Monday, September 18, 2006

Real Estate, Mortgage Employment Declines

"The number of real estate and mortgage industry professionals is declining after five years of growth."

"Employment in the real estate and mortgage industries peaked at 504,800 in February, according to the Bureau of Labor Statistics. In June employment was at 503,100, a noteworthy decline given that the sector gained jobs at a rapid pace for most of 2001 through 2005."

"In May of 2001, essentially when jobs started gaining, 290,800 people were employed in the two industries."

"Peter Morici, economist and professor at the University of Maryland’s Robert H. Smith School of Business, views the downsizing of employment as a good development."

“When things shake out it is going to be the better sales men and women that will stay,” he says. “They are the ones who have built a reputation over time.” Source: Reuters, Julie Haviv (09/17/06)

39 comments:

  1. My wife is friends with a couple that live in Seattle. The husband quit his six figure job last year and the wife also quit her job. They both said that they could make lots of $$ in real estate and they got their licenses. I wonder how well they will be doing for the rest of 2006 and into 2007?

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  2. David,

    I agree with you. I can truely say that when i was working with Prudential Realty, 80% of the office agents were not making money. I've read that 1 in 18 people in California possess a real estate license. And the average income of a Realtor in California is $7,000. Theres going to be a shake up within the next year.

    Richard Johnston
    http://www.estates.la

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  3. http://www.washingtonpost.com/wp-dyn/content/article/2006/09/18/AR2006091801090.html?nav=hcmoduletmv

    Loudoun Probing Builder Who Left Homes Unfinished

    G&M Homes never finished the houses, several homeowners who contracted with the company, say they soon learned that Grimm couldn't deliver what he promised.

    G&M's business was a casualty of the downturn in the real estate market.

    "He couldn't move anything. He started selling undeveloped lots at fire-sale prices," Thomson said. "Several subcontractors would not agree to work, and he just couldn't finish the projects."

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  4. I know a couple (husband and wife) team who became agents 5 yrs ago. They thought the good times would last forever. Eventhough they are my age (late 40's), they never realized that we had had previous downturns.

    Now the wife is looking for a job. They are based out of Loudoun County. Did not save for a rainy day. Thinking of selling their house. I talked them out of buying a couple of pre-construction condo's last year.

    The point is, alot of Realtors are clueless.

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  5. Regarding the bankrupt homebuilder. It has always been a risky proposition to deal with a small builder like this guy. He has a track record of going under before (early 90's).

    I wonder why construction draws were allowed , apparently, without the proper lien waivers from the subs. These borrowers should have been noticed immediately when the guy missed an interest payment.

    This is not a "new" story, and we will be seeing more of them in the months ahead.

    I would be very wary of building a house in this manner.

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  6. va investor said,
    "It has always been a risky proposition to deal with a small builder "

    Good post. I am not that familiar with new construction, but I have a guy at my work who is working with a small builder because the cost was less. The builder has delayed completion several times, which I guess causes problems with balloon loans(?). He found out that the builder was trying to finish his own project quickly so he could sell it before things tank even more. The main point, he is not happy and said he would never go with a small builder again.

    On another note. Anybody have any idea why homes in Frederick, md are selling for prices comparable to that of bethtesda. When I say selling, I mean asking price not actually selling. I spent about 3 hours surfing prices and couldn't understand that at all. I also have been tracking several different properties to see what the market is doing.

    condo in frederick, down from 280 to 220
    Condo in rockville, down about 10%
    House in brookville, down from about 649 - 599k.
    Houses in bethesda, about 5-10% off, but this varies. Close in to the town center about 3-5%, out a bit, 10% down, maybe a little more.
    Two houses I was watching sold, I didnt look for what though.

    Any insights on the frederick thing? My opinion is that home prices went up so fast that people paid a premium to be out there and the sticky down theory is really starting to play out.

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  7. I know an orthopedist who quit medicine to sell real estate. He did fine for two years, starve for five years and then re-started his medical practice in 1993.

    Why is it that no one noticed that this has all happened before? The premise of paying twice what a property is worth is that real estate ALWAYS goes up, at least in this location, etc., etc..

    Another friend of mine is staring at seven figure debt that he has no way to pay off, nobody will even look at his properties, and those interest only loans keep resetting. Even if he bankrupts he's goofed, much of that debt will carrry forward and he just can't earn enough to fill the gap.

    So sad.

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  8. fogcutter,

    The best education you can get is by studying history. People who jumped into this market, as realtors or investor's, without knowing the cyclical nature of real estate, truly deserve what they get.

    Regarding the Builder; a consultation with an experienced Real Estate Attorney could have saved these purchasers alot of grief.

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  9. fogcutter said:
    "The premise of paying twice what a property is worth is that real estate ALWAYS goes up, at least in this location, etc., etc.."

