Real estate agents affiliated with Crye-Leike in the Chattanooga area were told that “It’s a new day” concerning the 2013 real estate market. The company’s success in Chattanooga reflects market conditions across all areas where Crye-Leike has offices.
Home sales history in Chattanooga from 2000, shows the “high-water mark” came in 2006, and the “bottom of the trough” occurred in 2011, said Harold Crye, CEO and co-founder of the company. The final figures for the year show that 2012 was very good, with sales of $405 million in the Chattanooga area which is the largest increase since 2007.
The sale of 2,703 homes closed during the year is 28 percent above those sold in 2011, and far exceeded the goal of a five percent increase that had been set for the year. Company-wide, sales of 28,065 houses produced $4.5 billion in sales volume.
Mr. Crye told the realtors that there is an eight-year low inventory of houses for sale, and that new home construction was put on hold during the downturn in the economy. He said two-three years are usually needed to create a new subdivision from the acquisition of land to the actual building, so new homes will not be available immediately. According to the National Association of Realtors, 2012 was the best year for housing affordability since record keeping started in 2007 partially because of low interest rates and an abundance of available houses.
Now the industry is experiencing demand up and supply down which is contributing to a five-seven percent median increase in the sales price of a home. Construction prices have remained high so the increased cost of a new home will raise the price of existing housing, said Mr. Crye. He also predicts a rise in interest rates, however estimating that the rate will be around four percent. This is still very low he said. This price appreciation equates to wealth appreciation since the equity in a house is usually a persons’ largest investment, he said.
In the recent past a large percentage of transactions have been in distressed sales such as foreclosures and “upside-down” mortgages. In 2012, the top producer by unit in Crye-Leike’s Chattanooga offices came from the REO branch which deals with Real Estate Owned, foreclosed property. Mr. Crye predicts that REO sales will decline and said it will be necessary to prepare for a normal time which produces only about three percent of this type of sales.
In the next four years it is expected that REO sales will decline and that by 2016 the market will be back to the average normal of three percent. In 2010, 30 percent of the company’s sales were attributed to REO properties, 23 percent in 2011, and 25 percent in 2012. As the number of these properties decline, it is expected that in 2013, they will make up 15 percent of the sales, falling off to eight percent in 2014 and five percent in 2015.
Renter households are increasing because people think that they will not be unable to buy a house. One of Crye-Leike’s goals for the future includes growth in property management to take advantage of this trend. It is expected that this business will come from out of town investors that have purchased rental property and need a local company to manage it. Management services are also needed by individuals that may be “upside-down” in their mortgages, and want to rent a property until all the value is re-gained.
Embracing new technology such as the use of smart phones laptops and IPads to make presentations to customers is the way of the future, the realtors were told. A visual presentation provides a focal point and creates more interest. Social media such as Facebook is also seen as a form of customer engagement. The company is planning to provide technology training to their agents on a one-to-one basis.
Listing syndication presents a foreseeable problem for realtors, said Mr. Crye. The company has posted their listings on many websites other than their own, such as Truilla and Zillow. He doesn’t like the fact that on these sites, another realtor’s picture may appear alongside a listing that is not their own. This happens because the site has been paid, which is deceptive, he said. He likened the practice to extortion to get payment from the listing agent. This was not being done when the company started using these services, and the solution is unknown, he said. A possibility is to keep the company’s listings on only a few sites unless an individual agent wishes to pay for their listings on others. He told the audience that a national solution is being worked on. If nothing is done, real estate companies could lose because these websites could become the gate keepers, he said.
Optimism is exhibited by another goal of the company, which is to increase sales in 2013 by $5 million which would be an 11 percent company-wide increase over 2012. This equates to a goal of selling a 10 percent increase in the number of units for the upcoming year. The new year is off to a good start, since the month of January showed an increase of 25 percent over the same time period a year ago, he said.