State of the Housing Market in the Triangle

Hi everyone! I thought I’d touch base and talk a little bit about the housing market in the Raleigh NC area. We are experiencing a hot market here, and also a housing shortage. Anyone who lived through the crash as a realtor or builder, predicted this situation, because so many builders went out of business and because so many “cheap” homes were bought as either rentals or primary residences as the market righted itself. NOW, however, we are experiencing the slinky effect. There simply are not enough houses to satisfy demand here.

We lost a lot of builders and developers in the crash, and I assume many never came back, although many did. I see many of the same names pounding out spec homes and custom builds, but they can’t keep up with demand. Interest rates have been at historic lows, fueling the feeding frenzy, and now, there are not enough existing homes either. Baby Boomers are asking for one-level living, and requests for senior living communities are raging. This situation could also have been predicted, although you wouldn’t think so by the scramble to supply this need.

I drove around some of the older communities and knocked on doors, encouraging people who owned older ranch-style homes to list with me, because not only could I sell their house in the blink of an eye, but also,they could buy a home at a very low interest rate. Problem is, now there AREN’T any homes for them to move to if they do sell their ranch style home if they want to be under 200 thousand.

So we’re in a bit of a pickle. Trying to find a home under 200 thousand that’s within a reasonable commute distance is next to impossible, although there are some town homes coming on line under 160 thousand that will not force a huge commute to work. Problem is: Townhouse are two story. Baby boomers want one story.

So. We talk money. Because of the supply/demand discord, prices are jumping. It’s easy for me to list at the top of the price range indicated by a market analysis, and often get at or above list price offers! This is great for sellers, and kind of a balancing of the universe; because these folks took a beating in the crash. Senior communities are popping up all around, just getting off the ground really, but they are priced so high that many of my clients who might want that kind of home laugh and go another direction. People moving to a fixed income lifestyle often can’t easily afford a starting price in the 400’s. I do hear that DR Horton is starting an over 55 community in this area priced under 200. Now we’re talking.

So it’s as hot, crazy market. If you are thinking of selling, call me. We should start by talking about what you want to go TO, and makes sure we can find it for you. Because if we list your home, chances are it’ll fly off the market faster than you may want it to! But it’ll fly at a higher price than you might think too!

Statistics on Home Sales

Articles on home sales fill the internet lately, and most people cite those statistics without doing a deeper dive, or having the background information to interpret the data. But it is imperative that you know where the numbers come from that influence your decisions related to buying a home, or selling your existing home, or both. And it is important that you understand your market well enough to truly understand what the data is telling you, or whether it even applies.

I just read a article that said existing home sales are down 2.6%. For many, that would be the end of the story. But in my market, if existing home sales are down at all, it is definitely not due to the economy; it is because there is a shortage of listings. In other words, MANY realtors have clients standing in line to buy existing homes, but there just aren’t any available to buy in their price point. IMPORTANT: If you are thinking of selling YOUR existing home, this is GREAT news for you! Supply is low and demand is VERY high. This means many thousands more dollars in your pocket! So in this case a 2.6% drop is not bad news. In fact, it’s a reason to celebrate. And that is in the Raleigh/Triangle market, not in Chattanooga.

Something else to consider is seasonal effect on data. Most folks don’t want to have their home on the market for sale during November and December, because of the holidays. And during summer vacation time, it’s not unusual to see a slow down in buying activity. It doesn’t predict gloom and doom for the market; rather, data predict typical human habits and traditions. I always have homes closing over both Thanksgiving and Christmas, so some folks clearly take advantage of the lower supply of homes and they list, or they take advantage of the holiday slowdown to take advantage of buying at potentially a lower price. See how this works? Make the data work in your favor by understanding it.

The other thing you need to dig out of these articles is the source of the data. I just looked at a chart showing lowest time on the market for existing homes. I know our time on the market here is much lower, on average, than what the chart showed. So I found the small print and saw that the data came from San Francisco CA, Billings MT, Chattanooga TN. This data had NOTHING to do with our local market. So be sure you know where these “stats” come from. In fact, in some neighborhoods, I can almost predict when a home will go under contract, based on that community’s time on the market. In the last case I examined, time on the market was about 40 days, lower than that chart indicated from these other areas.

The bottom line is this, and you’ve heard it a thousand times: Real estate is local. Now that sounds a bit ridiculous, right? But the saying is packed with truth. What happens in San Francisco has nothing to do with us, here in the Raleigh/Triangle market. Each day we have 60+ people moving here, needing homes. EACH DAY. So our market is always healthy, or healthier, than markets anywhere else in the US. This means if the economy crashes, we will slow down, but not as much as most other markets in the whole country. So don’t be afraid to buy, and I will beg: Please list your existing home. I can sell it! I probably have a buyer waiting.

