Brokers Blog

Home brokers in California have predicted that the median home sales price will increase by 3.3 percent and that overall home sales will fall by 2.3 percent in 2010.

California brokers released their sales and price forecasts as their group California Association of Realtors held its annual conference this week in San Jose.

According to the brokers, total sales of pre-owned single-family houses will fall from 540,000 units this year to 527,500 units in 2010. The median price will increase to $280,000.

Sales of homes reached their highest level in 2004 when a total of 625,000 units were sold and fell to their lowest level in 2007 when only 346,000 units were sold. The median home sales price reached its peak in 2007 when it hit $560,300 and then sharply declined as the downturn began. This year, the median home sales price has gone down by over 50 percent to around $271,000.

Leslie Appleton-Young, chief economist of the association, said the year 2010 will be characterized by sales of low-priced foreclosed homes to investors and first-time home buyers and sales of high-cost homes at lower prices. She predicted that many owners of higher-priced homes will be forced to sell their homes because of job loss.

In addition, home brokers also said that many owners of higher-cost homes are not be able to modify or refinance their loans because of the reluctance of banks to provide jumbo loans at a time when the employment picture is dark.

Appleton-Young said that although there are slight differences among individual housing markets in California, the city of San Diego reflects the same economic conditions in other cities. Inland properties are falling in values while properties along the coast are being abandoned because of job losses and reductions in income, she added.

Nonetheless, Appleton-Young mentioned that there several positives in the San Diego market. She said that although San Diego has some areas where foreclosures are soaring, the demand for foreclosures is strong and that home affordability is being pushed up. She remarked that the higher end of the San Diego housing market is weak because many sellers are not yet willing to reduce their prices.

Appleton-Young also expressed confidence that the federal tax credit will be extended beyond its November expiration date. In a survey of home brokers conducted by the association, 40 percent said their buyers made their home purchases because of the federal tax incentive.

Residential real estate brokers in New York City have been experiencing reductions in their incomes as landlords pay OP commissions and as rental levels decrease. Many rental home brokers also lower their own commission rates when representing landlords who do not pay OP commissions to be able to attract buyers and tenants.

OP, which means owner-paid, is a term that has evolved in the rental real estate market generally due to the economic downturn. As the number of jobless individuals increased in New York, the number of prospective of tenants decreased. Landlords who want to attract more tenants then offered to pay OPs to real estate brokers as added incentives to tenants.

According to Uptown Partners’ co-founder Lewis Futterman, tenants are attracted to OP properties because they would save at least one month’s rent. But if OPs are good to tenants, OPs are not always good for the real estate brokers. Because of the bad times, landlords do not pay the standard commission rate of 15 percent.

Marc Lewis, head of Century 21 New York Metro, says that most landlords do not use commission rate to pay real estate brokers. They just pay the one-month rent equivalent, which is only about eight percent of the 12-month rent. As the residential market is slowed down by the foreclosure crisis, real estate brokers have no choice but to accept what the landlords can offer.

Whether residential real estate brokers are compensated by commission rates or by the monthly rental, their incomes have significantly dropped. The foreclosure-laden housing market has decreased rental rates in the city. Based on Real Estate Group New York’s data, the average rent for all types of apartments has declined. An apartment renting at nearly $3,000 in December 2007 has become available at $2,728. A studio renting at $2,748 in December 2007 is being offered at $2,495.

Another thing differentiating broker incomes is the higher commission rate offered by developers to buyers’ real estate brokers. While they add perks to the already higher commission rate for buyer’s brokers, they do not offer anything extra to rental brokers.