HINDSIGHT
During the last 10 years the global financial and real estate markets have experienced huge volatility. We’ve had more bubbles and crises than during any other post Second World War period. Bubbles are usually hard to identify beforehand, not widely accepted during the upswing but easy to detail with hindsight. Retrospection is remarkable, isn't it?
Take a look at just the past two decades:
1987 Stock Market Crash
The steepest stock market drop since October 1929.
1989 - 1990 Housing Crash
House prices plunge.
1990 - 1992 Credit Crunch
Some say the worst troubles in the banking industry since the 30s.
1995 - 2000 The Internet Frenzy
Technology drove the stock market to dizzying new heights and minted thousands of newly-made millionaires.
2000 – The Dotcom Crash
Many newly-made millionaires quickly became the newly-poor.
2000 - 2003 The Recession
The U.S. economy experienced negative growth in three non-consecutive quarters between 2000 and 2001. By many measures the worst bear market since the great depression.
2001 - 2005 - Housing Bubble
Real estate prices soared in many areas, madness drove speculation and greed threw caution to the wind.
2005 - 2006 Housing Market Stalls
Many in the real estate industry faced a turning market for the first time.
2007 - 2008 Subprime Catastrophe
Largest collapse of mortgage brokerage companies and huge write offs in living history – huge jump in foreclosures and sales volumes drop dramatically.
WHERE ARE WE TODAY?
According to the National Association of Realtors® existing-home sales slipped 0.4% to a seasonally adjusted annual rate of 4.89 million units in January 2008. This is down 23.4% from the 6.44 million-unit pace in January 2007.
The national median existing-home price for all housing types dropped to $201,100 while total housing inventory rose 5.5% at the end of January to 4.19 million existing homes available for sale. This is a new high and represents a 10.3-month supply at the current sales pace.
According to RealtyTrac, January 2008 reported 233,001 foreclosures during the month, a 57% increase from January 2007. California topped the list of states with 57,158 foreclosure filings in January, up 120% from January 2007. Florida was second with 30,178 foreclosure filings (up 158% from January 2007) and Texas was third with 14,698 properties in foreclosure.
TAKE AWAY
There is little value in hindsight unless we as real estate professionals analyze what actually happened and learn from it - the haunting question is will we?
For a great many agents that have never experienced anything other than the recent feeding frenzy this is the first time they'll be learning a lot of new lessons. For the rest who have "been there before" it's a time to reflect on the last time through the cycle and add the new lessons learned.
Above all, as a professional committed to the business of guiding others through the intricacies of real estate transactions, you need to find ways to help clients navigate situations that are unique to the current market. Pre-foreclosure procedures, creative facilitation of contingent buyer transactions and marketing strategies for property listings are but a few activities with changed nuances in today's market.
Your key to success is to arm yourself with the most current information available. Continuing education or pursuit of credentialing in Short Sale procedures, as well as maintaining an awareness of new regulations about lending practices, will go a long way toward helping struggling homeowners navigate current trends.
You know that banks do not want to own real estate and with so much at stake lenders are willing to explore creative ways to keep problem loans from turning into foreclosures. Here are three of the most common ones that you should be familiar with:
- Payment Plans – The lender temporarily forgives missed payments but requires the borrower to pay extra money each month. The strategy works best with homeowners who fall behind because of illness or job loss.
- Loan Modifications – The bank reduces payments permanently by lowering the interest rates, extending the life of the loan, or switching borrowers from an adjustable-rate to a fixed-rate mortgage.
- Pre-Foreclosure Sales – An owner, with the permission of the lender, sells the home for less than the outstanding loan. The bank takes a loss on the difference. This limits damage to the borrower’s credit rating.
Your professional approach to your customers is the key to making the most from the declining market, subprime meltdown and liquidity crunch. Learn about and understand how to facilitate short sales, how to prevent foreclosures or refer them to qualified professionals once they occur. In all these instances share your knowledge and expertise with the homeowner and you will most likely make a friend and have a client for life. |
