Local Housing Market in Rough Shape

Things are not looking good for the local housing market, Brian McNeill writes in the Progress, but few real estate agents will say that in so many words. Dave Phillips, CEO of the Charlottesville Albemarle Association of Realtors, actually claims that the market is “hot,” with the caveat that that’s in relation to Alaska’s temperatures. Pat Sury of Montague Miller says “we have stabilized,” and that “it’s a great time to buy.” And the president of CAAR, agent Judy Savage, says “we’ve hit bottom.” Real Estate III’s Pam Dent suggests that now is the time to buy a home in Glenmore because, really, who can commute all the way to a barn to see their horse? (It’s dreadfully inconvenient.) All of that tells me that we may have a lot farther down to go. Real estate blogger Jim Duncan is inclined to agree that, at least, there’s no way to tell whether or not we’ve hit bottom: you’ve got to start back up before you can know. Real estate agents are dropping like flies, expensive houses are being rented for a song, and houses are languishing on the market for months and months. True to its mission, the Bubble Blog says the bottom is nowhere in sight, and its proprietor has taken to drinking. So it’s a buyers market…as long as you don’t need a mortgage.

24 thoughts on “Local Housing Market in Rough Shape”

  1. So it’s a buyers market…as long as you don’t need a mortgage.

    Actually, not so much. If you have good credit there’s a ton of mortgage money available, and the rates are pretty decent. If you have bad credit (i.e. sub-prime) you’re SOL because that market (which was responsible for the foreclosure crisis) no longer exists.

    The mortgage rules have been tightened a lot, but the current rules for an FHA mortgage are pretty sweet – and if you have decent credit and enough money for a modest down payment you can get an FHA loan with little trouble. In Albemarle County, there’s a VERY high loan limit via FHA – $425,000. You can get away with as little as 3% down, which is very low.

    The mortgage $ is out there, but if your credit is poor you can plan on renting until your score improves. You know, the way it used to be.

  2. I’m starting to think Real Estate agents are worse than ambulance-chasing lawyers. Seriously, what other business gets away with such blatant misinformation and double-talk?

    When the market is doing great (as it was a few years ago), it was a GREAT time to sell. “Sell, sell, sell!… with me as your agent.”

    When the market is doing horrible (as it is right now), it’s a GREAT time to buy. “Buy, buy, buy!… with me as your agent.”

    In fact, it really doesn’t matter what the economy and/or the real estate industry are doing. As long as you want to buy or sell and you’re talking to a Real Estate agent, then it’s a great time to do whatever you want to do… with them as your agent.

    I’m reminded of the chapter in Freakonomics that compares Real Estate agents to the Ku Klux Klan. In the chapter, they relate the story of John Donahue, a law professor who was teaching at Stanford University in 2001:

    “I was just about to buy a house on the Stanford campus,” [Donahue] recalls, “and the agent kept telling me what a good deal I was getting because the market was about to zoom. As soon as I signed the purchase contract, he asked me if I would need an agent to sell my previous Stanford house. I told him that I would probably try to sell without an agent, and he replied, ‘John, that might work under normal conditions, but with the market tanking now, you really need the help of a broker.'”

    Within five minutes, a zooming market had tanked. Such are the marvels that can be conjured by an agent in search of the next deal.

    I hired a Real Estate agent to purchase my home and I’ll never use one again. Besides doing all the meaningful research myself (gotta love MLS numbers and web sites that provide free access to the details otherwise only seen by agents), he really didn’t do anything except drive us from house to house. And, in my opinion, he’s probably one of the more honest Real Estate agents out there.

    Other Real Estate agents will claim I got a bad apple, but that’s just because they spout off with conjecture presented as fact and claim that’s some sort of service. It’s not. In fact, it’s a disservice.

  3. Actually, not so much. If you have good credit there’s a ton of mortgage money available, and the rates are pretty decent.

    My experience has been quite to the contrary. I have excellent credit (a score of 799 at the moment), not a penny in debt, plenty of savings, seeking a small amount of money to build a small house (1,400 s.f.) and I am six months into the mortgage process with no end in sight. When I started researching mortgages and meeting with loan officers (well, a loan officer) last spring, it was easy-going. Now? It’s hugely, hugely unpleasant. Banks have become paranoid, tightening up their criteria irrationally, making it as difficult for a safe candidate to get a mortgage as an unsafe candidate. (It’s not unlike airline security, now that I think about it.) It’s been rather unpleasant week for me on the mortgage front…and it’s only Tuesday morning.

    Also, everybody expects rates to leap shortly, with the Freddie/Fannie meltdown in progress, maybe just a half point, maybe a point, maybe a few points, but everybody agrees that now is the time to lock in your rates, because things are only getting worse.

  4. Sorry the mortgage process has been so tough and unpleasant for you. But look on the bright-side…you have excellent credit, no debt and plenty of savings. You’re in a lot better place than a majority of Americans these days…so chill brother!

