Sensationalizing Real Estate News Does Not Provide A Solution

On Saturday, May 26th, the St. Petersburg Times ran an article in the Business Section about a homeowner -- who will remain nameless in this blog -- who is having a very difficult time selling his house near Euclid/St. Paul's.

The Times led off with a large color photo of this homeowner on his hands and knees, painting large signs which he hopes will sell his home. The signs say things like "Do I have to hit somebody over the head with a brick? This is a truly beautiful home. Are you going to force me to stand out here in a clown suit?" He changes the appeal every few days, according to the Times.

The Times article goes on to point out that the owner had listed his house with real estate agents who were unable to find him a buyer, so now he trying this unconventional approach to selling on his own without the aid of an agent.

Perhaps I'm overly sensitive, but it seems like the Times never misses an opportunity to zing area real estate agents for everything, including the fate of this homeowner. In several instances in this article, the Times is quick to point out all the failures of this seller's real estate agents. In many instances, those comments by the Times were unnecessary and added nothing of importance to the article except to try to put real estate agents in a bad light.

Here's the real situation ...

Apparently this fellow has owned his house for about six years, has lowered his asking price by $86,000, and is now reduced to painting signs and placing them in his yard. The article points out that the seller is now getting a few "lookers", and that he thinks he's doing better now than with a real estate agent.

Well, of course the seller is going to say he's doing better now. Does the Times expect this seller to say he's doing worse with his approach?

To tell you the truth, this situation as detailed in the Times is a classic example of a seller doing it all wrong. Consider these facts ...

1. He wants to make a killing. The fellow bought this house in August, 2001 for $164,000. He put it on the market initially for $433,500, probably around March of 2006 if the MLS system is correct. So his goal was to make a profit of almost $270,000 in about 4-1/2 years. Nice.

2. He overpriced his house at the beginning and it is still overpriced today. How do I know? Simple. He has trimmed $86,000 out of the price and nobody has bought it. That's the market talking to him, but he's not listening. The market is saying that at his current asking price of $339,000, his price for a 2 bedroom/2 bath house in that neighborhood is too high and they are not going to pay it. Despit the price reductions, his house is still not a good value.

3. He went the discount broker route. When he first listed his house, he hired a discount broker who offered a selling commission of only 2%. That is below average and many agents simply don't show homes that don't pay what is considered a full commission. Also, at a discount brokerage, he got a discount broker-style marketing plan, which isn't going to drive many qualified buyers to his door for showings. It looks like he caught on to this lack of marketing effort after about 100 days and fired the discount broker; that might be the only smart thing he did.

4. He hired a full service broker but probably didn't listen. After he fired the discount broker, he hired one of this area's premier agents who works for one of the best brokerages in the city. But he still kept his price too high, originally at about $400,000. He managed to lower it to $345,950, but still no buyers. Reason? His price was still too high. How do I know? The house is still for sale, isn't it?

5. He fired the full service broker and is now doing it For Sale By Owner. He's got some goofy signs he's putting up and is planning to buy some kind of big "For Sale" flag in his yard. What these signs are really saying is "I'm desparate! Come bail me out. I'm looking for an offer. HELPPPPPPPP!"

This man needs to come to grips with the way things are today.

First, in an oversaturated market like we have today, ONLY THE BEST GETS SOLD. Not only does your property have to stand out from the crowd, but you have to make it the BEST VALUE. The market is telling this man his house is not a good value when compared to similar homes.

Goofy signs are fun for people passing by to read, but solid marketing is needed to sell homes in today's market and that includes use of the internet, flyers, newspaper advertising, open houses, broker opens, magazine advertising, and the Multiple Listing Service to name but a few things. There is a very good chance that the next buyer for his house does not even reside in the St. Petersburg area, or even the United States. His signs will not reach those potential buyers, will they? By doing this on his own, he is missing the opportunity to find the best buyer -- the one who will pay him the most money. These days, that requires a world-wide marketing program, not some homemade signs in the front yard.

I guess nobody has told our friend that 80% of today's buyers find the house they eventually buy by looking on the internet before they contact a real estate agent. I don't see how those signs he's painting and planting in his front yard are going to help him with the 80% of people who do their house-hunting on the internet. Do you? Of course, the Times neglected to mention any of these facts in their article on Saturday, as usual.

This seller also needs to give some serious thought as to what he is selling. My gosh, no matter how great it looks from the outside, it's still just a 2 bedroom house in a neighborhood that is questionable. Let's face it, Euclid/St. Pauls is not Old Northeast, Crescent Lake, Snell Isle, or Historic Kenwood. Location matters.

