One on One With James Gillespie, CEO of Coldwell Banker
Tuesday, June 06, 2006
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SUSIE GHARIB: The National Association of Realtors today lowered its forecast for home sales this year and called for the Federal Reserve to take a break from hiking interest rates. The trade group says the housing boom has ended and home sales are settling into a slower pace. It is predicting a drop of almost 7 percent in existing home sales this year. New home sales should fall about 13 1/2 percent. Still, in both cases, sales would slow from record-high levels. The realtors say rising interest rates have slowed sales in many high cost markets, but job growth has boosted sales in some less-costly areas. Joining us now to talk more about the outlook for housing, James Gillespie, CEO of Coldwell Banker real estate corporation. Mr. Gillespie, a pleasure to have you back on the program.
JAMES GILLESPIE, PRESIDENT & CEO, COLDWELL BANKER: Susie thanks, thanks for inviting me back.
GHARIB: So do you agree with this forecast? Is the housing boom over?
GILLESPIE: Well, what we`re seeing here is return to a more normal market. Last year 7.1 million re-sales set an all-time record. So by being off 7 percent to $6.6 million is still the third best year in real estate history. And one thing that I`m concerned with maybe some of your viewers and potential buyers out there is that they are seeing headlines saying real estate is off by 7 percent. Well that`s true with units this year, but appreciation, the National Association of Realtors says that we will still see appreciation in the 5 to 6 percent range. So I want to make sure and this is a message that I`m preaching to our 118,000 salespeople to make sure that your buyers understand that real estate is still a very good investment. Sure, units are off, but there is still strong appreciation - historically strong appreciation at 5 or 6 percent.
GHARIB: People are also seeing headlines about the possibility of even higher interest rates which could mean higher mortgage rates. We`re seeing that the 30-year fixed rate mortgage is around 6.9 percent. Where do you see it going?
GILLESPIE: Well, I think the report said that by the end of the year, it would be at 6.9 percent. So over the course of this year, compared to last year, interest rates, mortgage interest rates will be about 1 percent higher and according to our National Association of Realtors that 1 percent will phase out about -- or price out about a half a million buyers so actually their numbers make sense going from 7.1 to 6.6 million re-sales this year. Again, the fundamentals are still there for real estate being a very solid investment. The demographics are overwhelming. Interest rates - my goodness, I started selling real estate 31 years ago and interest rates were 7.75. So with interest rates still in the high 6`s, it`s very, very affordable for most Americans.
GHARIB: We know that the rule of thumb is that as interest rates go higher, mortgage rates go higher, that home prices go down. What is the trend that you`re seeing?
GILLESPIE: Well no, that is not true. Appreciation is still here. The last time in our country where interest rates went up dramatically was between 1977 and 1982 and during that five-year period, there was tremendous appreciation. So what we`re seeing is less units being sold this year, 7 percent less, but with depreciation in the 5 to 6 percent range so that`s what I feel and that`s what the national association feels too, Susie.
GHARIB: So then what advice would you give to home buyers and home sellers? Is this a time to buy, sell, or hold?
GILLESPIE: Well, right now we`re in a balanced market for the first time in five or six years. The last four to five years it`s absolutely been a seller`s market. So with a balanced market, the buyers have the opportunity to see more inventory and not have to worry too much about having a home sold out from under them, although if they see the right home that they want, they need to make a decision. Sellers need to be very, very careful in pricing their home. Make sure you get with a reputable full service real estate company and a professional realtor and get that home priced correctly because there`s a lot more competition on the market. There`s a lot more inventory.
GHARIB: So where do you see the hottest real estate markets right now in the United States from the point of view of home sellers?
GILLESPIE: Well, this morning I was on television with "Good Morning Shreveport" Louisiana and that market is 16 percent up year-over-year first quarter over first quarter. Seattle is very strong. But what we`re seeing is a lot of strength in the heartland of America where the appreciation has never been as high as they have been on the coast and appreciation never -- not never, but usually not down. So the heartland of America is going very, very strong. GHARIB: All right. Thank you very much. We appreciate you coming on the program.
GILLESPIE: Thanks. Thanks, Susie.
GHARIB: We`ve been speaking with James Gillespie, CEO of Coldwell Banker real estate corporation.
