Expect High Demand But Lower-Than-Normal Supplies In The Fall Housing Market

Republished from The Washington Post Oct. 4th. Written by David Charron.

This year has been a busy one for real estate, but that trend will reverse course as we head into fall. A real estate slowdown this time of year is normal, of course. But this year in particular saw such huge numbers of sales during the spring and summer that we have had a large enough drop in inventory that there may not be enough homes to meet the buyer demand this fall.

The Washington metro area began the 2016 real estate season with about 700 more homes on the market compared to the year before — a first-quarter total of 9,744 listings vs. 9,015 (or approximately an 8 percent increase) and each of the early spring months continued to add even more new listings to the market. However, buyer activity was so strong during the spring and summer that we are entering the fall with a 16 percent lower volume of inventory compared to last year.

When we looked back to September 2015, there were almost 13,000 homes for sale. But at the end of August 2016, there were just over 10,000 active listings on the market. While that is better than those very lean years when we saw the number of active listings decrease to about 6,000, it still suggests the likelihood of a slowdown in activity while buyers wait for more homes to come on the market next spring. All this activity earlier in the year means that so far in 2016, the total volume of homes sold is 7 percent higher than the same time last year for the Washington region and 5.3 percent higher in the District.

As one would expect, the strong demand for homes helped drive up sale prices, making some of this year’s prices the highest on record. Within the District, the January through August year-to-date median sold price reached $545,000. When we add the suburbs into the mix, the median price comes to $417,000. Surprisingly, the median price for the District increased in August, topping $575,000 making it the highest on record. Since prices don’t usually go up in August, this might indicate buyer demand is so strong that homes will continue to be snatched up even though there aren’t as many to choose from.

Part of this surge in demand was driven by the rush to close on a home resulting from the threat of interest rates going up. Now that the Federal Reserve has decided to defer any increase until December at the earliest, my guess is that buyers won’t feel as much pressure to purchase as quickly. Despite the busy summer, I’m still going to give a slight preference to my prediction for a seasonal slowdown.

Of course, the upcoming election is on everyone’s mind, but this rarely has the deep impact that those outside the Beltway often perceive it does. Anyone who is going to undergo a job change because of a new administration has months of warning that it is going to happen, as do the new employees who are hired from outside the area. The consequential impact on the local real estate market takes place over such a long period of time that we are unlikely to see any major spikes on either the buyer or seller sides.

So far, 2016 has been the best year for real estate since the housing crisis. More new listings have gone on the market and more have gotten snatched up. Even though prices are increasing, the good news is this is the time of year when sellers are more open to negotiation as the busy summer has come to an end. If you are still looking to buy a home, don’t rule out finding one that fits your budget before the end of the year.

Housing Affordability At The Worst Level In Seven Years

Republished from Sept. 29th, 2016 written by Brena Swanson.

Home affordability is at the worst level in seven years, with 24% of the U.S. county housing markets less affordable than their historic affordability averages in the third quarter, the most recent ATTOM Data Solutions Home Affordability Index for third quarter 2016 recorded.

This level is not only up from 22% of markets in the previous quarter, but it is up from 19% of markets a year ago.

The only other time affordability came in worse than this was in third quarter of 2009 when 47% of markets were less affordable than their historic affordability averages.

The affordability index is based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3% down payment — including property taxes and insurance.

“The improving affordability trend we noted in our second quarter report reversed course in the third quarter as home price appreciation accelerated in the majority of markets and wage growth slowed in the majority of local markets as well as nationwide, where average weekly wages declined in the first quarter of this year following 13 consecutive quarters with year-over-year increases,” said Daren Blomquist, senior vice president at ATTOM Data Solutions.

“This unhealthy combination resulted in worsening affordability in 63% of markets despite mortgage rates that are down 45 basis points from a year ago.

According to the report, out of the 414 counties analyzed in the report, 101 counties (24%) had an affordability index below 100 in the third quarter of 2016, meaning that buying a median-priced home in that county was less affordable than the historic average for that county going back to the first quarter of 2005.

Key counties highlighted include: Harris County (Houston), Texas; Kings County (Brooklyn), New York; Dallas County, Texas; Bexar County (San Antonio), Texas; and Alameda County, California in the San Francisco metro area.

Despite the negative news, Blomquist did point out one positive area.

