The complete report/press release can be found here. Home values, while not going up as much as they were, are still appreciating in Middle Tennessee. If you live here, or are moving here, but are waiting to buy for some reason, you are making a huge mistake. Unless you have some credit issues to take care of, waiting doesn’t make any sense. Remember, all Real Estate is local, so forget the nonsensical news that you are hearing about the rest of the country. We sold 27% less homes in this area than we did last year, but home prices still went up. Imagine how much they are going to increase when things heat up again.

There have been lots of confusing reports over the last few days concerning Real Estate and the housing market.

First, we received this positive news, telling us how home sales increased in February.

Then yesterday we found out that home prices declined.

Today the big news is that new home sales, or new construction, saw a decline in the month of February.

So what does all of this mean? As I have said many times before, everything having to do with economics is cyclical. Federal Reserve Policy certainly had an effect on the housing cycle. By keeping the Federal Funds Rate low for way too long, the Fed encouraged mortgage lenders to issue credit to people that were not credit worthy. As a result of that, demand for homes increased. In any market, whenever demand increases, prices will increase. There was so much demand during the housing boom, that increases in supply (new construction) never had the effect of reducing price.

Well not until now, that is. When people began defaulting on loans, two things happened. The amount of existing homes on the market increased substantially. Also, as a result of the boom/bubble, too much new construction had been built. That accounts for the supply end of the equation.

Another result of foreclosures was a tightening of credit standards, which equals less demand.

Regardless of what the product is that you are selling, when you have an increase in supply and a decrease in demand, you get a decrease in price. It’s called the law of supply and demand. It’s really just simple economics.

So when I saw that home sales had increased in February, I knew without a shadow of a doubt why. I knew that it was because sellers were reducing their price.

So is any of this a catastrophe like the media and national politicians are making it out to be? Does this “crisis” require a government solution? The answer to both of those questions, in my opinion, should be no. The cycle should be allowed to run it’s course and work itself out on it’s own. Full disclosure here, I am a member of the National Association of Realtors, and the trade union, being a huge lobbying organization, has a much different opinion. But they are wrong. There is nothing catastrophic about business cycles and there are lots of lessons that need to be learned as a result of this one.

Lastly, we should never forget that all Real Estate is local. There is no such thing as “the Real Estate market”. Real Estate actually consists of many local markets, and this market in Middle Tennessee has never been in a crisis. Prices have not increased like they did in previous years. But they have not decreased either. Are we selling less homes? Sure. But that has more to do, in my opinion, with tight credit standards, than anything else. This market is still good. It’s a good time to buy and it isn’t that bad of a time to sell. If you can find a Realtor like myself, that is willing to give you the same quality service for a 4% commission, saving you thousands of dollars, you probably ought to go with that guy. Just saying.

This kind of goes without saying, but I will say it anyway. Now is a really, really good time to buy. Interest rates are low. Prices are down. What are you waiting for!

From REALTOR magazine:

Remember this is a place to live not a stock market investment, they say. Lenders want buyers to spend no more than 28 percent of their gross monthly income on mortgage payments, real estate taxes, and home insurance. Buyers shouldn’t count on stretching further because lenders won’t approve their loans.

• Cash is king. Having enough money in the bank to pay closing costs that are typically an additional 2 percent to 3 percent of the price of the home is necessary.

• Location. Location, location. As any good real estate professional knows, homes in good school districts where the crime is low are much more likely to hold or increase their value.

• Compare. Besides just looking at the comps, buyers should examine what it would cost to rent a similar house in the same area and they might consider what it would cost to buy land and build a comparable home.

• Think long haul. It will probably take at least six or seven years of living in the house to be able to sell and come out ahead.

As for the location part of it, Kingston Springs and Pegram has excellent schools. Harpeth High which serves both communities, was actually one of only four schools in the whole state to win the Blue Ribbon Award last year. Comparing what it would cost to rent in the area is a moot point if you choose the right location. For instance, over the last four years that I have lived here, I have seen my home’s value increase about 20%. That’s wealth that I would not have earned had I rented.

