Buyers have had it good for the past three or four years. Highly motivated sellers lowered their prices and gave into buyer demands. This is changing, and the next 30 days could be the beginning of the end for the buyers’ market. We might even see headlines as noted above.

Home prices in the Sioux Empire have bottomed out and it’s simply because of supply and demand.

We experienced a slowdown in new home sales as far back as 2006. During 2001 and 2006 contractors responded to a hot market by building homes as fast as they could. Unfortunately, they continued to build even after the demand had slowed. This caused an oversupply of homes; prices topped out in 2005 and started to decline in 2006. The national market crashed in 2007 as the early phase of a recession started a panic for home investors and bankers. Foreclosures multiplied, government intervention exacerbated the problem, and four years later the average value of a home in the Sioux Empire is down 15% on the average.

As painful as it has been for the construction industry, building slowed and inventory levels dropped. Builders have cautiously refrained from keeping up with demand.

The city of Sioux Falls has averaged 1.89% growth for the past two decades. The average household has 2.3 people. If we calculate 1.89% of 150,000 (city population) we would add 2,835 people to the population and a need of 1,232 new housing units (2,835 divided by 2.3). Although growth estimates have been below the average during the past two years, construction permits continue to be below the demand line every year since 2007.

Today we have a housing shortage. Many local companies have announced expansion plans and a need for more employees. More jobs attract more people; people create more housing needs. Apartments buildings are nearly full and single family rental homes are hard to find. Sound familiar? Go back to 2001.

The economic law of supply and demand is unbroken. The same reason prices fell over the past four years will now cause prices to go up. Regardless of the national economy, and Washington’s absurd interference, home values in Sioux Falls and the surrounding area have begun to heal and will thrive over the next several years. More demand increases prices when inventories are already low.

There are skeptics, but one can find evidence of what happens when a local economy does well against a weak national economy by simply driving to North Dakota’s oil fields and you’ll find a boom area where prices are skyrocketing. We aren’t in a boom area, but we are certainly in a ‘strong growth’ economy. I’m betting 33 years of real estate experience and my reputation, you can get more money this year than last.

We invite you to call.

Tony Ratchford,
Real Estate Broker
CRS, SRES, ABR

It’s a new year and time to brush off the goal list. Here is a little inspiration written by poet Amanda Bradley to help you start anew.

“Follow your dream. Take one step at a time and don’t settle for less, just continue to climb. Follow your dream. If you stumble, don’t stop and lose sight of your goal, press on to the top. For only on top can we see the whole view, we can see what we’ve done and what we can do, can we then have the vision to seek something new. Press on and follow your dream.”

During the past several years the economy has taken its toll on the dreams of many Americans. A combination of a weak employment market, poor investment returns, depreciating home values, loss of personal liberty, and uncertainty about the future has made many people question the greatness of our country and hope for continued abundance. This includes some people thinking owning a home is not such great idea any more.

Personally, I believe owning a home is the epitome of freedom. Property ownership rights, for the most part, are highly protected. It’s yours and you can do with it, or in it, as you please. It’s also a place for family, friends, and precious memories.

Although the past few years have been difficult for sellers, home ownership continues to be an excellent long-term investment. With mortgage rates less than 4% for a 30-year conventional loan and almost 3% for 15 years, coupled with decreased home values, the buying power today is extraordinary. A person can own a home nearly twice as nice today, than just four years ago for the same monthly payment. Ironically, the cost to rent is nearly the same as owning. It’s so attractive, it may be smart to purchase a second home for either investment or future college costs.

Think about it. Purchase a home today; take out a fixed 15-year mortgage, and in 15 years your home is free of debt. No more rent or house payments. One can also anticipate an increase in value someday due to inflation; plus, the value is usually free from income tax.

The bottom line is simple. Focus on long term rather than on short term. Just because we stumbled recently doesn’t mean there isn’t a better view ahead. Think of the dream instead of just the step. Take advantage of low mortgage rates now while you can. They won’t last forever. Find a great house that fits your lifestyle and enjoy. Later, you can dwell in delight of your prudent move in 2012.

Not sure of how to proceed? There is an answer. It’s called The Dream Home Vision Process (we even have a book written about it) and it will help you find more clarity, maximize your dollars, and save you valuable time!

We invite you to call.

Tony Ratchford,
Real Estate Broker
CRS, SRES, ABR

Home values nationwide have been in decline for nearly four years to such an extent that some people think homeownership as an investment is a thing of the past. I couldn’t disagree more. While a confluence of events in the last few years has affected homeownership, I believe returning to a strong free-market system will restore people’s confidence about owning a home.

