Jim Gillespie CEO of Coldwell Banker on the Home Comparison Index
Wednesday, September 26, 2007SUZANNE PRATT: Coldwell Banker today released the results of its annual home price comparison index, which showed a less than 1 percent drop from last year in the average sales price of a four-bedroom, two-and-a-half bath home in the more than 300 markets it surveyed. Joining me now with more about the survey and to talk about the state of the housing market is Jim Gillespie, CEO of Coldwell Banker. Jim, welcome to NIGHTLY BUSINESS REPORT.
JIM GILLESPIE, PRESIDENT & CEO, COLDWELL BANKER: Suzanne, thanks for inviting me on.
PRATT: You've been doing this survey for nearly two decades and this is the first year that there's been a drop in the average sales price. Does that suggest anything to you about the severity of the correction?
GILLESPIE: Well, we're in a very slight correction actually. I mean, I've been in the real estate business Suzanne for 32 years and this is the fourth or probably the fifth correction that I've seen and every single correction take place exactly like this is taking place and that is after a go-around of a strong real estate market for a period of time -- and this last one was 10 years -- then we see a number of homes sold fall off and sometimes dramatically and if that happens, then the inventory levels go up and it turns into a buyers' market. Then once the inventory levels go back to a balanced market -- and right now it's a 10 months and a balanced market is six months, then prices pick up again. So the fact that our survey showed prices off .4 of 1 percent actually mirrors what the National Association of Realtors and Fannie Mae are saying which are prices will be off maybe 1.7 percent to 2.1 percent this year which will be the first time since World War II.
PRATT: I noticed as you've been calling this a correction. You do not believe this is a housing recession, I take it. I mean is there something different about this correction than the previous ones that you've lived through?
GILLESPIE: Well, the difference is that we just finished a 10-year bull run like we've never seen in real estate and that 10-year bull run ended in August of 2005. And the thing that really should get headlines is the pundits when we were in this bull run and the market was appreciating high single digits and double digits each year, all the pundits said, oh, we've got a big real estate bubble and when that bubble bursts, prices are going to drop 20, 30, 40, 50 percent. That is not happening. For prices to only drop 2 percent after a 10-year bull run is actually absolutely amazing. And if you take out where all the speculators, the flippers that got involved in Florida and Las Vegas and Phoenix, you take those out of the equation and we've got appreciation. So most of the country is appreciating in real estate today.
PRATT: All right, let me just ask you, where do you think we are in this correction or recession? How much further do we have to go?
GILLESPIE: Well, I don't have a crystal ball. If I did, I'd be in Las Vegas. But my take on this is that the bull run that we enjoyed was 10 years. Typically in real estate, a good run will last four, five, sometimes six years. The correction is 12 to 18 months. Since this bull run was twice as long for 10 years, I would think that maybe 30 or 36 months it would be over which would put it sometime in early 2008 or mid- 2008 which is what most of the experts are saying.
PRATT: Ok, we have just a few seconds left. Let me ask you quickly about mortgages. What are your customers telling you? What are you seeing in terms of availability of mortgages? Is it harder now for people to get mortgages because of what's happened in the sub-prime market?
GILLESPIE: It's not harder for people to get mortgages. That's a misconception out there. If you've got a job and you've got good credit and can document your income, mortgage money is available. So don't let anybody tell you that it's not available. And what you need to do is go to a good full service mortgage company and a full service real estate salesperson to make sure that you're on track with a mortgage company that will do the right thing for you.
PRATT: Jim, thank you for joining us this evening.
GILLESPIE: Thanks Suzanne.
PRATT: My guest Jim Gillespie, CEO of Coldwell Banker.
