Inspected Thoughts

Business moves on. We see more firms in the real estate industry facing difficulties, but I noticed that many other businesses are being effected by our current economic climate. I was surprised to see a number of websites up for sale, mainly because they were not making the money that the owners expected. Yet we have to find a way to continue with our daily lives.

In the midst of this, we are finding that banks are going under, and other businesses are looking to the basics. We may see some new business models come about. I have heard from more Realtors who are questioning the usefulness of their corporate offices. Why share the commission, if the firms are not helping them appears to be the feeling. On that subject, I always thought that the book Freakonomics had it right. If you have a chance you should read the authors’ blog. It opens your eyes.

Rick Aster writes an article going over Franklin Bank being acquired by Prosperity Bank (both banks from Houston) after the FDIC had to step in. The post gives an overview of the nation.

Paloma Contreras shares an article from Ken Brand about what you should expect from a Realtor helping you find your new home. It is a good guide to show you what services they should be providing.

Here is a post going over what is happening in one specific neighborhood , Glen Bay, in Clear Lake. It is interesting to see these figures. Yes all real estate is local, and you can have local real estate go down to the neighborhood level.

The Houston Downtown Alliance has released a statement that registration is open for its tour to show people what living in our downtown is like. Alright, the end of the registration is in March of next year, but since it has been released, I decided to create the link.

Enjoy the read!

How is the real estate business faring? The jobs report this week showed that more workers have lost their jobs, and I am sure if I looked into it, you could find that real estate professionals are dropping like flies. My own business has been good, but not where I want it. Even though my costs are going up, I have people trying to get me to lower my prices (which are already reasonable compared to other inspectors). Ike rained on housing sales in an already slowing market.

In the midst of this situation, we are finding news which focuses on the positive as wells as news that does not bode too well. Here are blog posts and news releases for this week.

Press release from the Dallas Fed going over some highlights of reports in Southwest Economy (to which a link is provided). It is mentioned that the Spotlight section discusses the fact that commercial sales are slowing in Texas.

As many are trying to avoid being forced from their homes, HUD modernizes its online guide for avoiding foreclosure. This press release contains the link.

Houston Housing Market Blog produced an article about good economic news for our area based upon some information produced at Texas A&M.

Here is a report from an Austin Realtor relating some details of a study about the housing market. The bottom is predicted to hit in 2009, while a rebound is thought to be in 2010. It did mention that investing in apartments or warehouses in Houston may not be a bad idea.

Happy Reading!

This past week found me doing more home inspections for people who are not selling or buying a home. They simply want to understand the condition of the home, or they wanted to check on repairs made by a contractor. I have had a few calls from other inspectors pretending to be potential clients to check my prices, but not many calls from real potential buyers or sellers.

This week saw some good articles being produced. I really liked the statistics that Ken Brand’s post provides, because he explains what they mean, and Paige Martin’s post hits the nail on the head when it comes to looking at why a slow down is occurring in our market. Well read through all the posts, if you want a good view of the Houston real estate market.

Jill Wente takes on the topic of finding homes on the web. Where can you go to find the most homes listed? Actually, this is a tricky question. Homes listed through a Realtor will be in the MLS, so going through a Realtor is your best bet, but as pointed out in the comments, Zillow has made great progress with its API for industry professionals and search technologies on its own site. However, you may also need to consider that not all homes sold are listed in the MLS. For sale by owner is quite strong.

Ken Brand gives a good synopsis of the real estate market in The Woodlands. The introduction is standard fare of things we have heard before, so please keep reading down to where he presents facts about the market. He offers concrete advice there for sellers.

Another post from Active Rain from another Woodlands are Realtor, Stephanie Edwards-Musa reviews the Houston Solar Tour. There is a nice slide show for you to check out what is happening with solar in this community.

Here is a post by a J. Kim going over buying or selling a home in Houston Texas. It mainly deals with the types listing contracts, and what they mean to you. A brief post, but an interesting read.

Paige Martin seems to post regularly on market in Houston, and this post takes a look at what is happening in the mortgage industry. Banks may have tightened rules too much so not many are able to obtain a home loan.

Have a good week.

Maybe I am being overdramatic with the title of this post, but several factors have led me to believe that the housing crisis is so deep that we need to address the housing problems in this city, while also focusing on areas where foreclosures are more prevalent. If you have read blogs or news feeds during this past year, you may have seen articles that dealt with the fact that Houston has a great market for real estate, so where are the sales?

Consider the real estate market in Houston. Our home values are steadily increasing (we had a downturn in the late eighties, so we did not experience such a housing bubble). The energy industry is expanding, which means we have an influx of workers into the town to either be employed by such firms or to start businesses which cater to these firms. The city has programs in place to encourage homeownership. In fact, we have a large community that probably would love to live in homes, but who do not as a group have high homeownership rates (I am referring to Latinos, who now are the largest ethnic group in our city). An additional fact that bodes well is that immigrants do not take national economic factors into consideration when buying a home, because it is such a part of the American dream (although, I should point out that the immigrant portion of the Latino community would be only a fraction of the whole).