Real estate with a free market is one of the best hedges against inflation. Additionally, homeownership instills prides and provides many opportunities to make joyful memories with family and friends. Since 1945, home values have increased by nearly one percent over the inflation rate. This simply means your home value remains constant, or slightly better, with the buying power of the dollar.

The recent decline in values is a meltdown of runaway price increases created from government intervention over the past few decades. Policies were launched to encourage mortgage lending with lower standards and payback schedules. People who couldn’t afford to be homeowners previously were suddenly able to buy houses. This invited opportunistic investors to take advantage of a weakened position.

The result was a large number of subprime loans intermingled throughout the financial markets; when the economy softened there were fewer buyers and prices began to fall. The house of cards crumbled. In a free market, without government interference, the loans would not have been made and normal economic cycles would have prevailed. Even to this day, and to no avail, the government continues its attempt to manipulate the market.

The only fix is to return to a free-market policy. This means the government must get out of the way. Regardless of your political party preference, one must accept that neither party has done a very good job allowing capitalism to work freely.

In 1930 our country turned away from Adam Smith’s philosophy of free enterprise and embraced the Keynesian theory of bigger government. Since then, those in Washington have been making decisions of who wins and who loses. Whether it’s for a corporation or a special interest group, the government has been taking away from someone and giving it to someone else.

In this land of the free, should this be the way of our country? Is it right to take someone’s property and arbitrarily give it to another? Or, make rules that create a dysfunctional playing field? Have we strayed so far from our founding principles that we accept this as normal?

In this month of July, as we celebrate our independence, I reminisce about how well this great nation did when we focused on the reward of hard work, the pride of achievement, and respect for the rule of law. This country was created with a declaration that inalienable rights of life, liberty, and the pursuit of happiness would be our guide. I wonder how many of us understand this, or believe in it, or would die for this? And how many are willing to let it go away? There is a fine line between slavery and freedom, and a fine balance needed between tyranny and anarchy.

The past decade has shown us what happens when government gets too big, spends too much, and controls too much. One must ponder if it’s time to reverse our present course of action and march in the other direction. My best guess is the housing market and the economy won’t fully recover until we return to what made us great in the first place.

We invite you to call.

Tony Ratchford,
Real Estate Broker
CRS, SRES, ABR

During the past three decades, we didn’t need to understand or think of how this law applies to real estate. We always knew our house would be worth more later than when we purchased it. Unfortunately, this hasn’t been true for the past several years.

I find many sellers are in denial about values declining, and some buyers are concerned that increasing values may not return. The fact is, everything cycles and always will. Historically, property values have beat the consumer price index (CPI) over a long period of time, and to this day values are still higher than they were in 2001, and will be higher yet in 2021.

When more houses are for sale than we have buyers, prices will go down (buyers have the advantage). The opposite is also true when we have a shortage of homes (sellers would have the advantage). A balanced market occurs when there is about five months of inventory (it takes five months to sell all the homes presently for sale, based on the average number of homes sold during the past six months).

Each price range, location and style has a different absorption rate and therefore you may see one range of homes selling while another is in trouble. Typically a higher inventory level of 9 or more will force values down by a half percent or maybe 1 percent every month on the average; it’s twice as bad when the supply is 15 months or more.

The key for buyers is to believe in economic cycles and trust that values will increase as we work through the next few years. Sellers need to be realistic; it doesn’t make any difference how much it costs or what they think it’s worth—buyers dictate value in a buyers market. All a seller can do is determine their best price and hope it’s attractive enough to get an offer. Only then can a seller decide if it’s enough to move forward, hoping the market will improve in the near future is wishful thinking.

The most important thing for a seller to remember in this market is to be proactive, stay open-minded and trust the data. Buyers will see the value and everyone will win. And that’s why we are here. We invite you to call.

Tony Ratchford
Real Estate Broker
CRS, SRES, ABR

In my 30 years of experience, I’ve heard plenty of excuses for why homes don’t sell. Some of the most popular are location, price, market conditions, or some specific feature of the house. But the number one reason is lack of communication and understanding the importance of client and agent working together.

The key to understanding how to sell a house is to fully understand your situation, discover options and determine what you can do about it.

When either the seller or agent thinks they have all the answers, it’s the beginning for failure. Although there are exceptions, for the most part ignoring what each part can bring to the table is foolish.

Certainly it’s the obligation of the agent to have strong leadership and a comprehensive marketing plan with good implementation skills; it’s also highly important for the seller to understand they have a role, too.

The easiest part of selling a house is the beginning; it gets harder as each day passes, especially when market conditions are unfavorable. An agent is responsible for monitoring activity, analyzing market conditions, and readjusting market positions. On the other hand, a seller controls the property condition, showings and price.

