The Future Of Real Estate: What Will Happen Next For Home Sales (and YOUR Business!)

Picture 47We originally published this article in May….

…..with what is happening now in the real estate markets…and what is about to happen…

I am sure you will agree, its time to revisit this post:

This is one of those posts that I Know will generate negative comments from our readers.

And I am OK with that.

We are criticized all the time for sharing info like this with our students..here is an example.

True Story: I received an email over the weekend from a Real Estate Coaching company whom many of you would consider a competitor of ours. The coach (who is a friend of mine so I wont use his name) was very critical of our blog…and the fact that we don’t pump the usual ‘Its a great time to buy a house’ propaganda.

“Tim, why do you post so much doom and gloom?”

Important Message For ALL Realtors: Its NOT too late for you to become a REO Listing Agent. Its estimate that there will be as many as 7,000,000 bank controlled REO home sales over the next 24 months. Learn how to cash-in on this REO listings explosion. Watch the FREE Agent REO Secrets video and then grab your FREE Agent REO Secrets book.

He didn’t understand why we post articles like this one….

SO, for our competitors, our students and our future students…here is why we share info with you that may cause some of you to be alarmed and even angered with us.

We do it because no one else seems to have the courage to tell agents the truth about what may happen next in our respective real estate markets.

YOU SIMPLY MUST BE PREPARED FOR WHAT MAY BE COMING NEXT. Watch the HREU Real Estate State Of The Union Video NOW: After you have watched the video read the rest of this post….

It would be vastly easier for us to tell you to ‘get back to the basics’ or ‘its all about how you think’. But, that would be a lie.

Selling homes, being a Realtor is an honorable profession.

You are helping people solve a problem and accomplish an emotional and financial goal. Your job (as a Realtor) is to become a great sales person and an even better business person. When you are prepared for the worst but, hopeful for the best..you have an advantage. Once you have that mindset you will do a better job serving your real estate clients.

(Just posted: Breaking Real Estate News: Housing Come Back or False Hope?)

Here is the question we ask all of our Graduate Coaching students that I want you to ask yourself now: (Warning: reading what comes next may cause anxiety and doubt….but, if you read the whole thing you will find inspiration and strength).

Ask yourself…..

“What if I knew with 100% certainty that the real estate markets were going to get worse…far worse….in the next 6 months…what 3 things would I be doing differently NOW?”

Don’t be afraid of that question…take it seriously. If you KNEW that housing sales were going to plummet what 3 things would you be doing NOW…

If you knew for sure that the darkest days for real estate were still ahead of us…what would you be doing now?

IDEAS: Price reductions, taking FAR more listings, stronger focus on pre-qualifying, master Short Sale listings (finally), become a REO listing agent, follow a schedule?….what would you do if you knew FOR SURE real estate sales were going to decline further? Heres a thought, how about getting the education that you know you must have to learn the skills that this market demands. Make you own list. That is your plan of action for NOW.

Realtors, learn how to easily list and sell short sales. Watch the FREE Agent Short Sale Secrets video and then grab you FREE Short Sale Secrets book NOW

Bottom line, Realtors are the only true hope for homeowners….this market is about agents with the skill set to serve and the mindset to be of service.

Next super tough revealing question….

“What are you doing now that you would stop doing if you knew that home sales were going to become far more challenging”

IDEAS: Maybe you would stop waiting for the phone to ring (and make it ring), you would stop waiting for the sellers to ask for a price reduction and start listing homes with pre-planned and agreed upon price changes, maybe you would stop mailing stuff to homeowners in hope that some day…they will call. What 3 things would you STOP doing now if you knew for sure that the real estate markets were going to become much worse?

Maybe now you get it.

If you are prepared for the worst…and the worst never happens…you are in better position.

We don’t want the real estate markets to slide any further. Its truly horrible what is happening to our country. Nothing would make us happier than telling all of you that the worst days for the real estate markets are behind us. Until that day happens we promise to tell you the truth, the whole truth and nothing but the truth. If that offends some of you (and we know it does) we sincerely apologize.

Please don’t be afraid of whats next.

The fact is that if you are still in the real estate business (especially after the epic national washout of thousands of Realtors that took place over the last 2 years) you have already proven that you have the chops to make it through the end of this historic ‘correction’. Be mentally, emotionally and financially prepared for this correction to take another 3-5 years.

