Brint Wahlberg

Every October Newwest.net holds a real estate conference regarding real estate and development in the Rockies. Each year they've had an economist, Chris Thornberg, come and speak. Chris has been on-target all three years, predicting the burst of the housing bubble, the effects of the stock market collapse, and the rise in foreclosures. This year he was the keynote speaker, and here's what I took away from it:

• The United States is pulling out of the recession, all signs point to that, we're no longer heading downhill. In fact GDP growth in the 3rd quarter will be positive, the first time since the 2nd quarter in 2008.
• Job losses and the shrinking of the job market will continue. Jobs are a "lagging indicator" which means that they're usually one of the last things to correct after a recession. Chris is the 2nd economist I've heard this year say this, NAR's cheif economist Lawrence Yun also said it. Both cautioned that news media will use the shrinking job market to suggest we're still in a recession, which is not true.
• Unemployment is still high due to this, but it's improving a bit. Here in Montana, unemployment is acutally still pretty good. State-wide we are about at 6.5% unemployment which is about 2% lower than the current national average.
• Nationally, many housing markets have bottomed out and are now seeing recovery in terms of volume. Meaning that more houses are selling than in prior quarters, those markets include; Cleveland, San Fran, Minneapolis, Washington DC, Dallas, Boston, Denver, San Diego, Miami, Atlanta, Phoenix, LA, and others. Of the large national markets only Seattle, Detroit, Las Vegas, and Charlotte had negative volume in his reports
• Montana's median sales price has leveled out but seen little drop, his numbers suggested roughly a 4% drop in values. He predicts some correction will still occur, however Montana's market never spiked during the boom years and so it's only seeing a slight decline over the bust years.
• Prices nationally will continue to go down this coming year, in Chris's opinion and per his data, they're still too high, but getting a lot better.
• Montana is ranked 48th nationally in regards to houses with "mortgage issues" being people who are 60 days+ late or in foreclosure. Only Wyoming and Alaska are in better shape than us. Montana only has 3.15% of it's total housing market that are having mortgage issues.

The most interesting discussion was about where Chris believes we need to go from here, and how important the Federal Reserve is for all of us at this point. He even went so far as to call Ron Paul a "nitwit" for suggesting in his newest book that we should "end the fed." The federal reserve controls inflation and the US is on the brink of another massive inflation risk. Federal stimulus plans have injected billions of dollars into bank reserves, if that cash begins to seep into the market, our inflation rates will go up substantially. Interest rates would spike, in fact Chris compared it to the early 80's with 14% - 16% interest rates. Henry Paulson and the Fed have continued to monitor inflation and curb it as best they can, the issue that comes up is national pressure on further stopping job loss. Below me is what is known as the Phillips Curve. This very simple chart follows the relationship between inflation and unemployment. Chris Thornberg stated that if the Fed folds to political pressure and focuses on curbing unemployment, we will shift along the line below and inflation will rocket up.

The federal deficit will also affect inflation, and this next year we'll have a record deficit. However that should work to correct itself over the years to follow, he believes, and there will be other factors that will increase GDP, and shrink our deficit.

He went on to point out that this next year the Bush tax-cuts eclipse, so taxes will be going up. While as tax-payers this is bad news, for the economy, it's real good news. Tax revenues will increase for the government cutting back the deficit.

Also we want a weaker dollar globally, the reason why is that a weaker dollar means our exports cost less globally, and our export market will go up. Inversely our import market will go down and we'll buy locally a little more. This will further reduce our deficit, and help our economy.

Chris's overall projections went as follows:

• Expect 2010 to start with a sea of foreclosures. Many markets have investors who are begging for more foreclosures to come out for sale. His analogy was that they're begging for a glass of water and they're going to get a title wave. Banks will dump more foreclosures on the market in 2010 than ever before.
• Inflation will creep into the market regardless what the Fed does, but if they stay on target it will be a small effect.
• In 12 - 18 months interest rates for mortgages should be in the 7% - 8 % range.
• Unemployment will not dramatically improve, it should drop to around 7% but probably won't get much better.
• Next year we should see solid GDP growth in all 4 quarters.
• Expect taxes to go up once the Bush tax-cuts go away.
• Do not expect any more federal stimulus or bailout plans as further actions could really push inflation rates.

Chris said that of course his data could be all wrong and there are some big wild-cards that can dramatically affect our economy next year:

• It could be positively affected if our export market improves strongly, as suggested with a weaker dollar.
• It could also be positively affected if business spending goes back up.
• More tax cuts and/or more federal spending would have a negative influence on our economy.
• If Fed policy shifts from fighting inflation rates to fighting unemployment rates, that would also have a negative effect on our market.

Chris said it too, the scary thing is that both Democrats and Republicans right now have it wrong. And the other thing that really frightens him is that none of the actual reasons that caused our economic collapse have been addressed (such as compensation pay for stock brokers and loan brokers, and regulations regarding stock markets and loan markets).

The big theme was that this will be a slow recovery, be patient, because nothing will be fixed overnight.

I can guess, it's because someone will say something bad about you, God forbid. I'm like most of you, I don't want people bad-mouthing me online either! However, that's part of the new-world out there, web 2.0 and we'd better get on board with this before someone else does in a much more organized way.

Granted, there's a lot of details I don't feel like covering right now, however, if we as Realtors do not build a ranking/rating system that our consumers can use, then someone else will. In fact, a few have, here's a doozy of a review I read just today:

"[Agent's Name] of [Company] is a narcissistic sociopath that will say and do anything. Be careful of her an your money."

