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Blog
And don't think this is just a momentary lull, a short slowdown before the market recovers and then takes off again. What you see today is the market you have, for now and, quite possibly, for a long time to come. "At best, I think we're a year away from the bottom," says Sally Bodmer, who has sold Tampa-area real estate for 31 years and has never seen a worse selling climate. She operates mainly in the newer suburbs on the far eastern edge of the metropolitan area. It was a super-hot area in 2005, when developers couldn't build houses fast enough. "Now," she says, "you can't give them away." To be sure, things are not awful everywhere. Prices in metropolitan areas bypassed by the Big Bubble -- places such as Charlotte, N.C., or Rochester, N.Y. -- have held relatively firm or risen modestly through the Big Bust. And in some of the worst markets, elite properties and houses in the best neighborhoods may still buck the trends. But even the perennial playgrounds of the upper crust aren't immune. According to Zillow, a real-estate Web site, prices in Palm Beach, Fla., are down about 10% from last year. Prices are down 13% in Santa Barbara, Calif. So what's a home seller to do? What does it take to sell a house today? If your job or life circumstances leave you no alternative other than to sell in this market, you must be prepared to go well beyond the usual feints and gimmicks if you want to get potential buyers in the front door and, ultimately, to the closing table. By all means, feng shui the living room, bury a statue of St. Joseph in the front yard and bake brownies before the open house. But if you really want to sell the place, you need to think and act like a salesperson. Most important, you must separate your emotional attachment to your family home from your financial interest in your family's largest asset. Selling a house is business, and you must approach the sale in a businesslike manner. Here are seven points to keep in mind: 1. DON'T WAIT AROUND. Even in the better housing areas, it's taking a long time to sell houses; and in the hardest-hit metro areas, inventories of unsold homes are stretching well past 180 days. So, don't try to sit out the market. That's what hundreds of other timid sellers are doing, each of them hoping -- somehow, some way -- that hanging on the sidelines will improve prices and, ultimately improve his or her chances for selling success. It won't. Not if you expect to sell anytime soon. If you want your place sold, the best way to make sure that happens is to put it up for sale. Obviously, you should take advantage of your local market cycles -- early spring is usually better for selling in much of the country -- but otherwise don't try timing the market. You won't have any better luck than a stock trader who's always holding out for the market highs or lows. 2. FIX IT UP AND CLEAN IT UP. Buyers are taking your house out on a date. It has to make a good impression. ![[Image]](http://s.wsj.net/public/resources/images/YM-AA153_COVER_20080707140614.jpg)
Don't spend a lot of money -- absolutely no big-ticket renovations -- but do see that everything is in good repair. And give the place a new paint job and a general sprucing up. (Caution: This won't necessarily give you any pricing advantage over less fixed-up places, but it will attract buyers and keep them interested.) As you get closer to the date that the house actually goes up for sale, start moving out by decluttering the place. No buyer wants to see a house filled to the rafters with other people's things. They want to imagine their stuff filling the place. "Stage" the place with only enough furniture to make it look livable; put the rest in storage. 3. PRICE IT CHEAPLY. Don't fight the market by trying to price your house at bubble-era levels or by factoring in all those improvements you made. It won't fly. Set a realistic, salable price on day one. Don't let the house hang around on the market as you gradually lower the price. Forget what you think the house should be worth or what it was worth three years ago. That's not what it's worth today. Smart buyers will be looking for bargains. So you must set your price below comparable nearby properties. Look at the asking prices of neighboring houses, and set your price to beat them. If prices in your area are generally down 20% from where they were at the bubble peak in 2005, then price your house 25% to 30% below its peak bubble value. Your area down 40%? Be prepared to take just half of what the house was worth three years ago. Yes, it's painful. But if you want to sell, you don't have much choice. And remember: In much of the country, renting is still a better deal right now than buying. As you try to settle on a price, look at rents on comparable properties. Buyers are not likely to be counting on huge price appreciation, as they did during the bubble, so they may be less willing to take on the higher monthly costs of home buying and owning. You must set a price that makes someone's prospective mortgage and home-owning costs look like a better deal than a month's rent. 4. HIRE A TOP REAL-ESTATE