HREU Students (and future students) if you need any help…request a Free Coaching Call.

Here is the article from The New York Times.

As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

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In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.

With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

Important Message For ALL Realtors: Its NOT too late for you to become a REO Listing Agent. Its estimate that there will be as many as 7,000,000 bank controlled REO home sales over the next 24 months. Learn how to cash-in on this REO listings explosion. Watch the FREE Agent REO Secrets video and then grab your FREE Agent REO Secrets book.

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis.

Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

Robert and Kay Richards live in the center of this trend. In 2006, they took a 30-year, fixed-rate mortgage — a prime loan — borrowing $172,000 to buy a prefabricated house. They erected the building on land they owned in the northern Minnesota town of Babbitt, clearing the terrain of pine trees with their own hands.

Mr. Richards worked as a truck driver, hauling timber from a nearby mill. His wife oversaw the books. Together, they brought in about $70,000 a year — enough to make their monthly mortgage payments of $1,300 while raising their two boys, now 11 and 16.

But their truck driving business collapsed last year when the mill closed. Mr. Richards has since worked occasional stints for local trucking companies. His wife has failed to find clerical work.

“Every month that goes by, you get a little further behind,” Mr. Richards said.

Last June, they missed their first payment, and they have since slipped $10,000 into arrears. They are trying to persuade their bank to cut their payments ahead of a foreclosure sale.

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From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.

During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans — those given to people with slightly tainted credit — rose 159,000, to 836,000.

Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.

Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage servicing companies that reduce payments for troubled homeowners. The Treasury Department says the program will spare as many as four million homeowners from foreclosure.

But three months after the program was announced, a Treasury spokeswoman, Jenni Engebretsen, estimated the number of loans that have been modified at “more than 10,000 but fewer than 55,000.”

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In the first two months of the year alone, another 313,000 mortgages landed in foreclosure or became delinquent at least 90 days, according to First American CoreLogic.

“I don’t think there’s any chance of government measures making more than a small dent,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

Last year, foreclosures expanded sharply as the economy shed an average of 256,000 jobs each month. Since then, the job market has deteriorated further, with an average of 665,000 jobs vanishing each month.

Each foreclosure costs lenders $50,000, according to data cited in a 2006 study by the Federal Reserve Bank of Chicago, so an additional two million foreclosures could mean $100 billion in lender losses.

The government’s recent stress tests of banks concluded that the nation’s 19 largest could be forced to write off as much as a fresh $600 billion by the end of 2010, bringing their total losses to $1 trillion. The Federal Reserve concluded that these banks needed to raise another $75 billion.

Many economists pronounce that assessment reasonable, while cautioning that it could become inadequate if foreclosures continue to accelerate.

“The margin for error is not that big,” said Brian Bethune, chief United States financial economist for HIS Global Insight. “It’s kind of like, ‘Let’s keep our fingers crossed that we’ve seen the worst.’ ”

Among prime borrowers, foreclosure rates have been growing fastest in states with particularly high unemployment. In California, for example, the unemployment rate rose to 11.2 percent from 6.4 percent for the year that ended in March, while the foreclosure rate for prime mortgages nearly tripled, reaching 1.81 percent.

Even states seemingly removed from the real estate bubble are seeing foreclosures accelerate as the recession grinds on.

Important Message For ALL Realtors: Its NOT too late for you to become a REO Listing Agent. Its estimate that there will be as many as 7,000,000 bank controlled REO home sales over the next 24 months. Learn how to cash-in on this REO listings explosion. Watch the FREE Agent REO Secrets video and then grab your FREE Agent REO Secrets book.


In Minnesota, three of every five people seeking foreclosure counseling now have a prime loan, according to the nonprofit Minnesota Home Ownership Center.

In Woodbury, Minn., Rick and Christine Sellman are struggling to persuade their bank to reduce their $2,200 monthly mortgage on their five-bedroom home.

Mr. Sellman, a construction worker, found some work putting in asphalt driveways last summer, but he is now receiving unemployment. Ms. Sellman’s scrapbooking businesses shut down last summer. Since then, they have slipped $19,000 behind on their mortgage.

“We were always up on our house payments,” Ms. Sellman said. “You work so hard to keep what you have, and because of circumstances beyond our control now, there’s nothing we can do about it.”

