Today's business section has an article reporting that unit sales are down, but prices are "inching" up. This may surprise people, but it's important to remember how these statistics are compiled, and that's by adding all the sales in one time period and comparing them to all the sales combined in another time period. That's not an apples-to-apples comparison, unless by chance the same house sold in both periods, and you just looked at that sale.
With so many properties on the market, and the lagging state of the real estate industry, only the best homes are selling. By that, I mean the ones that are priced compellingly and are in close to pristine condition. There are some exceptions, especially in areas that are in demand and have less inventory, but in general only the "good" buys are selling.
What does that mean for sellers? Don't assume that your home is worth more than it was last year, and don't assume that you can price it aggressively. One of the most striking changes in the real estate field over the past 25 years is the amount of market knowledge available to, and often absorbed by, buyers. They know what your home is worth, and they aren't--except in the rarest of circumstances--going to pay more. If your house stands out, in price, location, appearance, or condition, you have a better chance of selling it. Those are the home sales showing up in the statistics. Adjust your expectations accordingly!
Friday, November 5, 2010
Wednesday, November 3, 2010
Home for the Holidays
This is the second of my annual posts. It's another one that is often the same, although this year I might even being writing it a little earlier than usual. It's time to remind those who want to close out the year by finishing a move that we have arrived at the eleventh hour.
By the time a buyer makes an offer, gets it accepted, does his/her inspection, obtains a mortgage and insurance, and closes the property, it will be the end of December. And that's if nothing goes really wrong.
The buying process has always contained some amount of sturm und drang, and there may be a little back and forth negotiation after the inspection results, but it is the mortgage process where the time frames have drastically changed. People who have not financed or refinanced recently will be shocked at the current level of documentation required for getting a mortgage. Often, they even spend time arguing about whether something is necessary--not worth your time, if you try--and it may take some time to produce all that is needed. The appraisal process can also take longer, especially since the low rates mean that there is a great deal of refinancing work being done at the banks now.
Even insurance is more complicated than it used to be. I remember the days when you could call on the day of the closing and get a binder. No more. Flood insurance in particular seems to slow up some transactions, where it is required.
The final point to keep in mind is that the holiday season is often a vacation time and/or a busy time for attorneys. Buyers have to plan ahead a little more to get things closed at the very end of the year.
There's my annual warning, so now it's time to get going!
By the time a buyer makes an offer, gets it accepted, does his/her inspection, obtains a mortgage and insurance, and closes the property, it will be the end of December. And that's if nothing goes really wrong.
The buying process has always contained some amount of sturm und drang, and there may be a little back and forth negotiation after the inspection results, but it is the mortgage process where the time frames have drastically changed. People who have not financed or refinanced recently will be shocked at the current level of documentation required for getting a mortgage. Often, they even spend time arguing about whether something is necessary--not worth your time, if you try--and it may take some time to produce all that is needed. The appraisal process can also take longer, especially since the low rates mean that there is a great deal of refinancing work being done at the banks now.
Even insurance is more complicated than it used to be. I remember the days when you could call on the day of the closing and get a binder. No more. Flood insurance in particular seems to slow up some transactions, where it is required.
The final point to keep in mind is that the holiday season is often a vacation time and/or a busy time for attorneys. Buyers have to plan ahead a little more to get things closed at the very end of the year.
There's my annual warning, so now it's time to get going!
Tuesday, October 26, 2010
It's That Time of Year Again
Every year I write the same thing at this season, because every year it's true: the best time to buy real estate is between Halloween and Thanksgiving. Why is that? Because that's when sellers are most likely to accept an offer that makes a transaction either possible or particularly enticing to the buyer. As the weather gets colder, and thoughts of heating oil, plowing driveways, and holiday hiatuses on open houses and offers creep in, sellers weigh, as they should, the costs of carrying a property through the winter (for that is most likely what they will end up doing, if they don't sell by Thanksgiving) against the reality of an offer that is less than they want to accept. In addition, there's no guarantee that prices will even go up in the spring, and a outside chance that values could decline over the quiet months. As a further inducement, some sellers have tax reasons that make closing before the end of the year important or at least profitable. Although some people say that tax considerations could change with a new Congress, I think most would agree that uncertainty generally doesn't favor waiting when one is talking about the chances of taxes going either up or down. Even the economic news, which has seesawed over the past year, should make one cautious about holding out for better times.
This year, with so much inventory on the market, and so little time before the holiday season, it's especially important to consider pricing properties at levels that are not just correct, but compelling. Stand out from the crowd with a price that entices, and get your property sold while others just sit. And do it before the first flakes of snow hit the ground!
This year, with so much inventory on the market, and so little time before the holiday season, it's especially important to consider pricing properties at levels that are not just correct, but compelling. Stand out from the crowd with a price that entices, and get your property sold while others just sit. And do it before the first flakes of snow hit the ground!
