We recently interviewed Brian Hickey who is a subscriber to RE-Insider and founder of teardowns.com to get his perspective on where the market is headed in 2013. Here are excerpts from that interview:
Q1. Where do you think the housing market is headed in 2013?
I hope it’s not headed in the direction it appears to be headed. Residential housing is for people to live in and enjoy and build a community, where they work, and live etc. The real estate market is not a commodity market even though it is an asset class. I don’t think it should be considered as a commodity.
The real estate market is euphoric now. I believe a healthy market is one that plods along and operates under the assumption that people are living in their homes and not flipping them. Ease of credit and the opportunity to make profit is making it easier for buyers now. But, I’m concerned about the market if this behavior continues. Are price increases a good thing? Sure but over 3%, 4% or 5% is not good. That is not what the housing industry is about. It’s not sustainable.
Q2. Are builders still finding it difficult to get construction loans?
Cash is king. Most deals are cash deals but construction loans are easing up a bit. Local banks have been in the business but the big ones like Bank of America are less likely to offer construction loans. Some builders are funded by investors so they have money to invest in the pool to fund housing purchases. The private sector can replace the banks with these investors on speculation.
Q3. Do you believe interest rates will stay low? Are you seeing people rushing to buy?
I’m seeing lots of multiple offers on properties due to tight inventory at the moment. Additionally the government doesn’t have any interest in letting the market take care of itself and it will keep rates low for a long period of time.
Q4. What kind of properties do you think we’ll see the most growth in 2013? (single family homes, income properties, etc.)
Renter nation and the young people want to buy houses and with rates where they are people should buy houses. Single family houses could make a comeback if the prices don’t race and price people out.
I believe people want to live in a house and raise a family. Given a choice people would want to own their house. However, there are a lot of homes that were built that weren’t made to last forever and they are waiting for redevelopment. People today want different layouts than people wanted 40-50 years ago. Reconfiguring or redoing existing houses is our focus at teardowns.com. People who buy used cars buy them because they can’t buy a new one. So people buy used houses and fix them up if they can’t buy a new home in the same area. Look at any city skyline and you’ll see that they aren’t static and over 30-50 years you see big changes.
Q5. What got you interested in a career in real estate?
My background was initially in financial markets so I was always a markets guy with experience connecting buyers and sellers. My interest in real estate came after the Internet bubble burst in 2000 when I went to sell my current home. There was a lot of redevelopment activity in the area and I thought our 3 bedroom, no A/C home on a nice piece of property would be of interest to contractors. After unsuccessfully trying to “go-it-alone” I called my agent, she listed my home in the MLS only to sell it the next day to a guy I knew from High School who intended to tear it down and build himself a new home.
Well, it took me about 6 months to figure out the market lacked an efficient and effective way to buy and sell this type of property – so I started teardowns.com to help organize this market by offering buyers and sellers an opportunity to connect with less hassle and cost. The trend is hyper local, so we started in our own community then grew into a national brick and mortar brokerage with offices from Greenwich, CT to Rancho Santa Fe – we covered about 400 markets. When the real estate market crashed, we re-engineered the business into a pure Internet play. Now we license our brands, programs and lead generation systems to agents and brokers. We do however, offer property sellers the opportunity to connect to buyers directly if they choose – we’re totally transparent in our processes and model.
Q6. Are REOs a target for teardowns.com?
We’ve stayed away from that business and focus on the upper end of the market. But a lot of the stock that went into foreclosure has become a teardown candidate due to neglect.
Q7. What else would you like our readers to know?
We’d like them to know that redevelopment of established communities does not have to be a bad thing. When we see push back from the community it is usually about what goes up not what comes down. There are a lot of good updates in water, sewer and other infrastructure that get done when a new house goes up and the process can be green when they rebuild and use technology in the process.
Deconstruction is also a positive outcome where instead of bringing in a bulldozer they pick out what they can reuse and sell from the property and there are tax credits that are available for that.
Residents are very accepting of projects where you preserve the character of the community. For example: if the character of the community is Victorian and a tear down of an old Victorian is done and the re-build is a new Victorian we have the support of the community. When you go outside of the character of the tear down or the community when redeveloping, that’s when you see resistance from the community.
Brian S. Hickey