AGENT. Get the best, most aggressive selling (listing) agent you can find. When everything was selling before it even hit the market, of course, you didn't need the best. You just needed the cheapest. But not these days. Fortunately, in this market, real-estate brokers are even more anxious than you. They're eager to get whatever work they can, so don't rely on your cousin with the real-estate license or your best friend's wife. Ask, instead, for the local real-estate office's top salesperson. All offices have one or two sellers who greatly outperform their colleagues. That's who you want. Interview various agents and insist that they present you with a well-conceived marketing plan that goes way beyond the usual Internet page, one or two open houses and a yard sign. (Think about using a professional photographer for multiple shots on the primary Web listing, your house as the featured "home of the week" in the local newspaper, a decorating segment on a morning chat show, a stop on the local garden club's spring tour.) ![[Image]](http://s.wsj.net/public/resources/images/YM-AA170D_SELL_20080711162530.gif)
Sellers of higher-end properties should be able to negotiate a lower commission percentage, but this is no time to quibble over a couple of percentage points. Also, offer the agent a big bonus if he or she sells the house in 30 days or at your asking price. Offer other agents bonuses if they bring in the ultimate buyer. 5. PROMOTE. PROMOTE. PROMOTE. Don't rely on the agent to do all the work. The agent should pay the usual marketing costs, but you should be prepared to pony up for extras, especially if you insist on more expensive or untraditional promotions. You want the house listed regularly in local newspaper classifieds and, if it's a special, high-end property in a desirable location, in national publications, too. Make sure your house is on the leading real-estate Web sites; Trulia, Zillow, Cyberhomes, Eppraisal and Realtor.com are some of the top ones. Beyond that, get really creative. Advertise in corporate newsletters and intranet listings. Check in with local relocation firms that help transferring corporate executives find new homes. List the house on eBay. Put it on Craigslist. Put it in your church bulletin. Trophy house in an upscale neighborhood? Hire a string quartet for the open house. Something a bit more midmarket in a family-friendly subdivision? Put a clown on the corner handing out brochures. 6. PLAY THE BANKER. As bad as things are, there's one big factor in your favor: the tight credit market. If you have no mortgage you have to pay off, your strongest selling point might be your ability to finance all or a substantial part of a buyer's purchase. You're a lot more flexible than a bank that has the Federal Reserve looking over its shoulders, so you might even be able to charge a higher interest rate than a commercial lender as well as command a higher sale price. (You'll need a real-estate lawyer to make sure everything is done to protect you and an accountant to set up a payment system. Peer-to-peer lenders such as virginmoneyus.com have systems to handle mortgage payments.) Worst case? Your borrower defaults and you take the property back. And sell it again. 7. TAKE THE OFFER. If any qualified buyer comes in with a reasonable offer, be prepared to accept it. You don't want to lose the deal by digging in your heels over a few dollars. Every real-estate office keeps records that show the percentage difference between asking and selling prices, so it's easy to figure what's an appropriate offer and what's not. Negotiate, of course, but recognize that the buyer has a lot more clout than you do. Your house, as wonderful as you think it is, is worth only as much as someone is willing to pay for it. And that, unfortunately, will probably be a lot less than you think. --Mr. Crook is editor of The Wall Street Journal Sunday and author of "The Wall Street Journal Complete Real-Estate Investing Guidebook." He can be reached at david.crook@wsj.com. 
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 More Home Owners Seeking Energy-Efficiency Upgrades
“It’s no surprise with rising energy prices and other costs draining the piggy bank that home owners want to maximize home performance with green remodeling options,” said NAHB Remodelers Chairman Lonny Rutherford, CGR, CAPS, CGP, president of Legacy Construction, Inc. in Farmington, N.M. According to the RMI, 33% of the remodelers surveyed said that they are increasingly called on to improve the energy efficiency of their client’s homes. The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. The growing home owner interest in green remodeling comes just as NAHB prepares for the upcoming National Green Building Standard, which includes the only consensus rating system for remodeling. The standard provides a roadmap for green remodeling and assures consumers that remodelers know how to plan and complete authentically green remodels. According to the survey, remodelers have installed a number of efficiency-enhancing products in recent months, including:
For more information, e-mail Kelly Mack, or call her at 800-368-5242 x8451.
