Words of advice from an industry veteran
By Alan Lev
We all know that 2007 was tough, but we also know the pendulum will swing back; it always does. Success is determined largely by attitude. If you think you won’t sell homes, I can guarantee you won’t. A positive attitude goes a long way in making people feel comfortable with buying a home.
Development is best suited to those in it for the long haul. For us old-timers, ups and downs are a natural part of the business. The best we can do is run our businesses by being fairly conservative and always planning for slower markets. We must learn to embrace change, which is the theme for my inauguration as 2008 president of the Home Builders Association of Greater Chicago (HBAGC). I like to say that the only constant is that things change.
That’s not to say everything will be like it was a few years ago, when real estate was going gangbusters. I am often asked what the market will be like in 2008. The truth is I just don’t know for sure, but neither does anybody else. Anyone purporting to know the future is just blowing smoke. My admitted lack of clairvoyance might disappoint those seeking predictions, but there are some things I know are true.
The current slump is not as bad as the news media make it out to be. By using monthly percentages it’s possible to announce “Sales nosedive 40 percent from a year or two ago.” This ignores the fact that sales two years ago were wildly hot.
In 1941, Ted Williams, one of the greatest hitters in baseball history, had a batting average of .406. Nobody has done that since, including Williams, who the next year hit .356. That’s a 40-point drop, but nobody claimed that his performance had plummeted, plunged or taken a nosedive.
During the first three quarters of 2007, approximately 3,312 homes were sold in the downtown area of the City of Chicago, according to Appraisal Research Counselors. That’s way down from the records set a few years ago, but if you look at a longer time frame, you realize that’s still a lot of new construction.
At the Belgravia Group we’re looking at approximately 175 sales in 2007. Approximately 50 percent of our sales were with broker cooperation; a very good year.
Of course, some developers had problems, which left some buyers and their brokers in bad spots. I hope the bankruptcies of a few home builders do not sour buyers or agents on the advantages of new construction. I always suggest to my friends that anyone looking at buying a new home should at a minimum look at the following to ascertain the quality of a builder:
• Is the buyer’s earnest money held in a segregated account or used by the builder for construction?
• Is the developer paying its lenders on time?
• Has the builder been in business for many years and through several business cycles?
• Is there construction going on, or does the site look abandoned?
• Does the builder have many homes built and ready for delivery, but unsold?
• Check references from prior buyers.
• Are there any complaints filed with the Better Business Bureau?
• Are there any mechanics’ liens filed against the development?
• Are there any outstanding building code violations?
By checking out a builder, and resisting the temptation to buy based on price or discounts, the market will regain a sustainable equilibrium. Will the market get as hot as a few years back? Again, I don’t know, but as humorist Will Rogers once said, “Things ain’t what they used to be, and they never were.”
Embrace change. Happy New Year.
Alan D. Lev is president of the Belgravia Group and the new president of the Home Builders Association of Greater Chicago. He can be reached at 312.751.2777 or [email protected]