Boise Real Estate Blog

Does “Think Positive” Sell Homes?

I have been taking a lot of heat from my colleagues for not “thinking positive” since putting up this blog a week ago.

They think I’m ”negative” because I’m willing to openly acknowledge the realities of our current Boise real estate market.

Sorry, guys ~ I’m not a cheerleader; I’m a realist!

Does anyone really believe that an agent’s positive mental attitude is going to motivate a client to do what is not in their own best interests?

This reminds me of some of the motivational seminars I attended in the my early years in real estate where the speakers encouraged agents to stand before the mirror each morning, chanting “I am becoming better and better each day!”.

Perhaps we should all start each day by chanting “the market is getting better and better each day”?

I am especially amused by my fellow agents who are complaining about the Idaho Statesman’s articles about the Boise real estate market.

If only that damned newspaper would be more “positive”,  everything would be okay.

Sure  .  .  .  .  like the average person lives in a cave, doesn’t have internet access, doesn’t watch the news, and doesn’t know what’s going on?

I have always believed that it’s best to face your challenges and deal with them.

So .  .  .  .  how do I feel about our current real estate market?

• It is neither good nor bad, it simply “is”.
• No amount of embellishment by Realtors^® is going to change things; to do so simply makes those of us in real estate look like self-serving cheerleaders (visit the David Lareah Watch for an example).
• Current market conditions create opportunities for skilled practitioners.
• Motivated buyers and sellers are closing transactions.

It is up to each of us to decide how we will deal with current market conditions.

A fool wishes for things to be different; a wise man becomes worthy of facing things as they are.

In these times, it’s a good idea to remember the 11th Commandment:  “Thou shalt not BS thyself”

September 22nd, 2006 Posted in Inside Real Estate |  Print | No Comments »

Charles Schwab Housing Report

(this posting is paraphrased from a Charles Schwab & Co. report to their investors dated 9/21/06; you can read the entire article here).

In their report,  Charles Schwab & Co. detailed the tight connection between the Housing Market Index and the S&P 500, as illustrated by the following chart.

Five years ago, the Federal Reserve was determined to keep the popping of the internet bubble, the economic recession, and the aftermath of 9/11 from turning into a self-reinforcing collapse. 

Short-term interest rates were lowered to 1%, banks encouraged mortgage holders to refinance and withdraw equity, lending standards were lowered, and a rash of new adjustable mortgage (ARM) products were introduced. 

All served to fuel speculation in residential housing, thereby boosting prices to an unprecedented level, which in turn reinforced more specualation.

The increase in real estate prices spurred increases in personal net worth, which in turn fuled a consumption boom and sustained economic growth.

And, with demand came more supply.

The report further noted:

• 32.6% of new mortgages and home equity loans in 2005 were interest-only; up from 0.6% in 2000.
• 43% of first-time borrowers (25% of ALL buyers) in 2005 purchased with no down payment.
• 15.2% of 2005 buyers owe at least 10% more than their home is worth.
• 10% of all homeowners with mortgages have no equity in their homes.
• $2.7 TRILLION in loans will adjust to higher rates in 2006 and 2007.

One of the last remaining vestiges of the real estate boom has been sustained mortgage equity withdrawals (HELOC’s), providing ready cash that has continued to spur consumer spending.

To many economists’ surprise, mortgage equity withdrawals have remained high, thereby sustaining consumer spending.  The ultimate danger, however, is that these equity withdrawals will eventually end and thereby cause a collapse in consumer spending.

The report goes on to say that the housing industry is more important to the overall economy than many are currently assuming. 

The harder housing falls, the harder it will be for the economy to land softly.

Sobering stuff indeed.

September 22nd, 2006 Posted in Boise Market Stats |  Print | No Comments »

Boise Real Estate Is On Sale !

Smart buyers wait for a sale to buy what they want at a lower price.