Thursday, October 21, 2010
Back From Boise
I just returned from Idaho, where the national group of independent real estate companies to which I belong was meeting, and I can report that it's scary out there. We have all cut costs, and are continuing to cut costs, finding new businesses and new ways of doing business, and changing our organizations to adapt to a changing world. No one thinks that it's going to get easier in the next couple of years.
We are probably not that different from owners in many industries. When you look at the stock market, it may seem as though times are better, since many are reporting higher earnings. However, when you examine things more closely, most of the improvement comes from cutting costs and laying off employees, not from raising revenues. Especially when you get to smaller companies, that strategy has its limitations. As one member of our group reminded us, you cannot save your way to prosperity.
While the whole country is affected, it's a good time to be in the Midwest. Those in that area say that it's because what doesn't go way up doesn't come way down, and that may be so. Everyone agreed, though, that some ways in which we traditionally made our profits--traditional brokerage, relocation, and commercial sales--are all suffering, and people are increasingly looking to new sources of income--mortgage, property management, and insurance (which, ironically, was fairly recently thought not to be much of a moneymaker for real estate). Short sales continue to affect all parts of the country, with the Midwest again being better than Nevada and other hard-hit markets.
We talked about the trends, the harsh realities, and the future of our industry. Afterward, we adjourned to do the only thing we could then think to do--drink!
We are probably not that different from owners in many industries. When you look at the stock market, it may seem as though times are better, since many are reporting higher earnings. However, when you examine things more closely, most of the improvement comes from cutting costs and laying off employees, not from raising revenues. Especially when you get to smaller companies, that strategy has its limitations. As one member of our group reminded us, you cannot save your way to prosperity.
While the whole country is affected, it's a good time to be in the Midwest. Those in that area say that it's because what doesn't go way up doesn't come way down, and that may be so. Everyone agreed, though, that some ways in which we traditionally made our profits--traditional brokerage, relocation, and commercial sales--are all suffering, and people are increasingly looking to new sources of income--mortgage, property management, and insurance (which, ironically, was fairly recently thought not to be much of a moneymaker for real estate). Short sales continue to affect all parts of the country, with the Midwest again being better than Nevada and other hard-hit markets.
We talked about the trends, the harsh realities, and the future of our industry. Afterward, we adjourned to do the only thing we could then think to do--drink!
Thursday, October 14, 2010
Not Enough Listings?
We were talking yesterday in a couple of offices about the current state of our listing inventory. While the average person might think that every third house is on the market as we speak, much of what is available is either shopworn, overpriced, or needs work. Today's buyers, who believe that they are in a buyers' market, expect that every week more properties will be listed, and that prices may even come down further. Therefore, they think that they can be--and they are--extremely picky about what they want.
While it is true that new properties come on the market each week, many of the new entries suffer from the same problems as the old ones--i.e., overpriced or need work. When we get buyers who are motivated and in a hurry, they often feel that they have surprisingly little inventory from which to choose a property. At the same time, we know that many sellers out there feel that they should wait to list until there are fewer signs in yards (not counting the ubiquitous political kind!). Properties that are in pristine condition, which would command top dollar, thus stay off the market, while their owners wait for a better time to sell.
Ironically, it would be hard to find a better time to list those particular properties. There are buyers out there, and there are more of them all the time that come out to look, as many feel that the recession is over, but rates are still low, and believe what we're all hearing, that this is the best time to buy in 50 years. Yet those buyers cannot get over the fact that they aren't seeing exactly what they want. Given the high inventory, they keep looking. They even think that they can find rooms painted in the colors they prefer. Most don't seem to want to do any work to the place of their dreams.
This mismatch between what buyers want and what sellers are offering leads us to believe that, although inventory is high, there are actually not enough listings on the market, of the type that will sell quickly. If you own a property like that, call us now. You may be pleasantly surprised at the results!
While it is true that new properties come on the market each week, many of the new entries suffer from the same problems as the old ones--i.e., overpriced or need work. When we get buyers who are motivated and in a hurry, they often feel that they have surprisingly little inventory from which to choose a property. At the same time, we know that many sellers out there feel that they should wait to list until there are fewer signs in yards (not counting the ubiquitous political kind!). Properties that are in pristine condition, which would command top dollar, thus stay off the market, while their owners wait for a better time to sell.
Ironically, it would be hard to find a better time to list those particular properties. There are buyers out there, and there are more of them all the time that come out to look, as many feel that the recession is over, but rates are still low, and believe what we're all hearing, that this is the best time to buy in 50 years. Yet those buyers cannot get over the fact that they aren't seeing exactly what they want. Given the high inventory, they keep looking. They even think that they can find rooms painted in the colors they prefer. Most don't seem to want to do any work to the place of their dreams.
