Board of Realtors: New prez for tough times

When Kimberly Evans first tried her hand at real estate in 1985, it was in Texas, where, she says, “We had more foreclosures than new sales and mortgage rates were 18 percent.”

Perhaps that’s why she’s undaunted by the current economic climate. In fact, the Asheville Board of Realtor’s new president holds fast to her optimism and works hard to spread it around. “I’m excited to be leading [the board] during such a time,” says Evans, 43.

She exudes energy and confidence, qualities that made her a top earner in her rookie year, a co-owner of a large real-estate firm soon after moving to Asheville, and savvy enough to switch gears a few years ago by selling that company and getting into property management. “I wish I could say I saw the market drop coming,” Evans jokes as she explains the career move.

Of course, such energy sometimes meets resistance. When Evans first came to town, she pushed to get the Multiple Listing Service computerized and was also a supporter of making it more accessible to the public. While some real estate agents hesitated to “give away the data, and I caught a lot of flack for that,” she says, she thought there were potential benefits. “Even though all that data is out there, most people are still not buying directly from the Internet. They still need Realtors.” The Internet makes the legwork of property searches much easier for both agents and customers, she says.

But the Internet can’t change the current market. Evans acknowledges the challenges: “The market has slowed, and [home] values have dropped here, but not as far as [in] some areas.” Times are tough, and there may likely be a reduction in the number of real-estate agents working the market. It’s time, she argues, to adapt and prosper, whether you’re a Realtor or not.

“It’s a great time to buy, not just because home values have dropped, but because there’s a good selection of inventory and interest rates are low,” Evans continues. “My outlook is this: All real estate is local. Just because it’s raining in Oregon doesn’t mean it’s raining in Asheville.” She encourages her colleagues to focus on the job at hand, focus on the customers, and stick to the basics.

Evans adds that there’s a lot of assistance out there for homeowners in trouble. “This is a time when we need to have a little more compassion and a little more leniency,” she concludes.

Evans is working at adapting, too. One of the twists in today’s market is that more rental properties are available simply because some homeowners find they can’t sell, and renting is an income-producing option. The market for high-end rentals, in particular, has exploded. “It’s one of Asheville’s best-kept secrets,” she says.

Realty sector in death spiral, BSE Realty down 86% y-o-y

MUMBAI - The current economic problem has its roots in the vast expansion of debt across the globe over the last few years. Much of this debt is tied to residential real estate.

Despite the BSE Realty Index correcting 86 per cent year on year, experts are advising investors not to go bottom fishing in the real estate sector. Some experts feel that the sector is in a death spiral and given the future valuations, some stocks are expensive and need to correct further.

In the third quarter of FY 09 major players like DLF and Unitech reported dismal results. DLF saw its third quarter net profit decline to Rs 670.79 crore, less than one-third of the same in the year-ago period.

Infrastructure major Unitech said its profit after tax was down 94.71 percent to Rs 19.50 crore in the quarter ended Dec 31, 2008 as against Rs 3.69 billion in the year-ago period.

Industry analysts have always known homebuilders never earn enough money selling homes to pay for the capital that's needed to buy and hold the land they require. Through its entire history, the realty sector has been a consumer, not a producer, of capital.

Experts opine that the core issue in the real estate sector has shifted from 'affordability' to 'demand'. Job cuts and increasing insecurity and low business confidence have become key concerns. Studies reveal that during times of severe economic uncertainty, consumers postpone big ticket purchases.

As such, developers indicate that they do not expect demand to resurface in the near to medium term, even if real estate prices correct 20-25%, and mortgage rates decline 200-250 basis points.

Developers have been forced to cut prices for new and under construction projects by 30-45%. Until recently, such discounts were not publicly reported and were available only to large investors. In the last two months, several large reputed developers have issued public advertisements about discounts, hoping to stimulate demand and lower inventory.

“RBI has introduced measures such as priority sector lending status to low-value loans, restructuring of loans taken for commercial property, and reduction in excise duty on inputs like steel and cement. Banks' special treatment to real estate companies may result in long-term benefits for the sector but this relief could, however, be ephemeral in short term. If transactions fail to pick up, some of the debt-laden companies could find difficult to survive," said Jonathan Paul, senior analyst at Krug and Brodman Advisory.

Subsidized interest rate on housing loans of up to Rs 2 million is likely to improve buyer sentiment and help revive demand. However, as very few developers have offerings in the range of Rs 0.5-2 million/unit, the rate cut measure is likely to remain only a sentiment booster.

“We expect FY09-10 to be a period of consolidation, in which industry leaders would be differentiated from peers. We believe developers with staying power would utilize this consolidation phase to emerge stronger. Focus on companies with high visibility on monetization of assets over the next 3-5 years, low leverage and robust financials, and strong execution track record. However, avoid this sector from short-mid term view," said Sameer Sinha, fund manager at Spark Wealth Management.

Tuesday on BSE the Realty Index slumped 7.55 per cent. The major losers were DLF (-13%), India Bulls Real Estate (8.85%), Housing Development (6.15%) and India Bulls Real Estate (-6%).