The Picture of Health (Reform) NAR's Officer's Blog

It is the 13th of October and I am writing from the 13th State. Yesterday, the Senate Finance Committee voted to forward a health care plan. The vote was 14 to 9 with Olympia Snow, Republican from Maine, voting with the Democratic majority.

The self-employed and small employers, such as REALTORS® and realty firms, would benefit from the significant changes that the amended Finance bill makes to traditional insurance underwriting and rating practices, including bans on the use of pre-existing conditions, health status and a number of other rating factors that have made coverage costly or unavailable. Self-employed individuals would be given an added advantage in that they could choose to purchase private health insurance as an individual or as a small business through the new health insurance exchanges.

Before the Finance measure goes to the Senate floor, it will be melded with the Senate Heath, Education, Labor and Pensions Committee bill, which passed earlier this year. The melding will be done by the Senate and committee leadership. Once melded, the combined bill will go to the Senate for a vote. Then, the House has three committee versions of its bill, HR 3200, that are also going through the melding process so that a single House bill will emerge for approval by the entire House.

In short, the legislation is moving forward, but has many steep hurdles to clear before it becomes law. It is important to remember that we are still in the early innings of health reform, which means the actual language that will be in any final bill is very fluid right now. Because of this, your National Association has not taken a position on the bill.

What your Leadership Team and staff have done is to work through the entire process, without a respite, to make sure that any legislative proposal includes provisions that take into account the unique challenges of the self-employed and independent contractors. Moreover, NAR has also been both visible and vocal about its opposition to any proposal that would limit the mortgage interest deduction (MID) as a means of "paying for" health reforms. You can be sure that we continue to be vigilant in that commitment.

We understand how important this issue is to the members. Last week, I traveled to the Maine Annual Convention in Rockport. Much of the conversation focused on health care. What was striking is the calmness of the conversation and the desire to understand and be understood. Over 20,000 people in Maine have lost their jobs over the past year. Its economy is a mirror of much of the country. Generally, the perspective was one of value. If we are going to have a national health insurance program it should have cost controls, be portable, be available to people with pre-existing conditions, and provide quality care. It should have ‘common sense.’ Does this sound familiar? It should. These are the National Association of REALTORS® priorities on health care reform.

All of this was in contrast to my personal experience in Rhode Island. Our small office obtains health insurance through Blue Cross/Blue Shield of Rhode Island. This month’s premium is $3,600. Over the past two years we have cut our overhead by 50 percent, but our costs of health care have increased by 25 percent. This has been necessary and I am confident you have been engaged in the same process. It is frustrating to see my premiums increase in part to fund a beautiful new glass skyscraper in Providence.

Nevertheless, please know that NAR is actively engaged in bringing common sense to the conversation. As Brokers, agents, support staff and Americans, this is a critical debate. -- Ron Phipps, 2009 NAR First Vice President

It's A Small World

We have spent the past week here in Greece attending the CEREAN (Central European Real Estate Association Network) annual conference, held is Thessaloniki. It has been a most educational and productive trip.

First, people are people. Regardless of language, race, color, heritage, baseball teaming branding, people are people. We were warmly received by our Eastern European hosts. It seems that a smile needs no translation. It was surprising to hear many of the attendees
tell us that they were impressed that we were so human, open, and engaged. (We are REALTORS®…that is what we are.) Dale Stinton and I both did formal presentations. As we talked translators simultaneously spoke in Greek and Russian. At first it was distracting, as you wondered how precisely your words were communicated. After listening to English translations of other presenters’ Greek and Russian presentations, it becomes ‘normal.’

Secondly, the importance of engaging international partners became so obvious. The earth may not be getting smaller, but the globe is. The Ukrainians were expressing frustration about buyer’s agents being able to collect a fee. The Romanians were complaining about government interference in real estate transactions. The Bulgarians were frustrated about the lack of mortgage money and credit. Does it sound familiar? One of the best parts of the conversation is it reminds one of how great our ‘system’ of real estate works.

In many parts of the world, there is no MLS system. There is no system of ‘cooperation and compensation.’ The lack of licensing, training, code of ethics, are challenging in the ‘emerging profession.’ It is to our advantage to share our systems and experience to benefit our members. It would be great to know that a referral to Greece would result in a referral fee. It would great to know that the investment our buyers are making in other markets would be with reliable professional advice. The international market is a huge market with exceptional opportunities for our members.

Finally, the international interchange of our organization leads to trust and understanding beyond real estate. It leads to understanding among different people. Its advantage goes way beyond real estate. – Ron Phipps, 2009 NAR First Vice President

To Loud to be Heard: The Health Care Debate

On Wednesday night, my Congressman Jim Langevin, held a constituents’ meeting on health care reform at the Warwick City Hall. The City Council chambers hold 475 people. Every spot was filled and more than 100 people assembled outside. In an effort to educate the public, Congressman Langevin presented a power point presentation. To his credit, he remained civil, patient and attentive. It is not easy to stay on message when people are yelling and screaming at you. It is also not easy to engage in real discussion when people come with an agenda of disruption and distraction.

