Sep 2, 2011
Gloria Frazier, owner of American Realty of Northwest Florida was invited to participate in a conference call between Richard Smith, CEO of Realogy Corp., and the top companies from each of these major franchises: ERA,Coldwell Banker, Century 21, Sothebys and Better Homes & Garden. With these brands, Reology holds a 30% market share of the nation’s residential real estate business. So, for them, the direction of the nation’s real estate market is of paramount importance. Frazier was invited into the call because American Realty has grown to be one of the biggest real estate companies within the Realogy brands. As she put it, “Imagine, in ‘little ole’ Northwest Florida!” where Okaloosa County has a population just over 180,000 (U.S. Census Bureau). Add this two the two neighboring counties, and you have a total population around 286,000 – not a huge population base compared to companies located in urban areas where there could conceivably be that many on a half-dozen city blocks.
The topic was about the current state of the national real estate market and what is likely to happen between now and the Presidential elections next year. The short answer is—nothing! The longer answer is that neither party wants to tackle any housing issues because of the upcoming elections. The problems contributing to this prognosis are:
1) The down payment and qualifying guidelines.
According to Gloria Frazier, “the problem is that their definition of a qualified buyer is way too high for the times we are in.” Lenders have basically flip-flopped. During the great run-up of real estate prices, requiring people to make higher down payments made sense. That is when lenders were approving almost anybody, and the down payment was coming from the increase in the value of the property from construction start to finish. “VERY DANGEROUS” says Frazier. Now, when buying a home can cost less than rent, is a market where guidelines could be eased a bit, and adjusted later when prices start going up again.
2) Politicians.
Richard Smith made a strong push for the need of a national housing policy to come to the forefront. He felt because there is no formal policy, there are no guidelines for Congress and the thousands of bureaucrats that write the rules for all the laws they pass every year. But with a major election drawing near, we are looking at what could be a lame-duck Congress for all practical purposes, thus the expectation that nothing is likely to happen between now and the 2012 Presidential Election.
3.) Unemployment.
Mr. Smith shared with the conference that unemployment and under-employment are the primary reasons the housing market is still struggling so severely. If you add current unemployment and underemployment together, the figure is 16.3%. For any significant change in the nation’s real estate market, we need growth in full-time jobs and that is not going to happen overnight. As Gloria Frazier put it, “Our area has been recovering much faster than other parts of the nation, but we still have a long way to go”.