  5. I agree with TheCowsaysmoo. With free information, agents find their value disappearing. They are increasingly unnecessary parasites in a transaction that, at best, they add very little value to. One of my favorite sources of realtor resentment comes from selling a house myself and the agent calls to say, “I’m thinking about showing your house to my clients, but I want to know if you are giving buyer realtors a cut.” I understand that they need to get paid, but it’s screwy. Presumably, if I say no, they wouldn’t show the house and their client actually knows less for having hired the guy. The whole thing is set up to encourage agents to distort reality to the people who they are supposed to be working for.

    That said, Jim Duncan has been a pretty straight shooter over at realcentralva.com. It doesn’t take much to stand out from this crowd, but he does. He knows the area and the basics of housing economics. In all he manages to avoid writing like a realtor. A bit of a backhanded compliment, Jim, but there you go.

  6. Waldo, shoot me an email, and I’ll hook you up with my mortgage guy. I’m in the process of building a house, have what seems to be a similar credit situation as you (except with less savings), and I had no problem getting a substantial construction loan. And it just closed a month ago, so it’s not like it was before the financial market meltdown.

  7. Waldo – if you’re having that much trouble I’d recommend finding another lender, now. If you plan on building and not just buying, that’s a different type of loan (unless you’re buying from the actual builder, who already owns the land). If you own the land and plan to be the general contractor that’s probably the hardest loan to get, though with your credit score it shouldn’t be impossible or even that difficult.

    Good luck – I hope it works out for you soon.

    As for the general negativity toward real estate agents, while there are plenty of good, honest, reputable Realtors with integrity, as in any field there are some with none of those qualities. Thanks to the internet they are becoming less necessary, and the standard 6% commission is outrageous.

    After our last home purchase, where the same Realtor listed our old home and had the listing on the one we were buying (and made over $17,000 in commissions), the not-so “hard-working” Realtor tried everything possible to screw us (our attorney had to threaten him with an ethics complaint while we were literally sitting at the closing table in order to get him to do what he had already agreed in writing to do), we’ll never use another one again. Never.

  8. Actually, I just bought a house and my Realtor worked really hard for that sale. But I agree, all those housewives playing as real-estate agents are just pests.

    Although I easily breezed through the mortgage process, the whole environment needs a complete overhaul: everyone in the transaction has all sorts of affidavits for their own protection, except really the buyer.

  9. “wow, the housewives comment is way out of bounds”

    Oh yeah? Put up a relatively desirable house up for sale and see who are the 1st to trot in without even slightly having qualified buyers. Can you say TOURISTS? And I bet you 10:1 it’s a part-time housewife-style “agent” whose curiosity is killing the cat!

    The consequences are far-reaching, above and beyond the impositions and the wasted energy (fossil fuels for their Lincoln Navigators, lights left on throughout the house IN BROAD DAYLIGHT): delayed valid evaluations of the marketplace, unreasonable requirements for “staging” houses, because these housewives have no imagination and think they’re shopping at Ethan Allen’s (which they can’t really afford)…

    Am I bitter about them? Youbetcha!

  10. Although I easily breezed through the mortgage process, the whole environment needs a complete overhaul: everyone in the transaction has all sorts of affidavits for their own protection, except really the buyer.

    You can say that again! It’s even worse if you use one of those “Closing companies.” Stick with a lawyer you trust – he or she is far more likely to look out for your interests. After our last experience, we wouldn’t dream of doing anything else. In the majority of cases the closing companies are fine, but if you run into any problems it sure helps to have an attorney beside you.

  11. It’s interesting reading the complaints against real estate agents. I hear them about doctors, lawyers, teachers, policemen a lot, so they’re in good company. There are over 1,000 agents working central Virginia because of the bubble; a while back there were 700. I really find it amusing when people who are acting as their own agen (For Sale By Owner or FSBO) think that the agents are going to point their clients to their homes then DRIVE THEM THERE on their own time and dime while they are missing phone calls from other potential clients. Its the FSBO’s job to get his buyers into his home by spending his time and money, not the agent’s. Agents don’t work for free. Many agents asked me if I would pay their commission so that they could tell their clients if they are not going to pay them, they’re on their own to do business with me and to find the rest of the FSBOs themselves. This way the seller is happy that he’s not paying for marketing and negotiating, the buyer is happy he’s not paying and the agent is happy to have time to find paying customers. I have yet to see anyone standing out on 29N with a sign that says “Will Work for Free.”

  12. Sure, they should get paid. They should be paid by the people they work for. The fact that they get paid out of the sale price creates an incentive for them to act against the interest of their clients. That’s dumb. Not their fault. It’s just a screwed up system sustained by inertia.

    Back when realtors owned all the listings, they were able to collect rent on that asset, like owners of the only bridge for a hundred miles. They also provided a few services on the side. But now there are lots of free bridges, and they’re just selling the side services, but for almost the same price. I don’t think they are getting wealthy, or that they don’t work. It’s just that the asset they owned became worthless.

