The Homebuyers’ Tax Credits Are Ending…Again.

March 11, 2010

It’s all about the next 45 days. The time period between now and April 30th will be very telling. The tax credits are set to expire…for real this time.

Consider what happened at the end of last year, when the tax credits were (supposedly) expiring in November. Leading up to September, the market was down 40%. But things rallied in the Fall, and by the end of ‘09, the market was only down 25%.

Down 25% is not exactly reason to party, but the overall annual absorption increase of 15% during 4Q (typically the sleepiest months of the year) made for a happier holiday than I was expecting.

We can credit some of the rally to the other three most important words in real estate: FEAR OF LOSS. In the case of 4Q ‘09, fear of loss meant fear of losing out on the homebuyers’ tax credit. There was urgency, people didn’t want to miss their chance.

This Spring, fear of loss is back. The clock is ticking. The deadline is looming. If history’s any indication, we’ll see a surge in volume over the next 45 days. We’ll see buyers rushing to sign contracts.

Make sure they’re YOUR contracts. Treat customers like there’s no tomorrow. (There isn’t.) Be attentive and close the deal. After 4/30 there will be fewer buyers, and the ones who show up will be harder sells – to close those deals, you may need to give up $8,000.

GARRISON INSIDER TIP: At Lake Bluff Condominiums in Milwaukee we MATCHED the $8,000 tax credit with every purchase. Take a look at how we packaged the offer. Do this while you still can. Better to spend $8,000 now than to pay the price later when that sale is harder to come by.

Will there be another extension of the tax credits? Not likely. But one thing is certain: if you take on the mindset that this deadline is the real deal, you’ll close more deals.

And if there’s no surge, well, at least we’ll know where we stand. It will mean the market’s not recovering, and that we need to adjust strategies for a tough year ahead.

Either way, knowledge is power, which is why I’m going to enjoy watching the next 45 days unfold. I’ll keep you posted with more tips and news during these exciting times, and always feel free to chime in below.

GB

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How Will Bernanke’s “Extended Period,” Comment Influence Real Estate?

March 2, 2010

Last Wednesday, Ben Bernanke,  Chairman of the Federal Reserve, reaffirmed that short-term interest rates would stay historically low for “an extended period.”

The speech caused a stock market rally of 50 points within one hour. Billions of dollars transacted in under sixty minutes, over a few choice words. Wow.

Words influence the world – a five-minute speech with carefully-chosen words can be the difference between buy and sell. We all know this.

But the ultimate question is: how will the “extended period,” comment influence the struggling residential real estate market?

It should build urgency into the equation. (I said “should,” not “will.” After all, this post is about carefully-chosen words.)

Potential buyers have just been granted about six more months to expect low rates. This should matter to them.

Six months takes us to September. If buyers wait for the Fall buying season, they MIGHT miss out on locking in a low rate this Spring – a low rate that was just assured by Bernanke’s speech.

Potential buyers who see it this way should be marking their calendars for house hunting next month.

Factor in the April 30th deadline for certain homebuyer tax credits and you have even MORE urgency.

It’s starting to feel like “fear of loss,” the magic element that fuels real estate sales. The fear that if you don’t ink the deal NOW, another buyer will snap up your dream home before you do.

Fear of loss can also apply to unique interest rates and tax credits that might slip away if you don’t buy soon. At least that’s the message we HOPE buyers are getting right now.

If a five-minute speech with a few choice words can spur billions of dollars worth of transactions, maybe a 300-word blog post with a few choice words can do the same for the real estate industry.

Okay, that’s a bit of an “extended,” fantasy, to say the least. Heck, if this post results in one sale, it’d pay for itself a million times over. I’ll let you know how it goes.

GB

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Local Developer Hitting Rock Bottom? Time For Rehab.

February 22, 2010

It’s not easy being a local developer in a downturn. National builders have challenges, too, but they’re able to maintain presence in key housing markets and ultimately increase market share.