Want another? Ohh boy, I've got more:

"How can I get information on how to pursue a LAW SUIT against [agent & company]. I have a lot of evidence on how this firm treats people. If anybody knows, please let me know. I would also like to report him. Anybody have his Realtor #"

Ouch. What was interesting was that the site I pulled these reviews from had it's 50 most recent ratings posted, guess how many were negative? Twelve, less than 1/4 total, most were positive! So it would appear from this small sample that most people actually want to provide positive reviews online.

Lets dive further into the issue with negative feedback. Yeah it sucks, especially when people say stuff that's way out there. However this type of feedback has it's advantages; first of all reasonable negative remarks allow us to improve our business, that's a good thing. Second, if an agent truly is that bad of a person, isn't it best for our association to weed out bad eggs anyways?

So fellow agents, lets please get on board with rankings and ratings. Talk to your board leadership to get something underway, the nice thing about if your association has control over the ratings system is you can filter the incredibly crazy remarks. Your board can filter the totally insane stuff or the remarks that don't have anything to actually do with your professionalism.

Zero Down!!! Buy! Buy! Buy!

Amongst the firestorm of the market collapse and lending rules buying houses with zero-down money seemed to be one of the main punching bags for many people. Heck, it was for me. How many Realtors have said this line, "Conventional and FHA loans haven't changed much over the last few years it's the zero-down, no income, high ratio, NINA loans that have caused this problem." And yes, that statement is true, partially, however lets look closer at the "zero-down" part.

Last week at the NAR Leadership Summit I found it very interesting to see a report about loan delinquencies. The report compared conventional, FHA, VA, and sub-prime. Naturally sub-prime was way up, nearly 1/4. FHA had a slight rise, conventional and VA a very slight uptick but were mostly flat.

NAR's chief economist pointed out in the data that it's really interesting to see the VA has not seen a big rise in delinquencies. As most of us professionals know, VA is well known for it's zero-down option for veteran buyers. What was pointed out was that the lack of issues with VA loans shows that zero-down financing simply was not/is not the problem in financing issues.

That made quite the impression on me, zero-down financing is not the issue, obviously it was the incredibly relaxed standards of sub-prime loans. It will be interesting to see if the National Association of Realtors makes some noise with this data, I think they should.

Thought I'd put a post out there mainly for feedback from fellow Realtors across the nation.

Here in Missoula we've been long time FNIS Paragon clients, to the north of us the Northwest Montana board has recently switched to FBS Flex, as has the board to the south of us. We tend to have a lot of market cross-over that leads to some headaches with compensation, showings, etc. A solution our state has been trying to work out has been a data-share between boards.

Currently if Missoula and our two neighbors were to share data, we'd have three options (there's probably more, but three basic options):

1. Read-only, non-compensation feed. This feed is accessed through a separate site, with no offer or intention of compensation. This practically exists right now, there is no cost, however there's little advantage as well.

2. A regional data share, with compensation. Possibly a single-entry web portal, that you can pull up all active listings from all three boards, and there is compensation. This seems like the best fit, the three boards would remain intact, we'd share data, and get more exposure for our listings. The issue at hand here is the two different vendors, and can we come up with a solution that works for all three of our boards without having to do a costly data conversion.

3. A single MLS, as we'd say in Montana, "Around here, thems' fightin' words." While the most convenient, I can't imagine this being an easy solution. At this point, it's not really an option.

So I'm curious Active Rain readers/posters - what does your board do, and how do you like it? For those of you who have a data-share of some sort, how has it worked, and what do you like and dis-like about it? Also I'd love feedback from FBS and FNIS users about their likes/dislikes in each platform.

Yesterday there was a 12 home Realtor lunch tour on the south side of Missoula. All of the houses were larger/newer homes in newer subdivisions, priced between $350,000 - $600,000. For those of you unfamiliar with our market, that's probably what you'd consider the "top end" right now, there's higher priced stuff, but these are mostly large homes with 4+ bedrooms, newer, big lots as high as 2 acres, etc.

After completing the tour it was sobering what is going on in our "top end" market, the general disconnect between agents and sellers, and how people still don't realize the changing national market. A few observations:

- Not a single house was priced within 10% of it's market value.

- Of the 4 most expensive homes only 1 had a yard, the rest had an acre of weeds or dried out dirt/clay. I figured some were foreclosures, none were, and in two cases the agents pretended to be shocked that I'd dare ask such a question.

- Only a few agents had the confidence that they were going to get a price reduction or work done on the house to improve it's appearance.

While the lower price range of our market is flying by, the top end crawls at a much slower pace, and agents are failing to help their sellers recognize that. In one house that was probably $100,000 over-priced the agent said she wasn't going to pass our feedback along b/c she was afraid of what her clients reaction would be! In another house that might've been $150,000 too high priced, the agent said that her clients would, "probably go that low." Well then, REDUCE IT! I don't usually search $150,000 over what my clients are approved for, and I doubt many other buyer's agents do so as well.

Someone help me, when did we go from being the professionals in our market that helped our seller clients get their house sold, to someone who will just appease their seller clients and not tell them what they need to hear? Come on people, if your sellers need to sell, and are willing to be priced within their actual fair market range, get it done. How on earth are you going to sell a house that's $100,000 over priced (at least), ugh.

The best advice I could give any seller's agent; if the seller wants to horribly over price the house, or bases their opinion on an old appraisal compared to your market advice, walk away - don't take the listing. Badly over-priced listings are probably the 2nd or 3rd biggest time wasters in this business (behind working with extreme low-ball bargain hunters, and selling short-sale houses).