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Subject: A Neat Tip Go to the kitchen and check this out for yourself. Whoever
looks at the end of your aluminum foil box?
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Northeast Will Be First to See Signs of a Housing Upturn
Although the national housing outlook has continued to deteriorate this spring, which is normally the peak home buying season, housing is expected to start climbing into positive territory before the end of the year in some parts of the country, according to NAHB’s state and top 100 metro housing starts forecast for 2008-2009. Continuing turmoil in the credit markets and a weakening economy guarantee that “housing markets will face another challenging year in 2008 before any meaningful recovery takes hold in 2009,” the NAHB forecast says. The credit market crisis alone, which started with last summer’s subprime mortgage meltdown and has since resulted in a broad-based mortgage credit crunch for prospective home buyers, has depressed housing sector activity by an additional 30%, NAHB economists calculate. As a result, housing permits nationwide have plunged to only 37% of their levels at the height of the boom in 2005. “Anticipation of further declines in house prices in many markets
will keep demand soft and additions to supply minimal in the near
term,” the forecast says. “Foreclosures threaten to dump additional
houses back into markets with already bloated inventories of unsold
homes. The Northeast will be the first to emerge from the current housing correction, with several states turning the corner in the third quarter and most by the fourth, according to the forecast. “While some of these markets experienced rapid price appreciation over the decade, the largest markets — New York, Boston and Philadelphia — avoided the extent of over-building that accompanied the price run-ups in other markets,” the study says. “The absence of large unsold inventories will help to mitigate the downward pressure on prices that will drag out the recovery process in markets that have similarly elevated housing prices but also have large inventories.” A growth patch for single-family housing starts in the Northeast during this year’s fourth quarter encompasses all of the New England states and extends into New York, New Jersey and Maryland in the Mid-Atlantic region. “Moving away from the eastern seaboard, markets in the western and northern parts of these states experienced more moderate house price appreciation and so are less vulnerable to price corrections and inventory problems,” the report says. Next in line for a regional housing recovery is the South, with the notable exception of Florida. “Housing markets in Texas, Atlanta and parts of the Carolinas performed well during the housing boom,” the forecast says, “resisting the excesses that have come back to haunt other markets.” These markets weathered the onset of the cyclical correction in the industry in 2006 better than most, but they did feel the negative repercussions of 2007 and will experience a mild 2% decline in single-family construction in this year’s final quarter before returning to robust growth in the first quarter of 2009. Most housing markets in Florida will continue to struggle through the middle of next year, NAHB predicts. “These markets have been the most volatile through the boom and bust of this housing cycle and will be the slowest to recover from the heights of speculative excess,” and they have also been hard hit by escalating foreclosure rates. Pensacola, where prices and production stayed closer to historical norms during the boom years, and Jacksonville, where production surged but price appreciation was more restrained, will experience weakness this year but are expected to display more strength in 2009 compared to other Florida markets. Although the Midwest on the whole is expected to move into a recovery mode next year, prospects are a bit divided between the region’s eastern industrial states, which are projected to experience further declines in the second half of 2008 as the result of ongoing economic weakness, and the western farm states, which will show signs of improvement earlier stemming from flourishing agricultural commodities. The West will be the slowest to recover, according to the NAHB forecast. “This should not be surprising since this region is dominated by Las Vegas, Phoenix and markets in California,” the forecast says. “These markets join the Florida markets as among the most troubled in the nation. Over-production, double-digit house price appreciation, heavy reliance on subprime mortgages and rapidly rising foreclosure rates were staples of these markets through this housing cycle and most of these markets are expected to decline through the end of 2009.” Levels of excess in western markets where prices have been on the decline are an almost certain indicator of further price erosion, the study says. Notable exceptions to the relatively gloomy outlook for the region include:
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Jim Glassman, managing director and senior policy strategist with J.P. Morgan Chase & Co., said that prospective home owners will have to return to how their parents bought homes and start saving more money for a downpayment. "The customer you have known for the past 20 years is not the customer you will know in the next 10 years," he said, as the economy transitions into a new era that "won't feel like it has as much oomph." The best news for the economy, he said, is that the emerging economies, largely in Asia, are doing fine and providing strong demand for U.S. exports and providing U.S. companies with "spectacular levels of profits." "The world has never seen such great economic performance since the dinosaurs," Glassman said, and as a result, the winds are shifting in favor of regions of the U.S. that rely heavily on exports, including Michigan. In NAHB's latest housing forecast, new single-family home sales are projected to decline 21.8% this year, to 605,000, before climbing 18% in 2009 to 714,000. Total housing starts are forecast to decline 29.5% to 948,000 in 2008 and rise 10.8% to 1.05 million next year. Most of this year's decline will be concentrated in single-family production, which is expected to drop by 37.1% to 653,000 homes.
