Six Reasons Why the Housing Market Peaks Can Not Return

Recent conflicting reports about the housing market and whether or not it is truly in recovery have left consumers as well as those in the real estate business more than a bit confused; those whose business plan is dependent upon a full or quick recovery should proceed with caution. I believe the housing market is far from recovered, and, in fact, will not return to the levels of the past decade for many years—if ever. I see six reasons why the housing market peaks can not return, that it will never regain its past “glory days.”

● Robust home sales are dependent upon consumer confidence in the economy. Consumers must feel that both their personal economy as well as that of the nation is on sound footing before committing to such a major, long-term purchase, especially on the heels of the longest recession in more than half a century. Thus far, consumers are far from confident.

● A vigorous recovery of the housing market cannot occur as long as we have unusually high unemployment. While there is much disagreement on when and how our recovery will occur, the financial experts all agree that unemployment will remain at higher than normal levels for several years, and some projections do not indicate a recovery to “full” employment for as much as ten years. With at least 20 million unemployed or underemployed, and with awareness that many of the jobs lost will never return, a high rate of joblessness could possibly become the norm.

● The dramatic loss of home equity will significantly limit the pool of available move-up buyers. In the past, move-up buyers used the equity from their former home to help them purchase a larger/more expensive one; however, declining home values with the associated loss of trillions in equity means fewer sellers will have the resources to purchase another home.

● A continued high rate of foreclosures will depress both the housing market and the hopes of many potential buyers. The millions who have experienced foreclosure will be automatically ousted from the buying pool. For some, several years of damage to their credit rating will be the defining factor; and others will become permanent renters, avoiding the potential for further pain and the trauma associated with foreclosure.

● A slow increase in mortgage rates will reduce the number of qualified buyers. As we experience the higher mortgage payments associated with rising interest rates, many will fail to qualify for loans on the homes of their choice. Others, having been “spoiled” by the low rates of the past decade, will stay out of the market hoping for a return to those rates.

● Tighter lending restrictions will also result in fewer buyers qualifying for home loans. And the restrictions, combined with the declines in credit scores experienced by millions of consumers will only further reduce the number of buyers.

Additionally, there are other factors such as: high levels of consumer debt, changing demographics, and a diminishing of the appeal of home ownership as a result of experiences during the current recession, will only serve to dramatically alter the housing market for the foreseeable future. While there will always be a group committed to home ownership and will always be homes available for them to purchase, an expectation that the housing market will soon recoup its losses and regain its momentum, for me, seems extremely unlikely.

The Housing Guru: The one source for all your housing questions

Thomas Scott, Showhomes

Subscribe to this blog and get our posts in your email inbox

She did an excellent job and  kudos to the live in Home Manager who brought this furniture with them when they relocated from Phoenix for a new executive job in LA. Beth was more than happy to find an empty vacant home that matched their furniture and we’re pleased it helped the home sell. Everyone wins!

We keep seeing homes like this one sell when nothing else does. Whole house staging with live in caretakers like this one are moving because they are the homes that buyers remember. Although they are expertly staged, they don’t look like it and buyers get really hooked emotionally.

Thomas Scott

Showhomes

We’re recruiting: www.showhomesfranchise.com

Franchised businesses, which typically outperform independent small businesses, were not immune to the downward pressure. The Franchise Business Review, which surveys individual franchise owners in franchise systems all over the country, reported that overall satisfaction scores dropped from the previous year.

One company, Nashville based home staging franchisor Showhomes, bucked the downward trend and posted sizable gains in the 2010 report. The company moved up from the #13 to the #6 spot in the exclusive Franchise Top 50 ranking and ranked #3 in the real estate franchise category. Showhomes placed behind real estate category leader Sotheby’s and ahead of Coldwell Banker for the second year in a row.

Kyle Stites, FBR marketing manager, said many of the 500 franchises surveyed are struggling in the down economy. “This is an outstanding showing for Showhomes,” Stites said. “They’ve earned some bragging rights.”
Showhomes is positioned to do well, if the company continues to respond to franchisees and embrace changes that affect their industry, Stites said. Of the 500 franchise companies surveyed, only 133 made FBR’s list of winners and only a handful placed as high as Showhomes.
Stites sees a pattern among franchises on the rise. “The best franchises communicate well,” she said. “They beat the competition by reaching out to franchisees, and by continually striving to get better through innovation. They are honest with themselves and embrace anything they can to continue to get better.”

Franchise Business Review, a New Hampshire-based franchise market research firm, is the only organization that publishes a rankings based on overall satisfaction of franchise owners.