Obviously, health insurance reform is a major issue for this country. It requires serious, open discussion. For REALTORS®, health insurance reform is about having access to affordable health insurance policies. Our status as independent contractors or self employed limits many agents to purchasing individual policies with high out of pocket costs, or simply to have no health insurance at all. Our membership survey found more than 300,000 REALTORS® have no health insurance at all, countless more have less than comprehensive policies and are at risk of losing coverage due to increased costs. It is a real challenge, in fact, a hardship for many of our members.

As a result, the National Association of REALTORS® is actively engaged in the conversation. We are working toward prudent, effective health care reform that recognizes our unique income situation as independent contractors or being self-employed. Also, we have been arguing for insurance reform and cost control. As Americans, we are involved in the conversation. As an Association, we seek a dialogue that addresses the needs of our members and staff. Know that we are doing that. I should also mention that NAR hasn’t endorsed ANY of the health care proposals floating around on Capitol Hill. And we won’t until a clearer picture of the final package emerges. That is why we are listening, learning and discussing. The issue and our membership require it.

You should expect that there will be more loud public forums. That is the way of public discourse now. It is a way for people to share the intensity of their position, but it would be very helpful to listen and learn before reacting. The majority of sound bites shared by the media demonstrated a total lack of understanding of the proposals. Ideology is important, but it should be argued with accurate information, not innuendo and propaganda. This applies to all sides of the issue. While it would be naïve to expect a change in process, it would be encouraging to work toward resolution of the issue with information and common sense. It is too important an issue to ignore or minimize. – Ron Phipps, 2009 NAR First Vice President

Realty Bytes August 2009

Realty Bytes August 2009:

Why is the bottom of the market so elusive?


The Rhode Island Real Estate market turned down in late 2005. Yes we have been in this market correction for almost four years. The rest of the country has been in this cycle since late 2006 early 2007. Obviously, all markets are local and there are exceptions to these general observations. Some markets like Detroit have been weak for a longer time, and other markets like North Dakota have not seen any down turn at all. Unfortunately, that is not the case in Rhode Island. From the market price peak of over $275,000 to a mean value below $200,000, the change in the market has been huge. Many people have no equity, or ‘negative equity.’ They owe more than the property is worth.

The most common question that we as Realtors are asked: “Are we at the bottom?” In all candor, we really do not know. We would like to think we are, or are on either side of it. The recent numbers of sales activity suggest that the market is improving with more sales, although the prices have continued to lower. Additionally, we will not know that we have hit bottom until we are beyond it. It is a rear view mirror event. Only after you have passed through it do you really know that you have reached it.

The challenging question is not whether we have seen bottom, but rather why is it so elusive? Why has this cycle been so long and the distance between peak and trough been so great?

The answers to both questions are intertwined. Because we had gone so high, as the result of inexpensive and easy credit, the correction is greater than it might have otherwise been. Anyone could get a mortgage and credit was so free flowing that you really did not need to be able to afford the mortgage. The assumption was that prices would continue to escalate, or your income would go up, or your lender would reduce payments. Rarely was there a conversation of ‘ability to afford to pay for the property long term. If you could not afford the month payment, you would just flip it. Obviously those assumptions were and are not sustainable.

With that as a backdrop, we had market and value exuberance that resulted in very high average sales prices. The peak was really high. When we began correcting the lenders process for underwriting mortgages became so rigorous, the majority of people would not qualify to refinance. Then we have the new appraisal rules, requiring direct comparables within 90 days. Mortgage denials became the norm, not the exceptions.

In Rhode Island almost 40 percent of our sales currently are distressed sales, either foreclosures are short sales. This has further reduced average price. Also short sale is an oxymoron. It should be called a LFS; Long Frustrating Sale. The average conventional transaction closes in 45 to 60 days. It takes, on average 9 and half weeks, to get a simple response to a short sale offer. That response could be a rejection or a counter instead of an acceptance. It takes months longer to close.

If is difficult to have price stabilization with so many short sales in the market that are never resolved. There is conversation within the industry that prices would stabilize more quickly if we have a 7 day response time for all offers. Cut the buyers loose and let them purchase something else. It is a total lack of common sense.

Appraisal issues continue to retard any stabilization. Many transactions are falling apart because the underwriters and credit managers are questioning the appraisals. It is difficult to find perfect matches that are only 90 days old. Then when the transaction falls apart, there is one less closed sale to use in other appraisals. It is a downward spiral.
Another lack of common sense.

Many potential buyers are also on the sidelines, wanting to make sure we hit bottom before they purchase. This is understandable and difficult to accomplish. Where is the bottom? Is this the time to buy? Historically low interests, low prices, huge inventory and the $8000 first time home buyer tax credit are all strong incentives. With all of those elements, some buyers are still waiting.

So far we have discussed the challenges in the real estate market. We cannot ignore the larger economic climate. The unemployment rate is a huge challenge. Over 70000 Rhode Islanders are looking for work. Those people need jobs to stay in their homes, much less buy other homes. Job creation is key to recovery.

It is our observation that MBTA rail service to Green Airport, (and Wickford later), will do a lot to stabilize price. Average price in Boston is approximately $373,000, in Rhode Island it is approximately $200,000. That is a huge difference between markets an hour apart. We are confident the rail service will go a long way to stabilize price.

So there you have it. It is elusive, but on the horizon. We are just not sure how far the horizon actually is.

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