With these positives, why are sales declining more than expected? The mantra from Realtor Associations this year has been “all real estate is local”. Now the association in Houston is telling Realtors should take the local mantra down to the neighborhood level. Meaning that maybe we cannot say Houston is alright, but we should say that Westchase is alright. Here are factors that I feel are preventing sales in Houston:

1. Personal financial habits of buyers- to live a certain life style, we consumers chose to take on various degrees of debt, but we looked for ways to live that did not require an effort on our part, like saving money towards our goals. We simply do not have the savings to make the down payments to obtain affordable mortgages. This will not be resolved till we consumers adjust our life styles so that we can save.

   
   

2. Our dream homes- home sizes (square footage) have been becoming ever larger. To accommodate this trend we have been building homes further out of the city. Square footage will be coming down to make houses more affordable. We are currently near 2600 sq ft, and I think that we will head down to around 1800 sq ft. Houston and Harris county have plans for improving public transportation systems, but they may need to expand the scope of these routes, and they will have to develop means that can be quickly implemented to meet current needs (such as busses that move people from transit area to transit area only, and more transit areas). We will also have to look at viable townhomes in the city center.

   
   

3. Rules ensuring that lenders behave- there are difficulties in obtaining mortgages. Yes, lenders are still providing loans, but they are increasingly hard to obtain. We need a temporary plan to allow borrowers some leniency in obtaining affordable loans that will produce a benefit to both lender and borrower, but I think this means that lenders cannot expect to make profits from the borrower at every turn, while borrowers must realize that they will be vetted.

   
   

These are three basic steps that need to evolve, and they are meant to compliment ideas on how to resolve the economic downturn. What do you think should be added to this list? Green homes for reducing utility costs. We will see.

Driving through town makes it obvious that the damage from Ike still has not been dealt with, and it probably will not all be dealt with till after the new year. I keep wondering why homeowners have not removed limbs from trees that could cause injury if they fall, but this might be due to a lack of funds, or it could be due to a belief that I heard expressed by some that the city will remove them.

This week the city has been removing trees and limbs which pose a hazard to our safety in areas where it becomes a public issue. If by this Sunday (October 26), that tree or limb has not been removed by the city, then you should realize that it has been deemed your responsibility.

You may have already heard that much of the waste is being composted by the firm LETCO, which is sharing the profits with the city to help fund city programs, such as the mayor’s plan to have one million trees replanted. However, there is a contest open to Houstonians who have the best suggestion of what to do with this waste that can benefit our community. You can find the contest rules at
http://www.recycleike.com . I guess that letting the Aggies have one big bonfire is out, but we could use the potash for our gardens. Obviously, I am not going to win.

Along the lines of going back to normal and finding a way to recycle, the mayor’s office also announced that curbside recycling is restarting next week. I have been taking mine to one recycling center, but I am glad that I can do it at home again. “B” week schedules start next week (October 27), and “A” week schedules begin on the week of November 3. If you are not sure about your neighborhoods schedule, you can go to http://www.houstontx.gov/solidwaste/schedule.html to find out when your area will be serviced.

That is it for now. Last word: take pictures for your insurance agent, then remove the damage (like a fallen tree in the bedroom). Insurance companies will be able to asses the damage, even if the tree has been removed.

What is happening on the Houston real estate scene? I am seeing sites with more listings, but Realtors for the most part are discussing movies and road trips on local blogs. There are a few blogs touting that the Houston real estate market as a great one for investment, but these seem to be taking the party line that has already been said before. The Houston Association of Realtors has released some disappointing sales figures, which was to be expected, with the bright spot still being median home prices in Houston continue to rise. Maybe this weekend’s Realtor Expo will inspire some Realtors to go out and convince the public to buy a home (then maybe I can work more).

Business is slower for me, but I have been inspecting foreclosures that investors or families want to purchase, so I have kept busy enough (not bad, but not great).When looking for views on the real estate market this week in blogs, I did not find much, but there were two interesting posts that I think may prove useful for investors and home buyers alike.

Aimee Hess is a real estate attorney who posted this eight point summary of the criteria for a real estate recovery presented by Dr. Mark Dotzour. Ms. Hess’ post is a good primer on what needs to happen in the market, but she also provides a link for those wanting more information.

The Balthorpe Group released this information about Texas apartment construction. If you wish to find out about the Houston market, scroll down the page. For me this is interesting since it implies that many are turning towards apartment living instead of home ownership. I can only say that I have not witnessed new construction for apartments beginning, but I have seen projects coming to completion. The slow down in residential building is not taking place in this commercial sector based on my driving around town.

