Pat Hiban's been selling homes for 21 years, so he's seen markets good and bad, interest rates high and low. I chatted with him recently to get his thoughts on the slump. (He's most familiar with the southern part of the Baltimore metro area — his Pat Hiban Real Estate Group with Keller Williams Crossroads has offices in Ellicott City and Glen Burnie.)
Q. What's happening to home values in the parts of the metro area you know best?
Hiban: Home values are going down — it's unequivocal. They're definitely going down and they're going to continue to go down. ... Baltimore generally is the last area to be affected by the swings, you know? They come through California, kind of almost down to Florida and they hit Virginia, Northern Virginia, Washington, D.C. and then they kind of move toward Baltimore. That's how it happened when prices went up, and that's how it seems to be happening now that prices are going down.
There's two levels of bottom. The first level of bottom you have is the sorting out of "want-to" sellers vs. "have-to" sellers. The market gets sorted out so the people actually selling are the ones going through divorces, the ones having deaths [in the family] ... or they're being relocated. They have to sell. The people who, "I want to sell because I want better neighbors" or "I want a better backyard" — those are want-to sellers. That bottom has kind of formed now. ...
There's a whole other bottom that hasn't hit yet. This bottom has hit in California, it's hit in Detroit, it's hit in Florida, it's started to hit in Northern Virginia and it's going to hit here next. It's unequivocally going to hit in 2009. And that's going to be another kind of seller. ... The banks.
I have accounts with several banks now — not bank accounts, but they give me the listings. The ask me, "If we've got to sell this thing in a reasonable amount of time, 30 to 60 days, where do we need to price it?" And any smart Realtor is going to say, "You need to be the cheapest guy in the neighborhood." And if it doesn't sell, then you say: "Let's drop it 10 percent."
Q. What's the trend with the foreclosure listings you're handling?
These things sell. A lot of our other stuff — I have five [non-foreclosure] houses in River Hill right now, in Clarksville, and they're all five just sitting there. Some haven't been shown in 30 days. ... I think some will sell. But it's a much longer process, you know, then the foreclosures.
Foreclosures come on the market, and we hope to get them sold in 30 days. A foreclosure's a done deal in our mind. The bank's going to take our advice and drop the price.
Q. But homeowners aren't?
They can't, and they're not. It's like anything — it's like the stock market. If you bought some Cisco Systems stock for $100 and now it's at $16, you don't want to sell it because you've lost 84 percent of what you had. It's the same thing.
I had somebody call this week who bought a house in June of 2007. ... They paid $550 for it, and I pulled the comps ... They needed to be around $450. She put $125 down on it, and I told her it was $100,000 less than she paid. She'd essentially lost all her equity.[So she didn't want to sell] and lock in her loss. In reality, she's already lost it.
Q. You expect more foreclosures to come. Why?
There's a lot of people I know, their savings are zilch, zero. Some of my agents that I counsel, I'm like, "You know, if this does get worse, do you have a couple mortgage payments saved up?" [They say], "No. I need to sell X amount of houses every month or I don't know what I'm going to do."
Q. How much have prices dropped on comparable homes?
They've probably dropped a good 10 to 15 percent in the last six months. And then before that — I'm guessing the peak was '06. If you paid a million in '06 and you called me to come list it and said, "What do I need to do to get it sold," I would tell you $699,9.
The upper end has been severely beaten up.
Q. Any good news out there?
Interest rates are extremely low. ... I really do think that we'll look back on this time frame and say, "Can you believe when they were 5 percent?"
Q. You're blogging at HibanTellsTheTruth.com. Why did you start the site?
Because I felt that no one was getting the truth. ... We would go on listing appointments and lose the listing because [another] agent would tell them the house was worth $800 and we would tell them it was worth $700, and then the house would sit on the market for six or seven months and drop to $700, and then drop to $650, and then the other agent would get the commission.
We got really frustrated. That's why I started it. I was hoping other agents would join in, say, "Yeah, it's true, the prices are going down, and there's some unrealistic prices," and I wanted my sellers to read it so they'd say, "Yeah, let's price it so it sells rather than price it so it sits."
Q. Is it working?
I think it works once in a while. ... I'll keep blogging once a week and see.