This body served as a guideline script for the Nexus Webinar dated May 13, 2020
This is the Nexus Southern California webinar focusing on market trends, pressures, covid-19 related issues, and some EXCITING New Opportunities that never existed before.
Today, we'll touch on the various types of real estate assistance that you can get if and when you decide to sell your home. Of course there are options to sell For Sale By Owner, you have full service and flat fees discount brokerages. And, there’s an exciting new Hybrid way of selling your home that is gaining a lot of momentum which allows you to sell your home by yourself, with professional guidance and licensed support whenever you need help in the process. We'll talk about the national market trends and what’s going on in Southern California. Covid-19 is having a dramatic effect on home values.
We’ll share with you the latest unemployment numbers and how consumer spending is affected. Plus some fascinating comparisons to 2009, some lending and home price data, and if you ARE thinking about selling your home, what are your options?
And finally, we'll go over questions and answers and of course say thank you to all of our many references that we relied on to give you a balanced look at what’s going on.
So let’s get started. So before we delve in to all the data, trends, and conjecture, let’s briefly touch on the various types of help that you can get if you’re thinking of selling your home.
The first one of course is for sale by owner. For sale by owner saves you all the commission costs, well except if there’s a buyer’s agent, but it also can be a little risky without the right guidance. There’s a lot of important paperwork that has to be spot-on, your pricing has to be right, and if negotiations aren’t handled properly, along with all these other factors, for sale by owner can, and often does, end up costing a home seller a lot more in the end if they don’t have professional help.
Next you have flat fee or discount brokerages. These are fixed fees, usually round 1% or they have rebates after the sale so you might have a 5000 or 10,000 dollar cost that is ultimately paid to the agency. Typically you ARE required to pay the buyer's agent fee as well, which can be 2.5 to three percent on top of the fixed fees. All in, you’re usually paying around 3.5 to 4% of the sale price back to the broker. If you’re looking at one of these services, be SURE to read the fine print because a lot of these companies say that their full service but in reality, most of them provide pretty limited service.
So… next you have the full service traditional brokerages everyone’s probably familiar with. They typically charge a total of 5 to 6 percent of your home’s value between the selling agent and the buyer’s agent combined.
By the way, whether you’re selling your home for sale by owner, using a flat fee discount broker, or a full service broker, YOU are the one doing most of the heavy lifting, regardless. You’re responsible for making repairs, you’re responsible for staging, you’re responsible for curb appeal, you’re ultimately responsible for setting your price and handling disclosures, among other factors.
Finally, there is a new hybrid for sale by owner option that saves you all of the seller’s commission and if a buyer contacts you without an agent, boom… you save the buyers agent commission, which, again, amounts to around 5% of the home value total. So if you sell a home for $500,000, for example, you’re KEEPING $25,000 that would have otherwise gone to an agent. If you’re selling your home for million dollars, you’d save $50,000. You get the idea. And the new hybrid gives you licensed professional real estate support for whatever you need help with, like negotiating, or handling paperwork, or legal stuff, or pricing strategy, or whatever you need. There are a lot more benefits to this way of selling your home, which we can talk about later but let’s start out with a look at…
Market Trends. So there are a lot of different opinions on the market right now and to be clear, I’m not an investment advisor or financial advisor. I don’t have a crystal ball and I don’t pretend to know more than these experts. My expertise is in selling homes efficiently. So here, we’re simply providing the different perspectives that are out there right now. And, a LOT of data… FACTS that I think are really helpful for you to make your own decisions about selling your home or not. But yes, there are varying opinions out there right now. The California Association of Realtors for example says that this is not the time to panic. Then we have a former Goldman Sachs analyst saying downsize your house and liquidate everything you can. Zillow’s research team expects a relatively modest adjustment in home values, maybe two to three percent through the end of the year with a full recovery shortly thereafter. So what is a home seller supposed to do?
Well, here are some interesting facts about the market and some really interesting similarities to the climate just before the housing & market crash in 2000. This is still pretty fresh in people’s minds. I know I remember feeling confident about the market just before the crash, even though all the signs were there. I think we all learned a lot through all of that.
Interestingly the NASDAQ today is behaving pretty much the same as it did in 2000. Back then, it dropped 40% and bounced back up 42%. Then from its lower level of stability, it crashed 43% two quarters later.
2000 was an election year, which always adds a little uncertainty.
In 2000 subprime lending was provided to a lot of overextended homebuyers. Now they call it nonprime lending for a variety of purchasing opportunities but it’s definitely still in play today.
How about shadow banks, which have minimal regulation. Globally, they’ve got $52 Trillion in assets and the US holds $15 Trillion of that. This represents a 75% INCREASE IN ASSETS since the last financial crisis ended.
