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VERSACE: Homebuyers can get a lot for the money
As even the most passive investor would recognize, the housing market has been a volatile one over the past several months. This volatility has increased to the downside with the expiration of the first-time homebuyer credit at the end of April. Since that expiration, new home sales dropped to a record low in May, mortgage applications have declined and housing prices remain weak over concerns over the strength of the economic recovery. And yet, there appear to be pockets of strength — as some have stated in the past, there is always a bull market out there; the trick is to find it.
To make some sense of this, I spoke with Steve Kann, the Washington D.C. District director for ZipRealty Inc., a California-based full service residential real estate brokerage firm.
Q:Steve, what is the current tone of the housing market as ZipRealty sees it following the expiration of the housing tax credit?
A: There was a quite a mad rush to put deals under contract before the tax credit expired, and we are seeing a bit of “wait and see” in the market right now — seeing if prices soften at all. However, Zip’s Home Hunter Report, released in April, revealed that several markets throughout the country are seeing multiple offers and above-list price contracts for the first time in several quarters. There are still plenty of active buyers out there (more than 235,000 active on ZipRealty.com alone since the tax credit went away).
Q:Is the housing market adapting to “the new normal” after so many years of growth?
A: It is documented that much of the growth in the housing market the last several years was facilitated somewhat by access to the easy money. Homeowners were burned when they couldn’t pay their mortgages — some 20 percent or more of all home sales in Washington D.C. area the last two years have been “distressed.” So I’d say it is looking like the “old normal” market — people who need and can afford homes are buying them. Demand is historically closely tied to job growth and in the D.C. area jobs have been growing.
Q:What other factors are weighing on the housing market? I ask this because mortgage rates are at very attractive levels with the 30-year fixed mortgage below 5 percent.
A: Rates are attractive, but in some cases access to loans can be difficult. In some situations, banks are requiring higher down payments, especially for higher-end homes which require jumbo loans. These can be really tough to acquire. The good news is the Affordability Index in the Washington D.C. area is at its highest point since 2003 (average income to average mortgage payment). Homebuyers can get more house for less money than at virtually any time in the last couple of decades.
Q:How is Zip positioned to respond?
A: Zip is the fifth-largest brokerage in the country (by transactions) and fast growing even in these difficult times - we increased revenue in both 2008 and 2009, which was up almost 15 percent. I attribute ZipRealty’s success to focus on the customer and growing technology. Homebuyers and sellers want the transaction to be as transparent as possible and the best way to do this is to give the consumer good information in a timely manner. It helps that we have a rebate of up to 20 percent available to our customers. Also we provide great technology tools, like mobile applications, home sales data and price evaluation tools to help our clients interpret all the information available to them in an instant.
Q:What tea leaves does Zip use to read a change in the market either up or down?
A: Because we’re a national company, the fifth-largest brokerage in the country, we can more easily spot trends and cycles as they move from one region to another. As the largest brokerage website, we have insight into the level of consumer demand and a lot of data about housing supply. But the real way to know what’s going on in the market is through our 3,000 agents around the country who are connected through our internal system and discuss what’s happening. All real estate is local, but it sometimes follows really similar patterns as it cycles through.
Q:One of the big concerns I and others have is the lack of real job growth. Is Zip looking to expand? If so, in what areas and what kind of candidates is Zip looking to add?
A: We are always looking to add service-oriented sales agents to our nationwide team and more specifically here in Washington D.C. to handle the flow of buyers and sellers from the region who visit our website. Sales professionals with fundamental people skills and who have thrived in a high-activity environment tend to do well at Zip. According to the Bureau of Labor Statistics, the Washington D.C. area will add 52,000 net jobs by 2014, and those people will each need a place to live. We want to help them find those places.
About the Author
Chris Versace, the “Thematic Investor,” is the director of research at Think 20/20, an independent equity research and corporate access firm located in the Washington, D.C. area. Before Think 20/20, Mr. Versace was the portfolio manager of Agile Capital Management (ACM), a thematically driven alternative investment fund. The groundwork for ACM was laid during Mr. Versace’s tenure as senior vice president of equity ...
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