    The best agents do provide a service; they should get paid for that service by the people they provide it for. I think Jim Duncan was taking up this cause on his blog a while ago. If he charges his clients a flat fee, hats off to him.

  13. Arthur – I’ll take an kind of compliment I can get. :) Thanks.

    Majunga – Outstanding comment worth repeating.

    everyone in the transaction has all sorts of affidavits for their own protection, except really the buyer.

    Big_Al – Regarding this –

    As for the general negativity toward real estate agents, while there are plenty of good, honest, reputable Realtors with integrity, as in any field there are some with none of those qualities. Thanks to the internet they are becoming less necessary, and the standard 6% commission is outrageous.

    These are two stories I’ve written specifically about this trends – Representation isn’t free and Towards Representation – in a nutshell, there’s far more to what a good Realtor does than “finding” a home.

    Finally (for now; this is a great story idea) – when looking at the media reports, consider the respective agendas of those speaking; that consideration will shed quite a bit of light on the context.

    We might be in the “bottom” for all I or anyone knows, but calling it is either courageous or

  14. Then the Florida Real Estate Boom of a few decades ago. Crook and Real Estate Agent became, among many buyers, synonomous terms, which, I believe, led to lingering distrust today- ergo Realtor ILO Agent. Not taking sides, merely recalling a little history.

  15. Boy, I remember when C’ville was the #1 City and developers were scarfing up any vacant piece of land they could find. So how much do you think you could get for the coal tower these days? Who’s the sap that bought that? Oops, was it C.C.? Maybe even King Midas can loose his touch in this economy. Thanks W!

  16. Elizabeth – LMAO! You forgot to add, “…in the kitchen”. Maybe that’s what it takes to get ejected.

    We do have an overabundance of part-time wannabes. There are a handful of professionals who do work hard.

    That said, I personally question whether the value of the service they do provide is anywhere near worth the cost. As Arthur describes, they once had a lock on information – which houses were for sale, and for how much – so you had to pay for that important function. Now though, particularly with the web, that role is greatly diminished (not, of course, without a major fight from the fine folks at NAR – see the Craigslist example).

    They can be an advocate and negotiate for you, and they purport to be experts on all aspects of the transaction – supposedly a Mortgage Broker and lawyer, all rolled up in one. Unfortunately, here in Virginia, you’ll very likely have to hire a real attorney (not just someone with a weekend course courtesy of VAR) to close. As far as finding good financing is concerned, once again, you are likely your own best bet: the agent is likely to steer you to someone who will get you a loan – that’s good for closing the deal and buying the house, but not necessarily, as so very many people are finding out, the same thing as getting the best loan for you. Finally, if you stop and think a moment – they are really not rewarded by finding you the best deal for you on the house either – they are rewarded for making as many deals as possible as fast as possible. Those things might overlap in a secondary way, but there is not direct linkage.

    I suspect a buyer or seller is better off doing their own due diligence, and hiring an attorney for legal advice. Of course, FSBOs are famous for a reason: a lot of people are completely out to lunch and would be better off attempting DIY appendectomies. I don’t think this is one-size fits all. I’ve only ever done one RE transaction with an agent involved, and it was unavoidable as they were the seller’s agent. I took the buyer’s “side” for myself.

  17. If one person is asking another to help them (e.g., help me buy a house, help me sell a house, help me get rid of this wart, etc…), then the helper should be compensated. My big issue with real estate agents is that I firmly believe they helped drive the craziness (house prices and bad lending practices) of the past couple of years. For this, they should not be forgiven and there should be consequences, such as a lack of public confidence in realtors.

  18. “…such as a lack of public confidence in realtors.” I agree and the field should be extended to all professions that I can immediatly think of. As someone posted earlier, there’s good and bad in all groups. But don’t forget the property owner who pushed the agent to price his house exorbitantly. I am constantly hearing Jim Duncan, Judy Savage, Dave Phillips (sp?) and Carol Clarke asking buyers to stop demanding excessive pricing, it only leads to their property’s sitting on the market.

  19. It is ridiculous to blame someone or a group to “stop demanding excessive pricing”. What you are doing is refusing to accept endemic problems in a system – *any* system – and address these head-on. America operates within a “boom and bust”, “raze and rebuild” paradigm. Excesses are everywhere to be seen, and when – and ONLY when – a large enough portion of the population is negatively affected or when things fall completely apart, does the mainstream pay any attention.

    Look around you: there are incredible excesses everywhere to be seen in virtually all areas of our society and economy. The bottom line is people are not the slightest bit interested in being pro-active. “Social-engineering” is allegedly not acceptable, yet in reality, is entirely left to the big corporations to dabble around as they please: there’s not a single high-impact aspect of our society that isn’t planned and controlled by big money and power.

    So, in conclusion, trying to charge individual home owners or real-estate agents with the housing bubble we are now experiencing is plainly laying the ground-work for the next Krach.

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