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  1. Brian Caronb says:

    Hi Tim and Julie
    Thanks for the blogs, and thanks for the realistic approach to what is happening, there is enough sugar coating of what is happening in the real estate market as well as the economy. I have been doing modifications and short sales for the last two years and if the banks lose a trillion dollars they deserve it. Massive incompetence should not be rewarded. Anyone dealing with banks knows what I am taking about and at least the professional realtor can discuss options with their client in realistic terms. As I currently see it we are the only ones trying to help. Good work and keep it up

  2. Tim and Julie Harris:

    Really refreshing to find an article that is straight forward and not watered down. For example: the last jobless report featured about 525 thousand people losing their jobs! The news spins it as JOBLESS CLAIMS DOWN FOR 3RD STARIGHT TIME!

    My gosh man, another half million people just lost their jobs!!

    You have to real and no matter what the future is be positive…but your very real picture of the future is right on.

    Thanks for the article :)
    John Stankevich
    Realtor 20 years
    California

    • Tim Harris says:

      The dudes pumping the ‘good news’ are the same guys who want folks to start buying stocks…etc. In other words, ‘the street’ needs the ‘dumb-money…retail investor’ (you know..you and me) to ‘invest’ our money back into the market. Why? Because they have to have someone to sell their stuff to.

      So, they know that people spend…act emotionally. Read good news…feel good….you spend. They are doing the selling….they make money. World goes around.
      Tim

  3. I see it and I get it. I signed up for the Short Sale Coaching and am studying everything I can locate to speed up my education. Minnesota ( my home state) was mentioned several times in the above article.

  4. Evvy Boggess says:

    I am from California and can’t find anything here in Santa Maria to sell my cash buyers, these people are users not investors and I get calls everyday “where’s my house???”I check everyday 3 r 4 times and no houses, there have got to be more houses out there, my ad in the paper didn’t work so I a calling the bank vendor companies and still no houses.
    I am getting desperate.
    Thanks for your great seminars and blogs
    Evvy

  5. zia montesi OBX says:

    Hey All…this AM while showing a foreclosure, built in 2000 that had REALLY been lived in for the past 9 yrs all for $129,900 / .92 acres, I just had this discussion, might I say, with this potential investor / buyer. “Oh no, no” he says, “things are getting better, we’ve bottomed out, so and so told me”…aaahhh!!! Trying to explain coherently and quickly to potential clients without argueing the point of misinformation is a skill in itself. I can only hope that this intelligent man, retired, obviously he & his spouse planned ahead since he purchased land in a sound-side golf community & built his custom home 4 yrs ago, that he sits down with his wife this evening and talks out my ‘counterpoints’ to his impression of today’s local market. As a REALTOR, just below used car salesman didn’t that survey say, they still seem to be skeptical of your information even when you are on their side with up to date and pertinent facts that they can google & verify…aaaahhhh again I say. Keep up the bad news / doom and gloom; I need more ammo to help them understand their position in today’s current market. zz

  6. Hey Tim,
    Good post, I run into the same problem, all the time I do primarily
    REO’s and distressed property sales. I usaually do 40-60 BPO’s a month, and I have to argue with other agents about the so called recovery, and the end of the recession. Most agents in my area belive all the good news they hear on the network news, and think the market has bottomed.I’m not an expert, and consider myself about average intelligence, But how can the market be bottomed out if the inventory is still increasing and prices still declining?That’s why I mentioned how many BPO’s I do a month, if my orders are increasing monthly, and inventory is increasing how do can they
    say with a striaght face the market has bottomed out. Several of Asset Manager I speak with tell me the same thing, and that is there is a large inventory waiting to go to auction, and be marketed. I work for several companies but they are all telling me the same thing. Maybe, the next time I offer cash for keys to some one who just lost their home I can tell them don’t worry the job market’s improving and the housing market is rebounding you’ll be on your feet in no time.

    Steve Shewmake
    Broker

  7. Sam Roney says:

    If this is true, those still in real estate in another year or so,
    will probably make money. The rest of us, including me, will have
    abandoned the business I’ve done well in for the past 22 years+, and
    retired. Best thing any of us can do, still in it, or not, is to
    work to change the politics in Washington, and get rid of Democrats
    in office, as trhey are ruining the country and our profession.
    – SAM RONEY, Augusta, GA.
    Broker, ABR, CRS, GRI