The most successful transactions are those with proactive sellers and agents. Those who brainstorm on what the house has to offer and how to present the home properly, have the best chance of success. What the seller likes about the house is more important than what an agent thinks someone might like about it.

The last piece of communication is respect. The agent needs to listen carefully to the desires and needs of the seller; it is, after all, their house and money. The seller, on the other hand, needs to trust the agent and accept the fact the agent may be more knowledgeable about real estate. When respect, confidence and trust are missing, there is little hope for maximizing results with a happy ending.

Keep in mind that the market might not let you reach your goals regardless of the effort. Miracles happen, but rarely in real estate. Be proactive, realistic and communicative. You’ll find the process will be more pleasant and rewarding.

As always, we invite you to call.

Tony Ratchford,
Real Estate Broker
CRS, SRES, ABR

Market Comments:
Steady, steady, steady. Sales, activity, and interest rates; it’s that simple.

Forecast:
More of the same? Unfortunately, it doesn’t look like we will see a huge surge this spring. Good news is we won’t see it deteriorate either. Steady as we go.

Current Interest Rates as of 4/30/2012:
Conventional 30 Year: 4.000%
Conventional 15 Year: 3.250%
FHA 30 Year: 3.875%
FHA 15 Year: 3.500%
South Dakota Housing: 4.250%
*These are general rates.  Please contact your local lender for your specific rate.

If communication is nothing more than stating a fact or opinion, how does one actually know if the message is understood?

The basis for our success of The Tony Ratchford Group is simply our ability to interact with our clients.  This includes dissemination of information via email or reports posted on our website, but more importantly it’s the ability to understand, and that requires an exchange of ideas.

Personally, I think of one sided communication as simply marketing or speech making, but two way communication as a desire for a relationship driven by understanding.  Is it possible to fully understand the needs, goals, and desired outcome without feedback and dialogue?

We’ve also discovered the more educated one becomes and the more precise questions are, the better the results obtained.  This can’t be done through technology alone.  Some would argue that 90% of true communication is through body language.  I tend to agree.

Finding common ground, or getting on the same page, allows everyone to move forward with the same goal in mind.  Quite often this is a process and a matter of trial and error during a discovery opportunity; whether it’s looking at homes, thinking of selling, or simply in dialogue looking for direction.

One might go as far to say goals are hardly accomplished without sincere and written communication.  Speech making, statements of fact, emails, texts, and tweets have little opportunity for feedback and exchange of ideas without mistaking the intent.

Try communicating with your partner, spouse, or friend purely with written word only.  Can you imagine not speaking with them for any extended period of time and expect a meaningful relationship?  It doesn’t happen.

Our commitment to you at The Tony Ratchford Group is to have a purposeful line of communication to disseminate information, find solutions to your problems, and answers to your dreams.

We invite you to call.

Tony Ratchford, Real Estate Broker, CRS, SRES, ABR

When a mother tells us she wants 4 bedrooms on one level and a family neighborhood. What she is really telling us is that she wants her young children next to her at night giving her comfort knowing they are safe and she is quickly available for nurturing, and of course a family neighborhood for social activities to include both children and other parents of like mind.  When an existing homeowner wants to purchase a new home, but they don’t want two house payments, it’s really all about financial security and peace of mind.  Hopefully you get the point.

Understanding values and the psychological drive is more important than just knowing what feature someone wants in a new home, or that they just want to sell their home.

Our local real estate market has been in a major transition for more than two years now. There are plenty of people who have desire and/or need to make a housing change.  Yet, they have decided to hold back due to fear around loss of home values, job insecurity, higher taxes, devaluation of their stock portfolios, governmental policies, or whatever.

Fear not, life goes on.  Cycles will go up and down, political battles will continue, and We The People will eventually overcome all obstacles we encounter.

This may be a bold statement, but real estate ownership should be mostly about the intangibles and little to do with financial investment.  A home is a place to call your own. The freedom to do with it as you wish, a place to share with family, entertain friends, to create memories, and enjoy life.

The value of a home historically will only stay ahead of inflation by 1% on the average, but it will continue to be a long term solid, conservative investment.

We at The Tony Ratchford Group know how to simplify what’s important, give you great assessment of your opportunities, and help you find the ideal plan.  Together we will maximize your dollars, quicken the process, and give you greater peace of mind.

As a young man I was eager for knowledge and wisdom.

One statement from this statesman settled hard and fast for me. It was how he had accumulated his wealth.

The answer was so simple, one could easily dismiss it as benign, until one actually gave it good thought. He said “when everyone else was selling I was buying, and when they bought, I sold.”

