DALLAS – Dec. 18, 2009 –Real estate agents will find more success prospecting for referrals with personal calls and requests than impersonal mailers and other marketing materials.

Clients will make referrals if they feel a personal connection to the agent and believe in the agent’s vision for his/her business, and they want to be seen as champions among friends and family and will tell them when they receive top-notch service and outcomes.

Agents can build a referral relationship at the first meeting or during the first phone call, saying something like, “I build my business primarily based on referrals from clients. The benefit to you is: My focus will always be to give you the best service possible. The reason is: I want to earn the honor to talk with you in the future about who you know that would benefit from my service.”

Agents should respect that they are asking for access to people with whom clients have personal relationships, and asking for a referral should never be treated as an after-thought.

Agents should ask for the client’s help, and they should ask permission to sit down and determine which of the client’s contacts could benefit from their services. Rather than make a general referral request, agents should specifically ask about people they know from church or their child’s school, for example, to ensure they get a more detailed response.

NEW YORK – Dec. 18, 2009 – Joseph Ferrara of TheClozing.com, a real estate news aggregator site, predicts increased reliance on technology in the property industry in the coming year.

He expects more brokerages to go mobile or virtual to lower costs in a weak market; and he believes agents will take advantage of mobile video text-messaging to send virtual tours and slideshows to clients and Facebook’s “fan” feature to design pages for themselves, neighborhoods, and local events that target their fans in the hopes of generating new business.

Ferrara also believes a new cell phone from AT&T with an attachable projector will make it easy for agents to show slideshows, photos, and videos to clients in the field; and he expects a new iPhone or BlackBerry app for the National Association of Realtors’ (NAR) Realtors Property Resource will give members a competitive advantage

Among other trends, Ferrara predicts video e-mail, Web sites that allow agents to bid on listings, and services that allow buyers to quickly obtain home details by pointing cell phone cameras at a bar code on the For Sale sign or magazine ad will gain popularity next year.

WASHINGTON – Dec. 17, 2009 – Out of the depths of housing’s worst downturn, smaller new homes are turning into a bright spot for some home builders.

The trend toward more compact new homes is being driven partly by the fact that more customers are first-time buyers who have less to spend.

Home builders are responding by offering smaller designs with features such as high ceilings and large windows that create a spacious feel and options that let buyers personalize the model they choose.

KB Home’s smaller model helped it achieve a 62 percent increase in year-over-year net orders in the third quarter.

The trend cuts across the industry. The median square footage of new homes has dropped 9 percent from a peak of 2,300 square feet in the third quarter of 2006 to 2,100 square feet in the July-September period this year, according to data from the National Association of Home Builders (NAHB).

Housing size drops with each recession, but economists expect the current movement toward smaller homes to continue for some time in part because of the severity of the current housing market slump.

First-time buyers are driving the trend toward smaller homes because that is what they can afford, says David Crowe, chief economist at the NAHB.

As the economy improves, move-up buyers generally enter the market and begin buying larger homes. But this time, so many homeowners owe more on their homes than their properties are worth that many potential move-up buyers will be stuck even as the economy strengthens.

That means first-time homebuyers will still be buying smaller homes while larger homes will find fewer buyers.

“This downsizing is more sustainable,” Crowe says. “The first-time buyer will continue to be a large part of the market because the move-up buyer will not have as much equity. It’s going to take them awhile to climb out.”

The NAHB doesn’t keep data on the percentage of new home sales that are made by first-time home buyers, but about half of all home purchasers were first-time buyers in October, according to the National Association of Realtors.

For builders, smaller, less-expensive homes mean less profit. But the industry is already facing strong competition from a high supply of foreclosed homes selling at comparatively low prices.

A welcome change

Some analysts say the downsizing trend could be good news for builders.

“The appetite for smaller homes may be a welcome change for home builders as new home sales have been challenged in the past few years,” says Tom Lydon, editor of ETF Trends, which educates investors on fund choices and market trends.

Major home builders such as KB Home and Pulte Homes are responding to the shift in demand by offering more of the smaller properties.