Interest Rates on the Rise, BUT…

It should come as no surprise that interest rates are on the rise. This means that a house payment you could afford six months ago might be out of your range now. It’s still a great time to buy a home, though, because rates are still at record lows. I’ve had some conversations lately that made me remember that the interest rate when I bought my first home was around 17%. I know.

My professional advice is to visit your preferred lender IN PERSON, and have a conversation about the different kinds of loans out there, and get several estimates, based on increasing rates. Understand that there are MANY different types of loans, including, yes, adjustable rate ones. My first mortgage was an adjustable rate loan, but my rate was frozen for four years, and could only adjust upward one percent per adjustment period afterward. Good. At that time rates were SURE to go down anyway, but before the adjustment, I refinanced to a conventional loan with a fixed rate. And just so you know, there were a plethora of adjustable rate choices at that time. I’ve used a balloon loan too. Low fixed rate up front for a period, after which the entire amount comes due. But you just FINANCE that amount, and the risk, of course, is what the rates will be at that time. In my cases, they always went down, which was a calculate risk on my part.

If you’re not comfortable with risk, then these adjustable rates or balloon loans are not for you. But the point is that there are other ways to calculate your payment than just a straight, 30 year, conventional loan. So take a couple of hours and visit a loan officer. You’ll be amazed at what’s out there.

Adjustable rate mortgages got a bad reputation in the aftermath of the real estate market crash…which should be called the Wall Street Greed crash…because lenders were writing loans that never should have seen the light of day and would land somebody in jail today. Note that they did that, often, at the behest of Wall Street brokers who needed sub-prime loans to fill tranches blah blah blah. HOWEVER…not all adjustables are bad. If you are responsible and do your homework, an adjustable rate mortgage can be a way to beat the rising rates for the short term. But you will need to be in a good financial position to refinance when the time comes.

Bottom line is this: In our market here in the Triangle, every seller expects a loan approval letter (some a pre qualification letter) to accompany your offer to purchase, otherwise your offer might be rejected immediately. So you’ve had to have at least one conversation with a lender in order to get that. Make it a meaningful conversation, a deep dive into your options…all of them…so that you get the most bang for your hard earned bucks. In other words, don’t let rising rates put you out your dream of buying a home. There are GOOD ways for responsible buyers to nab a low rate.

Wanted: Experienced Realtors…

Just like other areas of life, there was a recent push to replace experienced real estate agents with “millennials”. The thinking was that millions of home buyers would be people in this age cohort, that they would be THE buyers and that they would want to work with agents who were their peers. Well that wasn’t on target, to put it mildly. Many of the younger buyers are renting and paying off college loans, or even staying at home with Mom and Dad…not buying. Real estate planners shouldn’t feel bad; retail made that mistake too. Many of the millennials are educated, savvy, street smart and skeptical about anybody wanting their sparse cash. They want details, they want to know their agent has a solid knowledge of the market and is well capable of walking them through the jungle of tasks associated with buying and selling a home. In other words, millennials expect to be leaders and as such, their real estate agent had better be qualified to take that lead.

Millennials who do buy are not usually in the higher end market; rather, they are usually in the first time buyer and first time move-up buyer price range. They, and other who ARE buying in the high end market do not want a “millennial” guiding the transaction. Well, I’m a 10,000 foot view person. I saw this stumble coming a mile and a half away. Don’t get me wrong; I love young people. The ones I get to meet and work with are very smart, very motivated and very sensible about buying. They give me hope for the future. But young real estate agents are not well rounded, confident and knowledgable about the market just yet. They deserve to grow and build a skill base, yes; but that doesn’t negate the value of experience.

So some of the same companies who were nudging the older agents aside are now actively recruiting experience. It’s a shame that experienced agents are often overlooked by the ‘planners’ of the future of area market movement, and that that experienced agents are re-noticed only when the cavalry is needed. But that’s how it goes.

My advice to you is this: Realize that you are making one of the largest transactions of your life, and that you should put that transaction in the hands of experience and knowledge. That doesn’t mean someone who made a high score on the test, although that’s important. It means someone who understands the nuances of the market beyond what the publications say. It means someone who understands that prices in neighboring communities can be very different and why. It means someone who has experience with inspectors and builders. It means someone who knows how to spot hidden potential issues. It means someone who knows what’s worth worrying about and what is not. It means knowing the importance of pricing and how it impacts the overall market. It means knowing how to put the most cash in your pocket at the end of the day.

