Realtors are forced to reevaluate
The slow housing market didn’t stop Martha Franco and thousands of other real estate agents from attending the California Assn. of Realtors annual convention in Anaheim on Wednesday, but it did factor into how she and others spent their day there.
It was standing room only at sessions focusing on foreclosures and other consequences of the slump.
“I know I have to learn how to handle this changing market,” said Franco, who attended workshops on how to communicate with people facing foreclosure and how to make money on deals where the owner is selling at a loss. “It’s very slow right now.”
The trade group projects that 40% of the 500,000 licensed real estate agents in California will probably let their licenses lapse when they come up for renewal, noted Kevin Burke, a real estate attorney from Del Mar who is on the Realtors’ executive committee. The lack of demand from buyers is expected to send home values declining for the first time since 1996, the association forecast Wednesday.
The median price of an existing California home is expected to decline 4% to $553,000 in 2008, compared with a projected median of $576,000 this year, said Leslie Appleton-Young, the group’s chief economist. The median is the point where half the homes sell for more and half for less.
The volume of home sales is projected to fall 9% in 2008 -- which actually would represent an improvement. Sales fell by 24% last year, and are projected to tumble 23% this year.
Appleton-Young acknowledged that she underestimated the severity of the current downturn. In a two-year forecast in 2005, “I predicted a soft landing and a modest decline in sales,” she said. “Well, it’s been far from modest.”
In this kind of market, real estate agents need to focus on people who are serious about buying or selling, Appleton-Young said.
The husband-and-wife sales team of Richard Rangel and Socorro Cantoran say they’ve already learned that lesson. The Downey couple is being careful about which listings they take because they don’t want to get stuck with homeowners who may not be serious about selling.
“We tell people that listings now are taking up to four months to sell,” Cantoran said.
The reason: the huge supply of homes for sale. In the last year the inventory of existing homes on the market doubled. As of August there were so many homes for sale in California that it would take 11.8 months to deplete the supply if there were no additional listings.
The slowdown has hit California’s lower-priced markets hardest, thanks to tougher standards by lenders hurt by defaults and discounts by new-home builders hoping to clear their inventory, Appleton-Young said.
But she warned that even higher-priced markets, including Los Angeles, Orange County and the San Francisco Bay Area, where prices continue to appreciate and sales have been more robust, would start to show signs of stress, but to a lesser extent.
“Higher-priced regions of the state will react more to affordability constraints,” she said.
The last time existing California home prices fell was in 1996, when the median price declined 0.5%, according to the Realtors’ calculations. In 2003, 2004 and 2005, home prices rose more than 16% year over year.
In 2006, home prices started to moderate, rising 6.2%. For 2007, the Realtors are forecasting a 3.5% price increase to a record $576,000, despite the drop in sales volume.
The California Assn. of Realtors calculates its median price based on a sampling of data about existing-home sales supplied by real estate brokers around the state. The figures don’t include sales of newly built homes.
For her part, Franco believes that the best way to earn her commission in the months to come is to learn how to broker foreclosure listings and so-called short sales, in which a homeowner agrees to sell his property for less than his outstanding mortgage. In the coming year, 1 in 5 home sales in California is expected to involve a foreclosure or other distressed sale, experts said.
“I have to find new ways of helping people,” Franco said.
