Mortgage Rates Dip, Inventory on the Rise

Mortgage Rates Dip, Inventory on the Rise

July 18, 2013

iStock_000012512439SmallAfter a dramatic rise over the past month, mortgage rates trended downward this week. Key rates cooled, along with worries that the Federal Reserve would taper its massive stimulus policies — a bond-purchase program involving $85 million worth of Treasury notes and mortgage-backed securities. Even after the monthlong surge, rates remain historically low and continue to fuel both the housing recovery and growth within the economy.

Testifying before the House Financial Service Committee this week, Federal Reserve Chairman Ben Bernanke indicated that the Fed has no firm timeline in place for scaling its bond purchase program. Rates had spiked due to speculation that the Fed would be curbing the buyback program that has helped the housing market stabilize.

“We really are seeing an increase in inventory that has come in, just in the last couple months,” said realtor.com spokesperson Leslie Piper in a recent interview with Mark Crumpton on Bloomberg Television’s “Bottom Line.” “We’re seeing a lot of consumer confidence; we’re seeing employment rates go up. That’s obviously going to affect the amount of buyers out there.”

After hitting a two-year high a week ago, the average rate on a 30-year fixed mortgage saw a 0.14 percentage-point drop, according to the latest survey by mortgage lender Freddie Mac. Previously at 4.51 percent, the average rate on a 30-year fixed loan dropped to 4.37 percent. It had neared a historic low as recently as early May before spiking in July.

The average rate on a 15-year fixed loan saw its own decrease, dropping by 0.12 percentage point from 3.53 percent a week ago to 3.41 percent this week. It previously achieved a historic low in early May, when it fell to 2.56 percent and averaged 2.83 percent a year ago at this time.

Affordable loans continue to have a positive impact on the once-depressed housing market. The recent release of the Fed Beige book didn’t yield any surprises on the outlook of housing growth, according to mortgage expert Al Bowman. However, the report did indicate positive gains across the United States.

[The Beige Report] showed that most Fed regions reports modest to moderate economic growth during the period of June and early July. One thing worth noting was an indication of housing growth in all regions with some reporting strong gains. The Fed relies heavily on this report when they meet for their FOMC meetings to decide monetary policy, but there didn’t appear to be anything in the report that should alter theories of the Fed’s next move or mortgage rate direction.

The average rate on a 5-year hybrid adjustable loan also saw a decrease week over week, falling to 3.17 percent from 3.26 percent a week ago. For the fourth consecutive week, the average on a 1-year hybrid remained static at 2.66 percent.

For home buyers hoping to take advantage of the low interest rates, now may be the time to act. In the latest Mortgage Rate Trend Index by Bankrate.com, 56 percent of the analysts and experts polled believe mortgage rates will go down over the next week. “Mortgage rates seem to be retreating slightly as the Fed tries to calm the markets,” says Polyana da Costa, senior mortgage reporter for Bankrate.com. “But after rising more than a full percentage point in such a short period, a slight drop in rates won’t make that much of a difference to most borrowers.”

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Downtown Developers Put Multifamily First

 

By Lou Hirsh, July 1, 2013

Developer MB Property Acquisitions has proposed a 279-apartment, 22-story mixed-use development in East Village, called Pacific Heights, which would also include retail elements and four levels of underground parking.

Developer MB Property Acquisitions has proposed a 279-apartment, 22-story mixed-use development in East Village, called Pacific Heights, which would also include retail elements and four levels of underground parking.

A new 279-unit apartment complex with other mixed-use amenities, proposed for an East Village site by MB Property Acquisitions of San Francisco, recently joined a growing list of multifamily projects either under construction or in the pipeline for downtown San Diego.

According to Civic San Diego, the city’s current downtown project oversight agency, city planning committees in mid-July will begin formal review of plans calling for a 22-story development with apartments, 8,400 square feet of retail/commercial space, and 295 parking spaces in four levels of subterranean parking.

The project, currently listed with the project name Pacific Heights, would be located on the western half of the block bounded by A and B streets, Eleventh Avenue and Park Boulevard.