I decided to write about this subject today because I have been working on a market analysis for the last several days, in a new growth-spurt area, where prices have jumped significantly in the last year. I want to push my list price as high as I can…and be able to have it appraise at that value when the time comes. This of course prompted a deep dive into that area and into that community, and a subsequent spreadsheet…mine, not a canned product.

One of the values I use, LOOSELY, I might add, is price per square foot. And while this is the WRONG WRONG WRONG value to use in pricing a home, it does give you a nice snapshot of market activity at-a-glance, and it can be quite eye opening. It was for me. In my area of interest there were 3 of 14 homes I studied, which had VERY much lower sold price-per-square-foot. This prompted me to look at the listing agency AND agent, and each case, the agent was inexperienced. This costed the home owners/sellers a lot of money they could have made on their transactions and it hurt the overall market. These low-ball prices will be put into the “comp” pot, and will be used by appraisers in pricing other homes for mortgages. And this tells me nobody’s guiding these agents appropriately and nobody has told them the value of strong pricing. Nobody has shared with them that listing with strong prices raises the entire market, which is actually our job…to protect the market.

So, while other home sold in the 118.00 price per square foot, these homes sold at around 108. That adds up. To loss for the sellers. The moral of the story is this: If you hire inexperience, it will cost you. You may never know it…which would be the best scenario. If you do know it, you have to wonder where else you got short-changed.

I need to also say that sometimes it pays to price low if a quick sale is needed…for the SELLER, not the agent. And that’s all I will say about that.

Bottom line: Be sure your agent is experienced enough to be a strong, successful advocate for you. That’s what you are paying for. This isn’t an opportunity to be trendy; this is your money at stake. Experienced agents will understand that.

MARKET STRATEGY FOR THE TRIANGLE

If I said it’s a crazy market would you think I’m repeating myself? Well, it’s a crazy market. There’s a housing shortage folks, which makes it the strongest seller market I have experienced. For the first time in my experience, all of my buyer clients (and one seller) are BUILDING their next home. That’s because…duh…there’s as housing shortage, and people can’t find a home they want to buy! If they find one, there are five offers on the table already! ALERT! TIME TO LIST IF YOU ARE THINKING OF SELLING!! I’ve said that so much I’m out of breath. Again, you can make the MOST on the sale of your home now, while there are people clamoring for a great home to buy and who don’t want to wait six months to build!

Remember when I said I couldn’t wait until the pendulum swung back to center? When I was tired of my sellers getting the pants beaten off of them? Well, I’m glad alright. Sellers are now in control. Like I said, the universe WILL balance. Never fails.

But like always, there’s a “but”.

I find that many real estate agents negate the power of supply-and-demand when pricing homes to list. For example…one-level living is the hottest thing going right now, except for senior living communities…which are also one-level living. So if you have a ranch style home, you are in the proverbial cat-bird seat. Now that only applies if you home is marketable. I’ll explain later.

Back to pricing: Yes, look at the price range of homes in your zip code and focus on your comps. Then search for ranch style homes in the MLS AREA, and see how many ranches are out there. If you find ONE or NONE? Instant benefit to you, Seller. You may now price at the high end of the range and expect to get it. I recently had an agent lambast me in her feedback telling me that my listing was priced TWENTY THOUSAND too high. Well, we sold that house for the price I set. Booyah! Pricing is my strong suit folks. I get it done. If she had listed the house, well, not a happy face on that one. And it would have hurt the market for the community too.

When you meet with me, I will ask you this, “What is your selling goal?” Now that might sound stupid, but bear with me. If your goal is to get rid of the house FAST, that initiates a different STRATEGY for pricing your home. In other words, we might aim a bit lower in price, or come up with some enticing concessions. But if your goal is to get every last penny the market will allow for your property, well that’s another STRATEGY, and its my favorite. That means we price you at the high end of your range, but we expect to MAYBE take a bit longer to sell. I don’t know about you, but I’d wait two or three more weeks to net 5 grand. If you are not in a rush, relax and focus on your bottom line getting BETTER.

If your agent doesn’t talk strategy with you…ask why! There is more to pricing your home than pulling up some comps and taking an average! Supply and demand MUST be considered! If you have the only ranch style home with an acre or more lot in the whole area? You just hit the jackpot on pricing; I don’t care what the other homes went for.

