market Archives - Real Estate News and Commentary

April 20, 2018July 18, 2019

Housing inventory crisis?

The low housing inventory crisis has plagued the housing market for about six years. Low inventory has frustrated home buyers and all but eliminated move up home buyers. The ongoing housing inventory crisis is an obstacle to a balanced housing market.

As a result of the ongoing housing inventory crisis, existing home sales may see a decline in the next few months, when spring sales should be strong. Seasonal increases are a given, as National Association of Realtors (nar.realtor) data indicated a 3.0 percent month-over-month increase for February existing home sales and a 3.1 percent month-over-month increase in the Pending Home Sale Index (the Pending Home Sales Index is a forward-looking dataset indicating the number of homes that are under contract). However, February sales only increased 1.1 percent from last year. But the tell of slowing activity is the 4.1 percent decrease in pending home sales from last year.

Most experts blame the sluggish home sale activity on low housing inventory. NAR’s reporting that February’s seasonal month-over-month 4.6 percent increase of total housing inventory is expected. However, the 8.1 percent decrease in housing inventory compared to last year is worrisome.

The Greater Capital Area Association of Realtors (gcaar.com) March 2018 data for single family home sales in Montgomery County indicated a decline in activity across the board. Listings decreased 11.1 percent month-over-month and 7.8 from last year. Contracts decreased 6.6 percent month-over-month and 6.9 percent from last year. While closings only decreased 3.8 percent month-over-month, there was a 7.8 percent decrease from last year.

Another sign that that the housing market is in crisis is last week’s announcement from Zillow. If you have not yet heard, Zillow is expanding their Instant Offer program and plans to jump into the housing market (zillow.com). They plan to fix and flip homes by making cash offers and buying houses like other investors who participate in their IO program. The homes will be listed for sale with real estate agents who subscribe to Zillow’s Premier Agent program, as well as select partner brokers.

Zillow Chief Marketing Officer Jeremy Wacksman stated,

“Even in today’s hot market, many sellers are stressed and searching for a more seamless way to sell their homes…They want help, and while most prefer to sell their home on the open market with an agent, some value convenience and time over price. This expansion of Instant Offers, and Zillow’s entrance into the marketplace, will help us better serve both types of consumers as well as provide an opportunity for Premier Agents to connect with sellers. This is expected to be a vibrant line of business for us and for our partners in the real estate industry, while providing homeowners with more choices and information.”

The venture into flipping is a huge deviation for the internet juggernaut, whose revenue is mostly generated by selling advertising and leads to real estate agents and loan officers. The reaction in the industry is mixed, however Zillow’s stock dropped 7 percent the day after the announcement. Critics, including experienced real estate investors, scoffed at Zillow’s ambitious plan to flip a house within ninety days.

In a market where home owners are reluctant to sell, and frustrated home buyers are dropping out, Zillow needs to find ways to increase lead generation to grow subscribers (see why tech models looking for alternate revenue).

While being ridiculed by many, Zillow’s flipping plan may be a brilliant strategy to generate home seller leads for agents. Zillow acknowledges in their press release that “the vast majority of sellers who requested an Instant Offer ended up selling their home with an agent, making Instant Offers an excellent source of seller leads for Premier Agents and brokerage partners.” If Zillow’s plan works, it could also grease the wheels of the housing market by turning reluctant home owners into sellers.

As a home seller, the home sale inventory shortage limits your competition. But be aware that it’s not entirely a seller’s market. Your home’s condition can significantly lower the sales price, or even prevent a sale. Serious consideration should also be given to your listing price. Additionally, you should focus your attention to preparing your home to show to home buyers.

By Dan Krell
Copyright © 2018

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

December 30, 2015August 14, 2019

Real estate year in review 2015

2015 could have been considered a “damn if you do and damn if you don’t” year for the Fed. The Fed is often criticized (sometimes harshly) for their action and inaction. And as the historic run of near zero interest rates ended this year, many criticized the Fed for waiting too long to raise interest rates, while others said it was still too soon. The full impact of the first Fed rate hike in nine years won’t be known well into the next year.

Another real estate milestone that occurred this year was the implementation of the TRID (TILA-RESPA Integrated Disclosure) rule. Although the Consumer Finance Protection Bureau decided to delay enactment once; the decision to put the rule in effect in October was not only significant, but a historic change to the real estate settlement process. Initially, there was mixed reception; some lenders indicated that they have transitioned smoothly, while others reported having difficulty. Even Congress attempted to provide a grace period for those still transitioning (Homebuyers Assistance Act, H.R. 3192). Like the Fed’s rate increase, the full effect of TRID on consumers and the industry won’t be realized until next year.

