October 2006 Article History

There are 11 articles published in October 2006. Here are the first 20:

Who's right? Maybe both.

Off line (En différé) Experimenting with FusionCharts V3 Beta Starting a discussion on real estate commissions A complex diversion...Pot Roast and Chateau Margaux Fairfax County Real Estate Activity September 2006 I wonder...or, let me tell you what I really think... Loudoun County Real Estate Activity September 2006 500 Real Estate Blogs "Ready for Some Stories?" Has anyone noticed?

You will find a complete Index of Articles by Category in the History Archives.

October 22, 2006

Taking a break from 10/22 through 11/2. I'll be back with more stories, case studies, thoughts, very subtle humor, pictures, comments, news commentary and market updates. In the meantime, visit my friends on my favorites list. Help feed hungry agents. Buy a home...



Prenant une coupure de 10/22 à 11/2. Je serai de retour avec plus d'histoires, d'études de cas, de pensées, d'humeur, d'images, de commentaires, de commentaire de nouvelles et de mises à jour du marché. En attendant, rendre visite à mes amis sur ma liste de favoris. Aider à alimenter les agents affamés. Acheter un à la maison…

Comments will be turned OFF to unregistered visitors during this period. (get a TypeKey)

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October 21, 2006

I use a software product called FusionCharts for all the charting I do. The current production version gives me wide latitude of chart types and formats. The new version (Version 3) was just released in beta (maybe not quite ready for prime time) and I elected to be a beta tester. This version gives me more control over the look and feel by an order of magnitude. The downside is that there are so many options and variables, it will take me an order of magnitude more time to discover them all. I modified the Fairfax Daily Market Watch charts this morning with Version 3. I have to say that with little change, they are backward compatible and provide a much more sophisticated look. Take a look and see what you think...

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October 17, 2006

The chatter in the real estate blogosphere on commission models is on the rise. Here are a couple of good articles, one by Douglas Headings of True Gotham and another by Greg Swann of the BLOODHOUNDBLOG. (Thanks to Jim Duncan for pointing these out...) Ardell at the RCG has written a great deal on the subject from her perspective and, Eileen recently weighed in at the RCG with her thoughts. Great discussions and lots of comments. The traditional model is broke because ONE SIZE DOES NOT FIT ALL. The traditional model has no relationship to effort and expense across a wide spectrum of property types, markets and price ranges.

At the risk of being perceived as extremely self serving, I want to start this discussion by pointing to a section of my Website (not the blog) that I published back in January of 2005. In addition there are a few articles on the subject published in the Guide over time that received little attention. Here are the links:

• SmartChoice For Sellers
• SmartChoice For Buyers
• Commissions inside the Guide

Pam and I began using consumer Choice models when we established our relationship with RE/MAX on August 1, 2004. We have accumulated significant experience with different approaches and what works and what doesn't; the pitfalls, potholes, roadblocks and agent/broker scourge as well as documented successes. This stuff works! I believe it IS the future for the real professionals in this business.

Where did the models come from? We developed them based on a service/consulting fee model I used for over 25 years as an executive with EDS, an IT and Business Process services provider. In fact, it is a business model I have been familiar with for longer than my career with EDS. It is based on Activity Based Costing. Here's the simple explanation:

• Define every direct activity in a process at it's lowest convenient level and determine time and expense for performing that activity. In real estate, there are basically two types of labor activities: administrative (does not require a real estate license) and professional (a licensed agent).
• Group activities into major functions or components
• Develop cost models for each activity and major function
• Do the same for indirect (or overhead) function.
• Spread the indirect cost over the direct expense of each activity as a percentage of direct expense to the total.
• Add a reasonable profit margin (have to be careful not to price yourself out of the market).
• Develop a compelling value proposition on why you are better than everyone else at a competitive price (not necessarily lower) for your services.
• Show potential clients (sellers and buyers) your complete activity list that includes prices (this is called transparency) and collaborate with them on the services necessary to achieve their objective.
• Sign the contract (simple conclusion, there are, of course, other factors for both parties to be comfortable with before you get to this conclusion).

Determining the time and expense is easier than setting a value on your time for the different types of activities. Each individual must come to this conclusion on their own. I will say that it should be based (normally) on your skill level and experience in the business. Just like any other service business I can think of.

Using this model, we rarely let a consumer strictly define what services they want to buy. It is and must be a collaborative effort. Our skills and experiences must be a factor in developing an overall plan. In addition, we developed complimentary models for SELLERS and BUYERS. (Buyers can and will pay their agent when there is a compelling reason to do so. More about that in a future case study).

This is only an introduction to this subject at best. Our next series of articles will be real case studies on why it works most of the time and why it doesn't some of the time. Ardell is right:

For now…price matters is the key, and almost none of the discussions anywhere, focus on different fees for different home prices. So basically, they are ALL wrong.

