Tremendous confidence in the housing market
Interview by David Zaslawsky
Photography by Robert Fouts
Barry Mask is the chief executive officer of the Alabama Association of Realtors. He was recently interviewed by the Montgomery Business Journal’s David Zaslawsky.
Montgomery Business Journal: What are your responsibilities as the CEO of the Alabama Association of Realtors? • Mask: I’m tasked with our governmental affairs; all of our legislative agenda; financial oversight; membership retention and growth; enforcing the Realtor code of ethics; board services – we have 29 local boards of Realtors.
How many members do you have? • Right now, we are just over 12,000 members.
What are you hearing from your members about general concerns? • I think our No. 1 challenge probably for the last three or four years in the real estate industry is the technology advances – competing with and/or utilizing correctly with Zillow and Trulia, and of course, now, our own realtor.com, which is the National Association of Realtors and has become very competitive with those two.
Wouldn’t you still use a local Realtor for the listings on Zillow or Trulia? • Originally, Zillow and Trulia were aggregating all of these listings, but they were not showing the primary Realtor, who had signed up that listing. Now the fights and new agreements that we have nationally, require them to do that (show the listing agent). What we’ve done is empower our local MLS (multiple listing service) to negotiate that upfront and make that a requirement. At the end of the day, we’re inputting our data.
Who would show the house if not a local Realtor? • That is another side to this. It has to be that Realtor who got that listing that needs to be the primary source.
Are there other challenges? • Even with all the technological advances, you still need Realtors to take you into the property; talk about the neighborhood. As you and I know, you can touch up photos (of houses) all day long, but when you go see it …
You’re saying with the Realtor national website, what you see is accurate. • Right. The representations of the photos have to be true.
Are there other issues with technology? • With that technology, people will start with a primary search and they shop by area. They know generally where they want to be. I think there is a misconception that Realtors guide the consumer. We do not. Here’s what has happened particularly in the last 18 months. The platform has gone from computer to laptop now to iPhone. We’re seeing more and more, particularly people 40 and under, using their iPhone to make their initial query, which requires us to format the MLS (for all devices).
What else are you hearing from your members? • Probably the thing we’re stressing the most is continued focus on professionalism; adhering to our code of ethics; being that full service for the client. Their concerns are usually legislative or regulative of what’s coming out of Congress; what’s coming out of Fannie Mae; Freddie Mac; anything that’s obtrusive or would affect a closing. Of course, they are real sensitive to the banking and mortgage industry with respect to rates. I just tweeted out today (early April) that we’re getting back down to a 3.66 interest rate.
Is that a 30-year rate or 15? • For a 30; 2.92 for a 15.
How do you characterize the outlook for Realtors? Are they upbeat? • Early last fall, particularly here in the Montgomery metro area, which is Montgomery, Elmore, Autauga – we could feel a turn, and of course, the statistics have begun to bear it out, according to the Alabama Center for Real Estate (ACRE). We’re in our eighth consecutive month of month-over-month increases in sales. In Montgomery, we’re in our fifth month that began back in October. The average price in the Montgomery metro is also up.
You would say that the Realtors are much more optimistic? • Upbeat and we’re very fortunate here in Central Alabama. We sort of have this protective bubble with Maxwell (Air Force Base) and state government.
There were layoffs in state government, but it has stabilized. • There were layoffs. If you look at the height of membership here, in 2008 we had 17,000 members.
Let’s get back to the Montgomery real estate market. Since 2011, sales have increased in the Montgomery metro area each January and February. Montgomery has had the highest percentage of home sale increases for three straight years and four out of five with Tuscaloosa being No. 1 that one year because of rebuilding after the tornado. Why is the Montgomery market so hot right now? • That points to that protective bubble, and then when you look at the diversification with Hyundai and other ancillary industries, you’re having further diversified our economy. Hyundai has had a big impact.
What do you attribute the uptick in the fall to? • The interest rates were very low. Typically we see a lot of movement in the fall and we see a lot of movement in late spring. Most of the Realtors here in Montgomery see a very robust second quarter.
A homebuilder I interviewed talked about building larger and more expensive homes to meet demand. Are you seeing that – and doesn’t that mean homeowners are moving up, which opens up the first-time homebuyer’s market? • Exactly. I tweeted today that with interest rates (as they are), you ought to be buying or you ought to be selling. In my neighborhood right behind Emerald Mountain, homes are in the mid-$300,000s. Since last fall, it has really taken off. It’s interesting to see that dynamic at that price point. The price points are beginning to come up because of those low interest rates. I think the interest rates are driving it. The economy is trying to fight back. It’s what we call a slow grind. Lending is loosening up a little bit. The FICO scores, particularly for first-time homebuyers, are from 630 to 740.
I read that the state’s new construction inventory was up 5.6 percent in February vs. February 2014. That’s a very positive sign. • For the Montgomery area, building and development is a big part of this economy. That’s why when we had the downturn starting in the fall of ’08, people were hurting here. You had longtime developers and homebuilders (not building any houses). A home sold is like a 3.4 turnover rate with all the ancillary transactions it generates. It is huge.