From Bloomberg.com:

March 19 (Bloomberg) — Fannie Mae and Freddie Mac agreed to expand their purchases of U.S. mortgages and related securities after the Bush administration reduced the amount of capital the companies are required to hold as a cushion against losses.

The government-sponsored enterprises had their biggest two- day gains on record in New York Stock Exchange trading as their surplus capital requirement was cut to 20 percent from 30 percent by the Office of Federal Housing Enterprise Oversight. The companies, the largest sources of money for U.S. home loans, also agreed to raise a “significant” amount of new capital.

The goal is to “help restart the housing engine that powers our economy,” Fannie Mae Chief Executive Officer Daniel Mudd said at a news conference in Washington today. Freddie Mac CEO Richard Syron added: “This is what the GSEs were put in place for, to deal with situations like this and we will deliver.” continue reading

The one thing I believe that anybody in any business needs to do to be successful, is to attempt to see things through the eyes of the consumer, the customer, the client. I really don’t think a whole lot of that is done in the real estate business today. For some reason, Real Estate professionals have instead tried to convince the public to think like them. Rather than giving the same amount of service for a lower price, companies today are instead offering gimmicky service ideas for a higher commission.

In my opinion, that is the wrong approach. What the people need and want today is good quality service for a lower price. Now there are some companies that will charge you a flat fee to put your house on the Multiple Listing Service. Those companies offer you no service, but they at least give you exposure on the MLS, which is certainly important. I am not offering that. I still believe in the importance of having a full service Real Estate agent to market your property and handle all of the particulars, so I highly recommend you stay away from those “flat-fee MLS” companies. What I am offering though is the exact same quality service that you would receive from any Real Estate professional, but at a lower cost.

First off, it is important to understand that in Tennessee, all commissions are negotiable. Most agents though, charge around 6%. That is 3% for the buyer’s agent, and 3% for the listing agent. If the listing agent happens to find a buyer themselves, a buyer that is not represented, that listing agent ends up getting the whole 6%. That’s $12,000 you are paying the agent to list and sell a $200,000 home. Do you think that is a good deal? I doubt you do. In fact, you almost never hear of a seller happy with the service he received for the price. He might be appreciative of the service, but certainly not the price. Of course it is imperative that any home listed offer 3% to a buyer’s agent. That’s why most For Sale By Owners are even willing to offer an agent 3%. Sure it is true that real estate agents are ethically bound to help their client, regardless of how much money they are to make, but let’s get real. We all know that to compete with the other properties in your area, it is critically important to offer 3% to a buyer’s agent.

So where am I going with this? Knowing that today’s consumer is looking for value, I am willing to list your home, and offer you the same quality service that you would get from any agent, at a 4% commission rate. That is 3% for the buyer’s agent, and 1% for me. Yes, I will list your house, spend money to market it, and do it all for the potential of only making 1%. Not only that, but if I bring a buyer myself that is not represented by another agent, I am willing to wave one of those percents and settle for only 3%. On a $200,000 home, that is a potential savings of $6,000. On a $400,000 home, you could potentially save $12,000. Am I crazy for offering this? Are other agents going to hate me for messing up their good easy living? Perhaps. But as I said before, to last in any business, you have to think like the consumer. And the fact is, consumers feel like they are getting ripped off when they pay 6% (assumption, all commissions are negotiable), regardless of how happy they are with their agent’s performance.

So rather than pay too much for the services of a competent Real Estate professional or pay a flat fee for absolutely no service, contact me. I will do the same thing other agent’s do and sometimes more, but unlike them, I will also be nice enough to let you keep a little money in your pocket.

So if you live in the Nashville, Pegram, Kingston Springs, Fairview, Burns, White Bluff, Ashland City, Dickson, Brentwood, Franklin or any other surrounding area in Middle Tennessee, contact me, that is unless you don’t like saving money.