We will attempt to fix that.

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October 11, 2006

When I started this Blog I warned people that I would comment occasionally on wine...one of my hobbies...and in this case, FOOD and WINE. Hence, indulge me. This is like the recipe card you get in the mail, only better because you get to interact with me if you want. If this bores you, go to the next Blog. If not, you might be in for a treat.

I had an appointment and stress free day. So, I did what I like to do most. Cook and sample fine wine. What you say? What does this have to do with real estate? Absolutely nothing. It is a way I find to relax after weeks of grueling pressure trying to sell homes in a fickle market.

So here goes. Food and Wine. If you like pot roast, here's my famous (or not) concoction:

• 2.5 to 3 lb chuck roast (preferably Angus or other nice cut). Look for marbling...this will ensure tenderness.
• 1/2 pound pearl onions (maybe a dozen or so)
• 1 package button mushrooms (again, a dozen or so)
• Baby carrots, about 1.5 dozen.
• 1/2 pound semi-lean bacon
• Garlic...how much do you like? I do 2 large cloves (sections)
• 8 to 10 baby red potatoes
• 3 to 4 cans beef broth
• Good (not great) dry red wine...quantity varies...maybe a cup and a half or more! The more you put in the roast, the less you drink while it is cooking.
• Seasonings: garlic, marjoram, basil, thyme, bay leaf (2), rosemary, tomato paste, salt and pepper

Here is the instruction manual (be vicarious):

Fry bacon to crisp in heavy skillet. Remove and save for later. Have a couple while you are doing the rest of this recipe. Really good. DON'T discard the bacon drippings!

Cut roast into 1 to 2 inch cubes more or less (remove excess fat). Season with whatever you like and dust with flour. I use a garlic/parsley based seasoning.

Brown roast cubes in bacon drippings left in the pan. About 2 minutes a side on medium heat.

Remove roast cubes and set aside. De-glaze pan with a little beef broth, water or wine (yum) over medium heat.

Add two (2) more cans of beef broth. Add roast cubes to pan (this is the same pan that had the bacon, I hope ... grease and all, trust me, you'll like it).

Coarsely chop two large cloves of garlic and add to pan. Salt and pepper to taste (not too much, not too little). I add a little sea salt, a few cloves (whole) of white and black pepper. Add the other seasonings mentioned above sparingly. Only add one (1) tablespoon of tomato paste! Any more and the result will taste like spaghetti sauce.

Add about a cup to 1 1/2 cups of the red wine. Don't over fill the roasting pan like I usually do and make a mess. Bring to a simmer over medium low heat.

Oh...I forgot: Preheat oven to 350 degrees F. Geeeez...sometimes I forget this too. Doesn't matter. We can wait for it.

Cover pan. Yes, you need a heavy pan that can be covered and placed into a hot oven! Set the temperature to about 325 degrees.

You never want the roast in all the wonderful liquids and seasonings to boil. Just simmer. Simmer for at least 2 1/2 hours. So, watch it for the first 15 minutes or so. When it starts to boil, turn the heat down. I usually can cook this at 250 to 275 degrees for about 2 to 3 hours or until the roast is tender. Slow cooking is good. Don't rush it.

Easy so far? Yep! OK. Next.

Saute the Pearl Onions and Baby Carrots. Maybe 10 minutes in a shallow pan with a little water. Set aside. Boil the red potatoes to ALMOST done. Set aside. Wash and cut mushrooms (not too small). Set aside. Now, everything is ready for the roast to appear!

When roast is done (per your own judgement), remove from oven and add cooked ready vegetables (don't forget the bacon...crumbled). If you need more liquid, add beef broth or better yet, more wine. Not too much though. Re-simmer if necessary. If you don't have enough room for everything in the pan, add everything but the potatoes. Those can be added to the serving plates. Don't forget to be generous with the liquids. We do bowls along with some great french bread for dipping.

Ooops...not quite done. I forgot the fine wine. For this dinner tonight, I selected a 1982 Chateau Margaux Bordeaux (obviously french) to accompany this home recipe. I wasn't disappointed. Smooth, dry, good fruit balance and acidity/tannin balance. Exquisite! Bonn Appetite! Did I get that right?

Gentlemen: Fix this for the one you love or want to love...it is really easy and will place you in a class a cut above the rest. Trust me on this. Call if you want help.

CAUTION: DO NOT USE FINE WINE IN THE ROAST. SAVE IT FOR DRINKING!

OK. Back to real estate issues!

