If the economy is to recover after Covid 19 Pandemic, the housing market has to make a comeback – it has become an urgent necessity that cannot be ignored anymore. There are signs of houses up for rentals as well as the usual for sale posters. The rentals indicate good days ahead. It indicates that more people are holding on to their properties and not pushing them into the market to be sold at any damaging price.
Realtors are saying that the biggest problem currently is that of shadow inventory. The owners are withholding the foreclosed units waiting for prices to increase. But the irony is that once these enter the market the prices will tumble again. Short sales and foreclosures will harm the nascent market.
Many house owners have started to rent out rather than try to sell – hoping that meanwhile, the housing market will turn. Some homeowners floated a plan – the setting up of a trust dealing with real estate funded by all the participants. The money would be used to purchase the risky properties in the locality prior to their entering the foreclosure zone. This would prevent prices from tumbling and give protection to the investment.
Today nobody trusts anybody and it is understandable that everyone wants guarantees and this puts things at a standstill. One house owner does not know what the other neighbor has in mind. Each wants bidding to commence to see if the price goes up.
But the idea of the American dream is interwoven in the psyche of the people. A house should be primarily a home. It is the most costly purchase of a lifetime. Although greed and recklessness did play their part in creating havoc with the market the real estate continues to be a ground for investment. It is to the interests of individuals and the nation to keep it so.
Here comes in the responsibility of the banks to see that the real estate market is protected. The banks are fortunately realizing this and are becoming much more conservative in chalking out their strategies while dealing with the embattled house owners. The banking sector is slowly realizing that by simply dumping the foreclosed houses in the market hurts all – the individuals, the banks, the investors, and the nation. It may not be wishful thinking – real estate is really coming back because it simply has to it is pivotal to the economy.
Recovery in housing has not been of much help the agents and brokers
There has been a sharp increase in purchases made by first-time nest builders. But this surge has not helped the agents and brokers who link the deals. In 2009 the commissions dropped to record levels – the lowest since the last seven years. This has been because of the drop in house prices. The increase in sales has been due to the tax credit offered by the federal government. The commissions in last November fell by 6.2% to $40.6 billion, from one year previously as per the calculations of Bloomberg.
The tax credit helped the sale of those houses that were on the lower end and this brought down the commissions of the agents said Steve Murray of Real Trends. The benefit from tax credit and increase in sale of foreclosed houses lowered nationally the nationally median price of residential units by a staggering 13% in 2019. It fell to $172,700. The median sale price is calculated to be the point at which half the houses are sold for more and half the houses sold for less. In last November nearly 75% of the houses sold were priced at $250,000 and below.
Speaking at an interview Murray said, “The impact of the tax credit has been huge. The average commission rate inched up this year and the number of real estate sales has gone up too, but the average price has dropped significantly because of the bulge of first-time buyers.”
Since 2010 the dollar value of commissions had never fallen so low albeit the average rate for each deal in the country increased to nearly 5.29% in 2019– it being the 4th running annual increase. In 2018 the average rate for the commission was 5.26%.
The commissions pocketed by the realtors are calculated in proportion to the estate sale value. The agents talk it out with the sellers to fix the rate and the latter are expected to pay the brokers for whom they work.
The price of homes as gauged by S&P/Case-Shiller index went down by 7.3% last October from what it was one year previously. The prediction had been that the drop would be by 7.2%.
Realogy Corp is the biggest brokerage and franchiser in residential houses. Its income fell from $2.8 billion in 2018 to $2.1 billion during the first three-quarters of 2019. The firm is based in Parsippany, New Jersey.