MB President Michael Blumenthal said developers are looking to begin construction possibly in the first quarter of 2014, with completion by early 2016. Like other developers, those spearheading Pacific Heights are currently focused on serving the burgeoning apartment market, but also watching for signs that downtown’s for-sale condo market could revive in the next two years.

Pacific Heights’ developers and investors were among those involved in past condo projects in San Diego, and they are considering building the new development as condos. “They were partners in the Palermo (230 units), Union Square (263 units) and Alta (179 units),” Blumenthal said in an email.

Apartment Focus

Currently, local multifamily development remains focused primarily on apartments. Industry observers have noted that San Diego County currently has approximately 10,000 apartments either under construction or in the pipeline, and about a third of those units are in downtown San Diego, where at least six developments are currently under construction.

Some of the county’s apartment projects were originally envisioned as for-sale condos, but converted to apartment offerings after the housing market crash that preceded the Great Recession. While a few new local condo projects have been announced during the past two years as the housing market has recovered, there is not significant construction currently underway.

Tentative Buyers

“People are still tentative about buying in this market,” said Michael Yanicelli, managing director in the San Diego office of Phoenix-based multifamily developer Alliance Residential Co.

Alliance is nearing completion on the 199-unit Broadstone Little Italy, a six-story apartment complex where it is looking to begin renting out the first units this fall. Alliance in 2011 acquired the 1.3-acre site off Kettner Boulevard, which had previously been entitled for condominiums under a prior developer that was unable to obtain financing.

“We have a lot of people on our interest list for Broadstone Little Italy,” Yanicelli said, noting the project is drawing interest from young, upwardly mobile professionals looking to rent in urban areas near job hubs including downtown and Kearny Mesa.

A similar contingent will likely be the tenants at two other local Alliance apartment projects where construction recently began. Openings are set for late 2014 at Alliance’s 100-unit community at Fifth Avenue and Thorn Street in Banker’s Hill, and a 360-unit project underway off Aero Drive in Kearny Mesa.

Kearny Mesa Market

“Kearny Mesa especially has a lot of workers employed in health care, with hospitals there like Sharp and Rady,” Yanicelli said. He said that the company is also looking to serve a large contingent of workers employed at several distribution centers, government contractors and medical supply firms in Kearny Mesa.

Earlier this year, San Diego County placed sixth in brokerage firm Marcus & Millichap’s 2013 annual ranking of the nation’s strongest apartment markets, based on factors including supply and demand, construction trends, job creation and the overall health of the local economy.

The local region held its national ranking from 2012 in the report, intended to serve as a guide to multifamily investors. San Diego was among five California metro markets placing in the top 10 this year, joined by San Jose (No. 2 after New York City), San Francisco (No. 3), Orange County (No. 4) and Los Angeles (No. 10).

Marcus & Millichap is forecasting that new apartments coming on the market will raise San Diego County’s apartment vacancy rate slightly this year, to 3.1 percent, with asking rents rising 4.2 percent. The local apartment supply is expected to rise 2.1 percent in 2013 as 3,800 apartments come online, more than tripling last year’s 1,090 units.

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Real Estate Downtown San Diego

 

real-estate-downtown-san-diego Added by Chad on Jul 07 2:05PM

Like many places in California, the real estate in Downtown San Diego has taken off over the past 18 months with regards to prices!  According to Dataquick, home prices for properties in Downtown San Diego have risen 16.4% from this time last year and the median price of a downtown condo has changed 31.2% for the same period.

The average price per square foot for a condo in downtown San Diego has gone up 18.5% in the last 12 months.  Why are prices rising so rapidly?  In order to understand what’s taking place in the downtown San Diego real estate market, one must take a look at the market absorption rates to see where the shift is occurring.