Lennar posted a gain for seven quarters. DR Horton, KB Home – doing fine. How many local builders do you know who are “doing fine?”

But let’s say you refuse to be weeded out. Fair enough. After all, you’ve worked too hard to give up. The local community knows and trusts you. You’ve earned your reputation with excellent service. You have a right to exist.

You’re a builder. So build. Maybe not homes or communities – at least not right now. Build PARTS of homes, a.k.a. rehabbing.

The people who trusted you to build great homes will also trust you to turn old interiors and floor plans into brand new ones, build additions and give tired kitchens, baths and basements a new lease on life.

There are no national rehab companies. Rehab is a local game. As a seasoned local builder, rehabbing is well within your ability. You just need to rehab you business model a little, so you can weather the storm.

When the market recovers, your name will have endured because you never stopped building lifestyles. You’ll go back to homebuilding but with an increased sphere of local influence.

Consider that 90% of the NAHB is made up of homebuilders who build only ten homes or less, annually. Small, local builders are in the vast majority. Let’s keep it that way. Weather the storm any way you can.

Rehabbing is merely one option for local and regional builders intent on keeping their name alive no matter what. For more options, contact us.

– Garrison Insider

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How To Spark A 200% Increase In Online Registrations.

February 15, 2010

Presenting a new update on, well, new updates. A recent study indicates that swapping out old pictures of residential offerings with newer ones can be an effective way to stimulate new interest. (Most real estate marketers know this in theory, but it’s not always put into practice.)

LakeBluffCondos.com had been featuring the same pictures – both interior and exterior – for two years. The site’s color scheme had been changed in an attempt to give the project a fresher feel, but it wasn’t enough to improve the low registration count.

Finally, action was taken, the website was given a complete overhaul with a new layout, and most importantly, new photos. Registrations soared.

Constant updates have constant upside. In real estate, the story is always changing. Prices and trends change. The weather changes, the atmosphere changes, the competition changes.

A living, breathing site reflects these changes and tells a more relevant story about a given product. At the very least, start with the product – package it as today’s product, not something from two years ago.

Start with seasonal updates. Don’t show snow on the ground in summer. Let viewers regard the project, and the team marketing it, as vibrant and current.

Exploit your updates by spreading the word via Twitter, email and your blog. Call it out loud and clear on your home page. Write a press release. Give everyone an exciting new reason to take another look.

Budget is no excuse. Take new pictures with your phone if you have to. Today, the importance of immediacy trumps the importance of gloss. It’s a Facebook world.

Give your website the facelift it needs. It’s one of the simplest ways to give your sales board the lift it needs.

– Garrison Insider

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Has Real Estate Turned A Corner?

February 11, 2010

Take a look at this piece of reporting from Inman News, which basically summarizes the NAR’s ‘09 Q4 report on home sales.

Allow me to break it down further, to the bare essentials of what happened during the fourth quarter of 2009.

1. Sales of existing homes were up 27.2% during the last three months of 2009.

2. Single-family prices fell 4% – the smallest price decline in more than two years.

3. Garry Benson (that’s me) asserted in a Q4 Crain’s article that “the market has stopped going down.” One commenter asked me if I was insane. I replied with a post entitled: Garry Benson, Are You Insane?

Hindsight is 20/20 of course, but during the time of my quote and article (Q4), things WERE indeed getting a little better, or at least slowly correcting, reversing course – no insanity necessary.

Please don’t interpret this as gloating. My comment had been based on a gut feeling after watching 12 mil worth of real estate sell in one day.

Today I stand on much more solid ground when I suggest that maybe the market has stopped going down. That’s good news for all of us – we can really build a case for rational optimism for 2010.

Go ahead and check out the original NAR report, and let me know how you choose to interpret the new data. We at Garrison Partners would love to hear your take on it, insane or otherwise.

GB

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Top Five Ways To Make Your Lender Your Partner:

February 8, 2010

This year, the builders left standing won’t necessarily be the ones able to build the best homes – but the ones able to build the best case.

