Rising home values bring new firms | nnbusinessview.com

Rising home values bring new firms

John Seelmeyer
jseelmeyer@nnbw.biz

The last time that residential values rose sharply in northern Nevada, lots of homeowners cashed in part of their equity to pursue entrepreneurial dreams.

Now? Hold that thought.

“We’re starting to see people going back to take a look at home equity as a tool for speculative startups. But they’re very cautious about it,” says Gary Duffy, senior vice president of lending for Portland-based Umpqua Bank.

He adds, “A lot of people learned a sobering lesson in the past six years.”

But there’s one strong exception: Businesses linked directly to the residential real estate business are blooming like desert wildflowers after a spring rain.

Real estate offices are sprouting — this is right season for them to open, observers say — and companies such as mortgage lenders and title companies are opening as well.

So far this year, the Reno-Sparks Association of Realtors has fielded applications from 19 new brokerages. That comes on the heels of 27 new offices last year.

The reason? “The outlook for the market is positive,” says Mark Ashworth, president-elect of the association and a broker with Trans-Action Realty 500 in Reno.

Here’s a simple version of the math that inspires the brokers to open new offices:

The 532 closed residential transactions in Washoe County in October carried a median price of $215,000. That translates into $114.38 million of commission-generating sales.

In the same month a year earlier, when 522 transactions were closed at median price of $181,750, the market totaled a little less than $95 million.

Those new offices also create opportunity for new agents — nearly all of them independent contractors who are running their own small businesses.

So far this year, the Reno-Sparks Association of Realtors has added 145 new members, which compares with a total of 121 new members during all of 2012.

(The association’s total membership of 1,843 Realtors compares with 1,862 a year earlier, a reflection of the near-constant turnover of agents who enter and leave the business.)

Ashworth says the changing conditions in the residential market also encourage new entrants into the business.

Unlike the complex short sales that dominated the market in past years — sales that often didn’t generate commissions for sales agents or brokers alike for many months — traditional sales once again are moving to the forefront.

Potential agents calculate the relatively low costs of entering the business — somewhere around $5,000 — and figure they stand a pretty good chance of getting their feet on the ground quickly in this market, Ashworth says.

For brokers, meanwhile, he says this is considered the best time of year to open a new office. Sales are slow around the holidays, and a new office has time to get its staff, its marketing and its listings in place before sales activity perks up in the spring.

The growth is spilling over into affiliated sectors such as mortgage brokerage as well.

The Realtors’ association says it’s signed up 17 new affiliate members this year. That’s roughly twice the number signed up during 2011 and during 2012.

The Nevada Division of Insurance meanwhile, notes that the number of licensed title-insurance agents statewide has nearly doubled as Nevada comes out of the downturn, and three new title-insurance companies have entered the Nevada.

The number of home inspectors licensed by the state, however, has ticked up only a bit. It stands at 371 today, compared with 318 in 2009 when the market touched bottom, says the state’s Department of Business & Industry. (Neither the Department of Business & Industry nor the Division of Insurance break out figures on a county-by-county basis.)

So why haven’t entrepreneurs tapped rising home values yet to fund other types of retail startups?

Dave Funk, senior vice president and regional manager for Umpqua Bank in northern Nevada, says business owners and hopeful entrepreneurs alike are returning to an old-fashioned strategy of financing new and expanded businesses:

Rather than tapping the rising value of their homes, Funk says, they’re earning the money they need and saving it.


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