Downtown San Diego Real Estate

Price Range        
 $150,000-$299,999  Closed Sales in the past: 12 month 6 months 3 months
  Number of Homes Sold 236 101 47
  Average # Homes Sold per Month 19.67 16.83 15.67
  Current Homes Active on Market 14 14 14
  Months of Supply 0.71 0.83 0.89
  Days of Supply  21 25 27
         
 $300,000-$449,900  Closed Sales in the past: 12 month 6 months 3 months
  Number of Homes Sold 289 143 77
  Average # Homes Sold per Month 24.08 23.83 25.67
  Current Homes Active on Market 53 53 53
  Months of Supply 2.20 2.22 2.06
  Days of Supply  66 67 62
         
 $450,000-$599,999  Closed Sales in the past: 12 month 6 months 3 months
  Number of Homes Sold 179 88 46
  Average # Homes Sold per Month 14.92 14.67 15.33
  Current Homes Active on Market 41 41 41
  Months of Supply 2.75 2.80 2.67
  Days of Supply  82 84 80
         
 $600,000-$749,999  Closed Sales in the past: 12 month 6 months 3 months
  Number of Homes Sold 111 58 34
  Average # Homes Sold per Month 9.25 9.67 11.33
  Current Homes Active on Market 25 25 25
  Months of Supply 2.70 2.59 2.21
  Days of Supply  81 78 66
         
 $750,000-$1m  Closed Sales in the past: 12 month 6 months 3 months
  Number of Homes Sold 63 35 18
  Average # Homes Sold per Month 5.25 5.83 6.00
  Current Homes Active on Market 21 21 21
  Months of Supply 4.00 3.60 3.50
  Days of Supply  120 108 105
         
 > $1m  Closed Sales in the past: 12 month 6 months 3 months
  Number of Homes Sold 65 35 15
  Average # Homes Sold per Month 5.42 5.83 5.00
  Current Homes Active on Market 37 37 37
  Months of Supply 6.83 6.34 7.40
  Days of Supply  205 190 222
         
* All data is deemed to be reliable, but is not guaranteed.  Data pulled directly from Sandicor MLS
* data pulled 7/7/2013        

One must keep in mind that a balanced real estate market is one in which there is a 6 month supply of homes on the market at any given time.  When you look at properties in downtown San Diego under $300,000, you can see that there isn’t even a one month supply, thus proving to make it a seller’s market with buyers competing for a limited number of condos.

There’s not even a 1 month supply of condos downtown San Diego under $300,000

If you look at condos in downtown San Diego priced $300,000 to $749,900, you can see there is still only a 12 month trailing average of 2.2 to 2.7 months supply.  It’s still stacking up to be favorable for sellers in these price ranges.  For properties downtown San Diego priced from $750,000 to $1M, there is still only a 4 months supply of condos for sale. 

While properties priced over $750,000 lie closer to a balanced market between buyers and sellers, the seller still has the upper hand as long as they have a desirable property.  For homes over $1m in downtown, there is an average of a 6.83 month supply.

The luxury condo market is where the best opportunities can be found because there are less buyers in this price range and more properties to chose from.   With lending loosening up, we expect to see this price category tighten up as well. 

If you are interested in buying or selling downtown San Diego real estate, Chad Dannecker and Associates are experts focused on the downtown market that will make your experience a pleasant one!  For more information, give us a call: 619-309-8011.

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Employers must pay more for tax break

By Jonathan Horn – JULY 7, 2013
 
Andrew Pequeno working on the factory floor at Plenums Plus sheet Metal Fabrication in Chula Vista.
Andrew Pequeno working on the factory floor at Plenums Plus sheet Metal Fabrication in Chula Vista. — Nelvin C. Cepeda

Steve Johnston visits four halfway houses in the South Bay anytime he needs new workers for his National City ship repair company.

He has no shortage of applicants for jobs with YYK Enterprises, which hires with a starting pay of $9.50 an hour.

“Word spreads like crazy,” Johnston said.

Johnston’s business currently qualifies for a state tax credit on their wages of up to $12 per hour, called an Enterprise Zone credit. Last year, his company of about 260 employees saved about $360,000 on the breaks.

“They’ve come back to real savings to the business, which allows us to invest in more equipment, which allows us to do more work, which allows us to hire more people off the unemployment rolls,” Johnston said.

But on Jan. 1, if Johnston still wants to get a tax credit from the state for jobs such as blasting away rusted steel, painting ships or placing landing strips on aircraft carriers, he’ll have to boost his entry level salary to more than $12 per hour. That’s because last week, the state Legislature approved a bill that would eliminate the roughly 25-year-old enterprise zone program and replace it with $750 million of new tax incentives, some across the state.

