Archive for the 'Current Issues in Real Estate' Category
This post was influenced by two blogs that were recently posted on Active Rain. The first was Bob Haywood’s excellent post – How Did We Let This Happen??? Internet Real Estate Tough Talk . Although this blog was a members-only blog - it was about a mass email sent to agents from Zillow offering us all placement as a Zillow Premier Agent in the zip code of my choice. The only requirement was that I (and anyone else contacted) be willing to pay for the privilige. The second was Ron Tarvin’s blog Zillow named in a patent infringement lawsuit. Unlike Bob’s post, this blog was public-facing. So the members of the public might want to stop by and see what agents across the country actually think of the Zillow “Zestimate” – for those who feel that a Zestimate is a fairly accurate indication of home value, this should prove illuminating.
Disclaimer – There is no love-loss between Zillow and me:
Those who have been reading my comment threads on various forums know that I have absolutely no love for Zillow whatsoever. I consider their forums poorly monitored, and their Zestimates to be pointless bordering on the unethical since any number that is often off by 20% or more that the public tends to implicitly trust has the capacity to cause harm.
The fact that the Zestimate itself is inherently inaccurate doesn’t bother Zillow one wit. Their canned responses in Ron Tarvin’s blog regarding the lawsuit is a strong indication of same. They know the Zestimates are often way off the mark. They know it causes confusion within the public. They know this has the capacity to harm a seller. They know that agents tear their hair over inaccurate Zestimates that cause the public to put lowball offers on their listings. But they don’t care, because it was never about providing transparent information to the pubic. It was – and is – all about the traffic. If it drives people to their site, they simply could care less. The question is why?
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There is an old saying that there are only two things you can count on in life – death and taxes. Apparently homeowners in Westchester now have a third thing they can count on – exponentially increasing property taxes. Homeowners in New York are up in arms over property taxes. For those who don’t know the region, New Yorkers enjoy just about the highest property tax rate in the country. Westchester has some of the highest taxes in the state – so you get the picture…..In many areas of Westchester, the taxes actually exceed assessed values.
White Plains NY is a case in point. Taxes have been marching to new heights each year. Year after year, the city, schools and county come with their hands out expecting homeowners already reeling from the worst recession since the Great Depression to fork over more in property taxes. Many are hanging onto their homes by their fingernails. And as more and more homeowners feel the squeeze – many will find they can no longer afford to stay in a community that just a few short years ago was quite reasonable and affordable.
Traditionally, White Plains enjoyed significantly lower property taxes then the rest of the county thanks mostly to our large commercial and retail base. But even though that base has increased, the number successful certioari actions has also increased. The net result has been a shrinking tax base in the commercial/retail sector pushing the lions share of the burden onto homeowners. Most notably: owners of single family homes.
Homeowners and city officials in White Plains need look no further than Sleepy Hollow to see what happens to home prices when the homeowners are saddled with an ever more onerous tax burden. This burgeoning problem needs to be nipped in the bud or home values could well suffer.
I chose Sleepy Hollow for a comparison because it is an analogous community in many ways to White Plains. Although city officials and union leaders prefer to liken White Plains to Scarsdale and Larchmont where high taxes are better tolerated, our community profile is in truth more like that of Sleepy Hollow. The commute to Manhattan is similar the two neighborhoods I chose to focus in are are quite comparable in terms of home size, amenities and lifestyle.
Gedney Farms is an established upscale neighborhood in White Plains. Over the past ear the average sales price in Gedney was $993,000 – just shy of $1 million dollars. The average tax bite in these sold home was slightly more than $16,000 per year.
Philipse Manor in Sleepy Hollow is quite similar in many ways to Gedney Farms. However, Sleepy Hollow is a village with relatively little commercial activity resulting in a higher tax burden on the homeowner. Over the past year the average sales price in Philipse Manor was $847,000 – a significant 15% drop from the prices enjoyed by Gedney residents. That’s a difference of $147,000 – not exactly chump change. When you look at the tax bite that Sleepy Hollow extracts from Manor residents, one can see why. Its enough to make your head spin. The average tax on the homes sold that year was a crushing $22,500 or 29% higher than what is seen in White Plains.
Does the tax rate account for the price difference? Uh….ya think? Think of it this way….taxes that high are like another mortgage payment. For Gedney residents its about $1333.00 a month, but that goes up almost $550 a month for Sleepy Hollow residents. Assuming a 6% mortgage rate (assuming they have enough cash to not need a jumbo loan) that translates to a drop of over $90,000 in buying power. If you don’t believe me – the charts below tell the story.
City, county and school officials take note. I know you have turned a deaf ear to the voters on this issue for many a year. Your special interest groups have drowned out the silent majority. But now you are looking off the cliff and into the abyss. Single-family home values could easily implode. Here is the scenario that I fear the most.