What is that 3.4 turnover rate you’re talking about? • It’s the net effect on the local economy. The thing that probably helped us more than anything during the recession was of course the base, state government and with Hyundai ramping up. It gave us more of a bubble, but the problem was because of everything else, there was no confidence of where the economy was heading and people just hunkered down. They weren’t buying. They weren’t renovating.
I’ve also heard that people in the industry are feeling more confident, and that makes a big difference. • I think there is tremendous confidence, particularly for ’15 and ’16 in the Montgomery metro markets both in homebuilding and existing home sales.
Will the Montgomery metro area get back to pre-recession levels or were those levels unhealthy? • The people that are in this business in the long run would rather see a real measured, steady growth. When you have that boon growth you know you’re riding that (wave). Most Realtors, developers and homebuilders that I know – they see a healthy, steady incline from 2015 to 2018.
For the Montgomery area? • Yes. You look at the numbers here in Montgomery and Autauga and Elmore – they are all coming up and it’s at all price points.
The housing inventory level in the Montgomery metro area is 10 months. What is the ideal? • I think it’s healthy. An ideal (inventory) is eight months. That is elusive because it’s all about price points. If you broke that out, you may see only a four-month supply in the $150,000 to $250,000 range. What skews our market is that we have a lot of nice homes. We have a lot of high-end homes in the $400,000-and-up area. Those are going to take longer to sell.
Some developments offered some lower-priced houses a few years ago and that seemed very effective. • That’s right. The subcontractors – they’re hungrier – so you’re getting some good pricing.
Is it becoming more of a seller’s market or a buyer’s market because of low interest rates? • I think it’s pretty even. I think it’s a seller’s market and most of the sellers, because of the interest rates, are trying to move up. Then they’re selling to first-time homebuyers. There’s no quicker avenue to personal financial stability then property or home ownership.
You’re saying that people living in houses in the mid $200,000s are moving up to $300,000-plus. • A lot of moves up.
On the ACRE website, there are lots of numbers for home sales, including days on the market, selling price, inventory, etc. Do all those numbers carry equal weight or are some more important than others? • Selling price and days on the market are two things that our members pay a lot of attention to.
What do those numbers tell you right now? • We’re seeing the selling price, particularly in the Montgomery metro area, increasing steadily and the days on the market are decreasing, which points toward a robust market coming back. Again, not back to the heydays, but it’s definitely headed in the right direction, which instills confidence. It’s been headed in the right direction for five or six months.
Is there a new normal now for the real estate market? • Probably this is the new normal for the immediate future, which if you take a slow, steady grind – and we have confidence that’s going to continue for a year or two – that is the new normal. I have no doubt we can return to some really good years, but there have been a lot of checks and balances put in place with lending so that we are not overextending credit to those who cannot handle it.
Did you have some bills in this legislative session? • One of our major bills that has been talked about for a long time is the right of redemption. Currently, if you have a foreclosure, Alabama is one of the longest states in the union – you have a year. Our bill, which passed in the Senate, cut that in half to six months.
Six months for? • If you were foreclosed upon, you would have a year (to get it out of the foreclosure).
That would make it easier to move the property. • It makes it more attractive to investors to buy it and get it back on the market. If you bought it, you knew you would be sitting on pins and needles for a year. They could get it (the property) back.
What will happen to the real estate market when the Federal Reserve, as widely expected, raises interest rates this year – or are they so low it doesn’t matter? • I think they are.
At what point do interest rates impact the real estate market? • If you get them back above 6 percent, I think that would have a chilling effect. It’s all relevant to what else is going on in the economy. Until it gets to that point, these are still tremendous rates. It’s the best investment anybody can make. You can do all the technology and all the gizmos, but at the end of the day you need a Realtor to walk you through this transaction and deliver those professional services that we do and everything that they provide so you make the transaction right; look at your comps; and everything is done right.
How is the residential real estate market for Realtors? • It’s followed the market. It’s been slow growth with people coming back up with new licensees or people renewing their license. We hit 11,000 – our lowest zenith in 2012 and now we’re back to 12,000 today. It’s growing 3 percent a year. The average age in Alabama of a Realtor is 52.
That is close to the average age for physicians in the state. • You got it. We’re doing a lot of recruitment efforts as well as a lot of the major brokers like Keller Williams and RealtySouth. There is a real push on to reach back down and try to get this new generation into real estate, which is why we have a good partnership with the University of Alabama and Auburn University.
It would be great if universities and colleges offered real estate courses. • We’ve been laying the groundwork to get into these universities.
I don’t think universities offer courses in real estate. • No, but ACRE has been talking to the University of Alabama. They have some internships with ACRE.
Is the goal offering some courses in real estate? • Yes, we would like to see a curriculum on real estate development.
Maybe real estate development could be added to the courses in the Montgomery Preparatory Academy for Career Technologies. Have you talked to Montgomery Public Schools? • We haven’t, but we have talked about it internally.