Hopefully next week there will be more blog posts that actually provide good information on Houston real estate.

Market analysis reports for Houston real estate cannot present a great picture at the current time when you take in the fact that on top of the current financial crisis and Hurricane Ike have taken their toll on us. HAR had released a statement to the press that the number of homes destroyed or damaged by the hurricane will have effects on the real estate market for some time to come. Looking at some market analysis reports from some sites this week will show you that maybe some areas are not that bad (or at least there are ways to deal with the current market).

What is happening with home sales in South Katy? Robert Gilbert discusses the “Hotness” rating, and how it shows that this area is doing well. He defines the rating by the following statement:

This specific "Hotness" rating refers to the number of pending sales ( buyer demand) that occurred during a given month in relation to its active inventory ( homes currently on the market for sale).

Jill Wente deals with the effects of the hurricane in her market analysis of Spring Texas. The statement which struck home to me was about sellers not accepting low ball offers. Having been involved in some transactions on the sellers side recently, I saw buyers demand $20,000 off when the original offering price was already $20,000 off of asking. They were honestly surprised when the sellers had refused. Another buyer came back with a lower offer claiming it a better deal for the seller, when the seller had informed them that they would not go lower than a certain amount. These buyers were also shocked that they did not succeed. I think their Realtors should have better informed them through the negotiation process.

Jeremy Williams demonstrates how his firm uses the number of months it will take to deplete inventory of homes to develop a sales price for a home in his north east area of Houston. He goes through some typical home prices for this part of town.

Here is a quick report referencing an article in Bizjournals from Houston Real Estate Daily on the fact that Freddie Mac is holding off on foreclosure sales due to Hurricane Ike.

Paloma Contreras gives us the scoop on an issue related to Houston real estate: the new GPA calculations for our area schools. Real estate professionals frequently watch what is happening in area schools (as well as participating in area schools), because we know that this is an important factor to many buyers. I have known people to move from one part of town to another just so their children will attend certain schools. This post focuses on KatyISD.

Well, there are a few of the best posts dealing directly with Houston Real Estate for this past week. Now I need to go and check how much money I lost in stocks to see if I can afford that new investment property still :).

This is one of those “I wish that I had acted upon that idea” moments. I am trying to remember the commercial where it shows people saying that they invented something, but they never did anything about it, so they could have been a millionaire. Two years ago when I was considering the real estate business model and how it operates in Houston, I began dreaming up ways to make it more efficient. I floated the idea of a place which incorporated all of the needs that should be met for a home buyer or a home seller. I imagined a relaxed environment where people did not mind.

When, during the course of doing home inspections around Houston, I floated the idea to some Realtors, I generally obtained the response that this was against the law in Texas. I knew of no such law. I did know that some real estate firms had a rule against it though due to possible liability issues. I was also aware that there is a belief among some Realtors that Texas law states that they cannot suggest one home inspector alone to a client, which is actually a false rumor. When typing in a list of keywords to see what would show up on the results page, I was surprised to see that my idea has been carried out in one form or another. There are several firms which will take you through the process, so you do to have to worry about arranging any of the details. Of course these firms developed the idea on their own, so I will make no claims to be the inventor.

Is this a benefit for the consumer? This really boils down to how much service is provided at what cost. Navigating the real estate market can be tricky, but sites like mine or even better a Trulia or Zillow are providing the education that a consumer needs to be a more informed consumer. This aspect of the internet will only continue to grow as communication between the real estate industry and the consumer expands on the web. Although many consumers may have the knowledge to take steps by themselves, quite a few simply will not want to research facts, so they would be willing to pay someone to guide them through the transaction.

On one site, I saw the word free being used a lot. If the consumer accepted the idea that many services were free, they could believe that they were getting a great deal. However, do you think that all of those service people from inspectors to surveyors to appraisers will work for free? The cost is being placed in the percentage of the sale that the broker obtains from a transaction. Let us consider a breakdown of what the broker earns. If two Realtors are involved in the sale of the home, they will be splitting around 6% commission. Alright, so the one stop shop broker now has 3% of the value of the home. If he is part of a national firm, 1% could go to the corporate offices, .5% to his offices, another .5% to cover office paperwork and marketing, and then 1% to the agent working on commission. I am going by rough estimates here for ease.

Looking at those numbers, a firm could exist outside of a national business (many do). That leaves 1% up in the air. The average sales price in Houston is around $160,000 (I am rounding this off for the math again). The one percent is $1600. This amount is more than enough to cover the home inspector, an appraiser (with a desk appraisal), and the surveyor (possibly even a few more service contractors). In fact, those fees could be reduced.

