August 18, 2010

To Our Clients And Friends,

One thing is clear by now: The housing industry is tethered to the economy and that is not a good position to be in.

During the past 3 months we have been seeing more and more companies show good earnings and profitability. That is good and the result of prudent cost cutting and heightened fiscal management. However, at the same time we have heard much about the ‘recovery’ stalling, corporate expectations being corrected downward, and sales numbers falling. Even the Federal Reserve Chairman who causes adverse market reactions when he sneezes is willing to go public with serious reservations about the recovery and our fragile market. Is there any wonder why people are hesitant to spend significant money?

So it is in our industry. After 16 months of modest improvement in our sales numbers, we fell off a cliff in May, hit with a thud in June, and remain paralyzed through July and most of August. Compared to this time last year (remember we were at the bottom of activity in early 2009) we have dropped 25-30% in sales activity, all in the last 3 months. This is in normally the most active months of our seasonal cycle!

This is not just an analysis of facts and numbers, we have felt this mini-crash! We have seen showings dry-up and offers almost disappear. The buyers we are working with are hesitant to buy right now. “Is it going to drop more?”; “Is the economy going to go into a double-dip recession and so prices decline further?” Too much uncertainty, too much concern over joblessness, and not enough confidence to bet on the future; these are straining our markets and causing more distressed properties.

Interesting Evolution…
We have a new kind of distressed seller evolving.

· 3 years ago it was those with sub-prime, variable interest rate, 100% financing loans which started falling.
· Later and continuing more than two years later it is the unemployed or under-employed
· More recently those who were by all accounts fine but have to move for legitimate reasons (job transfer, divorce, medical, family issues, schooling, etc) but who got stretched too thin waiting too long.
· Now we have a class of distressed sales for people who do not have financial problems but are impatient to move. They are lowering their prices to ‘bank-owned’ levels and giving up all their equity to move on. The value in some neighborhoods is being destroyed by competition among neighbors to see who can get to the bottom and get an offer the fastest. Some of these kinds of people go and buy a new home, then walk away from good houses they can afford letting them go to foreclosure in order to get where they want to be faster.

Any Positive News?
The news is not encouraging and it is tough after 3 years to stay positive. Our clients are suffering loss and experiencing frustration and everyone continues to be stretched thin. Is there any positive news?
· Interest rates are at unbelievable lows! Right now one can get a 30 yr fixed loan for 4.5%.
· Lenders are lending! They are sitting on a lot of money and are lending to any qualified buyer. Jumbo money, not even available two years ago, is also available at exceptional rates.
· There are amazing values available. For example, we have 80 view acres, buildable with top of hill setting, with barn and shop, fenced pastures and oak trees, s in a good location for $219! What a steal…
· There are times even in a famine when there is a surge of activity and sales; it can happen anytime. Our sellers need just one buyer. Our buyers can find the values not seen in several generations.
· As for this mess? This too shall pass!

We will continue to work diligently for each of our selling clients and to help our buyers find exceptional deals and just the right property for them. We are grateful for the many successes Bella Casa Real Estate Group and its fine Realtors® have achieved in 3½ years, and hold out hope for better days ahead. We are always glad to have your comments, your referrals, and your trust.

Thank you for your loyal support, patience, and referrals to your friends, colleagues, co-workers, and family. We are glad to discuss these issues with you anytime or answer questions which you might have.

Randy McCreith, Principal Broker
Bella Casa Real Estate Group
503-310-9147 Cell
207 NE 19th Street, Suite 100
McMinnville OR 97128
866-281-6653 Fax

randy@thebellacasagroup.com