“Some silver lining in this report is that affordability actually improved in some of the highest-priced markets that have been bastions of bad affordability, mostly the result of annual home price appreciation slowing to low single-digit percentages in those markets,” Blomquist continued.

He explained that this is an indication that home prices are finally responding to affordability constraints — a modicum of good news for prospective buyers who have been priced out of those high-priced markets.

This infographic from ATTOM Data Solutions shows the U.S. home affordability affliction and some possible antidotes.

Single-Family Homes Are a Buyer’s Best Friend

Republished from National Association of REALTORS® Sept. 23rd, 2016. Written by Amanda Riggs.

Overwhelmingly, home buyers have purchased detached single-family homes more than any other type of home in the last 35 years. Since 1981, the Profile of Home Buyers and Sellers has collected data on the types of homes purchased throughout the three-and-a-half decades. Consistently, 74 to 88 percent of home buyers purchased single-family homes each year. Home buyers purchased townhomes and condos each at roughly 10 percent of the time and other types of homes less frequently.

In 1981, 76 percent of home buyers bought detached single-family homes, eight percent bought townhomes, and 16 percent bought condos. By comparison in 2015, 83 percent bought detached single-family homes, seven percent bought townhomes, and three percent bought condos.

Single-family homes were the top home choice in 1985 at 88 percent, and again at 87 percent in 2002 and 2004. From 1985 to 2002, four in five buyers steadily purchased single-family homes. From 2005 to 2012, three in four buyers bought single-family homes. Townhome purchases hovered around nine percent for the majority of the 1990s and early 2000s and then dropped one to two points since 2008. Condo purchases were most popular from 1997 to 2007 at 11 percent for several years, but also dropped a few percentage points starting in 2008. By 2015, only three percent of homes purchased were condos. Other home types started gaining popularity in 2003 at two percent and have grown in market share to seven percent by 2015.

To follow this series as we discuss the findings of 35 years of profile data, check out the hashtag #NARHBSat35 on your social channels. NAR Research will be releasing trend line data since 1981 to celebrate 35 years of home buyer and seller demographic research.


Who’s Gonna Take The Blame?

I’m going out on a limb here! There are lots of people pointing fingers at each other looking to place blame regarding lackluster home sales. No matter which department you ask, you’re bound to get a different answer.

Ask your sales manager and he or she will tell you the main problem is the sales team simply refuses to sell up to their abilities, no matter how much training they’ve been given. When you go and speak with the sales team they sing the blues, claiming they just don’t have enough “good” leads. Off you march down to the Marketing Department and they tell you, with complete confidence, that there’s plenty of leads, but no one is closing them. The Construction Supervisor pops his head in and tells you he has the answer; your competition is beating the pants off you because they’re undercutting you on price while offering way more options. And on and on it goes….but do you really need me to tell you that sooner or later, the buck has to stop somewhere.

I will be the first to admit every answer above may have an element of truth. No sales person can close enough deals to make everyone happy, and can there ever be enough leads? You should be able to easily identify if your marketing team is doing their job, and regarding your competitors, well, not to get too cliché, but the proof is in the pudding and cream will always rise to the top. To find the right answers you have to identify the real problem, and that, Dear Builder, involves accountability.

No matter how you slice it, your business plan needs X number of sales for you to prosper in 2016. Let’s assume for argument’s sake your sales plan is meticulously thought out. Let’s say your goal is to sell 15 homes this year. Assuming 5% of prospects that visit your website will visit you in person at your sales center, you’re going to need about 120 new website visitors per week. This means you should have, on average, 6 potential buyers showing up to meet your sales team in the flesh—every week. Still with me? Great, let’s move on to what needs to happen next.

Your salesperson needs to account for 100% of those 6 leads and close about 4-7% of them every month. That may sound like a lot, but it equates to 1-2 sales per month.

Leads are the currency of sales! Without leads you simply aren’t going to get any sales. So let’s talk about the two “flavors” of your leads: first-timers and be-backs. Granted there will be different types of visitors, but all fall into these two categories.

First-time leads—be they visitors to your model or visitors to your website—are mainly the responsibility of the marketing department. Be-backs have been there, talked with a sales person or hostess, and made a decision to return for additional information or to purchase. Today, more than ever, each of your leads can easily be tracked. Whether you are actually tracking these all-important prospects is an altogether different can of worms.