    Fogcutter, first off a property is worth what it sells for ... period. Factors can change and it can go down or up, but if you wanted to buy a certain property last year for $X and there were 5 other people willing to pay $X for it, then that is what it was worth at a minimum. Secondly, unless you are talking about flippers or wannabe flippers (which I think a lot of bubbleheads truely are), most people aren't buying a home because they think its value will "always go up". Most people are buying a home for the amenities it provides including shelter over one's head and the social standing that comes with being a homeonwer vs. a renter. (There's no denying that in general society holds renters in lower regard than homeowners except in exceptional cases such as "just moved to town", "am a college student", etc.) Additionally, people bought in order to lock in known payments over the long haul. No one can predict the future, so the best option for people who want stability (and aren't willing to gamble like flippers and wannabe flippers) is to lock in known payments. Again, you're assumption that most people bought thinking they'd make a killing on buying is flat out wrong. Most people bought to have a home. Longterm, of course, values do indeed rise though. But, not as much as a stock or as any investment. A home is not an investment but an expense.

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  10. "Fogcutter, first off a property is worth what it sells for ... period. Factors can change and it can go down or up, but if you wanted to buy a certain property last year for $X and there were 5 other people willing to pay $X for it, then that is what it was worth at a minimum."

    At a minimum? So, it is never worth less than what people are willing to pay for it, but it could be worth MORE. How absurd.

    Come on, Lance, you can do better than that.

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  11. I hope all RE agents become unemployed. The majority of them are no better than child molesters and many of them are in fact child molesters. A very large increase in the number of realtor suicides would be a wonderful thing. I hope to see them leaping from tall bridges and offices every single day of the week until there are none left.

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  12. stupid statement reinhardt. Ever hear of karma?

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  13. Survey: Private sector pay should keep rising
    Wages should accelerate modestly in coming months, helped by healthy employment climate, survey says.
    September 19 2006: 8:11 AM EDT

    WASHINGTON (Reuters) -- U.S. private sector wage growth should continue to accelerate in the months ahead on the back of a healthy employment climate, according to a survey released Tuesday.

    The Bureau of National Affairs Inc., a Washington, D.C.-based news publisher, said its revised ....

    http://money.cnn.com/2006/09/19/news/economy/wages_survey.reut/index.htm?cnn=yes

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  14. VA, When I get bored at work, I imagine you as a bored woman with time on her hands... and I imagine stopping by your place for "lunch" together and filling our time with far more interesting pursuits than blogging... perhaps we should chat sometime.

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  15. sidv,

    I am bored, but not THAT bored!

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  16. and now deflation
    "Outside of energy and food, core inflation was even better behaved, falling by 0.4 percent after a 0.3 percent decline in July. It marked the first back-to-back declines in core inflation in more than three years."

    http://biz.yahoo.com/ap/060919/economy.html?.v=6

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  17. Oh come on, what better way to deal with boredom?

    (I'll retain my fantasy regardless; thank you) ;-)

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  18. http://money.cnn.com/2006/09/19/real_estate/futures_trading_indicates_housing_drop/index.htm?source=yahoo_quote

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  19. anon asked:
    "At a minimum? So, it is never worth less than what people are willing to pay for it, but it could be worth MORE. How absurd."

    So, you haven't heard of bidding situations?

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  20. lance said something truly amazing.
    "Secondly, unless you are talking about flippers or wannabe flippers (which I think a lot of bubbleheads truely are)"

    This statement is as false as you lieing about being so strapped that you HAD to take a IO loan. I think most bubbleheads are people who didnt see the value in a buying a POS house for 3-4 times rent, or strapping themselves so they can move up a social class as you proclaim in the next segment.

    "most people aren't buying a home because they think its value will "always go up". Most people are buying a home for the amenities it provides including shelter over one's head and the social standing that comes with being a homeonwer vs. a renter."

    Social standing? So now owning a home implies that renters are less on the social ladder then homeowners? Tell that to people in manhattan who make about 10 times what you do.

    I emplore anyone who reads lance's post to take them with a grain of salt. He has also said that bubbleheads are responsible for the falling house prices.

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  21. anon said:
    "Anonymous said...
    and now deflation
    "Outside of energy and food, core inflation was even better behaved, falling by 0.4 percent after a 0.3 percent decline in July. It marked the first back-to-back declines in core inflation in more than three years.""

    Actually, 0.4% less inflation is not deflation ... just less inflation ... less than half of 1 percent less inflation ...

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  22. Lance said:
    "anon asked:
    "At a minimum? So, it is never worth less than what people are willing to pay for it, but it could be worth MORE. How absurd."

    So, you haven't heard of bidding situations? "

    So, you haven't heard of people offering cars, trips to Hawaii, closing costs, condo fees for a year, etc.?

    My $0.02.

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  23. MyTwoCents said, I have determined that you can not have a logical discussion with lance. Real estate has become religion to him, you can never make some one see the truth when religion is at question! He went on a rant a few weeks back which was priceless. He was accusing all of us bubble people for being of bad character for wanting to pay less for what a house is "worth".
    I guess I dont blame him. He made a mistake, bought at the peak (Oct 2005), and now probably has to justify to his spouse and himself that it was the right decision. I only hope that if everything bubble related turns out to be wrong and I have egg on my face, i have the courage to admit I was wrong. I sure dont want to look like the housing heads do right now, posting quotes about inflation is going down(core inflation was even better behaved) and not even realizing that housing prices and inflation dropping at the same time is the worst possible thing for a housing head and the best thing for a bubblehead! I would have a lot more respect for housing heads if they would just admit they were wrong, at least wrong in the short term.