At Pulte Homes, its most popular designs today are 100 to 200 square feet less than the most-popular plans in 2005-06.

So the lower-priced homes don’t seem bare-bones to buyers, open floor plans and 9-foot ceilings provide a sense of roominess. Fireplaces are an option.

To hold down costs, Corian – a surfacing material created by DuPont – is a standard for kitchen counters instead of granite. Appliances are standard models instead of pricier stainless steel.

“It’s not just making it smaller, it’s maximizing the space in the home,” says Caryn Klebba, a spokeswoman at Pulte Homes. “It’s a 9- or 10-foot ceiling rather than a cathedral ceiling.” Cathedral ceilings are 14 to 18 feet.

Getaway option

Smaller homes also are appealing as vacation homes.

Nancy Coronado, 55, a retired framer in an art gallery, has a large home in Whitehall, Mich., and bought a second Pulte home in Florence, Ariz., in March. The new home is about 1,400 square feet. “I have a big home in Michigan and didn’t want another big home,” she says. “I wasn’t looking for that.”

KB Home also has redesigned its homes to reflect the trend, because nearly 80 percent of its customers are first-time homebuyers.

Toll Bros., which builds luxury homes, says demand is down across the board, and not just for larger homes. Company officials say they, too, see an increased interest in smaller homes but believe that homebuyers will someday return to wanting larger properties.

Smaller homes, they say, reflect a down economy and tighter credit rather than an appetite for less space.

“We see the demand for smaller homes, but it’s not as though there’s huge demand for smaller homes but no demand for larger homes,” says Kira McCarron, a spokeswoman for Toll Bros. “There is still a demand for luxury homes.”

WASHINGTON – Dec. 17, 2009 – The think-tank Center for American Progress is questioning the premise that a 30-year, fixed-rate mortgage is the best option for homebuyers.

The reason mortgage-backed securities looked so attractive to banks is that they solved the problem of a mismatch between low rates on mortgages and higher rates for deposits. Banks worried about getting stuck earning low rates on a mortgage for 30 years while having to pay higher rates on bank accounts to attract depositors. Their answer: unload their mortgages to investors and let them worry about the profitability of the loans. Those investors hedged their bets by purchasing interest-rate swaps and other derivatives. Now, even Fannie Mae and Freddie Mac are having a hard time getting a handle on what those hedges are worth.

In other parts of the world, variable rates are the norm. While borrowers face the risk of rates going up, lenders at least can ensure the rates they pay to depositors don’t outstrip what they receive in mortgage products. Homeownership rates in Canada and the European Union, where variable rate mortgages are the norm, are about what they are in the U.S.

And in any case, there are ways for borrowers to mitigate their interest-rate risk. They can take out loans with fixed initial periods, for example. For homeowners who typically hold their homes for seven years, a five-year fixed rate provides considerable security.

If the country persists in choosing fixed-rate mortgages, some observers say, lenders might consider the Danish model where mortgages are financed through the bond market rather than a separate securities market. That’s a system that has worked well for two centuries.

From FAR EarlyBird

ORLANDO, Fla. – Dec. 7, 2009 – Despite having no luck selling their properties, homeowners in some parts of the country have clung tenaciously to their notions of the value of their homes.

Forbes magazine ranked markets it considered the most overpriced based on the ratio of the median initial list prices compared to the median list prices at the time the properties actually sold. It also factored in how long the properties stay on the market.

In addition, the magazine considered expert forecasts of price increases in the areas, which could be what encourages homeowners to price high.

The top 10 areas where Forbes found the most over-priced properties were:

1. Orlando
2. Miami-Fort Lauderdale-Pompano Beach
3. Jacksonville, Fla.
4. Baltimore-Towson
5. Chicago-Naperville-Joliet
6. San Antonio, Texas
7. Denver-Aurora
8. Tampa-St. Petersburg-Clearwater
9. Indianapolis-Carmel
10. Austin-Round Rock

Source: Forbes, Francesca Levy (12/03/2009)

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