What if I did not need to spend money to maintain an office or any other costs associated with operating my business? If this brokerage has worked out a deal with me that all of the home inspections required by his agents went through me to the extent that I would not need to find other customers, I could reduce my costs, and thereby lower my price. Other contractors could do the same. Here is where a clever one stop real estate shop could be a benefit to the consumer: if the certain office/marketing costs are taken out of the equation, the cost to the consumer could be lowered by the broker taking a lower commission. In a way, this plays on the idea of economies of scale which internet brokerages are already using to reduce the expense to their clients.

Not bad if it works out that way. Currently, internet users have an advantage which they need to leverage more, and that is using the web to find the best service for the best price. Studies show that most buyers and sellers are heading to the web for information, but they also show that many of these people still only contact one Realtor, who guides them to a specific contractor, so savings are not obtainable, because they are not acting upon the information which they now posses. It will be intriguing to watch this development in Houston real estate, where it may do well, since we are fairing better than many markets.

Recently, I have been reading different blog carnivals on various topics, but I have focused on the topic of real estate since I participated in one. It is an interesting way to see a cross section of thoughts on the web. One issue that I see with many blogs is that their authors are not really trying to expand a conversation with a wider audience. Most seem to be promoting their business or focusing on why their services are important, which to me misses the point of a blog.

There are many good sites detailing what is happening in Houston, but I was curious about Houston real estate. I thought that there might be enough material for a blog carnival on this topic, which might be of benefit to the consumer in this area. For the past week, I diligently searched each day. Here is what I came up with; my own version of a carnival.

Some House Hunters Are Getting Cold Feet- Following the travails of one potential buyer of a home in Houston, you get a look at the situation here from Houston Texas Real Estate Daily.

Hurrican Ike Meets Bubba- part of the economic health of any city relies upon the activity in the residential and commercial real estate markets. Ike offered a chance for some intrepid entrepreneurs to come to the city to help clean up. This leads Ed Ayres to look at the commercial market.

Houston Real Estate October- On the paige-martin blog, we get an overview of the flipside to the commercial market, residential real estate. She looks at the bail out package and what is happening in general which may be of concern to the consumer.

Are granite countertops a threat? Alright, this has nothing to do with Houston real estate as such, but I have a reason for adding this report. The New York Times did a report on radon being emitted from granite counters in kitchens. After that report, KUHF interviewed a group mentioning that they were setting up testing in Houston, and that this should be considered a real threat. In the interview, they did mention that they had not found many counters to be concerned about. Now I challenge you to find a radon test kit at any hardware/home improvement store in Houston. Odds are that you will not find one. This idea has been on some consumers mind, so I thought they should read this article.

Maybe there will be enough interesting posts to continue this carnival next week. We will see.

Last night, my son read to me a paper he is working on about his experience with Hurricane Ike, and I realized that although I have been dealing with the aftermath of the storm, that I had not written about some of my observations of events around it. I was surprised by the lack of preparation by some people, and I was impressed at how neighbors pulled together, so I wish to share some random thoughts with you.

Home inspectors love their tools and gadgets, and I was glad that I stored my hand tools in an easily accessible spot. With no electricity or gasoline available, power tools quickly became useless.

My son with the yellow shirt and his friends

I was glad that my son found several other boys. Our lives are so focused on what is happening inside the home, that boys do not seem to experience the outdoors as much, unless it is through some group’s activity. For the evenings, I discovered that reading fairy tales from the Brothers Grimm proved to be a family favorite. My wife laughed as I trying to keep up with all of the different voices for the various characters. I have always read to my children, but the time became special when there was little else to do in the evenings. My son liked my reading of the play Cyrano De Bergerac which came after the fairy tales, which my daughter enjoyed. I often have not thought about the fact that many people do not keep books. One visitor called my home a library, since I have tomes stuffed into spaces in every room.

I am the cook in the family, and I worked hard to prepare healthy meals after we had lost power. I wished that my cooktop worked on gas, but I did have my grill. I had canned vegetables, but I was concerned that my pregnant wife and small daughter were not obtaining the nutrition that they needed.

Katya seeing how far into the flood water she can go

Each evening after the storm we had a neighborhood party. We gathered at one house or the other to share what news we had managed to hear. During the day, we sought ways to help each other with the clean up. At one of these gatherings, we had families from two other subdivisions in our mist. They were amazed at the atmosphere on our block. They mentioned that nothing like this was happening around their own homes. Although I know that such events were taking place all around Houston, it is easy to forget that in some places this feeling of community was not as lively as I was experiencing, so I am glad for my neighbors. We really did look out for one another.

The pile of limbs in front of my house.

What can you expect in the aftermath of a storm? Well, that question is hard to answer. Many neighbors did not have coolers to store ice and other items in. Many did not have a means to cook, or stay entertained when there was no power. Clean water also became an issue. Keeping a cool head and thinking through problems becomes very important. Having good relationships with the neighbors was important too.