“We’re extremely proud of Showhomes rankings, especially since Franchise Business Review has such a strong emphasis on the franchisee,” said Bert Lyles, CEO of Showhomes. “We believe owner satisfaction is critical to the success of Showhomes. We listen to our franchisees: if something needs to be improved, the franchisee will tell you. Our job is to listen. If they rank us highly, then we must be doing something right.”

Showhomes franchise owner Cindy Montgomery featured on the cover of Mpls St. Paul Magazine

It takes a specialist to sell million dollar homes and Showhomes’ Cindy Montgomery, owner of Showhomes Minneapolis and the 2009 Franchise of the Year, was recently featured on the cover of MSPaul Magazine for her excellence in her market. Here’s a portion of the article:

“Affluent home buyers make up a small, yet influential piece of the private real estate market. In their search for luxury, they can be finicky and demanding. As builders conceptualize homes for this crowd, they are challenged to create fashion statements that showcase the latest and greatest in architectural design, technology, and luxury amenities. For Realtors, supply and demand makes for tricky terrain in the re-sell market for luxury homes. “The bottom line is there are a fewer number of buyers to look at the homes in this price range, a larger number of competing properties, that can lead to an extended marketing time,” explains John Everett, a realtor with Edina Realty Home Services. “There’s therefore less margin for error. If you misjudge the market, there are fewer chances to get it right the first time around, and you may not get these buyers back.”

by Kara G. Morrison – December. 7, 2009
The Arizona Republic

Last year, when Jim Guido needed to downsize and sell his home, his biggest concern was keeping his children in the same school.

That’s when he stumbled across an ad that looked like a mistake: $1,200 per month for a 2,800-square-foot house with a private pool in a gated Cave Creek community.

“It was really a godsend for me,” said Guido. “The house was perfect for us. It fit all our needs.” Not only was the rent price correct, Guido said pool care and yard care were included. Their duty as “home tenders” was merely to furnish the home nicely and keep it spotless for Realtors to show on a moment’s notice.

Home Managers Jeff and Paige Hren

Seven months later, the home is under contract at a price that pleased its sellers.

“I think it worked out for both of us,” Guido said. “The buyers kept saying how much they liked our furnishings.”

In this down housing market, companies are matching sellers with live-in home stagers in a bid to give them an edge. Locally, Showhomes trains home “managers” or “tenders” who are technically independent contractors. They pay a fraction of typical rent, utilities and renter’s and keep the home looking like a model one for buyers.

On the downside, they also have to move – sometimes quickly – when a property sells.

“We say it’s a great lifestyle for someone who can live an organized life,” said Dana Reynolds, who along with Kathy Haase is a local Showhomes franchise owner. “It’s kind of a hugely coveted group to be in.”

With a flood of unsold homes on the market, Showhomes works with homeowners, Realtors, banks and builders. Their clients get a nicely decorated home, lower because the home is occupied, and ultimately a chance to sell for more than the vacant home might fetch.

Haase and Reynolds, who specialize in $1 million to $5 million homes, said their program continues to grow, boosted by the number of vacant luxury There are more than 3,000 luxury homes for sale in Greater Phoenix that are listed for $1 million or more, said Mike Orr, founder of the real-estate research Web site cromfordreport.com.

Showhomes has more than three dozen active home managers and several bank-owned houses lined up to fill – in part to mitigate liability from unsupervised pools.

Showhomes, charges the owner a pre-negotiated fee at closing and keep the managers’ monthly fees in exchange for professionally staging the entire home. Owners like this arrangement because it saves them from making expensive monthly staging payments.

Greg Dols, assistant vice president for consumer lending at Gilbert-based Bank, is working with Showhomes to bring in more managers for its bank-owned luxury homes and to minimize their risk of vandalism.

“We’ve had one (vacant) home broken into five times,” said Dols, adding he thinks the Showhomes program ultimately makes the homes more desirable to buyers.

“I’ve gone into a lot of empty homes, and they just look cold and uninviting,” Dols said. “I believe when we do get a buyer for the (Showhomes-managed) home, it’s going to sell for more.”

Showhomes says it’s a huge savings over merely staging a home with furnishings. Haase said staging-only services for luxury homes can cost clients about $4,500 to $6,500 per month with a four-month minimum, without any of the added benefits of keeping a home occupied.

“If I have 10 homes available, I will get 100 calls a day,” she said. “We have to go through a lot of calls before we find the right person to live in these homes. We’ve never had to kick anyone out for not following the rules because we do so much up front.”

Reynolds said some of their home managers have been through a foreclosure or a divorce; others simply want a short-term obligation while they adjust to new surroundings.

