From the Financial Times:
Subprime defaults fastest in decade
US subprime mortgages written during the first half of the year are going delinquent at the fastest rate this decade, according to a report from Moody’s on Thursday that analyses home loans used to back bonds. The average rate of “serious loan delinquencies” in the 2007 bonds is higher than those created last year, a vintage considered to be one of the worst-performing ever.
The ratings agency defines “serious delinquency” as loans that are 60 days or more overdue, and includes properties in foreclosure and those already foreclosed upon. Typically, subprime mortgages are used to back bonds sold to institutional investors.
“The early performance clearly shows that the 2007 vintage is worse than last year’s,” said David Teicher, co-head of the Moody’s residential mortgage-backed securities group.
“What the ultimate performance will be remains to be seen.”
Almost 6 per cent of subprime mortgages written in the first half of this year and subsequently used to back bonds went into delinquency within three months of securitisation, Moody’s data showed.
In contrast, fewer than 4 per cent of subprime mortgages originated last year went into delinquency withÂin the first three months of being securitised.
Among subprime-backed bonds more than six months old, 2006 was the worst year for serious delinquencies since at least 2000, the ratings agency said.
The Gofer Broker
In the soft market, clients are asking Realtors to perform menial, sometimes humiliating tasks. June Fletcher on scooping, painting, vacuuming and drawing the line.
By JUNE FLETCHER
October 5, 2007
Jonathan Marks makes his living as a real-estate agent. Lately, he’s been babysitting rats.
With the housing market in a dive and homes lingering unsold for months, the relationship between real-estate agents and their clients is beginning to change. Both buyers and sellers are demanding more from their brokers, and getting it.
Jim Perry, an agent in St. Helena, Calif., spent most of an afternoon vacuuming up thousands of flies from one client’s guest house. Mary Hartley, in Albany, Ore., organized a garage sale for one seller, spent 10 hours painting the side of the house for another and recently enlisted her grandchildren to help clean out the debris in a crawl space for a third. And to help Sandra Le Buhn sell her $1.2 million, four-bedroom home in Mill Valley, Calif., Mr. Marks agreed to board her nine-year-old daughter’s cherished brown-and-white rats, Zack and Cody, who had been living in a cage in the bathtub.
But some agents are drawing the line. Kirsten Lindquist, a Sonoma, Calif., agent, says she made a marketing pitch to a seller a few weeks ago. Two days later, he called her from the hospital and asked if she would drive him home from his colonoscopy appointment. She declined, even though it cost her the listing. “I’m licensed to practice real estate, not medicine,” she says.
During the boom times just two years ago, real-estate agents didn’t have to do much more than post a house on the multiple listing service and watch the bids roll in. But the dynamic is changing. In August, existing-home sales were down 12.8% from a year earlier, to 5.5 million, and the index of pending home sales plummeted 22%, according to the National Association of Realtors. During the same period, new-home sales dropped 21.2% to 795,000, according to the U.S. Commerce Department. It would take 10 months to sell the number of existing homes on the market, according to NAR, the highest supply since the trade group began tracking this number in 1999. New homes are at an 8.2-month supply, about twice the level they reached during the boom years of 2001 to 2005.
PODCAST
Listen to Albany, Ore., broker Mary Hartley talk about clients’ rising expectations.As a result, client demands are escalating to the point that brokers say they’re instructing their agents on how to walk the fine line between being helpful and being stepped on.
Cora Bett Thomas, a Christie’s Great Estates broker based in Savannah, Ga., encourages her 60 agents to do personal favors that aren’t too time-consuming. Three weeks ago, for example, one agent retrieved a set of false teeth that had been left in a vacation home and sent them by overnight mail to the out-of-state owner, a task that took less than an hour. But Ms. Thomas counsels agents to deflect demands to scrub toilets or do other demeaning jobs by offering to recommend or set up an appointment with a business that specializes in that service. “It’s all about managing expectations,” she says.
Diminished Role for Agents
J.P. Garlington, a Century 21 broker in Houston, tells his 36 agents not to do tasks that are unrelated to their jobs because of liability concerns. “You get enough of those issues just selling houses,” he says. Mary Jo McNally, director of education for Corcoran Group, which has more than 1,500 agents in New York and Florida, says that while new hires are expected to do minor favors, like dropping a client off at work after a showing, they’re also told they don’t have do to anything that makes them feel uncomfortable.