Understand that pricing your home is a many-faceted operation that takes time, it takes knowledge of the greater market, your LOCAL market…which sometimes means your exact community…and it takes an understanding of what you, the seller, want to achieve.

My goal in any listing situation is to get you, the seller, every penny I can get for you on pricing. But if you just need to move on, we can change that strategy. It’s a team effort and your agent MUST know your needs, not just how to average the sale price of three properties sold in the last three months.

Now, back to having your home “marketable”…People sometimes hate to hear this, but here is the cold, hard truth. If you want TOP DOLLAR for your home, it MUST be in top dollar CONDITION. That means you have to roll up your sleeves and do some cleaning and re-arrange or maybe even remove some pieces of furniture. Remember we look at houses ALL THE TIME. We know what sells and what doesn’t. You HAVE TO DECLUTTER.

Buyers are buying space, not your decor. Don’t fault the professional real estate agent when she tells you what you have to do to get top dollar. Is your decor worth ten thousand dollars to your bottom line? I’ve seen people say yes to that time after time! Amazing! I don’t have that kind of money to spare, how about you? If you do, don’t worry about making your home “marketable”.

So…remember that if you want top dollar, the house must be WORTHY of it. If you are not willing to put in the sweat equity to get top dollar, do NOT blame your real estate agent! Instead, look in the mirror. Remember that selling your home is a team effort and you…let me repeat…YOU are one half of the team. So get involved, know your strategy, and get that home spiffed up to garner the best price! If I’m your agent, I’m going to work very closely with you to get you that price.

Let me just add one more thing: Don’t start getting antsy. If you have chosen a savvy real estate agent who has clearly understood your needs and laid out a great pricing strategy, listen to her and settle down. Selling a home is nerve wracking I know, but you will shorten your life by pacing around being nervous. Relax and let the strategy work. You can count your money and your blessings later, trust me. And if you can’t trust your agent, you’ve got the wrong agent. Just sayin’.

Are You Sitting On a Goldmine?

The universe balances; what goes up must come down; if you don’t like the way things are, wait a minute for the change. Same is true for real estate. Remember when it was a strong buyers’ market, such that sellers had to jump through multiple hoops just to have a CHANCE to sell? Not anymore.

It is now a strong seller market, particularly if you own a one-level home with half an acre or more. In Wake county and surrounding areas, it’s very hard to find a ranch-style home with a big yard. If you can find one, it’s expensive! So chances are, if you are the owner of a property like I just described, your property value is higher than you think!

Add to that the fact that interest rates are still low AND lenders have loosened the process to make it possible to get a loan now, even with no money down, and you, homeowner, have a chance to capitalize on your investment in a big way. If you are ready to up-size or downsize, and you own a ranch style home with some land, think about listing now. You might be surprised what your home is worth…so don’t underprice it if you list. Supply and demand DO make a difference. Hire a realtor who understands this concept.

Email me and let’s talk about your property. I’d love to meet you and I’d love to list your house.

Interest Rake Hike

Well, we’ve been on the roller coaster of opinion about a rate hike for some time. Latest news is that there won’t be one…but there might be one by year end. I wonder how much it cost to have all of that discussion in the ether…but I could have done it free, right here. MIGHT be one? Please. Seriously, I could have said that. I DID say that, in fact.

Janet Yellen had some apparent brain “pauses” in her speech and was, according to CNN, seen by doctors when she finished. It takes a lot out of you to predict the future politically correctly, I guess. I’m not having any brain cramps, spending no money, and I can tell you exactly what will happen. Here goes. Note that I don’t have any wolves at my door that I know of.

OK. Cracking my knuckles. Here goes: As soon as the “FED” decides they can successfully take more money into their coffers, they will. There. Not dehydrated, not feeling dizzy. I’m good. But make no mistake about it, the powers that be know that if they MENTION rate hike the economy…our THRIVING economy…goes running for the hills. We have NOT recovered from the fall, we are not back to the pinnacle. We’re not ready. And I’m guessing that many of us have decided that its a good idea for us to keep more of our hard earned money, rather than sending it out in interest. Call me crazy but I think that’s ALWAYS been a good idea, although believe me, I’ve paid my share of interest.

I have heard a hundred people say they don’t do credit cards anymore. Why? Interest. People are buying so many homes there’s a housing shortage. Why? Interest. It’s LOW. How stupid do you have to be to think that the very thing people AVOID would be a good idea to INCREASE…for the economy?