Here’s a bold statement: If your sales person sells a house and that lead isn’t in your tracking system – be it Infusionsoft, Lasso or a scribbled on a notebook pad – that sales person should not be paid in full or at all. Why? Accountability my friend.

I wrote a blog last year titled “Your Sales Team Sucks”. In that blog, I stirred up quite the hornet’s nest when I mentioned sales people, on occasion stonewall their superiors or, even worse, tend to downplay how many visitors have come to the sales center. You’re under the impression that you had 4 prospects show up last week when in reality you really had 10. That means 6 potential homebuyers went unreported! Even though your sales person continued to try to close those 6 unreported visitors, they mislead you in an effort to pad the numbers to their benefit. This is a problem in more ways than one.

Taken further, the marketing department is firing on all cylinders, battling to bring in more leads. Their analytics (your marketing arm is performing analytics, right?) suggests there are more leads than are being reported. Something just doesn’t add up…

Ok, let’s not throw the sales team totally under the bus. I realize some leads aren’t ‘great’, but, nonetheless, they are leads. You’ve invested money in getting as many leads as possible, regardless of how viable those prospects are, you still deserve to have them reported.

Website leads are easier to validate, but the marketing team is no less accountable. Google analytics always presents the facts and easily monitors the who, what, when and where of your online lead activity. If the bounce rate on your home page is over 40%, the marketing department is responsible and has some work to do. That’s not the sales person’s fault, but it does become their problem as 90% of all sales begin online, usually from your website. A lack of traffic affects the sales person’s ability to close deals. If the number of web visitors is too low, the marketing team is accountable. Web leads drive face-to-face sales!

What about onsite traffic? Who’s responsible for that bad boy? Marketing! Your website is where homebuyers either choose or eliminate your company. A scruffy looking website equals an out-of-date builder in the eyes of a website visitor. Bad photography represents a poor quality builder. A poorly designed website equals immediate negative judgment from the visitor. Psychology has taught us that in the absence of adequate information, we tend to form negative opinions.

So what’s the bottom line? As a Homebuilder, you are judged by the way your website looks and performs! End of discussion. No one looks at a weak website and then jumps in their car to go visit that great builder: “Come on honey, I can’t wait to see that ugly house.” Your website is the key to legitimate face-to-face traffic results. Period. Sure Search Engine Optimization is important. Yes, retargeting, Facebook ads, Pay-Per-Click and email marketing will produce results, but inevitably, if the website is a disappointment, you lost that buyer.

Your marketing person/team should be held ultimately accountable for the number of onsite visits and the quality of your website. Are you holding their feet to the fire?

You, or your sales manager, or marketing manager—or whatever you call that person—needs to understand the metrics and hold people accountable. No more allowing sales to stack the lead deck in order to falsely increase their closing ratios. No more receiving contracts for people you’ve never even seen in the lead deck (ok, we’ll allow that on occasion). No more investing marketing dollars when the marketing team can’t prove a ROI. No more excuses why 150 web visits a week equals only 3 site visits and 2 phone calls a week. No more allowing leads to visit your website and vanish into the night like a panther in the darkness. All of the above is simply unacceptable! The tools to ensure you’re not falling prey to these tactics are readily available. Remember this: Every lead costs a builder hundreds of dollars, sometimes thousands. Holding every person accountable for their respective results, role and responsibility in the sales and marketing system is crucial.

Here’s a quick review:

  • Review and track every lead as though that person(s) is the only lead you have.
  • Understand the metrics necessary so you can hold your marketing team accountable for the right things regularly.

Stop the excuses. Ask the hard questions. Measure. You can only expect what you inspect. It’s time you know where every lead comes from and, more importantly, where they’re going!

What A Pain! How To Keep Your Leads Interested…

Scott Stroud Infusionsoft Certified Consultant

Scott Stroud

Let’s face it, whether you’re a homebuilder, car dealer, lumberjack, insurance provider, heck, regardless of the type of your business you’re in, we all experience some form of pain! Deep down, you know what I’m talking about and if you follow the symptoms to get to the source it all leads back to one thing, and one thing only—getting your leads to convert.

Think about it for a minute; how great would it be if you could alleviate the pain associated with prospects, I mean really qualified leads, that simply fail to convert? What would it mean for your company if you could keep your leads engaged throughout the entire sales cycle, converting them to satisfied customers? I’m here to tell you it’s possible, but, just like a physician, let’s first identify and address your specific pain. Continue reading