The latter was the case for Paige and Jeff Hren, who split their time between Phoenix and California. Jeff, an executive chef, and Paige, an attorney, pay $1,800 per month to manage a 5,845-square-foot, $2.6 million home in north Scottsdale’s Mirabel Golf Club.

“We’re getting extremely spoiled,” Paige Hren said of the home’s luxury features, including the kitchen’s two slab-granite islands and Wolf ovens, a master suite with his-and-hers vanities, toilets and walk-in closets, plus automated glass pocket doors in the great room that open to a private pool and a view of the 11th fairway.

When they saw an advertisement about the home-manager program, the Hrens admit they were skeptical, thinking the deal was too good to be true. So far, she said the only real challenge has been the 10-day window to move in and furnish the home.

Haase, also a home manager, said most of her managers pay $1,500 to $3,500 per month plus utilities, which can average $400 to $600 per month for a large luxury home.

Both programs screen the prospective managers/tenders and their furnishings to make sure they’re compatible with the home’s style and scale. Showhomes does not accept pets and prohibits smoking inside the home. HomeTenders makes exceptions for some pets and prohibits smoking inside or in front of the home.

Scottsdale Realtor Karen Picarello said she is baffled that more sellers don’t utilize the service.

“It’s such a good deal,” she said. ” . . . If it (a home) doesn’t present well, it may still sell, but you’ll lose a lot of money.”

Brandon Norwood is another Valley resident who decided to downsize while maintaining a luxury lifestyle. He said he was paying about $8,000 per month to rent a 5-acre Troon North estate when he found out about Showhomes.

For the bargain price of about $3,700 per month including utilities, the 33-year-old sports agent opted to manage a new $3.8 million home in Paradise Valley.

“Who wouldn’t want to save $40,000 a year?” said Norwood, who relocated to Phoenix from Seattle, where he still owns a home. “It’s been great. We’re in a beautiful place, and business is going well.”

Norwood said so far being a home manager has been easy.

“You make the bed when you get up, tie the curtains back and spray the sink,” he said.

Showhomes pays for a manager’s move if the homes sell within 30 days; HomeTenders covers moves if the property sells within 60 days.

“I moved five times last year,” Haase said, adding that in today’s market, most of her home managers stay in their properties about six months.

Elayne Wooding, Showhomes St. Petersburg Owner

Showhomes, America’s largest home staging company, is proud to have a member of its team who’s a participant in this bright economic trend. The St. Petersburg Area Chamber of Commerce recently named Elayne Wooding, owner of the Showhomes St. Petersburg franchise, the area’s most outstanding young minority small business owner. With 2,600 members, the chamber is largest in the Tampa Bay region and some estimates have put it at the second largest in the country.

Wooding, 34, decided to become a home staging entrepreneur after working her way up the ladder in the real estate and finance fields. She only bought her franchise in March, but quickly made a name for herself in St. Petersburg, where the downturn in the housing market has left hundreds of vacant homes stagnating on the market. Wooding recently sold a $530,000 home that was on the market for two years in 120 days for 97 percent of the list price.

“We’ve had so much negativity when it comes to real estate,” Wooding said. “I’m thrilled to be a part of a solution that helps everyone – the homeowners, Realtors, builders and top notch home managers that we find to live in the homes while they are on the market. It’s extremely rewarding to help people in distressed situations and homeowners who feel overwhelmed by all they are up against because of the market for high-end homes.”

CWBR estimated that there are about 1.9 firms owned by women of color that employ 1.2 million workers and bringing in $165 billion in revenues and making up 26 percent of all women-owned firms.

“I don’t spend much time thinking about the fact that I’m a woman and a minority,” Wooding says. “But leadership is very important to me. It’s important to be a strong role model for others and help others in any way you can.”

This means that Wooding finds ways to link her knowledge of real estate and home staging to the community. Just last week she talked to third and fourth graders at a local elementary school about her career in home staging, emphasizing the importance of having a clean, organized room and telling them about the benefits of being an entrepreneur.

The South Florida Daily Blog Featured Showhomes today:

The three-bedroom waterfront estate in Fort Lauderdale normally would rent for about $5,000 a month. But Angela Genereux gets to live there for roughly a third of the cost.

The tradeoff is she has to keep the place in show condition – no dirty dishes or wild color schemes, please — and move out when the place sells.

That’s the deal she struck with Showhomes, a home management and staging company that opened a Fort Lauderdale franchise this summer. The Nashville, Tenn.-based company works with owners of vacant residential properties and their real estate agents, providing live-in managers who make the homes more appealing to potential buyers.

