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Housing's Humble Pie

Written by Steve Christ
Posted September 21, 2006 at 8:00AM

Baltimore,MD-Thomas M. Stevens should have known better. After all as the reigning president of the National Association of Realtors, he is a guy that ought to have some bona fide real estate savvy. How couldn't he?

But as we have come to find out, Mr. Stevens' real estate acumen in practice has certainly left a lot to be desired.

His own brush with the housing bubble began just last October. It was then that he listed his Great Falls, VA. property for sale.

At the time, of course, he was hopeful of a quick sale.

And who could blame him. Even then the real estate market still had some juice although there were some early signs that the trend was coming to an end.

Since then, like so many other sellers in the current market, his "quick sale" has fizzled out.

After all, demand has come to a standstill and the Stevens' home is just a small piece of the burgeoning growth in supply.

And clearly it is not a good mix.

In fact, the current listing sheet shows that his property been on the market for over 350 days. And amazingly its listing price has since remained unchanged.

But with a price of $1.45 mil, this 4 bedroom, 3.5 bath brick colonial is apparently a little pricey. And not even its "exceptional room sizes" and "easy commuting" have been enough to deliver a closed deal.

Needless to say, the experience has left him with more than a little egg on his face given his lofty position as one of real estate's head honchos.

And appearing on a recent interview with CNBC it seemed more like the entire carton.

You see CNBC had been tipped off to this situation by a story that had recently appeared in The Washington Post.

And the results were classic.

Because appearing a tad bit uncomfortable, Mr. Stevens was at a slight loss of words when the questioning turned to his own housing troubles.

In fact, he seemed to be grasping for straws when he explained that his troubles were on account of his busy travel schedule and his refusal to follow the good advice of his agents.

Of course, it made for good TV and it mirrored what had already been written in The Post.

In the Post's article Stevens stated his case this way: "Who knew last September how long this down trend was going to continue."

Going on, Stevens said further, "What I should have done, was listened to my agent and cut the price by $50,000 to $100,000 early on, and the property would have sold last October."
 

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He didn't, of course, and now his property sits watching and waiting for a flood of buyers that no longer exists.

But Mr. Stevens is not alone since the downturn in housing began with a less than stellar spring season.

And unfortunately it is a problem that continues to get worse.

For instance, just take a look at the most recent report on new residential construction released just two days ago by HUD.

Its headline number reveals that housing starts have declined only 6% from on a month over month basis. But the disturbing truths can be found deeper within its pages. In them are the year over year figures which are alarming to say the least.

And sadly they touch every region of the country.

Consider these statistics, first in permits, which give us a glimpse of future starts:

National

  • Single family housing permits down 3.5% from July, down 25.0% compared to a year ago

Regional

  • For the Northeast, single family housing permits down 1% from July, down 27.4% as compared to a year ago.
  • For the West, single family housing permits down 2.3% from July, down 31.2% as compared to a year ago.
  • For the Midwest, single family housing permits down 8.2% from July, down 28.5% as compared to a year ago.
  • For the South, single family housing permits down 2.9% from July, down 20.3% compared to a year ago.

And now in starts which represent homes currently under construction:

National

  • Single family housing starts down 5.9% from July, down 20.6% as compared to a year ago.

Regional

  • For the Northeast, single family housing starts down 7.9% from July, down 19.3% as compared to a year ago.
  • For the West, single family housing starts down 4.4% from July, down 33.4% as compared to a year ago.
  • For the Midwest, single family housing starts down 12.9% from July, down 28.7% as compared to a year ago.
  • For the South, single family housing starts down 6.1% from July, down 9.9% as compared to a year ago.

Naturally, these figures were much weaker than expected by Wall Street economists.

In fact, according to the MarketWatch survey, housing starts were expected to sink about 2.5% in August to 1.75 million, while permits were expected to drop 1.6% to 1.74 million.

Pared down even further, the numbers also delivered this projection: new home construction will fall to a 1.665 million rate, a 3-year low.

Faced with this news, the nation's builders continued their gloomy outlook.

In fact, on Monday The National Association of Home Builders reported that its survey of builder sentiment fell for the eighth straight month in September to the lowest level in 15 years.

 

But it's for good reason since demand has come to a screeching halt.

So as Mr. Stevens continues to sit and wait on his property, at least he won't have to do it alone. He will have plenty of company.

But he may want to follow some of his own sage advice that he recently offered to lonely sellers like himself.

"You need to adjust the price. . . . But I didn't do that. And my house is still on the market."

But he should have known that.

Just ask any realtor. They will tell you.

 

 

-Steve Christ

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