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  24. “The housing boom ended more than a year ago, but sellers are having a tough time accepting that fact, says David Lereah, chief economist at the National Association of Realtors.

    Hahahaha

    The nerve of this guy to show his face.

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  25. “The housing boom ended more than a year ago, but sellers are having a tough time accepting that fact, says David Lereah, chief economist at the National Association of Realtors.

    Didn't he write some cheesey book last year about the Long -Term housing boom?

    Irving Fryer 1929 before the Crash D. Lereah 2005 at the peak.
    This guy was wrong big time and he still paid.

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  26. The Real Bob,

    For the most part I have stopped bothering to respond to Lance. His arguments are typically weak and very poorly stated. Furthermore, he takes every salient pro-housing point ever made on this blog and claims that it was either what he was trying to say or was a direct conclusion of his ramblings.

    Get a big container of salt and read away...

    My $0.02.

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  27. A decrease in inflation is called "disinflation".

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  28. Nikki said...
    "A decrease in inflation is called "disinflation"."

    Nikki, you're REAL GOOD at distorting the meaning of words, aren't you? What was that discussion you had with Va_Investor where rather than admit you were wrong you changed the meaning of things you'd said? You gotta love it, if you can't say "deflation" since prices have NOT dropped, then you mislead by saying "disinflation" for where you have less INflation than you had previously!!! What manipulation of words (and ideas) will we think of next! LOL

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  29. Disinflation: A slowing of the rate at which prices increase.

    Disinflation is not to be confused with deflation, where prices actually drop.


    http://www.m/terms/d/disinflation.aspinvestopedia.co

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  30. Lance,

    What was distorted here? Did you even bother to look up the definition of the word disinflation before attacking Nikki?

    here's a link for you: http://www.investorwords.com/1487/disinflation.html

    My $0.02.

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  31. lance,

    Housing prices have ddeclined in the DC metro area, as David has already demonstrated earlier this month.

    There is not disinflation; there is actual deflation... with far more to come.

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  32. Definition of Disinflation: Disinflation occurs when the inflation rate is declining over time. Deflation occurs when the inflation rate becomes negative.

    Poor Lance... Nikki was right, you were not, as usual.

    B747

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  33. my2cents asked:
    "Lance,

    What was distorted here?"

    Simple ... the fact that right after someone makes the statement that deflation is coming and going to wipe out everyone and everything, Nikki jumps in with a name for the fact that the rate of inflation went down last month by "0.4 percent". The name sounds earily similar to deflation ... although all it is saying is that instead of 4% inflation like last month, the rate when down by 0.4% bringing the inflation rate down to 3.984% ... Whoody-doo! What a change! I agree that the first person to even bring up the subject was manipulating to begin with ... But Nikki's justifying it with a name just adds to the manipulation ...

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  34. regardless lance, You have to admit that inflation going down is bad for you. You want inflation to skyrocket, there by making the amount you owe on your home actually drop without paying a dime. So be honest here, for the first time, are you worried that prices are falling (-8.7% in dc where you live) and inflation is dropping?

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  35. You all need to learn the proper definition of inflation and deflation. They have nothing to do with whether prices are going up or down. That is the symptom, not the disease. Inflation is an expansion of supply and availability of credit and deflation is a decrease in the supply of credit. Decreasing home prices is deflationary in the sense that credit will contract. The Fed will fight this situation by increasing liquidity to the banks. The issue of inflation vs deflation comes down to whether the Fed can increase liquidity fast enough and whether the general public will continue to borrow in the face of declining home prices.

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  36. no Bob, I'm not worried. 4% inflation is still 4% per year that I owe on my mortgage in real terms ... and more importantly, I am in no danger of inflation coming in hard and my having to then buy at vastly inflated prices ... Like I've said before, I'm fairly conservative when it comes to money .. I don't day trade either with stocks or with real estate. I bought my house to be a home. And I know what "the most it could cost me to live in my home for the next 30+ years will be." Can you say the same?

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  37. "most people aren't buying a home because they think its value will "always go up". Most people are buying a home for the amenities it provides including shelter over one's head...Again, you're assumption that most people bought thinking they'd make a killing on buying is flat out wrong."

    Hmmmmm??? And I suppose that is why all those homes are just sitting on the market- because people just want shelter, amenities and do not want to make a killing.

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  38. anon asked:
    "Hmmmmm??? And I suppose that is why all those homes are just sitting on the market- because people just want shelter, amenities and do not want to make a killing."

    Maybe they're the kind of people more willing to give a hand up than give a hand out?

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  39. Lance said...
    "So, you haven't heard of bidding situations?"

    Bidding wars? Where?

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