Flat Fee MLS

January pace of housing starts tops forecasts

Incoming Federal Reserve Chairman Ted Bernanke told Congress on Wednesday that "a number of indicators point to a slowing in the housing market." And, "given the substantial gains in house prices and the high levels of home construction activity over the past several years, prices and construction could decelerate more rapidly than currently seems likely."

Most forecasters expect the housing market will avoid a catastrophic crash. Ed Leamer, director of the UCLA business forecast, said  "It’s going to be a buyer’s market not a seller’s market — possibly  for a long period of time,"

Despite Bernanke’s and Leamer’s remarks and widespread prognostications of a housing market slowdown, January saw the highest level of housing starts in over 32 years. The Census Bureau’s newest report showed that new homes construction is at an annual pace of 2.28 million homes.

See Also

• Census Bureau Reports New Homes Sales
  Current Press Release
• Federal Reserve Chairman - Bernanke
  Transcript: Ben Bernanke’s First Congressional Testimony as Fed Chair

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White House expects home price increases to cool

The White House Council of Economic Advisers wrote in its annual Economic Report of the President, which was sent to Congress yesterday that, "Prospects remain good for continued growth in the years ahead." While the overall economy is expected to continued growth, the CEA’s assessment of the housing market was somewhat more subdued. According to CEA member, Matthew Slaughter, the rate of home price appreciation is "likely to slow in the future."

After 5 years of 9.2 percent annual growth rate, due to low interest rates, strenghtening job market, and rising income, the next 5 years is likely to see a downward trend in part due to rising interest rates, the report said. A dramatic housing bubble burst is not expected because "the elevated level of house prices will sustain homebuilding as a profitable enterprise for some time."

See Also

• Economic Report of the President Feb 13, 2006
  White House assessment of economic indicators for the years ahead
• Council of Economic Advisors Indicators
  White House CEA searchable economic indicators

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When the Housing Bubble Bursts…,or, just slowly leaks air.

Patrick Newport, U.S. economist at consulting firm Global Insight in Waltham, Mass., said in a recent statement,  "Interest rates have eased in recent weeks, but we are expecting them to drift back up over the first half of 2006," he said, adding that if the Federal Reserve raises interest rates two more times before pausing, the increases "will cool off the housing market and deflate many local housing bubbles."

It seems that everywhere you look today, a housing bubble burst imminent. So, what do you do if you want to sell your home in a slowing market? In a buyer’s market, pricing it the number one most important factor in selling a home. Obviously, anyone can sell their home by lowering the price enough to cause a sale, but for most home owners, this option leaves a bit to be desired.

So, to re-phrase the question, "How do you sell your home and still NET the most  during a market slowdown?" Enter "flat fee mls" listing. A relatively recent entry to the real estate brokerage industry, a flat fee MLS listing allows home sellers to place their property in the Realtor MLS and on Realtor.com for an upfront fee (usually in the $500 range) instead of paying a whopping 6% commission at closing.

A flat fee MLS listing allows a home seller to lower their price and still, maximize their net return. Studies show that a MLS listing increases the odds of selling a home by providing the highest marketing exposure possible. Higher exposure means a greater demand and consequently a higher price. 

Here’s how it works: Instead of listing with a traditional broker, find a flat fee broker offering MLS entry only listing of homes for sale. (for a nationwide listing of flat rate brokers visit www.MLSLion.com). A flat fee broker will enter your property into the Multiple Listing Service in your area where it can be viewed by all of the real estate agents as well as their buyers. If a buyer’s agent brings you a buyer, you pay them 1/2 of the normal commission amount, generally around 3%. For every $100,000 of your sales price, you save approximately $2,500. That means on an average $200,000 home, you can lower the sales price by about $5,000 and still net the same amount of money from the sale as if you had used a traditional real estate agent. Of course, all other factors being equal, a house selling for $195,000 sells before one selling for $200,000 in any market.

If you’re not ready to go the For Sale By Owner (FSBO) route, most flat fee brokers also can provide additional assistance for marketing, contract preparation and transaction management and closing. Flat fee MLS also provides significantly higher marketing exposure than FSBO. The reason is simple - most buyers go to real estate agents using the MLS to purchase a home. In fact, the most recent comprehensive study showed that over 75% of home buyer’s use a real estate agent when purchasing a home.

There’s usually little risk with flat fee MLS listing too, as many flat fee brokers will credit your upfront fee back if you allow them to refer you to a traditional real estate agent, should you change your mind down the road. It’s truly the best of both worlds. All of the exposure of a traditional real estate listing without the cost, or even the risk!

