2006 Housing Market Third Best Ever Overall Dollar Volume Second Highest In History
For those of us in the real estate and mortgage industry much of the recent news is causing us to wonder if many of us will still be here this time next year. The real estate industry is changing and any successful agent or mortgage broker must adapt to stay in business. Individual demise will not however be the result of lack of volume.
Consider these numbers: In 2003 as a real estate agent making 3 of the 170000 median sale price and completing 25 transactions the gross income would have been 127500. In 2006 that same agent would have only had to complete 20 deals and the gross income would have been 133200. The total number of sales in 2006 was not 20 less than the 2003 number yet one could still make more money and work less. What a bummer!
Mortgage brokers should consider these numbers as well: In 2004 with 20 down the average loan amount would have been 147280 based on the median sale price. Charging 1 and completing 50 transactions throughout that year the gross income would have been 73640. In 2006 with 20 down the average loan amount would have been 177600 based on the median sale price. With 15 less production the total number of loans completed would have been 42 and the gross income would have been 74592. Not a big increase but loan volume was not down 15.
As industry professionals we need to adapt with the market and know how and where to find the next deal. You could offer the best service lowest rates or fastest whatever. The bottom line is that if people dont know how to find you or you dont find them the product/service goes unused.
Lets consider some of the NAR comments and opinions of past years to determine what to expect in 2007 and beyond. David Lereah NAR’s chief economist and previous NAR President Al Mansell have had this to say:
1/2002 David Lereah NAR’s chief economist Although mortgage interest rates moved around a lot during 2001 they generally stayed within a range of a half of a percentage point. In fact last year was the second lowest year on record since Freddie Mac started tracking mortgage interest rates in 1971 and that is one of the fundamental factors in the favorable market conditions that we expect to prevail for this year as well Freddie Mac reported interest rates averaged 6.9.
2/2003 David Lereah NAR’s chief economist To a certain extent it appears many of the buyers may have been in the market for a while and moved decisively as interest rates dropped to generational lows he said. When you look at the corresponding rates of price increase these are buyers who put their money on the table to get their share of the American dream. Freddie Mac reported interest rates averaged 6.08.
1/2004 David Lereah NAR’s chief economist “We’ve been expecting the pace of home sales to ease and a decline in November 2003 seemed to indicate a more sustainable pace but the rebound in December 2003 the second highest monthly pace on record shows there’s still a lot of life in this market” he said. “The biggest factor is a resumed decline in mortgage interest rates which have been much lower than most analysts expected.” Freddie Mac reported interest rates averaged 5.88.
1/2005 NAR President Al Mansell CEO of Coldwell Banker Residential Brokerage in Salt Lake City said strong price growth is being driven by a shortage of homes available for sale. “The demand for homes remains in record territory but the supply of homes on the market set an alltime low in January” he said. “The growth in home equity is adding to housing wealth and helping the overall economy yet low mortgage interest rates are keeping homes within reach of buyers in most of the country.”
1/2006 David Lereah NAR’s chief economist “This is part of the market adjustment we’ve been discussing with a soft landing in sight for the housing sector” he said. “The level of home sales activity is now at a sustainable level and is likely to pick up a bit in the months ahead. Overall fundamentals remain solid driven by population and employment growth as well as favorable affordability conditions in most of the country so we expect the housing market to remain historically high but lower than last year’s record.” Freddie Mac reported interest rates averaged 6.23.
1/2007 David Lereah NAR’s chief economist Despite all of the doomandgloom stories and dire predictions over the last year 2006 was the third strongest year on record for existinghome sales. It looks like were moving beyond the low for the housing cycle last fall and buyers are responding to historically low interest rates and competitive pricing by home sellers. In addition a tightening inventory of homes on the market is supporting prices. Freddie Mac reported interest rates averaged 6.14.
Spokane Real Estate Agent and Washington mortgage broker Michael Sanborn said While rates continue to remain at a very low point historically inventory is much higher than average. Home prices for 2007 are expected to be maintained and even increase in certain regions. As the inventory tightens home values may increase as long as interest rates dont increase to a point that might offset that. Either way people will have to buy and sell. Homes will need to be financed or refinanced. New homes are being built all of the time and the population is continually increasing. Things really do look good but you need to make sure youre business is doing the right things to be in front of the clients.
About the writer: Don Conrad is the author of the soontobe released book How to Find That Quality Tenant. His book and website are dedicated to educating and improving the landlord tenant selection process. His website at www.findthatqualitytenant.com contains informational articles valuable links real estate forms a list of landlord associations tips of the month a Fair Housing Test FAQs and much more.
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