The case, that is, for partnership…with their banks. As a developer you’ll be best served if you enter into 2010 with a new mindset regarding bankers: bankers of 2010 are not just your lenders. They’re your partners.

Work with them. Bankers are looking for ways to cut their losses. If you have a compelling idea, they’ll listen. Give them rational reasons to be receptive to your plans. Consider these five ideas:

1. Take a higher interest rate on loan renewal, but have some of it accrue. Recently I’ve seen more than a few banks accept these terms. Banks, more than anything, want to have a performing loan. Accruing interest and collecting some interest is better than nothing.

2. Defer points and refinancing charges to the back end of the deal. Again, many banks will welcome this as an acceptable alternative to NOTHING. Put it on the table, see what they say. You have nothing to lose.

3. Add new capital to the deal. Banks love new capital. Do whatever it takes to find an investor by offering to pay 20-25% returns. That’s high, but sometimes you have to be willing to pay returns in order to get returns. If it keeps you in the room, it’s worth it.

4. Use your history to prove your future. Don’t overstate your pro forma. Banks respond to sober truth and facts, today more than ever. Be ready to back up your claims with plenty of objective justification. Modest expectations based on solid evidence are far more attractive to banks than grandiose speculations based on gut feeling.

5. $plit profits. An offer to spread the wealth is the ultimate form of making your bank your partner. Your lender is looking for a reason to be in the deal. If all else fails, splitting profits might be the ticket. If it buys your project another lease on life, it’s worth it.

It’s a fact: banks are literally becoming developer’s partners. Perhaps it’s happened before over the years, but not to the large degree that I’m seeing it today. Keep this “partnership,” concept firmly in mind, and let it set the tone for your dealings with lenders going forward.

Good luck, and let us know if you have any questions – or if you can share any brilliant new ideas about partnering with lenders that have worked for you.

GB

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Chicago’s Real Estate Forecast And Why You Should Ignore It.

February 4, 2010

Found an interesting read by Dennis Rodkin in Chicago Magazine’s online version of the monthly “Deal Estate,” column. A collection of quick, mostly unsettling sound bites overheard at the Chicago Association of Realtors (CAR) economic forecast panel for 2010, which met January 28th.

Many of the sound bites involve the accurate (but not-so-original) notion that the economy is bad…and it will be slow to recover.

I have respect for the experts quoted – their perspectives are valuable to all of us. But somehow the tenor of Rodkin’s compilation reminded me of how much my team and I bristle at the constant repackaging of negative information.

Exchanging factoids about just how “bad,” things are has become a guilty pleasure for many in real estate, and possibly an unproductive one.

Here’s one (I can’t resist):

There were fewer permits to build new homes in the eight-county metropolitan area this year than permits issued for Will County alone in 2005.

Wow. Another way to meditate on how “bad” things are – by way of comparing everything to Will County in ‘05. I could give you hundreds more like that – but I don’t see the point.

There’s nothing better than awareness. Knowledge is power. But when we obsessively gaze at things through the most disturbing lenses possible, we’re doing it to build a case for inaction, or to paint ourselves as victims. We’re venting when we should be invented. Here’s another:

In 2009…

…foreclosures, short sales, and bank-owned sales made up 40 percent of sales of single-family homes and 24 percent of condos…

Yikes! What do you DO with that information? (Aside from saying “yikes.”)

Here’s what you do: keep it productive. Let it guide your business decisions. Let it direct the relationships you forge with lenders. Let it lead you to new opportunities.

Don’t fall into the trap of using statistics to build a case for you to feel powerless. That’s the enemy of progress in real estate.

I saw a brilliant billboard on the Kennedy Expressway this week. It said: “Recession 101: Bill Gates started Microsoft during a recession.”

Amen to that. Try to see the tremendous opportunity between the lines. If you don’t, someone else sitting next to you at the forecast panel will.

There are opportunities, there are answers, there is hope. That’s the attitude that made ‘09 a fantastic year for Garrison Partners and our clients. It can work for you, too.