In other words, as more people buy, prices tend to go up. When they sell, prices tend to go down. It’s basic law of supply and demand coupled with “buying low” and “selling high” philosophy.

This applies to real estate as well. Fewer buyers push prices down as sellers bid for buyers’ attention. More buyers and less supply give sellers the advantage and they can demand better terms. Prudent buyers, interested in building wealth faster, are now in the market. Not everyone is interested in wealth building, but if you are interested in getting more comfort and amenities for less money, this is also the time for action.

The economy in the Sioux Falls area is as solid as a rock. There is low unemployment, low mortgage rates, good job growth, and hundreds of millions of dollars of investments going into our economy every year.

The national economy is a different story. We’ve all heard about the financial crisis and real estate meltdown. Let me briefly explain why this will have little effect on our economy here.

It began several decades ago when well intended Congress’ wanted to increase home ownership. Throughout the 80’s and 90’s many programs were implemented to accomplish the idea. In 1999, a mandate by Congress and signed by Bill Clinton demanded that lower income families, minorities, and special interest groups reach predetermined levels of ownership. This opened the floodgates for sub-prime mortgages which has now come back to haunt us.

In addition, Fannie Mae and Freddie Mac took a free hand with regulations and expanded their reach (knowing the support of the US government was behind them). After the stock market crash of 2001, investors were looking for new opportunities and found it in real estate. Ridiculous loans were made. With more buyers and fewer homes available prices increased in many top markets ranging from 10-50% per year for several years. (The average in the US since WWII has been 4% per year). Obviously, things that go up that fast must come down to reasonable levels and they are doing so now. Weak management and shortsightedness left some financial institutions holding bad portfolios when real estate began to fall.

Life is full of cycles. The fallout of real estate values and the financial cleanout is just part of the process. Companies in trouble now are the ones poorly managed, full of greed or are just plain arrogant. Notice the conservative, cash rich, and well managed companies are starting to buy the weaker ones. This scenario isn’t bad, it’s good and necessary for the overall strengthening of macroeconomics.  Unfortunately, it’s been a long time coming and it seems bigger than it is, mostly fed by the media frenzy.

Long-term real estate has always been a consistent and solid investment. Given the strength of our basic fundamentals here, and in the nation as a whole, we will continue good fortune.

Dave Ramsey recently made the statement, “When you get on the roller coaster, stay on until the ride is over. You’ll only get hurt if you try to get off early.” In other words, stay focused on the long term.

Happy Dreams,
Tony Ratchford

Given the present state of the union, this may be a good time to revisit The Declaration of Independence, The Constitution, The Bill of Rights, and even The Federalists Papers or biographies of our Founding Fathers.

During the Constitutional Convention in 1787, the object of our founders was to seek a consensus from The States as to what should be in the Constitution. Nearly everything was agreed upon except for a few items, and those were resolved in the ratification process with the addition of The Bill of Rights.

Thomas Jefferson and John Adams were probably the foremost champions for preserving our freedom and creating a government that could endure changes throughout centuries. They stressed the need for a balanced center and a three branch government, all working together with checks and balances to prevent anarchy and tyranny.

The Founding Fathers of the Constitutional Convention worked hard for us to enjoy the right of Life, Liberty, and the Pursuit of Happiness. They believed we must govern from the middle. Too little government could cause a weakness in central planning, but too much control would cause monarchial powers and is contrary to our fundamental beliefs expressed in The Declaration of Independence.

It is inappropriate for a central government to dictate to us how we are to live. It becomes subjective to the political whim of whoever is in power. The Constitution and The Bill of Rights were designed explicitly to minimize political persuasion and protect our freedom. The three branches of government are there to keep powers in balance.

Questions at hand today are: Is our present government performing the duties outlined in the Constitution? Is one branch more powerful than it should be? Are there more rules and control over our lives than are legally allowed or intended?

We the People are now the majority owner in at least four major corporations, 11 trillion dollars in debt, and the government thinks it’s their job to tell us how we are to live and what to own. Today, officials want us to drive small cars because of greenhouse gas; tomorrow someone may want us to drive big cars because they think they are safer.

The purpose of a three-headed government rule is to keep political whims from reaching into our personal lives. What is needed today is for us to go back to the basics of our Liberty and our Pursuit of Happiness, not the freedoms dictated by a bureaucrat. One must remember when we start dictating to others on how we should live, we will also have the opportunity to be dictated to when things change.

Patrick Henry said it well; give me Liberty or give me Death. Maybe it’s time for us to think more about what that means.

May you enjoy a fabulous month of celebration.

Tony Ratchford, Real Estate Broker.