Now, largely as a result of Covid-19, by May 1st 2020 over four million homeowners went into forbearance – that’s 7.3 percent of all mortgages.
And not that Warren Buffett is the end-all be-all of market timers, but it’s a fact that he has liquidated big time! Now Mr. Buffet has over a hundred and fifty BILLION dollars in cash set aside. And guess what… he did the exact same thing right before the crash in 2000.
Oh, and here’s a fun-fact. Last week Elon Musk announced that he’s liquidating also. He’s got his homes on the market now and guess what… for sale by owner. And by the way, you might be thinking, yeah, but he has all these lawyers and experts to help him sell his homes. But the truth is, everyone has the ability to sell their home on their own with expert assistance when necessary. Gosh, can you imagine how much commission money he’s saving by doing it himself? We’ll talk about that a little more later but for now let’s move along to some other important and interesting data.
This is a graph of the US jobless claims from the US Department of Labor. Here you can see the big unemployment spikes in 1990. You see them again in 2000. You see them again in 2009. But check this out. Nothing has EVER compared to what we're observing right now.
And California is no different. These are the jobless claims compared to our historical ups and downs since 1990.
Okay, so, what is the historical relationship between unemployment in California and property values? Well, it’s pretty simple really, when unemployment goes up, home prices go down, historically. This graph shows the historical numbers from the mid 70’s right up until before Covid-19. What are these graphs going to do in 2020? Well, we know for a fact that unemployment is at an all-time high. So what are home values going to do? Again, I’m not a financial advisor, I sell homes but the data are very interesting, don’t you think? So what will happen to home values this year?
Again, there are a lot of competing theories and outlooks. So besides the Goldman Sachs analyst, and Warren Buffet, and Elon Musk, I’d also like to share Zillow's Outlook. Zillow’s research team is obviously well funded and they’re projecting a relatively modest change in home prices, of up to three percent with a recovery starting between next quarter and around the first quarter of next year.
Right now there's been a fifty percent drop in home sales compared to the end of last year, really as a result of the Coronavirus.
A good indicator for future home values is retail sales. Here’s some data from the California Association of Realtors, who likes to track this sort of thing. This is the most dramatic decline in retail sales since they started tracking these numbers. Retail growth is now down over 66 percent.
I’ve always used metropolitan areas outside of Southern California as indicators as well. For example, whatever is happening in New York and San Francisco tends to lead our Southern California numbers. Here again, according to the California Association of Realtors, Bay Area home sales dropped by over 12 percent from their ten year average in January of this year, which really represents AN OVER 20% drop in values since their peak at the end of last year.
When you look at the current California data for single family homes, there is definitely an increase in the number of reduced-price listings. And, pending home sales dropped almost 25% in the first quarter.
And, sales slowed in every home value range.
So what should a homeowner do with all these data and competing outlooks?
Well, you have a few options. Of course, if you’re in for the long haul and the value of your home really doesn’t affect you, then you can certainly choose to do nothing and just ride it out.
Some homeowners might look at all these factors and decide that they would like to sell. Sort of a speculative move in anticipation of a crash like in 2000 or 2009. We just helped a guy to sell his home on his own. In addition to saving 32 thousand dollars in commissions, he was able to liquidate and turn the equity of his home into cash with the idea of buying another home. So if the market crashes or he finds a good opportunity for a new investment, he’s ready. Kinda like Warren Buffet and Elon Musk.
The third option is to downsize or liquidate your home. And this may be because you’re over extended with debt or you’re worried about losing your job or maybe your job has been eliminated in these tough times. Some homeowners might be worried about what happens when the forbearance period ends or maybe they just can’t afford to risk another housing crash. So whatever the reason, if you need to sell your home, that’s where the new Hybrid comes in.
Again, there's no commission and no flat realtor fees. So why is this important? Well, obviously putting more cash into your own pocket is a good thing. I mean, it’s cash from YOUR equity, right? So yes, more cash to you is great. But not having a 10 or 20 or 50 thousand dollar commission to pay also gives you the FLEXIBILITY you might need to price your home to sell. If you’re on the hook for a big commission check or flat fee to your realtor, maybe it affects your ability to list your home for the right price.
And again, if you need help with pricing your home properly or negotiating or managing the transaction, or getting contractors to help get your home ready to sell… really ANYTHING that you might need help with in selling your home, this new hybrid way of selling gives all of that to you.
If you’re interested in seeing how much you can save by using this new hybrid, please feel free to reach out to us at 760-205-2339 or you can visit our website at nexushomesales.com. We have a few different packages which all include a one-hour training course to give you every bit of knowledge I have to get your home sold faster and for more money. Plus, we can give you all of the licensed-professional real estate support you need at a really reasonably priced hourly rate.
Thank you for joining us today. Stay safe and healthy. We look forward to talking with you!