Many real estate buyers jump into the market when they feel good about it and try to get out when sentiment turns negative.  The shrinks call that ”herd psychology” ~ when people do what everyone else is doing.

Acting sheepishly, however, may not be in your best interests.

Have you ever noticed that the really smart investors buy when everyone is selling and sell when everyone is buying.

It’s a good idea to ask yourself a couple of questions if you are considering investing in Boise real estate at the present time, including:

• What are the underlying economic factors for Boise real estate?

They are extremely strong. 

We are not in a national recession, our unemployment rate is a little over 3% vs. the national rate of 4.7%, we are creating new jobs, people are still moving here, and this is a terrific place to live ~ so good, in fact, that Money magazine says the Boise area is the 8th Best Place To Live in the entire U.S.

• Will the Boise real estate market remain soft forever?

Obviously, there are no guarantees of future appreciation because no one can predict the future.

However, given the desirability of our area, our quality of life, and our comparatively lower cost of living vs. other areas, it seems likely that our real estate market will recover.

And, it may recover rather quickly after we blow off some of the froth in our market.

Our market simply grew too fast during 2004-2005, and we also experienced a tremendous influx of speculators in the lower end of our market, thereby driving Boise real estate prices to unsustainable levels.

We are now in a period of adjustment that will ultimately result in more affordable homes in the Boise real estate market.

So, the choice is yours ~ do you pick up a bargain when Boise real estate is “on sale”, or do you wait until everyone else has jumped back into the pool?

Let’s run some hypothetical numbers and consider the trade-offs of buying now vs. waiting for the Boise real estate market to strengthen.

As an example, lets consider a $200,000 home similar to one I now have listed in West Boise.

But, let’s forget about the 20-25% appreciation we enjoyed over the past couple of years.

Instead, let’s use what might be a worst-case scenario of (gasp!) only 3% annual appreciation, and let’s say you keep the home for 5 years.

In this scenario, that home would be worth $231,854 at the end of five years.

Using only a 2% annual appreciation rate, the home would still be worth $220,816.

So, you see ~ everything is not all doom and gloom.

For many buyers, this is a buying opportunity ~ a chance to snag a good deal while Boise real estate is “on sale”.

I wonder how many “I could have bought  .  .  .  . ” stories this market is going to generate in the next five years?

September 21st, 2006 Posted in Buyer Stuff |  Print | No Comments »

Builders Offering Inventive Incentives

You don’t have to look far to find a deal if you are a buyer interested in a new home.

Buyer incentives abound, and some are becoming pretty creative ~ like Corey Barton Homes’ “Live Free” program that offers to pay your mortgage payment for the first six months.  The remaining 29.5 years of payments are the buyers’, however.

(Gee, I wonder if that incentive is built into the price ???)

I am also receiving e-mails and flyers from listing agents offering to pay me bonus commissions (up to 6%) if I will steer my buyers toward their listings, and it has now become commonplace for builders to offer incentives to buyers for seller-paid closing costs, $5,000 to be used for upgrades/furniture, and other inventive marketing ploys.

It is indeed a good time to be a home buyer in the Boise area!

September 21st, 2006 Posted in Buyer Stuff |  Print | No Comments »

New Home Starts Tumble

The U.S. Commerce Department reported this morning that U.S. housing starts fell a greater-than-expected 6% in August.

Specifically, single-family housing starts dropped 5.9% to their lowest level since February 2003.

Across the country, housing starts are down 19.8% from the August 2005 pace.

The report came a day after a building industry survey showed that home builder optimism sank for the eighth-straight month in September to its lowest level in more than 15 years.

I am hearing comments on the street that builders are not buying lots and avoiding starting spec homes as they attempt to build on the lots they already own.

Two years ago, builders were buying up every Treasure Valley lot they could find at any price developers asked.

Stay tuned for a future posting about builder incentives in the Treasure Valley!

September 19th, 2006 Posted in About Our Area, Inside Real Estate |  Print | No Comments »