Managers, or stagers, typically bring their own furniture and agree to have the homes ready for showing on 30 minutes’ notice. In exchange, they get reduced housing costs.

www.showhomes.com

Luxe Living Arrangements for Less

Unique living arrangements are a fantastic way for Frugalitarians^TM to live well on less.  And you have more opportunities than you might think.  If you’re beyond the apartment complex, done with duplexes and ready to live in a house, but not own it, here’s something you should know:  you can live in a gorgeous home – even a mansion – for what you might be paying for an average apartment.  Showhomes is a company that connects sellers with vacant homes on the market with people who want to live very well without the full commitment of a house.

Showhomes Home Managers

With more homes going into foreclosure and other homes languishing on the market for months, money is being lost.  One creative solution for homeowners who have had to move on is to fill their vacant homes and recoup at least the costs of insurance and utilities until their homes sell.

Here’s how it works: homeowners, or banks in the case of foreclosures hire Showhomes to find trustworthy people with nice furniture.  The company screens what they then call home managers – to live in homes.  Get this!  Showhomes then pays professional movers to move you and sends a professional stager to arrange your furniture, art, etc., in a way that emphasizes the home’s most attractive features and minimizes its less appealing qualities.

What’s the catch?  No catch.  But you do have to do your part – pay on time, treat the property respectfully, oh – and keep the home in show condition at all times.  So if messy is your M-O, maybe this isn’t the arrangement for you.

Showhomes has franchises all over the U.S.  So for more information go to www.showhomes.com.

And certainly, there are other creative ways to live in a lovely lodging for less.  I lived in a masterfully refurbished farmhouse and fed a small herd of sheep and some free-range chickens in exchange for lower rent.  We have friends who shovel snow and clean the hallway of a fourplex and, in exchange, pay monthly rent of just a few hundred dollars a month.

It’s true that landlords want responsible, reliable tenants.  Just think about what you can – and are willing – to do for them and make a proposal.  You’d be surprised what can happen when you simply ask for a creative living arrangement.  Your humble abode could be a splashy residence that exceeds your wildest imaginings.

By Paul Owers, Ft Lauderdale Sun Sentinel

December 4, 2009

The three-bedroom waterfront estate in Fort Lauderdale normally would rent for about $5,000 a month. But Angela Genereux gets to live there for roughly a third of the cost.

The tradeoff is she has to keep the place in show condition – no dirty dishes or wild color schemes, please — and move out when the place sells.

That’s the deal she struck with Showhomes, a home management and staging company that opened a Fort Lauderdale franchise this summer. The Nashville, Tenn.-based company works with owners of vacant residential properties and their real estate agents, providing live-in managers who make the homes more appealing to potential buyers.

Managers, or stagers, typically bring their own furniture and agree to have the homes ready for showing on 30 minutes’ notice. In exchange, they get reduced housing costs.

Don Vanderhoef

“A big part of it is psychology,” said Don Vanderhoef, owner of Showhomes’ Fort Lauderdale office. “Buyers see food in the refrigerator, clothes in the closet. They see all the signs of life of a regular home.”

The housing bust has left millions of vacant homes in its wake nationwide during the past four years. Some homes become unmaintained eyesores, with overgrown lawns and swimming pools full of green water. They also can attract squatters and crime, hurting nearby property values.

“Vacant homes are a prime target for vandals,” said Gerry Schilian, a Boca Raton lawyer who handles foreclosure cases. “Any way you can keep these homes intact preserves a community.”

Vanderhoef insists it works. Managers sign contracts and undergo thorough background checks.

Before Showhomes

The company prefers upscale homes – those that are priced at $500,000 or above – but will consider lower-priced proeprties. Vanderhoef said properties in the program tend to sell faster and for more money than other vacant listings.

Homeowners – including individuals, builders and lenders — pay Showhomes an upfront fee that ranges from $750 to $1,500 for a 3,000-square-foot property, Vanderhoef said. They continue to pay the mortgage, insurance and taxes while the property is listed for sale. The company covers normal operating expenses, such as utilities, and minor maintenance costs.

Once the home sells, the owner pays a “success” fee, up to 1 percent of the home’s list price. If the property doesn’t sell, Showhomes pockets only the upfront money.

After Showhomes

The Fort Lauderdale home Genereux is staging went to contract Nov. 12, less than two weeks after she moved in. Vanderhoef said the home is selling for close to the $599,000 list price.

Genereux will have to find a new place later this month, but she said she doesn’t mind such a transient lifestyle.

“You get to live in luxury on a smaller budget,” she said.

Copyright © 2009, South Florida Sun-Sentinel