Home prices are down about 12% since the height of the housing boom in 2005 and incomes have grown 14%, bringing "prices relative to income to about where they were in 2003" during this year's first quarter, he said. "We have flushed out most of the excess." Glassman said his guess is that home prices will decline 5% or so further, but gloomier forecasts foresee another 15% to 20% drop, and what will actually happen is probably somewhere in between those two views. "By fall, we will start to see that most of this is over," he predicted, but he conceded that he wished he knew "where home prices would settle out."
The outlook for housing and the economy should be gradually brightening within a few months, but before there can be any assurance that the worst of the downturn is over, there needs to be a pickup in home sales, according to panelists at NAHB's Spring Construction Forecast Conference on April 24 in Washington, D.C. Residential production and sales this year have declined "more sharply than anticipated," said NAHB Chief Economist David Seiders, and the situation for the U.S. economy "definitely has darkened," with more than an even chance that it has lapsed into a "mild" and brief recession in the first and second quarters. Seiders said that he continues to believe that new single-family home sales will stabilize during the middle of this year, paving the way for an upturn in late 2008 and in 2009 and leading to improvements in housing starts next year. However, "the sales side has to be off the deck before starts stabilize and move up," he said. And so far, he reported, there are few signs that new single-family sales are close to bottoming out, with the Commerce Department just announcing an 8.5% decline in March, to a seasonally adjusted annual rate of 575,000, a 17-year low, and increasing the unsold inventory to an 11-month supply at the March sales pace. Through March, Seiders said, NAHB surveys of 30 large builders accounting for 25% of sales nationwide, showed "no signs of stabilization, although the rate of the decline may be slowing." Likewise, the NAHB/Wells Fargo Housing Market Index, which polls builders to gauge their opinion of current sales conditions and demand six months down the road, remains close to its record low recorded in December and "shows no recovery yet, implying further deterioration of sales." "We need demand to revive to turn around the market," Seiders said, and he suggested that a temporary tax credit for home buyers, an approach being considered in housing and economic stimulus legislation on Capitol Hill, could help provide the impetus to boost sales and end the downward spiral in home prices that is the biggest concern for the health of the nation's economy. As home prices have declined, he said, "underwater" mortgages with balances exceeding the value of the home have been adding to the deterioration of loan quality that began in the subprime sector last summer. This is "bad for the financial markets," he said, and could result in further tightening of lending standards, yet more foreclosures and even softer housing demand. Economists participating in the conference were fairly optimistic that the downward turn in housing prices, while substantial, will taper off before it takes a toll on the longer-range outlook for the economy, but nobody can know for sure, they said. Seiders also stressed that there are negative implications for the economy if housing does not move into positive territory next year. The tax rebate checks that households will soon begin receiving as part of February's economic stimulus legislation should help revive the economy during the second half of this year, he said, but growth in housing will be needed to keep the economy on a positive course in 2009 as that stimulus fades.
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