See Also

• Real Estate Journal
  Homes Sales Fell in December, Condo Market May Falter
• Extreme home selling
  As the market slows, home sellers are throwing in sweeteners to move properties…dual-mode toilets, anyone?

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Talk of housing bubble overstated. Home sales remain steady,

With all the talk recently of a housing bubble, what can home owners expect in the months ahead? Comparisons to bubbles in other industries fail to take into account several salient factors with regard to real estate.

For instance, the tech bubble of the 1990s saw stocks in that industry tumble nearly 80%. Can we really think that the same kind of correction could take place in the real estate market?

Real estate differs from other assets in many important ways and is affected on a regional basis more often than a national one. A correction in one area of the country doesn’t necessarily spell a nationwide housing price drop. While it has become much more difficult to buy a home in many cities, in others it has actually become easier, pointing to a boom taking place regionally, rather nationally.

In comparison to stocks or bonds, homes are largely illiquid assets that can take a significant amount of time to sell as compared to stocks which are negotiable securities. Different factors drive housing prices such as mortgage interest rates, the local economy and housing supply and demand.

The United States leads the world in population growth. Not suprisingly, this increasing population needs housing. Children of the baby boom are now reaching home buying age.

It may be that housing prices are due for a correction, a slow down is likely, but home sales should remain steady and will regain momentum throughout the next decade.

See Also

• Don’t Buy Housing Bubble Propaganda
  Media created housing bubble overstated.
• Real Estate Vulnerability Index
  Plenty of people can still afford to buy homes

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Steps You Can Take When the Market Softens

While economists debate whether the housing industry bubble will burst, there is no doubt that home prices have stopped their rapid ascent.  The number of home sales has also dropped with the National Association of Realtors predicting a 4% decrease for next year.  With increased inventory, sellers face longer marketing times and increased pressure on price.

There are, however, steps sellers can take to better position themselves when the markets cools.  The most obvious factor is price.  Sellers should explore all options that provide flexibility when pricing their home.  There are several brokerage firms now offering homesellers marketing services at a significantly reduced cost.  These savings can be utilized to better price your home against the competition. 

Many of these flat fee brokers also allow the sellers to set the amount of commission to be paid the agent that brings a buyer.  By adjusting your price and commission, you not only compete on price but also work to better promote your property to the local real estate agents.

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How limited service and MLS entry only models can help homesellers in a down market.

Much of the real estate news today focuses on the "eminent" housing market downturn. What after the longest run of increasing house prices since World War II, it seems likely that the housing bubble must end at some point, sooner rather than later.

During these residential real estate market boon years, alternative discount and limted service models of real estate brokerage have proliferated and flourished. Under a "sellers market" it’s easy to understand how home sellers might need fewer services and less marketing in order to sell their homes. In a seller’s market homesellers have obviously been able to sell their homes without paying a traditional 5-7% commission because of the demand for housing.

But what happens when the bubble bursts? Won’t sellers come running back to the traditional Realtors?

Not according to Claude Davenport, President of limited service brokerage, InSight Realty. "InSight has operated in markets throughout the Mid-Atlantic since 2001. And during that time, not all of these areas have experienced the same housing boom as most of the United States has for the past 5-7 years. The tremendous success we’ve had in those areas where housing sales have been sluggish is indicative of how limited service brokerages can assist sellers in a down market." 

His point is that in a down market, the key to selling property is competitive pricing, not as many traditional agents contend, more services. By charging clients less to sell their homes, limited service and "MLS entry only" companies allow sellers to pass on those savings to their buyers thereby undercutting the competition in terms of house pricing.

Most Realtors will tell you that the ultimate amentity is price. The lower the price, the easier it is to sell a home. It makes sense then that if you are not paying a relatively high real estate commission, the largest single expense of the sale, you would be able to offer your property to a buyer for that much less thereby attracting a larger portion of the market to your home.

"If you can sell your home in a down market for 2-3% less than your neighbor because you don’t have to pay those monies to a Realtor, your going to sell your home faster." Davenport said. "You really can’t get much more marketing exposure for your home than you can with an MLS listing and posting on Realtor.com, so the differentiating factor then becomes price."

If all of the recent forecasts and forewarnings of a bearish housing market come to pass, we may find out for sure fairly soon.

See Also

• Free market suffers setback over real estate turf battle
  Attempts to ban limited service and MLS only models

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