Watch these people. Watch how many times they threaten to raise rates and then back down because the ‘economy’ runs for the hills. They’re testing the waters on a regular basis. When the economy really IS strong and people have confidence it will stay that way? Then it will be time to raise rates. In the meantime, if you’re thinking of buying or selling, do it now before they pull that trigger. Great time to list while there is a housing shortage…and to buy while rates are…I can’t believe it’s been low so long…low.

Do something joyful today.

Recent Hot Market Effects…

Hello again! I hope your life is going well for you and that you are finding time to do things which bring you joy.

As you know, I am a real estate agent, and somewhere along the recent past I made a comment about what to be aware of in the coming months, with regard to the crazy real estate market. Well, some of the things I feared are showing up, just as I predicted. For example, heightened emotions due to multiple offers are definitely in play. Emotion is not a great idea in a business transaction. Hard to eliminate, to be sure, but never should emotion lead the way. I cautioned real estate agents to advise their clients well in that regard, to prepare them for the inevitability of multiple offers and even offers above list price.

I tell my clients to know their limits, discuss them with one another, and be prepared to walk away from an overheated offer situation. They know before we get in the car, what they are facing and how they will probably react.

It’s funny how people might be ambivalent about a particular home until they know someone else is interested. If you, as an agent, see that phenomenon, it’s up to you to be the good advisor and make sure your client hasn’t gotten caught up in the competition, that they truly want the house.

And let me also add this: real estate agents are not immune to getting caught up in emotions. It’s your job to guide, not lose control.

The other issue I cautioned about was homes not appraising for the elevated offer prices. And now that’s also happening. Listen, it is up to the realtor to know the market and know when an offer just won’t fly when it comes to the lending part of the equation. Yes, it feels good to have your offer accepted over the others, but you had better know what to do and how to explain to your excited clients what happened, when the appraisal comes in low and the deal falls apart. And if you get crazy with the offer price, it will.

Of course sellers want to get every penny they can from the sale of their house…and they should… but listing agents, you need to make sure they understand the implications of an above-list-price offer if it falls through at appraisal. In other words, it’s not just buyers who need to be prepared.

Okay, here’s another issue. EVERYBODY is busy. So inspections take more time, repairs take more time, and underwriters take more time. If your realtor tells you he can sell your house in 3 weeks and a mortgage is involved, or repairs are involved? Fire him. Any good agent knows that service providers are no longer sitting around waiting for the phone to ring. They are busy and your request will be put into their queue. DON’T RUSH THE TRANSACTION. Nobody benefits from that.

This market is going to be hot for a while; it takes a while for the pendulum to swing. Knowledge is power. Know what to expect and plan ahead.

Due Diligence in Real Estate

: the care that a reasonable person exercises to avoid harm to other persons or their property

: research and analysis of a company or organization done in preparation for a business transaction (as a corporate merger or purchase of securities)

That’s the Merriam Webster definition. Neither really clearly defines the way due diligence works in real estate, but it’s a period of time the buyer ‘buys’ to do inspections…all of them…and also to get their loan application done. Usually takes about 45 days.

I’m finding that buyer clients are not usually clear on how this works…and neither are listing clients most of the time. But Due Diligence in real estate is the period of time the buyer uses, and pays for, by the way, to search through the nooks and crannies of a home…and pay for inspections of them…before taking the step to actually put both feet in the game. Buyers can spend a lot of money during this time, and a lot of stress equity wading through the inspection results. During this period, buyers can walk away for any reason…or NO reason…and stand to lose only the money they invested in due diligence fees and inspections.

Buyers, particularly first timers, usually get very upset when they see the inspection report, even if they’ve been told what to expect. Here’s how it goes: The older the house, the longer the report. The longer the report, the more freaked out everybody gets.

I have decided it’s all about expectations. Bottom line is this: Don’t expect an older house to have a three page inspection report. Older houses have older house issues, not the least of which is that it’s not a new house. It’s a great idea to have this conversation right up front, even before you find ‘the one’ that the buyer wants to make an offer on.

Anyway, the buyer benefits greatly from this period of inspections, but the seller needs to be aware that if a ‘disclosure’ issue is uncovered during inspections, they must then either disclose the defect, or repair it. And it’s a no-brainer that it’s better to do the repair. Are we hearing dollar bills rustling, or is it just me? Oh, and the seller can also take the house off of the market, by the way.

So bottom line is this, I’m thinking: Buyers need to have clear expectations of the inspection results based on the age of the house, and sellers should have a home inspection done, including the crawl space, before they list. That way nobody gets surprised.

Scratch that. Everybody gets surprised. It’s real estate.

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