Anyway, this was a pretty crummy story. While the Times probably thought it to be real insightful, those in the know see a different set of circumstances, causes and solutions. Someday, maybe the Times will hire a writer who knows something about what really goes on in the world of real estate rather than writers who just seek to sensationalize a situation.

As for our friend the seller, he needs to get up off his knees, stop painting signs, and hire a real estate professional who will put together a written marketing plan and then execute that plan. He also needs to get his price into a realistic realm. Frankly, I'd like to know if he would be willing to pay his asking price for the house. My bet is that he wouldn't. And obviously, neither will anybody else.

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April Sales Report: Very Interesting

Hmmm ... this is very interesting. Let's see if we can make some sense of it.

We'll begin as usual with the Abosorption Rate which, as you probably know by now, is determined by dividing the number of units sold in a month by the total number of listings.

In April, the Absorption Rate for single family homes in Pinellas County was 6.7%. That's an increase of 6/10ths of a percent over the rate for March. The April Absorption Rate for condominiums was down again. In April it was 3.8%, a decrease of 4/10ths of a percent from March.

If you went no further you could say that single family sales were up a little and condo sales were down a little. If you said that, however, you would be wrong. The Absorption Rate is misleading.

Single family sales -- despite a slight uptick in absorption -- were down in April. There were 9,175 single family listings in April. But in March, there were 11,226 listings. So there are now over 2,000 fewer listed single family homes than there were a month ago. Sales of single family homes also fell in April. In March there were 687 single family sales, but in April there were only 615. So despite fewer sales we had an increase in Absorption Rate because there were so many fewer properties listed. Remember, Abosrption Rate has to do with the total number of listed properties.

Condo listings skyrocketed in April to 9,280 units for sale on the MLS in Pinellas County. In March, there were 7,278 condo units in MLS. So, we had an increase of about 2,000 condos during April -- a big jump in inventory. Sales of condos in April were a total of 355 units, up a little from the 309 condo sales in March. This big jump in inventory probably had an adverse effect on the Absorption Rate for condo sales in April, although the rate still increased a little.

Just so you know, the median price for single family homes in April was $212,500, and the median for condos was $177,900. Both down for the year.

In total, there were 18,455 listed properties in April; 18,504 in March. There were 970 sales in April; 996 in March. I don't know how you define a flat market, but those number look pretty flat to me.

Here's my opinion on what all these numbers mean.

I think that many sellers of single family homes are fed up with trying to sell in a down market. When their listings expire from their agents, many of them are just not re-listing them again and are waiting for the market to improve at some point in the future before putting their property back on the market. This was the first month in many, many months that we had a large reduction in single family listings. I think it shows that sellers have become frustrated. Other sellers are taking their property and turning it into rental property just to get some kind of cash flow to help with the overall expenses of ownership. Look at the numbers! Single family listings dropped by over 2,000 units in a 30 day period and only 615 single family homes sold during that time. So, about 1,400 properties were simply taken off the market in April. It will be interesting to see if this trend continues in May and on into the summer.

Condos experienced just the opposite situation. The number of condos for sale jumped by almost 2,000 in the same 30 day period. Yet condo sales increased only slightly in April, with only 355 sales. Holy cow! If you own a condo it might take a long, long time for the market to take an interest in your unit. Condo sellers will need a lot of patience, a lot of high-level marketing, and they need to negotiate every offer in a serious manner because it might be the only offer they get for a very long time. No matter how you look at it, there is not much demand for condos today -- except for those that are brand new and just coming out of the ground. Those new ones seem to be getting some play, especially in overseas markets.

By the way, these numbers also tend to confirm my theory that the market has not "bottomed out" as yet. I believe that the market will bottom out when we have a large enough influx of buyers who are making offers that sellers accept. These then become the new level of selling prices for the market. When that happens we have an active market in which buyers will re-define real estate prices. Once re-defined by buyers, the market can be said to have "bottomed out". I don't think that time has come yet because -- as these figures tend to indicate -- there just are not many buyers making real estate purchases. I look for prices to continue to drop. Of course, if the legislature makes property taxes and insurance more affordable then housing becomes more affordable. That may help to re-define pricing quite quickly and the market will bottom out as a result of those legislative actions. The upcoming special session is very important to the future of real estate in Florida.

Well, that's it for April. A pretty flat month all in all.

For more information about real estate in Tampa Bay, visit my website at www.TheStPeteRealEstateSite.com.

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