Even though the 2015 housing market started slowly, because of record cold weather; the market demonstrated its resiliency with increased sales and continued home price growth throughout the year. Some markets were on fire this year; such as the Seattle WA region, where multiple offers and single digit days on market were the norm and home price indices exceeded the national average. However, most other regions (such as the Washington DC region) experienced average growth. The lack of inventory in some markets was said to add pressure on price growth. Home sale growth is expected to continue in 2016, as housing formation and employment outlooks are brighter. While home prices are still below the 2006 peak, home prices are expected to increase with a market expansion. And as housing affordability decreases, some housing critics are clamoring to predict another housing bubble.

San Francisco CA was one of 2015’s hottest markets. The market was so heated that many described it as “insane.” Madeline Stone reported that San Francisco teardowns sold for well above $1M while resales typically sold for 70% above list price (San Francisco real estate has gotten so crazy that this startup founder was offered stock options for his house; businessinsider.com; March 31, 2015).

And of course, there is the notable sale of a 765sf two-bedroom home that sold for $408,000 earlier this year (17% over list price). The significance of the 100-year-old San Francisco home is that it was described as a “shack” and needed much more than TLC (Daniel Goldstein; San Francisco earthquake shack sells for $408,000; marketwatch.com; October 22, 2015).

And what can be more proof that the real estate market has been recovering (at least for those who can afford it) than the world’s priciest home sale. Patrick Gower, Francois De Beaupuy , and Devon Pendleton reported on December 15th (This $301 Million Paris Chateau Is the World’s Priciest Home; bloomburg.com) about the sale of Chateau Louis XIV for €257Million (approximately $301Million); a private sale to a Middle Eastern buyer. Located in a 56-acre park, the recently built Paris estate is said to have taken three years to build. Amenities include an aquarium, cinema and a wine cellar, and a gold-leaf fountain.

By Dan Krell
Copyright © 2015

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April 20, 2011July 25, 2019

Has the market hit bottom yet?

I have to admit that after offering definitively optimistic analyses about the housing market after the meltdown, I now answer housing market questions tentatively. The tentative answer is not for a lack of optimism (the local market has shown strength in the last year where other regions continue to languish at best); however current analyses are tentative because rather than making a decision to buy or sell a home strictly on the strength of the market, consumers also need to be aware of personal goals and preferences.

Sure, if you look at some of the housing market indicators, such as the S&P/Case Shiller Home Price Index and the National Association of Realtors® (NAR) existing home sale report, national data are conflicting and may not yet indicate a solid recovery (although the Washington, D.C. regional data has shown strength).

The last S&P/Case-Shiller Home Price Index (standardandpoors.com) data that was released March 29th indicated that national home prices have not fared well for January 2011. However, it must be pointed out that as home prices slid across most of the country, the Washington, D.C. region’s home prices revealed an annual increase of 3.6%.

The NAR’s February existing home sale report released March 21st indicated a further decline for the number of homes that sold compared to the same time the previous year. However, the Washington, D.C. region was reported to have increased in home sales but decreased in home prices compared to the same time the previous year. We are anxiously waiting for this month’s report, which is scheduled to be released this week (realtor.org).

Additionally, the April NAHB/Wells Fargo Home Market Index (HMI) fell to 16; as reported in the April 18th press release by the National Association of Home Builders (nahb.org). The HMI is a scale from 0 to 100 that rates builder sentiment across the country (the lowest index reported was 9 in 2009; the highest index was 77 reported in the late 1990’s). NAHB Chairman Bob Nielsen was reported as saying in the press release, “While builders in some areas are starting to see a pickup in traffic of prospective home buyers, many consumers remain skittish about the health of the housing market and overall economy, particularly in view of recent legislative and regulatory proposals that could make it much harder to get a mortgage…”

Economists and other housing experts remain conflicted about sources for the continued issues facing the national housing market. Some point to continued problems with distressed home sales, which include foreclosures and short sales; while others continue to point to unemployment. The reality is that these economic factors are just a part of a larger puzzle. Other economic forces that can affect consumer sentiment and the housing market can range from mortgage regulation (as recognized by Bob Neilson of the NAHB) all the way to energy shocks and policy (one of Shell’s energy scenarios named “Scramble” predicts major global economic difficulties as early as 2020 unless serious energy policies are undertaken).

Has the housing market bottomed out? Macro-economic factors may indicate that housing could continue to manifest symptoms of a labile global economy; while micro-economic factors might indicate a completely different picture. For someone contemplating buying or selling a home, the answer is probably more of a personal reflection combined with local and hyper-local housing data.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.