Russ Phillips

Good morning real estate afficionados, from the World Headquarters of Optimism Atop the Hill (based in my study with a wonderful view of rural Williamson County, Texas).

I was sitting here reading my email this morning, going through the maze of "How to Survive" and "Get More Listings" spam from vendors, and it occurred to me - they want us to buy in to this sensationalism, but the real truth is that things are going briskly here in the Georgetown area.

Sure, we still have a little over 2 years of inventory in the $500-750k market here (on the west side), but you know what? If you have that kind of money to spend, you've seen them all and the ones that have sat forever have sat forever FOR A REASON.

NEWS ALERT: WELL LOCATED PROPERTIES THAT ARE APPROPRIATELY PRICED AND CLEAN/STAGED SELL QUICKLY...SOMETIMES WITH MULTIPLE OFFERS.

Holy cow. Is this a new truth? Well, I think you know the answer to that.

But it is kind of uncanny. With all the horrible news, I have been shocked to be involved in no less than FIVE different multiple offer situations in a span of two weeks. This tells me two things:

1. Either sellers that are not selling aren't preparing their properties well enough, or
2. Agents are not exercising their fiduciary responsibility to tell them that they are priced too high.

Right now, it IS a buyer's market - for the stale inventory. If your listing has been sitting, and there are no showings, revisit your marketing - starting with the price. Buyers do not care about houses that are built as "monuments to the seller." BUYERS CARE ABOUT VALUE. PERIOD.

I realize this sounds a bit condescending, and I don't mean to be critical. Often, sellers take an emotional approach to pricing their home, based on what they have in it, what others are asking, etc. They need us to tell them when their impressions of what TODAY's buyers want are skewed. Floorplans, finishout, location, competing inventory, success rate of the neighbhorhood, convicted sex offenders, school rankings....anything and everything could be a reason why your listing never makes it above choice #2 in the buyer's eyes. Our job is to find the anwer and deal with it if we can. Sometimes (like floorplan or location) the issue is unchangeable. Sometimes it is because the photos are teeny and you cannot see anything in them.

Regrettably, it is often price tag.

Because they view homes as a commodity, Buyers today measure value in two ways:

1. I get more for my money, or
2. I get the same for LESS money.

As a buyer's agent, I get frustrated with price tags that are nowhere near realistic. It paints a negative spin on our profession. "Well, my realtor didn't get it sold..."

Tell your sellers this simple principle about today's real estate buyer:

THE INTERNET HAS MADE BUYERS MORE EDUCATED THAN ANY OTHER POINT IN HISTORY.

I work with a lot of buyers. Many times, they show up for their very first visit to Texas with pre-conceived notions about what is and isn't overpriced! Of course, it is my job to reign them in and educate them, but when we put our listing agent hats on and wonder why no one is buying, we MUST consider the point above.

Gang, there is a lot of "pent-up demand" out there right now, regardless of what CNN says. Buyers are willing to buy if you give them a reason. Let's all take a look at our listings and look for a COMPELLING REASON to be chosen #1....because we all know: IT ONLY TAKES COMING IN SECOND TO NOT SELL YOUR HOME. In a time where prices are declining, you can cost yourself by not taking care of things early in the game.

Who knows? I may show up with a buyer for you...

Well, so Lehman Brothers could not find a buyer in the 11th hour and filed for Bankruptcy. No big surprise - we've been saying "Garbage in - Garbage out" for a couple decades now...In this case, we're not talking about computers. The "garbage in" is the ridiculous loans that have been made.

You can always expect this kind of thing when people are making big money without having to be smart.

Think about it. During the height of the real estate boom, my phone was ringing off the hook with people identifying them as "real estate investors." They were always looking for property where they could borrow 103% and cash flow with a tenant in the house. Never once did I take a bite of the tempting fruit of the out of state "investor." Californians were amazed at how cheap homes are here in Georgetown (or the Austin area) and would buy anything. I heard stories of investors buying up city blocks of new construction.

Perhaps this is how Lehman Brothers ended up with $60 Billion (with a "B") in bad loans (according to the news report I heard on the radio today).

Does this remind anyone of the tech bubble in the stock market? I remember people going nuts on day trading. And with everything going up and up and up, it was easy to look like a genius. This is the same phenomenon that happened with real estate investing in more recent years.

The truth is that the acquisition costs are prohibitive to cash flow...unless you find a steal of a deal. And if you're being pitched a "steal," then why isn't the agent buying it?

Anyway, it was this mentality (manifest in different ways) that is driving the crisis in our financial industry right now.

So what should we expect next? More of the same. But I have to say, it is a good time to buy!

• Buyers will be even more tentative, as question marks continue to hit us from all sides. Gas prices, stiffer loan underwriting (focused on responsibility), and fears about the stock market will give buyers pause.
• When buyers do commit to writing offers, they will be looking to protect themselves from future problems, and will offer low. Many an agent is writing several lowball offers before one sticks...really this started a few months ago. Lehman Brothers' situation will just exacerbate this.
• Wall Street's mortgage poolers will continue to promote "risk based pricing" on home mortgages. This means that the better your credit score, the better interest rate you'll be able to get, and the less you'll be required to put down on a home.
• Essentially, every area where the pendulum can swing back to a sense of responsibility, it will. This is a good thing, but it will continue to be painful in the interim.

Thankfully, Austin continues to outperform the nation. Where Austin has seen the most pain has been in the luxury market, where months of inventory has been very high, and price drops are coming in big chunks.

In Georgetown, we have the same story going on. In Georgetown, I'd place the "luxury market" at anything above $500k. At the time of this post, Alamo Title Company is reporting 33.88 months of inventory in the $500-750k range in Georgetown's west side. It is a GREAT time to buy if you are shopping in that price range. However, supply and demand are MUCH more in balance in the $100k-200k market. Here's the grid:

The idea behind "months of inventory" is basically to provide a simple answer to this question: How long would it take to sell off the current listings at the rate we've been selling over the previous 12 months if no new listings were added to the market. You can see, we have a lot of high end inventory here.

No analysis of Georgetown would be complete without a look to what is east of the interstate:

Most of the higher price range properties in GTE will be rural homes with acreage or restored Victorian homes in "Old Town." The lions' share of what trades on the east side are homes priced at $300k or less. Generally, land on the east side has been cheaper for developers to acquire. This allows them to price lots at a lower price, and ultimately you have more affordable homes. That said, the east side offers some great value, as well as convenience, proximity to the park and downtown.

Well, I suppose I'm packing too much into this blog, so I'll go ahead and use this as my stopping point.

Russell Phillips can be found at www.GeorgetownRealEstateExpert.com/blog.