Nobody says businesses in the enterprise zones are going to shut down without the low-income credit, but they may feel a little pinched.

That worries South County officials, such as Chula Vista Mayor Cheryl Cox, whose city had 7.9 percent unemployment in May. Cox said the enterprise zone credits created 1,400 new jobs in Chula Vista last year. She said anyone would like to have a better paying job, but losing the current benefit could hurt the people that just need a chance.

“In many cases you have to start somewhere and for some people the enterprise zone gave them that first foot in the door,” she said. “I think the state sometimes does the kinds of things that are considered at the state level to be a fix or a cure, but I’m looking at this and thinking this was perhaps considered a fix that I’m not sure needed fixing.”

Hiring tax break

Example hiring tax credit, beginning Jan. 1, 2014

Credit is available on wages between $12 and $28 per hour.

Qualifying employee hired on Jan. 2, 2014, by a qualifying employer in a qualifying location and the pay is $28 per hour and the employee works the maximum hours of 2,000 for the year.

The credit calculation would be as follows:

$28 — $12 = $16

$16 * 2,000= $32,000

$32,000 * 0.35 = $11,200 tax credit.

Source: California Governor’s Office of Business and Economic Development

There are currently 42 enterprise zones across California, drawn and expanded by public officials to help create jobs in disadvantaged areas.

The San Diego Enterprise Zone, which originated in 1986, is mainly composed of areas in National City, Chula Vista, and parts of south and east San Diego. It provides credits on wages of up to $12 per hour, and allows businesses to claim sales tax paid on manufacturing equipment as an income tax credit at the end of the year. The region’s enterprise zone has expanded over the years to include pockets of North County to provide incentives to companies like Soitec, a solar panel manufacturer that chose Rancho Bernardo over other states for a major plant.

While enterprise zones are popular with those who reap their benefits, Gov. Jerry Brown says they don’t work. That’s why he pushed hard to eliminate them through Assembly Bill 93, which passed last week. A report issued in May by the Legislative Analyst’s Office said the zones are generally not shown to be effective, and that job gains in some areas are offset by losses in others. The report recommended the zones be eliminated partly because their costs have ballooned on average 18 percent per year since 2000, six times faster than the state budget.

Brown is now moving the state enterprise zones to a new system that encourages higher pay, and broadens some tax incentives to all businesses.

Moving forward, wage credits are going to stay in current enterprise zone areas that are not considered wealthy, but will also be expanded to businesses in census designated areas of high poverty. Brown originally wanted to only apply the credits to the census designated areas, but that was changed during the legislative negotiations.

Come Jan. 1, future qualifying employees — long-term unemployed, veterans at discharge, ex-offenders and those on the federal Earned Income Tax Credit — will only be eligible for a tax break for their employer if they are paid above $12 per hour.

The state will give a credit on 35 percent of the difference between the actual pay and $12 per hour, with the wage maximum of $28 per hour. That means that if an employer pays a worker $13 per hour, the credit would be based on $1 per hour.

Steve Copp, who owns Chula Vista based Plenums Plus, a manufacturer of air conditioning equipment, said about 20 percent of his new hires earn $12 or more.

Other new tax incentives created by the legislation will apply all over. The widest example is eliminating sales tax on manufacturing or biotech equipment. The state will also create an agency called California Competes, which will offer income tax incentives to companies and small businesses that are considering creating jobs in California, a state with some of the highest costs of doing business due to high taxes. Small businesses are set to receive 25 percent of the incentive credits.

Johnston, president of YYK Enterprise, who bought the company five years ago, said ex-offenders have an opportunity to work their way into superintendent positions, which pay $30 per hour. He said he plans to continue his same hiring practices, whether the new employees qualify for a tax credit or not. Johnston said he hired 45 more people Tuesday and is hoping to add another 75.

The current enterprise zone system, including tax credits on low-income jobs, will be available through the end of 2013. Anyone hired before Dec. 31 will qualify for the credit for five years. Companies that have banked previous enterprise zone tax credits have 10 years to use them.

