Speaking to a gathering of industry professionals Friday, longtime California real estate titan Fred C. Sands called the housing market "pathetic" and said some agents needed to start looking for other work.
"If you've been in it for five or six years and are barely making a living, you might want to think about what you were doing before and get back into it -- you can come back in a couple of years," Sands told members of the California Assn. of Realtors meeting in Universal City.
In the short term, the local real estate market "is not going to get better," Sands said.
He added that he could speak with candor because he was no longer in the home-selling business. Sands now leads Vintage Capital Group, an investment firm that focuses on commercial real estate development.
Such frank remarks are rare at gatherings of famously upbeat real estate agents, but Sands said those in the business needed to remember the last slump and realize "the last five or six years were not normal."
The soaring market of a few years ago will be followed by a correspondingly sharp decline, he said: "The longer the up cycle, the more excess there is, and the worse it is for what follows."
Few homeowners and real estate agents would find room to quibble with that. An estimated 12% of Californians will sell their homes at a loss this year, said Realtors association economist Leslie Appleton-Young, up from about 2% in 2006.
Slumping sales and prices have also brought hardship on many agents, many of whom were drawn into the profession during the housing boom that began in the late 1990s.
There are now 540,000 licensed real estate agents and brokers in California, up 50% from 2003, according to the state Department of Real Estate. But more than half of those agents haven't been involved in a transaction in the last 12 months, a Realtors association board member said.
Sands on Friday asked audience members who worked in the San Fernando Valley to raise their hands. "I feel your pain," he told them. He suggested that those who planned to stay in the business focus on affluent Valley areas or "move to the Westside."
Prices have remained stronger on the Westside and in other affluent areas, in part because buyers there are less likely to use loans with low teaser rates that are now adjusting higher.
But wealthy areas won't escape unscathed, Sand said.
"We saw 25-year-old guys buying $3-million houses," he said of the questionable mortgage practices of recent years. "Someone who makes $100,000 a year can't afford a $2-million house, but that's what's been going on," Sands said.
"The idea that everyone is supposed to own a home is baloney," he added.
Sands counseled agents that property prices must be cut drastically to "get in front of the crisis." Otherwise, agents will "follow it down like a dope" and get even less for the properties, if they can sell them at all, he said.
Speaking with Sands was Alan Long, president of the Southern California region of Sotheby's International Realty Inc., who also told agents to cut listing prices to speed sales. Rising foreclosures could cause prices to fall 20% below 2005 levels, he said.
Long counseled agents to drop sellers who aren't willing to lower prices.
"Let go of the fear another agent will take over and sell it -- they won't," he said. Long said agents could survive by working with buyers, emphasizing to them the advantages of purchasing from a position of strength.
Agents should "go with the flow" by using the downturn to prod buyers, he said. "We are salespeople. We have to be positive."
That remark prompted Sands to interject: "But if you go too far, you lose credibility. People need to know what's happening."
Wow, so many great quotes in this article I don't even know where to start. Its pretty ironic that the only Realtor who is actually honest about the housing market is one who "is no longer in the home selling business"
I really enjoyed the part where he strongly advocates that Realtors should consider finding other employment. He also bashes the belief made so popular during the bubble that every American is entitled to owning a house.
The lesson here to learn is simple economics 101 material: The bigger the boom, the bigger the bust! and never trust a Realtor on commission.
1 comment:
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How they were SE michigan realtors. And business was slow. Your picture isn't as out there as some think.
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