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Fairfax Buyer Intensity
Red Bars: Sellers Market | Green Bars: Buyers Market Gray Bars: Balanced Market
[click for more detail]

This is the continuation of a monthly series of commentary on the housing market in Fairfax County. See Fairfax County Market News and Daily Market Watch graphs.

INVENTORY:
Inventory of homes for sale is slowly declining after peaking at nearly 9,200 in June. September shows a small decline to a little less than 8,500 homes, down 2.6% from August. About 25% of new listings are properties coming back on the market after expiring or being withdrawn.

HOME PRICE APPRECIATION:
Home prices seem to be holding up much better than surrounding jurisdictions. If anything, appreciation this year looks to be about 0 or slightly negative.

DAYS ON MARKET:
Average time it takes to sell ballooned to 77 days, 10 days higher than last month. A few days into October shows a slight increase to 79 days. With a slower sales season ahead of us I suspect this measure is going even higher.

SOLD TO LIST PRICE RATIO:
This ratio held up at 93.8% from last month. This is the "negotiated" ratio, SOLD PRICE as a percent of the LAST LIST PRICE. Buyers are getting about a 6 - 7% price reduction during negotiations.

NEW CONSTRUCTION (chart not yet available):
As of the end of September, the MLS is reporting 667 homes on the market with only 40 SOLD during the month, a 6% absorption rate. A lot of the excess inventory may be due to Condos being overbuilt and investors trying to flip. Reminder: new construction data in the MLS is very unreliable. More may have sold but we won't know the real number for several months.

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October 10, 2006

I've taken a break from Blogging the last several days (yes, it is hard work and difficult to constantly find something worthwhile to say). I continue to read my favorites like Jim and Dustin and The Tomato (newest favorite) and Ardell (female WonderBlogger) and sellsius and Marlo and ... I wonder where they all get the inspiration to spew forth mostly meaningful rants, opinions and advice. I read the Real Estate Carnival articles and learn sometimes. Sometimes not. I really wonder about the Blog challenges. 101 articles posted in 24 hours? Fun? Maybe. Sorry, not interested. It will take me 101 days to read them all. I have trouble writing one a day.

I wonder why there is so much debate about Zillow (home valuations), Trulia (cool home searches), Redfin (a different brokerage business model) and the like. They don't seem like that big of deal to me. Novel, interesting and tiring. This is a competitive industry. The last time I looked it was still a relationship business. I have a great relationship with both of my computers and I like to experiment and try out new and cool tools. And, I can get more information than I can humanly digest. I prefer the human kind of relationships that rely on experience and wisdom to interpret information and provide sound advice. Personal trust is in there too. Big time.

In the local news, I wonder why our politicians can't get it right about our transportation needs. We're choking in traffic and they worry about their political hides. I wonder why County officials (also of the political persuasion) can't come to agreement on growth controls. We're choking some more. At the national level I wonder why there seems to be a void of common sense on very basic issues concerning our industry, consumer choice and protecting property rights from stupid, ridiculous, selfish and outrageous eminent domain condemnations not for public use but, (drum roll) for developers!

Speaking of developers, I wonder why they clear cut woods to put 800 homes on 200 acres. Don't they realize wooded lots bring a premium? I like looking at new homes that have some old trees left behind. Besides, a few trees are good for the environment and some are really cool for kids to climb. I climbed trees when I was a kid. I even had a tree house. I also wonder why a small custom builder would build an 11,000 square foot spec home in a neighborhood where the average size is probably 4,000 square feet (I know, some consider that obscenely big too). What are they thinking? Who is going to buy it? Have they not heard about the principle of regression and progression? Or, how about conformity? Another common sense void not to mention the lack of social responsibility at some level to a community. And, the county (the one mentioned above) approved it. Go figure.

I wonder why our standard real estate purchase contract has ballooned to 10 pages of legalistic bull $&^#@$ with many more potential add-on addendum. Is it protecting consumers or are we just covering our own back side? I suspect it is more back side. I see another class in my future.

I wonder about the real estate commission debate. Inman news is offering a big book about commissions for nearly $700 ($549 for subscribers). I don't need to spend that kind of money to figure out that the whole commission structure has out lasted its understanding (actually misunderstood). Full service, limited service, half service, no service. What's wrong with just getting paid for your efforts (time) and expenses? Now that's a novel idea. What's wrong with sharing the financial risk with a client instead of taking all the risk and and charging the risk fee in commissions? Do buyers pay commissions? Yes, over 30 years in their mortgage. Real estate is a personal service business just like CPAs, Lawyers and consultants. I think I'll publish a series of articles on commissions as I have given it much thought, experimented with different models and learned a lot about what works and what doesn't and what consumers like and don't. I won't charge a thing for them.

These are a few of the things I wonder about. There are many more things I worry about that we trust our national leaders to deal with effectively. Or do they? I wonder about that too.