Cox, Chula Vista’s mayor, said she feels the state reneged on a commitment to keep the zones in place through 2021. Still, she hasn’t yet noticed an influx of permit applications at the city to start businesses before the opportunity goes away.

“I don’t see any rush in the immediate future,” she said. “I do think though that as businesses become more aware of the opportunities presented in an enterprise zone, they’ll inquire with us.”

 

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Feds shy away from crackdown on ‘nothing down’

By Dan McSwain – July 6
FILE - In this June 19, 2013 file photo, Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington. A majority of the more than two dozen economists polled in an Associated Press survey late last week agree with the Fed's plan to start slowing its bond purchases later this year if the U.S. economy continues to strengthen. Higher long-term rates will likely result. (AP Photo/Susan Walsh, File)
FILE – In this June 19, 2013 file photo, Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington. A majority of the more than two dozen economists polled in an Associated Press survey late last week agree with the Fed’s plan to start slowing its bond purchases later this year if the U.S. economy continues to strengthen. Higher long-term rates will likely result. (AP Photo/Susan Walsh, File) — AP

It looks like regulators are chickening out on a major tightening of lending standards for mortgage loans. Low down payments are here to stay, and may be poised for a big comeback.

Although this certainly helps homebuyers, owners and Realtors, it won’t do much to protect the banking system or smooth out the ups and downs of the real estate market, which have become particularly volatile in San Diego.

On Tuesday the Federal Reserve outlined new regulations that may eventually reduce systemic risk by increasing the amount of equity a “too big to fail” bank must hold. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. are scheduled with the Fed this week to unveil detailed proposals on leverage.

But the Fed went easy on small and regional banks, and it backed away from a proposal that would have discouraged lenders from making loans without at least a 20 percent down payment from the borrower.

What a difference a few years makes.

In 2009 Washington was full of talk about raising minimum down payments. Prices were plummeting in the U.S. housing market, and mortgage defaults were skyrocketing. This had triggered a global financial panic as investors and creditors discovered that giant banks were holding highly leveraged portfolios of troubled mortgage-backed securities.

President Obama talked about requiring borrowers to contribute at least 10 percent of a purchase price for a mortgage down payment. Sheila Bair, Obama’s former chief of the Federal Deposit Insurance Corporation, gave speeches calling for a 20 percent standard.

Their reasoning was straightforward. The more equity borrowers have in their houses, the less likely they are to walk away from their mortgages. And when properties do fall into foreclosure, lenders are less likely to lose money when their loan balances are smaller percentages of the values.

They were right about one thing: Federal support for cheap and easy mortgages helped pump up the housing prices – and led to the big deflation – so removing some of that support could at least moderate the next cycle. This is a big deal for San Diego, where zoning constraints on new construction tend to increase the swings in prices up and down.

To be sure, there were multiple causes for the historic rise in foreclosures, which began in late 2005 and peaked in early 2009. But several studies point to negative equity as a major cause, surpassing low credit scores, unemployment and the expiration of low, “teaser” interest rates.

But here’s another telling statistic: Defaults were unusually high among “prime” loans, or those to borrowers with high credit scores and large down payments. This suggests that the size and rapidity of the drop in housing prices — rather than only the “nothing down” phenomenon — was responsible for much of the negative equity that caused people to give up on paying their mortgages.

On the other hand, it was the pell-mell willingness of lenders to make loans to unqualified buyers that inflated the housing bubble to begin with. With home prices rising, lenders grew overconfident that they could simply sell foreclosed properties and get their cash back.

By 2005, you could routinely get a mortgage with nothing down, a low credit score and without even proof of income. Bankers were crazy.

Those days are over, at least for now. Credit has been tight for five years, with standard mortgages limited to those with big down payments, great credit scores and steady jobs.

But the federal government has filled the gap. Buyers can get mortgages with zero down payments from the U.S. Department of Veterans Affairs or the Rural Housing Service, and 3.5 percent down through the Federal Housing Administration.

Such loans shot from 5 percent of the market in 2006 to more than 40 percent in 2011 and remained “elevated” last year, according to apresentation in May by Elizabeth Duke, a member of the Fed’s board of governors.