This mismatch between what buyers want and what sellers are offering leads us to believe that, although inventory is high, there are actually not enough listings on the market, of the type that will sell quickly. If you own a property like that, call us now. You may be pleasantly surprised at the results!
Thursday, October 7, 2010
Thank You, John Paulson
If any of you have not read reports about hedge fund investor and Wall Street prognosticator John Paulson's recent speech about the economy, I can summarize it this way: Buy real estate. He told listeners that, if they didn't own a house, they should run out and buy one. If they did own one, they should buy a second home. If they already had two, they should buy a third and loan their relatives money to buy homes as well. He called it the best time in 50 years to purchase real estate, mostly thanks to historically low interest rates.
Since we are used to seeing all the stages of a real estate cycle, we know that we are at the bottom, and hope that we may even be starting up. While sales fell badly in the third quarter, due in large part to the expiration of the tax credit, prices in our region only dropped 1 to 2%. That's far less than most people think prices are off, and shows that the underlying value is solid.
Now ask yourself how you will feel next year if you do not buy now, and prices, sales, and interest rates all go up in the intervening time period. If you feel that you have enough house and enough mortgage debt, even with the prices and rates, then you'll be fine. But will you be kicking yourself if that house you coveted is now $100,000 more, and rates are up to 6 or 7%? If so, then you know what you have to do. So, as Nike says, just do it!
Since we are used to seeing all the stages of a real estate cycle, we know that we are at the bottom, and hope that we may even be starting up. While sales fell badly in the third quarter, due in large part to the expiration of the tax credit, prices in our region only dropped 1 to 2%. That's far less than most people think prices are off, and shows that the underlying value is solid.
Now ask yourself how you will feel next year if you do not buy now, and prices, sales, and interest rates all go up in the intervening time period. If you feel that you have enough house and enough mortgage debt, even with the prices and rates, then you'll be fine. But will you be kicking yourself if that house you coveted is now $100,000 more, and rates are up to 6 or 7%? If so, then you know what you have to do. So, as Nike says, just do it!
Wednesday, September 29, 2010
Why Does Consumer Confidence Matter?
I like to read the papers as early as possible in the day. As a morning person, I find that I can absorb bad economic news best before 6 AM. This morning, I was challenged to do just that, as consumer confidence hit a low that was unexpected by analysts. That, of course, will make the real estate market worse.
It's somewhat of a chicken-and-egg situation, because the poor real estate market has a lot to do with what happens to the consumer confidence index. Is it so low because recent news about housing sales has been so negative? Or is low confidence causing the level of real estate sales to drop? Although it's hard to know for sure, it's probably some of each.
If you were making a list of what goes into the strength of the real estate market, apart from local issues and demographic trends, you would probably cite three things: household income; interest rates; and consumer confidence. Income is obvious, because the more you earn, the more you can afford to buy. That can occur because your job pays more over time, or for other reasons, such as the run-up in prices caused by two-income families going up dramatically and allowing housing prices to follow. Interest rates also have a clear effect. Since the only thing that really matters to most people is the amount of their monthly payment, lower rates will let them buy more house for the same monthly nut.
Consumer confidence is really the measurement of people's expectations about the near-term future, both of their own situations and the national economy. To translate that into housing prices and sales, the index reflects what they think will happen to their jobs and wages. Unless they feel positive about their prospects, they are most likely not going to take on additional or increased debt. Unfortunately, there is a multiplier effect as well; when they read that others are not feeling rosy about the future, their own opinions tend to drop as well.
The Federal government is charged with raising confidence about all of our futures. Let's hope, for all our sakes, that they come up with something that works, and sooner rather than later.
It's somewhat of a chicken-and-egg situation, because the poor real estate market has a lot to do with what happens to the consumer confidence index. Is it so low because recent news about housing sales has been so negative? Or is low confidence causing the level of real estate sales to drop? Although it's hard to know for sure, it's probably some of each.
If you were making a list of what goes into the strength of the real estate market, apart from local issues and demographic trends, you would probably cite three things: household income; interest rates; and consumer confidence. Income is obvious, because the more you earn, the more you can afford to buy. That can occur because your job pays more over time, or for other reasons, such as the run-up in prices caused by two-income families going up dramatically and allowing housing prices to follow. Interest rates also have a clear effect. Since the only thing that really matters to most people is the amount of their monthly payment, lower rates will let them buy more house for the same monthly nut.
Consumer confidence is really the measurement of people's expectations about the near-term future, both of their own situations and the national economy. To translate that into housing prices and sales, the index reflects what they think will happen to their jobs and wages. Unless they feel positive about their prospects, they are most likely not going to take on additional or increased debt. Unfortunately, there is a multiplier effect as well; when they read that others are not feeling rosy about the future, their own opinions tend to drop as well.
The Federal government is charged with raising confidence about all of our futures. Let's hope, for all our sakes, that they come up with something that works, and sooner rather than later.
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