Todd Waller | Ann Arbor Real Estate | Team366

I began a conversation with a few of my Twitter friends regarding a recent post on how to recover losses in your 401k/IRA accounts. Using Twitter, you're limited to only 140 characters, and my answer to where investments should be made, and why, is a lot longer than 140 characters!

The Question

From @tvanderwell: "devil's advocate time - when prices are down, how do you persuade people that RE is the place to invest" My answer: "have you LOOKED at your stock holdings recently? When should you buy those same stocks, when you did or now?" So the question has been posed: As an agent, I know inherently that real estate is THE investment to make, but how do I educate my clients that it's a GREAT investment option RIGHT NOW? Look at how many of the world's richest people gained their wealth: through real estate. Look further at those that made their wealth via any kind of investing. They did not purchase stocks, commodities or real estate at market highs! For clarification, we are talking about real estate as an investment, not necessarily as a residence, although there is some spill over of thought in that direction too. The added benefit in "investing" in real estate that is your primary residence, is that the utility factor of the property needs to come into play. The days of the home being an ATM are gone, for now. The days of seeing your home as a place to keep you warm and dry are back. If you have the ability to purchase now, live there for 7-10 years, your "investment" will keep you warm and dry and likely give you some price appreciation at the end.<!--more-->

Investing In Real Estate

The fun part about real estate, RIGHT NOW, in our country is that property is cheap! In the South East Michigan marketplace, we are staring at 1998-2000 year price points! In many cases, that's translating into about $100 per square foot and great quality in a home. Now stare at those time frames and price points again. They are only 8-10 years old! That means that this real estate cycle is/was 8-10 years long, from beginning of price appreciation to a return to that price point. What is wild, to me, about that cycle is that at this point in time we are looking at a HUGE amount of inventory (granted, it's dwindling around Ann Arbor) and near historically low mortgage rates. "Okay Todd, you've made the point that real estate is a great purchase at this point in history, but I'm still trying to recoup my losses from the stock market. Why would I throw any remainder into real estate? After all, it's falling in price too." I ask myself a similar question as I invest money in the stock market these days. Especially when some of these stocks have hit multi-year lows! But we were always taught to buy low and sell high, right?

Buy when there's blood in the streets, even if it's your own. - Baron Rothschild

Real estate will never equal zero! It will trend lower, it will trend higher, but there will always be an inherent value to property. Buy low, sell high and buy twice as much when there's blood in the streets! There is a great section of the tax code that pertains to IRA's and how you can utilize real estate as one of the "eggs" in your diversification strategy. The neat thing about this little utilized piece of tax code, is that you can direct your IRA funds to purchase a rental property, vacant land that you could farm, a Real Estate Investment Trust (REIT), or any other property type that you can imagine! The point is, you are in control of where your IRA real estate dollars go! As one friend of mine explained to me about real estate in Roth-IRA's: "It can appreciate without taxes till the sun explodes." And a final quote from @BawldGuy:

If you have 10-20 years we can possibly add an extra few grand a month in retirement income. Oh!! Now yer payin’ attention. All kiddin’ aside, sometimes it takes a steel-toed kick in the pants to make people look at something better than Wall Street. Capital growth is the name of the retirement game. No capital growth = very little retirement cash flow.

The Summary

Why do I invest and suggest others invest in real estate as a retirement/investment vehicle? The different kinds of real estate vehicles available (rentals, development, office space, etc) offer a real estate investor a bunch of options to accomplish their investment goals. I have some clients that started a while ago in acquiring rental properties for the sole purpose of equity accumulation. The rent they are able to collect more than covers my investor's monthly mortgage payment. With professionals to asisst you through the process of identifying and acquiring the correct property, you simply need to let us know what your investment goals are!

Post Script

There is also a question of mindset underpinning this whole conversation about investing in real estate. Tom's use of the word "persuade" is a strong word, but correctly chosen. As an industry, we are not exactly being overwhelmed with folks throwing money at us saying, "Invest it! Invest it!" The mindset that real estate professionals and investors need to see and have is one of opportunity. When the bulk of your marketplace is thumb sucking and whining about the good ole days, that is a great time to strike! Those folks have taken themselves out of the marketplace by convincing themselves that nothing can be achieved in these conditions. A contrarian viewpoint now in our market cycle will take investors to great heights with just a little patience and foresight.