Raising the taxes the proposed 19% will make homes in surrounding areas such as Scarsdale, Larchmont, & Rye – more attractive to buyers. Many single family home buyers preferred these areas over White Plains, but high home values put them out of reach. Now that home prices have declined and taxes in White Plains have risen, the trend has been towards these higher-end areas and away from White Plains. Fewer buyers means lower prices.
As taxes rise, those who were hoping to retire (or simply age) “in place” will realize that this is no longer possible. The increase in taxes will be just that extra shove off the cliff that will force many homeowner’s hands. They will have to sell in a bad market. This will push additional inventory onto an already weak market. More homes for sale = more downward pressure on home values.
Further, as home values decline, more homeowners will be able to successfully grieve their taxes. Thereby further eroding the tax base. And the merry-go-round keeps going round and round.
In the past, home owners were just giant money cows to be squeezed to the heart’s content of public officials, educators and unions. But declining home prices translates into lower property values and lower assessed values – and that should put the fear of God into you. The message is loud and clear! Keep hiking taxes and you erode home values AND your tax base.
Further Reading:
Certioraris a Taxing Situation for New York Homeowners
© 2010 Ruthmarie Hicks, http://thewestchesterview.com. All rights reserved.
The title pretty much says it all – but I should add the caveat that agents embrace social Darwinism when the herd being thinned does not include THEM.
Before continuing further – full disclosure here – I am a full-time agent. I do sometimes work as an adjunct professor of biology/natural sciences. But such work is very part-time and more because I enjoy it than for income. (I’d be in a ton of trouble if I relied on teaching for income.)
There have been several recent blogs about the war between part-time and full time agents. It kind of reminds me of the war between stay-at-home vs. working moms of the 1980s. Each camp is armed and dangerous – and with fewer sales to go around – the goal is the extinction of competition that they feel is squeezing their ability close enough sales in order to survive. It’s kill or be killed so the waring parties are in opposite fox holes exchanging fire.
I don’t know what it was like before. I came into this industry at the tail end of the boom. Productivity was already heading well south and new agents were hated beyond belief. When I walked into my first brokerage – bright-eyed and bushy tailed – I was greeted with a mixture of out and out hostility and anger combined with smug amusement. Skirmishes between the long-term full-timers and part-timers were common. Over the next few years this escalated to out and out warfare.
“Part-timers are better because they aren’t so pressed to make a sale…There is nothing worse than desperate agent breath!” Major artillary
“Full-timers are available 24/7/365 – a part-time agent means part-time service and a lack of dedication. “ Saturation bombing.
Blah, blah, blah!
Two recent articles by Bernice Ross showed me just how explosive this issue has become. The articles – Crackdown on independent contractors and 8 reasons we need independent contractors, and were actually about the potential loss of the independent contractor status for most agents. But the comment stream led me to realize that in war of the part-timers vs. the full-timers we are at DEFCON 2 and the leaders on either side of the argument are ready insert the brass keys and launch their ICBMs. Rather than looking hard at the issue itself – many chose to view it through the lens of “how can this work to thin the herd.”
Some of the comments included:
” Elimination would allow brokerages to run themselves as real businesses. Training, coaching, team work, company and individual goals and on and on. Such a breath of fresh air.
“The agents who sell one or two houses a year would be gone leaving more for the agents who take this business seriously.”
“If 50% of the agent’s left the field, it would probably be the agent’s who are not committed to being in real estate.”
“If it curtails or eliminates the part time agents it could not be a bad thing. They cannot answer their phone or return calls while mixing paint or selling merchandise. Many are not being fair to their agency, peers, or clients.”
“There are way too many non-professional and part-time agents in this business…. It is time to professionalize this business and hire agents with years of experience and industry knowledge, who have taken the time to get their CRS, their GRI, and many other real estate designations.”
“Memo to Bernice: It’s 2010 and the real estate buying public is one hell of a lot smarter than the average Realtor slug! Improvise, adapt and overcome or go the way of the Fuller Brush Man!”
Note that the article wasn’t even ABOUT part-time agents…Also note that the responses rather CONVENIENTLY cast the surviving agent’s mold in the image of the poster.
To me it comes down to professionalism. I’ve met some very professional and attentive part-timers and some real laggards that were supposedly full-time. Do we need to raise the bar? Absolutely. I think demanding an apprentice period along with a more intensive course of study is in order – perhaps even a two-year degree. That would get rid of dabblers trying to turn a quick buck. But I draw a line of distinction between part-timers and dabblers.
© Ruthmarie G. Hicks – http://thewestchesterview.com – All rights reserved.
This could also be entitled – “How to steal a house.”
First, the inspiration for this post belongs to C.Tann-Starr. She wrote a tremendously refreshing and honest post - Momentum After The Tax Credit Expires? Seriously? Suffering From Lookie-Lou-Itis?
