Real Estate Investing

October wasn’t a good month overall for real estate, except for the buyers who snagged thousands of great deals thanks to the sliding house values we’ve seen this past year.

According to the National Association of Realtors and as reported by MSNBC.com, existing home sales dropped by 3.1 percent in October.

Nationwide sales of existing homes fell more than expected last month, as economic fears made buyers leery even though prices plunged to the lowest level in more than four years.

The National Association of Realtors said Monday that sales of existing homes fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October, from a downwardly revised pace of 5.14 million in September.

My own sales in October are typically strong, but like the rest of the country they too were down somewhat in 2008.

Following this same pattern, new home construction has also slowed to where it was 50 years ago,

Construction of new homes plunged last month to the lowest level on records going back nearly 50 years as U.S. builders slashed production while Wall Street nosedived.

While the “experts” are saying the decline is unexpectedly large, I view it as a necessary evil to level the market.  The number of houses available now far exceed the number of buyers.  This is one of the reasons home prices are dropping - ye olde supply v. demand economics are well into play.

On the flip side, fewer sales at mega stores like Lowes and Home Depot, fewer jobs for workers at these stores and at construction sites, few manufacturing jobs making nails, light fixtures, etc. have trickled down and is causing our economy great pain.  But reflecting to 50 years ago, home sales did recover then… and they will again.  Patience, grasshopper.

Photo by Lee Coursey through Flickr Creative Commons.

California is getting closer to having one state-wide MLS system, according to the San Francisco Chronicle.  Expected to be available in 2009, 66 local REALTOR® associations and three regional MLS groups — representing 60 percent of the market in California — have signed nonbinding letters of intent to participate in CALMLS so far.  Read more from Realtor.org.  In my own MLS area, we’ve faced challenges simply to get the various associations to embrace on preferred lock box … this will be very interesting to see how one MLS works itself out.

Donald Trump is lending a helping hand to Ed McMahon who has been facing foreclosure of his personal home following health issues.  He is buying the home so he can lease back to McMahon.  Says Trump, “When I was at the Wharton School of Business I’d watch him every night,” the mega-developer said. “How could this happen?”

Austin, Texas is set to recover from the real estate slump faster than the rest of the U.S., according to the Austin Business Journal. 

In the coming year Austin will outperform the rest of the country in job growth and in the health of its housing market, according to Mark Dotzour, chief economist at Texas A&M University’s Real Estate Center.

Finally, ghost towns are popping up all over the country due to halts in new construction developments.  According to MSNBC,

The Colonial-style brick home had four bedrooms, three-and-a-half bathrooms, and designer touches and offered everything they expected in a town known for great public schools and homes fit for Ford execs. 

Everything, that is, except neighbors.

When the MacDonalds arrived, there were fewer than 15 homes in Kirkway Estates, where 179 were planned. Their home was the only one built thus far on a cul-de-sac with six lots.

I’ve seen many developments that look like this.  There’s a monster-sized subdivision near where I live and I’ve seen that construction has come to a skidding stop.  I have to wonder what all those workers are now doing to earn a living.

Fort Worth-based D.R. Horton Inc., one of America’s largest homebuilders, has had a hard year. Revenues dropped from $2.8 billion to $1.71 billion, home closings fell 36% and cancellation rates stayed at 44%. And they are not alone. Builders across America are running into similar hard times.

According to the Commerce Department, housing starts in January were at their lowest level in 17 years. Just over 1 million new homes were started in January, up 0.8% from one month prior, but down 28% from one year prior. Builders have offered all sorts of incentives to pique buyers’ interest, including discounts deep enough to anger surrounding homeowners who paid full price only to see their home value drop like a rock.

D.R. Horton is no different, except maybe in marketing tactics. The company’s recent “unauction” offered “auction-level pricing without all the hassle.” The tactic, also commonly referred to as a “firesale,” offered discounts of up to 50%, more than $300,000 in many cases. These are in about two dozen developments in southern California, a notoriously pricey real estate market. Well, obviously, response was overwhelming, with a line of buyers camped out in sleeping bags in the cold. According to the Outstanding Investment blog, this is the first of many such sales as builders look to cut their losses and boost their capital. What a boon for first-time homebuyers!