[image source]

Here's a repost of my Real Estate Chat (Team366's take on an open house) this past Sunday. It was a liveblogged event and was a simple, but effective way, to generate more interest and exposure for this home and our Team.

-------------------------------------------------------------

2:00 pm, Sunday, November 16th - Will Anyone Show Up?

It’s Sunday, November 16th and all the open house signs have been hung with care!

Welcome to the liveblog of an Ann Arbor Michigan Home open house. Or, as we on Team366 like to call them, a Real Estate Chat.

The purpose of an open house has traditionally been to expose a listing to the area buyer community. Ads are taken out, signs planted, maybe even postcards sent out, and the day of the open house, a small prayer is recited to lure interested parties through the door. The era of the internet has changed the effectiveness of an open house. Now, prospective buyers come through the front door with more information than ever before. In many cases, the buyers know detailed facts about the neighborhood, community and in increasingly many cases, huge detail about the subject property specifically!

Team366 decided to shift how we approached open houses. Given the level of detail many folks already have on hand, we decided to simply host a two hour window when anyone interested in the home, or the area could drop on by and chat with us about real estate.

Today, I am holding a real estate chat at the gorgeously well appointed 4951 St Andrews Ct, Ann Arbor, MI 48108.

2:23 pm - Did I Mention it Snowed?

I mean it was a darn near white out driving to the real estate chat today! Middle of the day and the amount of snow flying around made it feel as though it was about 5:30 pm, or just before the sun goes down!

“Really Todd? Fascinating. Who cares about the weather? I’m here to learn about real estate, not your commute!”

Yeah, I hear that. The point of bringing up the weather is that it can, and does, affect folks’ desire to go see properties. Let’s face it, unless you NEED to purchase a home in winter time in Michigan, there are better things you would rather be doing. Watching football (bite your tongue! The Lions don’t “play” football!), sitting in front of the fireplace, taking in a movie.

We have often found that many folks, whether or not they need to move, will go open house touring when the weather is at least sunny, warm and the home meets a few of their criteria.

“Then that begs the question, why force homeowners out of their homes for 2 hours on a Sunday, if it’s simple chance that interested lookers will even show up?”

For the sellers, it is another item to check off the list of things done to expose the home for sale. For buyers, it’s an opportunity to see homes that just caught their attention. For agents, it is an opportunity to meet prospective buyers and sellers. It allows us an opportunity to show buyers and sellers how we do what we do.

2:35 - Guest Number 1 Arrives

First guest has arrived and found our real estate chat via the signs whilst dropping a son off at a friends home. They are looking to “upsize” and with 3100 sqaure feet, and an additional 1500 square feet in the finished, daylight basement, this home has plenty to offer.

2:48 - Guest Number 1 Departs

I will say this about the Real Estate Industry, it certainly gives one the ability to talk to many different folks! This guest is looking to up size their current home and enjoyed the amenities that 4951 St Andrews Ct, Ann Arbor, Michigan had to offer!

3:10 - More About The Home & A Phone Call

4951 St Andrews, Ann Arbor, Michigan has a lot to offer today’s buyer! 3,172 square feet, plus 1,500 sf in the finished, daylight basement, this home features four bedrooms, and four and a half baths. Gorgeous clear maple cabinets compliment Granite cinnamon blue countertops. Professionally landscaped yard opens up to the second tee/first green of Stonebridge Golf Course. The generous eat-in kitchen, dining room and brick paver patio, combined with the finished basement with wet bar, make this executive home a great space for entertaining.

This post was delayed because I couldn’t type and hold the phone between my ear and shoulder…… I can only do three things at a time!

3:30 - The Internet & Real Estate

So, if it’s not painfully obvious by now, Team366 and I see tangible reasons to embrace the internet when it comes to marketing and talking about Ann Arbor Homes for sale. As you have seen across an hour and a half of a modified open house (we call them Real Estate Chats) it can be hard to talk with folks about a home or real estate in general, if they don’t show up to see us in person.

Ahh, but there in lies the catch! What about the folks that wanted to be here, that wanted to come to the real estate chat, but were unable to due to prior commitments or work schedules? They may not be (most likely are not!) interested in my ramblings about real estate chat v open houses, and whether or not I got lunch today (did not). But they will be interested in learning more about the property! And that’s where the internet plays such a huge role in how Team366 markets properties for our clients.

Our listings feature the exclusive Listing Syndication System (LSS). We make effective use of many different avenues of online marketing. Narrated walkthrough videos and hi-res photos are simply the beginning!