Second, I don’t have a crystal ball. I can only use common sense to look ahead. The only thing I know is this: What goes up, must come down – and what goes down, eventually goes back up. We can also look to the past in order to better see the future.
How I stole a house in 1996:
The year was 1996 and willy nilly I found myself thrown into the housing market. There were no incentives out there, no $8000 tax credits, interest rates were hovering between 7-8%. The country was MIRED in a real estate recession that seemingly had no end. Few were buying – and those that were – were offering low ball after low ball. Homes languished on the market for months if not years.
But I needed to move. I moved back in with my mother when she became ill and now she had passed on. It was time to sell the big family home that had housed three generations of my family.
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The Westchester real estate market is now truly a buyer’s market. In most communities, the number of westchester ny homes for sale is in excess of six months inventory. This is not universal throughout the county. But for the most part, the county is in a buyer’s market. A few days ago, I wrote a blog about seller’s stuck on unrealistic prices (Dear Seller, About that number in your head…) But this is one of those markets where unrealistic expectations are not limited to one side of the transaction. Fueled in part by media reports filled with sturm und drang (storm and stress) many buyers have confused a buyer’s market with a fire sale.
Unfortunately, unrealistic expectations can set buyers up for unnecessary disappointment and frustration. There are several flavors of unrealistic buyers out there.
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Whenever I go on a listing appointment, I generally find that the seller already has a “number in their head” about what their home should sell for. This number can come from various sources. It is – unfortunately – almost always higher than the current market can command.
In truth, I can’t blame sellers for this…their minds have been levered to continued price increases to such an extent that the current market has left most sellers blind sided.
The first thing I often hear is that “I need to get X out in order to buy my next home which I can now get for Y because its gone down in price. The trouble if the property you want to buy has gone down so much in price, chances are the property that you want to sell has gone down by a similar percentage. Wishful thinking is often the culprit here. Markets are fluid – that was fine when prices were going up – but it also holds true when prices decline.
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This segment on the Daily Show was very disturbing. Normally I find Jon Stewart a laugh fest. But the fact that one Senator could block unemployment insurance extension during the worst recession since the Great Depression is NOT funny.
Clients ask me where the Westchester real estate market is going. I have to be honest with people. I have definite thoughts about how interest rates and expiring tax credits are going to impact the market – but another wild card remains – unemployment along with under-employment.
My own former career fell victim to outsourcing combined with an influx of H1-B employees from abroad. With absolute stunning speed, I watched as prospects for employment at a livable salary evaporated into smoke. This happened several years ago and the only reason this is relevant to the discussion is that my story is not unique. Earning capacity has gone down -even for those who are fortunate enough to be employed. Housing can’t completely recover until the employment issues and stagnating pay are addressed. These are issues that are bigger than the real estate market but the point is that the housing crisis does not exist in a vacuum.
© 2010 Ruthmarie G. Hicks – http://thewestchesterview.com – All rights reserved.
Yesterday I showed a foreclosure. Until fairly recently, Westchester hasn’t witnessed much in the way of “underwater” home ownership. We’ve always had our share of foreclosures, but they were far from commonplace. The house was a mess. The walls contained broken dreams of home ownership and you have to wonder about the people who lived there.
There have been a lot of blogs written lately about who is to “blame” for the housing bubble and its disastrous aftermath. Some bloggers blame lenders, some blame agents, brokers, NAR, the Fed, home owners…the list goes on and on.
But one common thread I find very discouraging are blogs which lay blame on the homeowner who was underwater. They should have KNOWN better. They were GREEDY. They were IRRESPONSIBLE, they were this, they were that…
In truth, the housing debacle is as much a result of the decimation of the middle class as it is about a housing bubble itself. Families have found the ground shifting under them faster than they could ever have imagined. Many homeowners have found themselves into the horns of a dilemma. This is the story of my generation. As a forty-something I’ve felt the sands shifting under my feet ever faster. I have found myself scrambling to earn those ever elusive extra dollars that will allow me to keep my own home – even as I help my clients sell theirs.
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You know that your real estate market is expereincing a shake-up when an article about it in Inman News. The post was actually a reposting of an original article written by “The Real Deal” by Amy Tennery called Westchester real estate shake-up: Brokerage world sees shuffling of agents as firms shutter and consolidate during downturn.
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My initial rant on this topic was posted both here – and on Active Rain where I have another blog. Active Rain attracts many from the industry itself – unlike this blog which is more consumer facing. So I thought I would paste a link over to that blog and I have put together a follow-up since that posting created such a stir.
Since there was such a debate over my blog on designations and their relative value, I thought it would be nice if I culled through the responses in order to get a consensus and also offer up some references for further reading.
There were 41 responders to the blog – excluding those who posted more than once and of course my responses. There were three distinct camps:
1. 49% Felt designations were of dubious value (I included myself in that group.)
2. 29% Felt that having one or two made sense.
3. 22% Felt that felt multiple designations were valuable.
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