Podcast Transcript: Scott Nagel
Here's a transcript of the conversation Mike Sante, managing editor of Interest.com, had with Scott Nagel, the chief of real estate oprations for Redfin.
Mike Sante: Hi, this is Mike Sante at Interest.com. We are talking today with Scott Nagel, who is chief of real estate operations for Redfin, which is a brokerage that has operations in 21 cities across the country.
Scott, we have seen several studies that indicate that the inventory of houses, that is the number of houses that are on the market in the United States right now, is surprisingly low. What are you seeing out there?
Scott Nagel: That is exactly what we are seeing. We have seen over the last three months that inventory has become the No. 1 issue that is impacting our site clients, and our listing clients as well, but in a more positive fashion. We have really seen inventory go down as a whole this year compared to last year.
The surprising thing about that was that last year was not a great year for inventory. It actually was down last year from 2011. So that lack of homes to buy is definitely having an impact on the market as a whole.
Each person, particularly buyers who are now just entering the market and who may be thinking that, given the past three or four years, it is still a buyer’s market — I think in a lot of cities that is no longer the case.
Mike Sante: Are your agents telling you that people are therefore not seeing ... as many houses that they like. But are they seeing any houses that they like? What are you hearing?
Scott Nagel: Sure. So they are — I think both points that you made are things that I am hearing from our agents.
The first is, back three or four years ago, we would often have clients who would want to see a large number of homes in a particular tour and set it up well in advance and it would be no problem. The homes were there; they would see them at the leisure and then talk about it. They would go see a home they liked a second time, then decide maybe to make an offer.
In the 21 cities we are at, that type of a buying experience is pretty much gone. Instead, homes are coming on the market, usually on a Thursday or a Friday. Oftentimes they are under contract that same weekend or shortly thereafter.
And if you see a home you like in San Francisco or Los Angeles or Washington, D.C., or Seattle, you need to decide after one viewing that weekend whether or not you want to put an offer in. Because there is a good chance that that home is going to be gone by the next Monday or Tuesday.
Mike Sante: Are you suggesting that perhaps we are seeing lots of these houses that are getting more than one offer right off the bat?
Scott Nagel: Yes. That is, homes that are getting just one offer are the minority right now.
In fact, in San Francisco, we track how many of the offers that our agents make are in a multiple offer situation. And for April, so month that just ended, April, a few days ago, in San Francisco 91% of the offers that our agents made on behalf of buyers were in multiple offer situations. So more than 9 out of 10.
In Seattle, it was 75%. Austin, Texas, which you may not think of as this hot real estate market, not on the coast, limited water nearby, Austin is at 87% multiple offer situations. So the majority of our markets are seeing multiple offers about 60, 70 even 80 percent of the time.
I had one more point there, just at when I am talking multiple offers, back a couple of years ago, it would happen sometimes, there would be two or three offers. Now in many places it is 20, 30 sometimes. I talked to one agent from Silicon Valley in one situation with 65 offers.
Mike Sante: Wow. That is amazing. That sounds like we are back in 2006 again.
Scott Nagel: You know, in a way it does sound that way, and there is a reason for it.
This year in particular, one of the things that we track — we track inventory, which is what we are talking about. But not just inventory as a whole, but also the types of inventory. So this year, through basically the last full week, the bank-owned properties, foreclosures this year, compared to last year — new listings that were foreclosures are down over 40%. So there is just a lot fewer foreclosures on the market.
The same is true of short sales. People who were thinking, wow, I do not think I can keep this mortgage payment up any longer. I am too far under water. I have no choice but to sell it short. Now are thinking, wow, prices are going up. If I hang on just a little bit longer, I may not have a short sale.
If I am in Phoenix, which saw prices rise over 20% — across our market the average is 15% price increase for March. You may think, "I have got a tough mortgage, but if I wait a few more months, four, five or six months, then I may be able to sell this just as a regular sale, protect my credit and then just move on." So that has resulted in short sale inventory being down over 40%.
So you have these two pillars of the real estate market over the past five years — foreclosures and short sales — that used to be a significant part of the inventory, down 40% year over year. That is really what is driving this inventory crunch.
Because the opposite is true for just the regular homeowner. Those homeowners who are selling their house will make some money on it, not short, not foreclosure. Those types of homes have come on the market at a greater rate than last year. It is a 13% year-over-year gain.
So we are really talking about the different types of inventory diverging and completely different directions. It is just that the bank-owned and the short sale inventory has been impacted negatively so much more, it is causing a shortage across the market.
Mike Sante: Let us say that your agent is going to take you to a house that is listed for $350,000.
Scott Nagel: OK.
Mike Sante: Should you go into this thinking, "I am going to pay at least what the asking price is and I may have to pay more"? Is that the kind of market that we are seeing as we enter the spring and the summer?
Scott Nagel: I think it is in a lot of different places. As always, all real estate is local, and so it can vary on where you are at, the type neighborhood you want and really just how hot that market is.
But again, in a lot of our markets, in San Francisco and L.A., and Seattle and D.C., you are going to need to pay over list price if you are in a popular neighborhood.
I was just taking a look at one of the popular neighborhoods here in Seattle. Queen Anne. It is close to the city; it is on a hill; it has a beautiful view. So far, basically, our most recent numbers show that the median sale to list price, that is the median number of the final sale price to the list price, is in 99.9%.
What that really means is that out of all the sales in Queen Anne, half were over the list price and half were under. The ones that are under are not under much, looking at some other numbers. So, really what it means is, if you are in a popular neighborhood and it is a nice house, then there is a high probability you are going to need to pay over the list price in order to win that home.
Mike Sante: What a change. So, you sort of alluded to this earlier — it is no longer a buyer’s market, it’s a seller’s market out there in a lot of places.
Scott Nagel: Exactly. In a lot of places it has now become a seller’s market, because, you know, we have a lot of buyers who have been in the market for some time who recognize the fact that there are low interest rates. That makes it a very attractive time, if you can buy a house, to do so. That recognize the fact that, hey, prices went up and they may still be going up.
We actually surveyed the buyers and sellers on our website every quarter, to basically get a temperature of what they think, what they are doing, what they think the market is going to do, et cetera. Our last survey from the first quarter of this year, we had 79% of buyers believe that prices were going to go up in the neighborhoods they cared about in the next 12 months.
So you combine that belief from buyers of, "Hey prices are only going up with the low inventory," and you can see why there is a lot of buyers who decided now is the time to get out. I want to go find the home that I love now before it gets more expensive and before money gets more expensive.
So that is not just one person thinking that. There are a lot of buyers thinking that. So they are out trying to find that home while the flip side is the sellers are just now starting to recognize, "Wait a minute. Prices are going up. I have got a good opportunity here and that, in fact, where I am at, this may not be a buyer’s market any more like I was thinking. I have got a real opportunity here."
Sellers have not yet really realized that. Wow, this is a seller’s market, and they are not coming on. The inventory is increasing like I said 13%, but I think over the next few months, more sellers will start to understand the situation, and we should see some more inventory come on. We will find out if that is the case.
Mike Sante: And that is the surprising and changing state of the real estate market out there, folks. We have been talking to Scott Nagel, who is chief of real estate operations at Redfin. Thank you, Scott.
Scott Nagel: Thank you. It has been a pleasure.