Editor’s note: Inman News is talking to agents and brokers who have persevered through past real estate cycles and is offering their perspective on business strategies that they have used in past cycles and those that they are employing in the current market downturn. This is the second part in a multipart series. See Part 1: "Agent leans on experience, Internet"; and Part 3: "Paying the price for the bubble."
While the impacts of the global credit crunch may be unavoidable, Spokane, Wash., tends to be insulated against the most extreme peaks and valleys in housing cycles, said Ken Lewis, who has worked as a broker for the past 42 years.
"We’re hurting like everybody else, but not nearly as bad," he said.
And while the market has slowed down, "This is not the worst I’ve seen," said Lewis, broker for Prudential Spokane Real Estate. "It’s slow, but it’s not terrible."
The real estate downturn during the late 1970s and early 1980s was prolonged, and Lewis said he expects the Spokane market to rebound more quickly from this latest crisis. He is hopeful for signs of recovery in the spring. "I personally see the bottom to this," he said.
Prospective buyers, though, are a bit more jittery. "They’re searching, just like everyone else, for the perceived bottom." News travels more quickly today than in previous downturns, and Lewis said that the national news is having an impact on consumers’ confidence in the real estate market.
The National Association of Realtors reported that the median sales price of single-family resale homes in the Spokane area rose from $156,400 in 2005 to $184,100 in 2006 — a 17.7 percent gain — and rose another 5.3 percent to $193,800 in 2007. But the median price in the second quarter of this year, at $196,600, fell 0.1 percent compared to the same quarter last year.
And sales of resale homes in the Spokane area dropped 29.1 percent in the second quarter compared to the same quarter last year, according to a separate report by the Washington Center for Real Estate Research at Washington State University. Meanwhile, building permits for new homes in the Spokane area shrank 38.2 percent in the second quarter compared to the same quarter last year.
The use and abundance of adjustable-rate mortgages and other "exotic" mortgages were a big factor in the latest market downturn, Lewis said, and a lesson from this downturn is that agents should advise buyers not to bite off more than they can chew in their monthly payments.
"When the market is really good (agents can) make promises they never have to keep," Lewis said, as prices are continuing to appreciate. "Now, they make promises they have to live up to.
"Real estate agents have to counsel them from the first day — less on the house and more on the financing. ‘I have to counsel you to let you know there’s more than one option, one way to do this. Let’s talk to a few lenders.’ "
Buyers seemed to get into a mindset in the latest housing boom in seeking to buy "the most house they (could) buy" even if it stretched their budget, rather than buying within their budget using fixed-rate loans.
The foreclosure problem was not disastrous in Spokane as it has been in some other housing markets across the country, particularly in some overbuilt markets in Arizona, California, Florida and Nevada, as well as economically gutted Michigan.
The worldwide economic problems will likely lead to more bank closures, though he hopes the worst of the downturn has passed.
"I think all that people want, whether it be buyers, sellers or Realtors, is just a direction. If the direction (in the market) were just pointing up a little bit, then it’s going to take us a lot (less) time to get booming. We just need this to turn up."
Hospitals and a military base are among the largest employers in the area, and Lewis said there is mostly a service-based economy in the region. "We don’t get hit by things like the Boeing strike (in Seattle) " and Wall Street declines as much as some other areas, he said.
For the 75 agents attached to his brokerage, Lewis said he works to maintain an upbeat business environment and to serve in a sort of counseling role.
"I’m just a ‘shrink,’ " Lewis says. "I’m a pretty positive guy when things are not good. This business is hard enough, and it’s really hard if the leadership is negative and cynical and in the dumps."
His goal, he says: "Keep (agents) as positive as you can and feed them the positive information. I’m counseling and talking — ‘You need a shrink, I’m the shrink.’
"With competitors leaving the marketplace, I tell them there is business out there. I tell them there will be more. This is opportunity time. You’re storing nuts for the winter."
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