For concrete techniques to improve your outcome in 2010, read the new Garrison Insider entry slated for this Monday: “Top Five Ways To Make Your Lender Your Partner.”

GB

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Trend In Residential Real Estate: Think Small

January 26, 2010

The NAHB has released data about the incredible shrinking American home. You can read the full article on The Wall Street Journal’s website, here.

2009 was a big year for small:

“The era of easy money is over. You really have to think before you go out and decide you need that five-bedroom, five-bath home,” said Rose Quint, the NAHB’s assistant vice president for survey research. “Couple that with the energy [cost] concerns of consumers today and I think we will continue this trend.”

It reminds me of another “small movement,” dating back to 1959: the Volkswagen Beetle. Smart marketing touted the financial, practical and image-related benefits of owning small. But there was nothing small about that marketing approach – it translated to big sales.

As marketers in real estate, it’s our job to turn this current real estate trend toward small into something big.

Like Volkswagen, we need to package “small,” and make it appealing. Real estate marketers have been doing this for years by using words like “cozy,” in advertisements. We have to go beyond that.

Today small means power. Small means ownership. Small means freedom. Small means lower carbon footprint. Small is nimble, sane, sensible. Small, in terms of living space, can have tremendous caché if we market it properly.

For some developers, building smaller homes means the hope of turning a profit on new construction – even in this economy, when standing inventory makes such a thing seem impossible. That’s a perfect example of turning the trend toward small into something big.

As marketers and real estate consultants, it’s not enough to merely embrace the trend. We have to harness its power and translate it into better products, smarter marketing and more sales. That’s exactly the kind of challenge we love at Garrison Partners.

Size may not matter as much right now. But sales still do.

GB

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Be Cautious of Cautious Optimism!

January 22, 2010

An article posted by the NAHB today reports that the mood of attendees at this year’s International Builders’ Show was cautiously optimistic.

I was there, and the energy was indeed more upbeat. The networking and communicating is great for the industry, and there’s a certain power in numbers, a sense of energy that breeds cautious optimism.

But I saw something else at the IBS show. Something very good for the industry: rational optimism.

Rational optimism bases your expectations on what you KNOW to be true.

Cautious optimism limits your expectations because of all the unknowns involved.

Rational optimism is earned by seeking out the projects you can grasp fully and get excited about. Putting in honest work and street-level research and taking your best shot, no regrets.

Cautious optimism happens when you lack information. It’s a result of moving forward into the unknown too quickly for your confidence to keep up with you.

Rational optimism can save the residential real estate industry.

Cautious optimism threatens to hold it back.

I’m involved with several projects right now for which I can be rationally optimistic. They’re the only projects I’m willing to take on. I’ve discovered that you can hold yourself to this standard EVEN IN THIS ECONOMY. In fact, it’s more important now than ever.

For banks, receivers and developers in particular, rational optimism is the holy grail. In order to achieve it, intelligence gathering techniques and depth of insight have to adhere to a new standard. Well, new to some. To us, it’s business as usual.

OK, admittedly, I can recall a few times in 2008 where I indulged in cautious optimism. However, I’m very optimistic it won’t happen again. (Rationally so.)

Garry

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Gary Benson To Speak at The International Builders’ Show, Las Vegas, 2010

January 15, 2010

I’ll be in Las Vegas next week to coach a session entitled: How to Get Started in Developing Apartments and Condos, Pt. 4: Managing & Marketing, at the International Builders’ Show.

To read the details, click here.

Date: Thursday, January 21
Time: 10:00 am – 11:30 am
Location: North 259

The bottom line is that “getting started,” involves knowledge of marketing and management. (My forte.) That is, without these skill sets at the outset of your journey, you won’t get anywhere. So I’ll be discussing some of the basics.

WHY someone would want to get started in real estate development right now is another story. Whoever is teaching that course has their hands full.

In any case, what happens in Vegas will NOT stay in Vegas, it will be reported right here so check back. I’ll let you know what I learned at the show and share highlights on the blog.

Garry

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