Officials worry that removing the stimulus of low-equity loans will hurt the housing recovery, which is barely 18 months old. They are particularly reluctant to chase away first-time homebuyers, who represent the first rung on the ladder of a “move-up” real estate market.

With prices again rising, the credit market is beginning to respond.

Navy Federal Credit Union, which at 4 million members is the nation’s largest, has seen “robust” demand for its zero-down mortgages, according to CEO Cutler Dawson. The loans, which are designed for members who don’t qualify for VA mortgages, don’t charge the private mortgage insurance fees that typically accompany loans with less than 20 percent down.

Dawson says that careful underwriting has kept default rates close to those in his portfolio of prime loans. “We make an attempt to know our members,” he said.

But foreclosures surely will rise again if prices retreat.

A recent working paper by Fed economists estimated that requiring a 15 percent down payment or greater on all new mortgages would reduce foreclosures by 30 percent, without hurting housing prices substantially. This view on pricing is controversial; many economists say that wiping out the population of buyers who can’t raise the cash for down payments could kill the recovery and suppress prices.

But few dispute that requiring more equity from borrowers would make banks safer. In the great debate about preventing the next crisis, officials aren’t ready to pull the plug on the housing market.

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Pending Home Sales Hit 6-Year High As Rising Mortgage Rates Propel Home Buyers

LARKSPUR, CA - FEBRUARY 21:  A sale pending si...

By Morgan Brennan

Looks like those rising mortgage interest rates are beginning to affect home buying. Pending sales of previously owned homes surged to six-year highs, according to the National Association of Realtors, as more buyers jump into the market looking to lock in on home prices and mortgage rates that have begun upward marches expected to continue.

Pending home sales, which represent the number of contracts signed but not yet closed, ratcheted up 6.7% in May from a month earlier and 12.1% higher than a year ago. May’s index reading of 112.3 marks the first time contract activity has grown at this rate since December 2006, when it hit 112.8.

Pending sales are a forward-looking indicator for the housing market since signed contracts offer an early outlook on the number of existing home sales coming within the next one to two months, the typical time frame it takes a deal to close. Economists have been eager to see May’s numbers to better gauge how changing market conditions could be beginning to affect buyer behavior and more so, the housing recovery as a whole.

The biggest issue currently facing housing is mortgage rate increases. This week the 30-year fixed mortgage jumped to 4.46% rate – the largest weekly increase in 26 years, according to Freddie Mac, from 3.93%. That’s up more than 100 basis points – meaning more than a full percentage point – from the 3.35% rate logged mere weeks ago in early May. While still very low by historic standards, that 4.46% rate, compared to a week earlier, translates into an extra $31 in monthly payments for every $100,000 taken out in financing; compared to early May, it’s an extra $63 and change for every $100,000 taken out.

The dramatic jump, fueled by investor activity tied to the anticipated winding down of the Federal Reserve’s $85 billion-per-month bond buying program, makes borrowing costs more expensive and chips away at the high level of home affordability that has been fueling the housing recovery.

Real estate experts have wondered in recent weeks whether rising rates could spur an uptick, short-term at least, in sales, as on-the-fence prospective buyers jump into the market to lock in on rates before they climb further. The bump in May’s pending homes numbers might be reflecting the start of this. “Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher,” explained Lawrence Yun, chief economist of the National Association of Realtors. “This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand.”

As inventory levels have dwindled over the past year, the growing ranks of buyers have helped propel dramatic price increases in many of the country’s largest markets. On Thursday, the Realtors association upgraded its price forecast for 2013: Yun now expects the national median existing home price to rise more than 10% this year. If realized, it represents the largest yearly increase since 2005, the height of the housing bubble.

Home sales have been climbing for the better part of two years. The number of pending sales has grown year-over-year consecutively for the past 25 months, according to NAR.  In May, sales of existing homes – meaning closed contracts for previously owned homes– totaled an annual rate of 5.18 million. It was the first time home sales broke above the five million mark in three and a half years, after the First Time Home Buyer tax credits temporarily boosted housing activity. NAR expects sales to increase as much as 9% throughout 2013, which would translate into slightly more than five million homes sold (a number last seen in 2007).