When the average listing is able to generate 7 Google indexed backlinks and our LSS can generate, in some cases, nearly 5,000, is there a benefit to having that much exposure?

Yes.

Nearly 80% of our listings sell within their contract time frame. When the board average is nearly 1 in 5; that is, nearly 20%, that’s a tangible benefit. It’s one of the things that has set us apart and placed us in the top ten of real estate teams in the Ann Arbor Area Board of Realtors.

4:00 - Heading Out

Well, this real estate chat wasn’t as productive as I thought it would be. I think the weather conspired against me… I did enjoy, however, writing about the real estate chat process, what this beautiful home has to offer and communicating with friends via twitter.

The snow has continued, albeit in the flurry format and not the ridiculous white out mentioned earlier! Be safe all and I will see you on the ‘net or, hopefully, in person!

Ta ta for now!

Buyers: Search all Ann Arbor Area homes for sale. List updated every 15 minutes
Sellers: Learn about Team366’s proprietary Listing Syndication System (LSS), the area’s BEST marketing system.

Todd Waller
Team366 | Real Estate One
734.564.7465
Search for Homes in Ann Arbor
Visit Team366.com

The most recent issue of the Michigan Realtor (MAR) is out and has a great article outlining the Michigan housing market compared to the rest of the country. To sum up the article:

• Michigan did not rise to the housing value heights that other states have;
• Housing market recovery will likely follow an economic recovery in Michigan;
• Michigan housing prices are back to 1999/2000 price points.

Team366 and this blog have talked about price being king when it comes to real estate sales. The Big House Data summary for the Fourth Quarter 2007 Inventory Report state:

Putting the area on notice, that to sell a home, you need to be at or lower than the
2000 and 2001 price points, many Pfizer’s relocation department showed us what it takes to sell homes in slow markets….Price.

And that summary from last year has continued to hold true in the Ann Arbor area real estate market for 2008. The article from MAR backs up the fact that Michigan housing values are back to 2000 price points….as a state.

Another interesting fact to glean from the MAR article is that while the national housing market continued to accelerate the number of homes sold, the 2005 housing market in Michigan was down, even though prices remained relatively the same.

Average Sales Price of Michigan v National Homes

Figure one, taken from the article, shows the average sales price of homes sold in Michigan versus the nation. What is curious is that the nation starts at a higher average sales price than Michigan. Also intriguing is that from 2004 to 2005, Michigan’s average sales price remained stagnant while the national average sales price continued to climb through 2006. Figure two, also taken from the article, shows the number of sales per year. Again, this is Michigan sales against the national sales. This time, however, to ‘level’ the playing field, all sales are indexed against the year 2000. This means that the number of sales for the state of Michigan and the nation equal an index value of 100.

Michigan v Nation Units Sold (Indexed, Year 2000 =100)

By examining this graph, we see that the number of transactions in Michigan for the year 2007 was below the number of transactions in the year 2000. We can also see that the decline in the number of units selling in the state of Michigan began from the year 2004 to the year 2005. Compared to the national trends, we as a state were ahead of the nation in entering into a housing market slowdown. It can also be inferred that we will likely pull out of the housing market decline before the rest of the nation, but that inference has too many “but’s” in it for this analyst to be comfortable!

It could be posited that Michigan is kind of like the canary in the coal mine: if the canary isn’t doing well, soon the whole shaft is gonna be coughing! The automotive industry stumbled, hard, and Michigan took it is taking it on the chin. Combine the slow down in manufacturing with an economy that is now sputtering, and a credit crunch that makes bankers reach for the antacids and Michigan has been weathering this “storm” for quite some time.

The silver lining for the good folks of Michigan is three fold:

1. We didn’t have too far to fall compared to the rest of the nation, so our “readjustment” could be over soon;
2. Investors have noticed Michigan’s property values (just like Warren Buffet buys low and sells high, it’s a good sign of the bottom when investors swoop in);
3. All the folks that left the state gave up their claim to Michigan’s greatest commodity -FRESH WATER!

Frankly, if you’ve made it this far through the post on real estate housing trends, you deserve a cookie and a pat on the back! Don’t hesitate to drop a comment or give us a ring to talk further about the housing market and how it affects you.

Buyers: Search all Ann Arbor Area homes for sale. List updated every 15 minutes
Sellers: Learn about Team366’s proprietary Listing Syndication System (LSS), the area’s BEST marketing system.