Housing Market Braces For Steeper Fall – From The Nashville Business Journal
Friday, December 19, 2008
Agents battle for business amid new landscape
Nashville Business Journal – by Jenny Burns Staff Writer
Efforts to lure home buyers with tax credits and lower interest rates aren’t working. Home values are dropping, and foreclosures are rising. Last month, Nashville’s home sales fell to levels not seen in more than 15 years.
Local real estate experts called it an aberration, but national experts are predicting a dismal forecast for housing next year.
The mounting bad economic news that’s keeping buyers on the fence has pushed Middle Tennessee real estate brokers to shuffle their strategy: cut staff, consolidate offices and watch as agents flee the industry.
Meanwhile, others are taking an aggressive stance, calling on agents to focus on the growing foreclosure market and adding divisions to gobble up smaller firms that are struggling.
November’s 45 percent plunge in home sales means real estate agents are competing for a piece of a pie that’s half the size of what it was last year, says Harold Crye, CEO of Crye-Leike Realtors. And half of the homes that are selling are foreclosures.
“We have buyers who say ?I don’t want to see anything except a foreclosure.’ The existing home market is really suffering,” Crye says. The company’s best seller this year was a Memphis foreclosure agent with 318 sales.
Preparing for an even tighter market, Crye-Leike just added a position to focus on buying smaller real estate agencies. The firm hired real estate veteran Brandon Patrick as the new mergers and acquisitions director to scout potential deals.
“In the current economic climate, it’s clear a growing number of real estate companies and individual Realtors are having a difficult time sustaining a level of transactions to remain in business,” Patrick says.
Even Crye-Leike is cutting back. Crye says he shrunk his Cool Springs and Hermitage offices by 2,600 square feet to cut expenses. He also cut staff that handled fliers and mailers since most agents use email now.
The heads of the largest real estate firms in Nashville say 2009 likely will find fewer agents in the market and even lower sales, with an expected flattening or slight increase by the second or third quarter.
“What we’re planning on for next year is no increase, and if anything, a small amount of decrease (in sales),” says David Barnes, owner of Coldwell Banker Barnes, who is budgeting for another low sales year in 2009.
Nationally, experts aren’t predicting much of a real estate recovery until 2010 or 2011.
“The condition of the industry is pretty bad and outlook for 2009 is dismal,” says Bernard Helm, president of Market Opportunity Research Enterprises in Rocky Mount, N.C. Nashville’s market is about average among the Southeastern cities that Helm charts.
The sales doldrums has done something many real estate agents were hoping to see: drive competitors out of the business.
“For a long time we’ve needed a cleansing in the marketplace. I’ve looked forward to this,” says Robb Campbell, owner of Re/Max Elite, adding that his agency is cutting expenses and consolidating positions and offices.
Agents have several pricy payments with board dues and insurance that are due at the end of the year. Campbell says that deadline likely will push out those who are wavering on whether to stay in the industry.
Still, local real estate CEOs hope that just as Nashville was late to the real estate bust ? about a year after many cities ? it could be among the first to recover.
Their reasoning: Nashville’s diverse economy, and home prices haven’t dropped as much as the double-digit declines elsewhere. The median price of a single family home in Nashville fell 8 percent in November compared to last year.
Realtors hope consumers’ moods will change with the inauguration of a new president, dropping mortgage rates and another anticipated economic stimulus package.
The $7,500 tax credit that was supposed to lure first time homebuyers failed to serve as much of a motivator, so experts say it’s going to take extremely low interest rates to see sales stabilize. Rates dropped again last week to about 5.15 percent nationally.