The training coaches at RE/MAX International, which has 120,000 agents, encourage agents to provide extra services that they feel comfortable with. One agent who specializes in seniors, for example, calls them to remind them of their doctors’ appointments. Agents are also advised to keep a list handy of the things they are willing to do, plus referrals to service providers, according to Shaun White, a spokesman for the Denver-based company.
The need to please is part of a larger diminution of the agent’s role in the age of Zillow, Trulia and other online real-estate research sites. In the past, agents controlled what houses buyers saw and provided data to sellers about local markets. Now, sellers can advertise their homes themselves online and buyers can do their own research, without a middleman. Listings on Forsalebyowner.com, for example, were up 12% at the end of September from a year ago, according to a company spokesman. Listings on Owners.com, which also includes advertising from people who use discount brokerages or pay a commission to buyers’ agents, were up 45% in the same period.
As a result, many clients now question whether agents deserve the commissions they once commanded. Indeed, average commission levels at big brokerages have dropped to 5.1% from 5.4% in 2001, according to Real Trends, a real-estate research and publishing company.
In Florida, a faltering market, the demands can be extraordinary. Eleven months ago, Natalie Warner, a retired schoolteacher, asked agent Jeene Brown to help supervise repairs and repainting of her two-bedroom vacation condo in Stuart. Ms. Brown says she spent almost 30 hours doing so, and even worked right along the cleaning person, scrubbing floors and organizing cabinets and closets. Then she held an open house and immediately found a buyer. But when Ms. Warner flew down from her home in New Jersey to close the deal, she saw how nice the spiffed-up condo looked and decided not to sell after all. “I felt bad in a way,” says Ms. Warner, who offered to pay Ms. Brown for her time. Ms. Brown declined, because she hoped that Ms. Warner would use her services in the future and recommend her to her friends: “It’s not always about an immediate profit,” she says.
Some clients ask for favors even after the sale closes. In August, Liz Dameron, a homemaker, closed on a three-bedroom Craftsman-style house in Roanoke, Va., after 18 months of hunting with agent Mary Dykstra. During the search, she was going through a divorce, and appreciated the fact that Ms. Dykstra did some personal favors for her, like bringing her a bottle of wine when she was feeling blue. So less than a month after the closing, when she couldn’t pick up her 14-year-old daughter from an evening ballet class because of a scheduling problem, she called Ms. Dykstra, whom she has come to consider a friend. “I know she’s there for me,” says Ms. Dameron. But this time, she wasn’t: Ms. Dykstra, who was driving around another client when the call came, gently declined the task.
A Competitive Field
Still, surprisingly, agents continue to enter the field at an accelerating rate, according to the Association of Real Estate License Law Officials, despite lower commission rates and slowing sales. From 2004 to 2005, 129,728 new agents received a real-estate license; from 2005 to 2006, 138,107 new agents entered the field. Though such a trend may be counterintuitive, it can be explained by job losses in other sectors and few barriers to entry into the real-estate profession, says Debbie Campagnola, chief executive officer of the association. “Real estate in most jurisdictions is fairly easy to get into,” she says.
In such a competitive environment, new agents are especially vulnerable to demanding clients. To make her first sale, of an $849,000 home in Sebastopol, Calif., Cheryl Sanfilippo agreed to dig up landscaping — including hauling away huge plants — and remove the goldfish from an indoor pond before the house was tented to eradicate termites. “I didn’t want to make waves,” she says. Buyerr David Ostroff, a retired college professor, says he didn’t see anything wrong with asking her to perform such tasks, and didn’t offer to pay her. “It didn’t seem necessary,” he says.
But veterans don’t necessarily see the need to do whatever they’re asked to do, either. Sellers asked Suzanne Grace, an agent in Thousand Oaks, Calif., to straighten up before brokers visited and to be sure to bring her own bleach, since they didn’t have any. During an open house, another couple asked her to clean up dog droppings that had been deposited on the bedroom floor. She politely demurred. “I have my limits,” she says.