But for all of the Realtors’ robust projections, as rates rise – and economists believe they will continue to do so, albeit unevenly – that increased cost of borrowing could still cut into the blossoming housing recovery. Though higher rates aren’t likely to derail the rebound, they could slow it, weighing on the hefty double-digit rate of appreciation underway as buyers qualify for lower principal amounts moving forward and sluggish economic growth keeps income levels relatively stagnant.

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7 Reasons Why the Customer Should Be #1

7 Reasons Why the Customer Should Be #1

June 25, 2013 

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The customer is king. Believing otherwise will likely drive your business into the ground.

Here’s what I mean: Far too many businesses are stuck on perfecting their ideas, products, or services, when the real focal point should be pleasing the customer. Those businesses and brands who do cater solely to their user will always win in the end. But transforming your company to better serve your customers may not be as simple as it sounds.

To get more proactive insight on putting your customers first, I spoke with John Tabis, the founder and CEO of TheBouqs.com, an LA-based cut-to-order online flower delivery company. After recently receiving a $1.1 million seed round of funding, it’s clear their focus on improving the overall customer experience hasn’t gone unnoticed.

Here are a few tips from John to get you on the fast-track to putting your customers first:

1. Define and focus. Before your can begin to improve the overall experience for your customer, you must first understand who they are and what they really want. Toss out the idea of having a broad audience and hone in on the specific target market most relevant to your business. Research their basic interests, wants, and needs and begin transforming your business to better accommodate these aspects.

2. Keep it simple. If you’re really looking to stand out, simplicity will be your saving grace. Far too many businesses think their customers want fancy features and end up overbuilding their products to the point of no return. In reality, your customer craves a simplistic experience with no unnecessary features, “extras”, or gimmicks.

For example, Tabis knew a stealthy, no-nonsense ordering process mattered to the target audience of TheBouqs.com. They created a straightforward, honest, and simple way to purchase their product that involves one flat fee, only 40 bouquet options to choose from, no hidden fees, and just three clicks to checkout.

3. Tout your personality. Who says simple can’t be fun? Make your brand more memorable by injecting it with a level of personality. TheBouqs.com may have a simplified ordering process, but their website and online presence boast a youthful and engaging level of personality. From their bouquet names to their use of photography, one click-through of the website gives customers a taste of the energetic personality of their brand.

4. Find what’s missing in your market. This mixture includes equal parts of knowing what customers in the market want and understanding what your competitors aren’t doing right. By fixing this disconnect and filling a void, you’re not only going to stand out from your competition, but also have a chance at changing the market in the process.

In the flower industry, many businesses have completely forgotten about the buyer by throwing in hidden fees, spamming marketing materials, and trying to sell non-bouquet extras in the purchase process. TheBouqs.com got to the heart of this big market-related issue, which also positively transforms the customer experience as a whole.

5. Develop a pleasant experience. By making your customer’s interactions and experiences as efficient and effective as possible, you’re ensuring their return. Streamline interactions and processes to cut the fuss and put your customers at ease. This means providing fewer clicks at the point of purchase and keeping fees as transparent and standard as possible.

6. Show them respect. Giving your customers an unmatched experience is only possible through respecting their time and inbox. Don’t spam your customers with marketing materials or hit their inbox too often. Too many businesses believe this is a way to keep their customers “in the know” when it’s actually working to push them away. At TheBouqs.com, they send out one email a week. For your customer, twice a week or daily might be best. You need to customize your marketing to match your customers wants and needs.

7. Play to your user’s values. Sure, you may doing your best to give your customers what they want in terms of experience, but keying in on their values will show them you really care.For instance, TheBouqs.com knows their customers value social-responsibility. They built their business foundation on this value through partnering with eco-friendly, sustainable farms that respect the environment and their farmers.

When it comes to your customers, giving a little will get you a lot in the long run. Put your customers first and you’re sure to come out on top.

About Ilya Pozin:

Founder of Ciplex. Columnist for Inc, Forbes & LinkedIn. Gadget lover, investor, mentor, husband, father, and ’30 Under 30′ entrepreneur. Follow Ilya below to stay up-to-date with his articles and updates!

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