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Loudoun Buyer Intensity
Red Bars: Sellers Market | Green Bars: Buyers Market Gray Bars: Balanced Market
[click for more detail]

Market commentary for Loudoun County, Virginia. Headings are links to historical charts.

INVENTORY:
Inventory of homes for sale continue a slow decline to a bit above 4,100 from about 4,400 last month. Again, it is NOT because of more homes being sold because both new contracts and settlements (sold) are down 11% and 15% respectively. Re-lists are 33% of all new listings. For a buyer's market, we see fewer and fewer buyers taking advantage of the good deals that are available.

HOME PRICE APPRECIATION:
Average appreciation continues its decline to 6.2% year over year. Considering 90% of all current re-sales included another $10,000 on average in seller subsidies, the real decline is even greater by about two percentage points to 8.2%.

DAYS ON MARKET:
Average time it takes to sell breaks 100 days (109) for the first time in over 6 years. This appears to be headed even higher based on the rolling 30 day accumulation we provide on the Front Page Daily Market Watch (114 days as of this writing).

SOLD TO LIST PRICE RATIO:
The "negotiated" ratio is holding at 92 to 93%. Successful sellers are drastically lowering their price and buyers are getting another 7 to 8% during negotiations (plus seller subsidies that are not "officially" reported).

NEW CONSTRUCTION:
Incentives? Considerable! For buyers and agents alike. Recent ads are full of agent incentives: 5% of sales price...3% plus a $10,000 bonus. For buyers: finished basements...sun rooms...closing costs...mortgage payments for the first year. As of the end of September, the MLS is reporting 740 new homes on the market and only 34 SOLD. A dismal 5% absorption. I have to extract average price manually and will report in a new article. There are more for sale that are not reported in the MLS.

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October 4, 2006

Rummaging through my server stats this morning I found this article from Pittsburgh Homes Daily. The author must be spending midnight oil surfing for anything and everything having to do with real estate blogging. The Guide is on his list in Virginia.

What an incredible effort! I added PHD to my Blogroll.

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October 3, 2006

Really Simple Syndication (RSS) = Ready for Some Stories (RSS). Thanks to Galen at RCG for discovering this nugget. Still confused about RSS? Read this about RSS Oprah style!

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October 2, 2006

I extract sales data every morning and update the Daily Market Watch and corresponding charts. I am surprised that no one is looking at the charts and figuring out what is happening. In the last 30 days, the average sold price of resale properties dropped 7% in Fairfax County and 6% in Loudoun County. Look at the charts: Fairfax ... Loudoun. A 20% drop in average price this year looks more and more realistic.

Average sales price in Fairfax for RESALE properties dropped below $500,000 for the first time since February, 2005.

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October 1, 2006

We hear different forecasts from economists as to what the future holds for the real estate market. Here are two views published this morning in The Washington Post's special "Mega Real Estate Section." I can find points in both views that I agree with. Wheaton expects a 5% to 20% price drop depending on the market area while McClain looks at history and the macro economics of the region and predicts a flattening or slight decrease before a return to a normal moderate rate of growth next spring.

Signs Point to Continued Slowing
Sunday, October 1, 2006; Page R03
William C. Wheaton
Professor of economics and research director, Center for Real Estate at the Massachusetts Institute of Technology

Should you buy a house now? All around the country, prices are stalling or falling. In theory, the answer could vary depending on your situation. Here are the most common ones.

or...

Make Way for Moderation
Sunday, October 1, 2006; Page R03
John McClain
Senior fellow and deputy director, Center for Regional Analysis at George Mason University

There is no longer a question among local housing researchers about when the market is going to cool -- the cooling is here. Prices have ceased their yearly double-digit percentage increases, the number of sales has fallen, and the time it takes to sell a house has tripled. The questions now are how much the market will cool, whether prices will fall and when this market adjustment will be over.

The Post's intro to these articles uses terms like "returning to normal" and "headed for a bust." Neither of these economists forecast a bust. Even a 20% decline in average price is NOT A BUST! It is simply a return to early 2005 pricing. If a homeowner bought two or more years ago (and not leveraged all of the equity), there is a paper gain, not a loss. Using sensational terms and words may sell newspapers but does nothing to put the current situation into proper perspective.

On another note, Wheaton makes the following statement: "I would discourage households from making discretionary moves unless they absolutely have to." If you absolutely have to, it is not discretionary. Otherwise I agree with the statement.

On a final note (nothing to do with real estate), washingtonpost.com would do itself and all of us a favor by getting rid of those highly annoying pop-up and pop-under ads. Seems as though I had to turn pop-up blocking off on their site to get to content I wanted. Then wham...the floodgate was open.

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