here) is brief, but offers some interesting perspectives on selling in today’s market, as well as on the strange standoff in which buyers and sellers are currently engaged.

1. These days (and perhaps always) consumer confidence plays a large role in the state of the housing market. Many buyers and sellers are fearful that home values are dropping precipitously, or will be soon.
2. Consumer confidence, in many ways, is shaped by the mainstream media — as this is where many Americas get information about the housing market.
3. One of the highly regarded sources of information on the housing market is the Case-Shiller Index, which tracks 20 major markets.

. . . that may be having unreasonable effects . . .

• The markets featured by the Case-Shiller index tend to be in California, Florida and other down markets. This makes the index show price declines, which the media highlight, which scares consumers. As Lawrence Yun states, “This is total distortion of market conditions based on a small selection of falling local metro coverage.”
• A second source of information on the housing market, the Office of Federal Housing Enterprise Oversight (OFHEO), shows 70% of 287 local markets having price increases. Again from Yun, “the OFHEO survey gets far less coverage than the Case-Shiller index. Perhaps the media is intent on looking for sensationalized headlines. After all, the media is in the business of selling news, and more sales can be made with sensationalism. (I have been told by few reporters off-the-record that they are interested in increasing their viewership even if it means putting things out of context.) “
• And perhaps the most unreasonable of all, “Another factor that rarely gets attention is that Dr. Shiller, a Yale professor, has a side business in Chicago. His index is used at the Chicago Mercantile Exchange for hedging housing futures values. The more hedging of bets that occur, the more profits go into Dr. Shiller’s bank account. And more hedging of the bets will take place if people believe there will be a crash in housing values. So naturally he has a financial incentive to “scare” the market.”

The entire article from Lawrence Yun is definitely worth reading — and it is great to see NAR bringing these facts to light.

H/T - Jim Duncan, RealCentralVA.com

I have always sent first-time buyers to lenders that offer VHDA financing programs. These programs offer below-market rates for first time home buyers, with flexible financing up to 103%. However — as of April 1, 2008, these 100% loan programs will be suspended (i.e. not available) until further notice.

The explanation, in an e-mail from Michele Watson (Director of Homeownership Programs, VHDA) was that it is “…an effort to best utilize our resources, maintain adequate long term funding for our loan programs and to mitigate the risk to our borrowers and VHDA…”

There are still some 100% options, but as the number of programs dwindle, it will become increasingly harder to finance a home purchase, especially for first-time buyers. Some remaining options include:

* VHDA/FHA 103% loan program (via any VHDA lender)
* Fannie Mae 100% program (via most lenders)

So . . . if a Virginia buyer needs a 100% loan, and isn’t committing to it on or before March 31, 2008 — prepare for fewer options, with less favorable rates.

(1) Broker Consolidation: Brokers are growing and consolidating, which is causing MLS’s to grow. Some MLS’s are consolidating, some are sharing data.

(2) Web 2.0: Key components of this movement include:

• universal accessibility of information
• open access to technology
• consumer choice and particpation
• independence, freedom and respect

Some companies that are involved (in varying degrees) in the Web 2.0 world are zillow, redfin, craigslist, google, point2, trulia, yahoo, and roost.

(3) NAR vs. DOJ: The basic accusation is that NAR is anti-consumer. Since NAR is Realtors, the syllogism is that Realtors are anti-consumer (fees are too high). Lawsuits create a status quo — no changes are made to make sure that the lawsuit isn’t complicated. This vacuum of innovation is being filled by many of Web 2.0 companies.

Is It Too Late?

Will the web run over the MLS? According to Michael, no. We define the web . . . and yet, at the same time, the web defines us. So . . . as Michael says, “The Future Is Now. ” We are defining our future today, by our decisions and actions — and the foundations are just being built. Some of the current trends include . . .

• Standards: Standards are being defined (in real estate and other areas) to provide broad and deep definitions. The Real Estate Transaction Standard (RETS) is defining a listing in these ways, to allow for data portability. Data portability provides power and choice.
• Syndication: Entering the data (listings) into one location, which then sends out out to many different web sites. RETS has created a syndication work group to try to standardize syndication. This standard will ideally be used by MLS vendors

Thinking Points . . .

Licensing Our Syndicated Data

What happens to the real estate content we provide to third parties via syndication? From Google’s terms of use, when content is submitted to Google, the submitting party is granting Google a “…worldwide, non-exclusive, royalty-free license to reproduce, modify, adapt, publish, and otherwise use, with or without attribution such Content on Google services.” However, it goes on to state that the “…license terminates when such Content is deleted from the Google service to which you originally submitted.” We need to consider developing standard ways to license our data. (ex. Creative Commons) Standards are just now being developed for all that matters. We have the opportunity to participate in that process.

MLS is More Than Technology

The MLS is essentially a social network, with (strangely), competitors cooperating. It is, to some extent, a representative democracy. This cooperation allows an aggregation of data. Without this cooperation, listings will not all be in one place. Thus, the question (again) is who is serving consumers? The aggregation of listings (via the MLS) is a service to consumers.

Moving Forward

• IDX is a fantastic tool, but it lacks the standardization and full features necessary for moving forward. Perhaps IDX needs to be revisited, within the Web 2.0 context.
• How should we cooperate on the web?
• Which parts of the listing we want to share?
• Are listings are advertising, or information?
• Who are the members of the MLS?
• Should the consumer be a “member” of the MLS? What if they agreed to our terms of use?

As leaders in the industry, we need to determine whether these trends, questions and ideas are just noise, or whether they are an indication of a major industry change on the horizon. The future is being formed right now . . . the question is who will determine this future.
—

Some of Michael’s recommended readings:

• Only The Paranoid Survive
• Cluetrain Manifesto
• Code 2.0
• The Summer of 1787

Looking for more insights from Michael Wurzer? Check out his blog: http://www.flexmls.com/blog.