Creating home staging vision

home staging vision
Creating home staging vision (infographic from nar.realtor)

Although home staging has become entrenched in the home sale process, it doesn’t have to be a pricey way to prepare your home sale. Not only has it become part of the home seller experience, the home staging vision is now expected by buyers and their agents when they visit homes. 

The spring home sale season is the perfect time for the National Association of Realtors to roll out the results of their 2019 Profile of Home Staging survey (nar.realtor).  In a March 14th press release, NAR President John Smaby summed up this year’s profile by stating, “Realtors understand the importance of making a residential property as welcoming and appealing as possible to potential buyers. While every Realtor doesn’t use staging in every situation, the potential value it brings is clear to both homebuyers and sellers.” 

Staging may affect a home’s time on market, and it’s likely due to visual cues.  Meaning that home staging vision helps the home buyer picture themselves living in the home. More than half of the agents who responded to the survey indicated that home staging reduces time on market.  Forty percent of buyer agents said that home staging effects most buyers’ perceptions of a home.  Eighty-three percent of buyer agents believe that home staging vision makes it easier to visualize living in the home.

It’s not surprising that agents agree that the most staging attention goes to the living room, kitchen, master bedroom, and the dining room.  It’s not that these rooms have special significance, but rather it’s because it’s where people spend most of their time in the home.

The NAR survey also found that real estate TV shows has impacted home buyers’ views and expectations.  Thirty-nine percent of buyers indicated that they experienced a more difficult home buying process than what they expected.  Twenty percent of buyers reported being disappointed that homes they visited didn’t look like the ones portrayed on TV.  While ten percent believe that homes should look staged as they are depicted in TV shows. 

Not all agents stage the homes they list for sale.  Only twenty-eight percent of listing agents said they staged all sellers’ homes prior to listing them for sale.  Compared to the thirteen percent of agents who confessed that they only stage homes that they deem difficult to sell.

Does home staging affect sale price?  It was noted that all agents surveyed indicated that home staging affected their home sale positively.  Twenty-two percent of the agents reported an increase of up to five percent in buyers’ offers, while seventeen percent reported offer increases up to ten percent. Only two percent of the agents responded that it increased offers up to twenty percent.

But the idea of staging your home to get top dollar may just be traditional wisdom, as evidenced by NAR’s survey.  One of the few studies on staging revealed that indeed, staging does not have a significant impact on sale price.  Lane, Seiler & Seiler’s 2015 study (The Impact of Staging Conditions on Residential Real Estate Demand. Journal of Housing Research, 24,1. 21-35) concluded that although staging affects the home buying process and the buyer’s opinion and perception of livability, it’s not enough to result in a higher sales price.  The authors stated, “These results stand in stark contrast to the conscious (stated) opinion of both buyers and real estate agents that staging conditions significantly impact willingness to pay for a home. As such, the findings are new and useful to a large group of stakeholders (sellers and agents).”

Original located at https://dankrell.com/blog/2019/03/21/creating-home-staging-vision/

Copyright© Dan Krell

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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.

Curb appeal science

curb appeal science
How to increase curb appeal (infographic from keepingcurrentmatters.com)

Curb appeal is one of those “intuitive” topics that only gets media attention in the spring and maybe the fall.  If you search the internet, you’ll find millions of websites that talk about curb appeal.  Because the concept is based on accepted lore, my guess is that most of those sites regurgitate the same ideas.  Everyone has some understanding of curb appeal.  And if asked, they will give you their opinion on improving it to get a higher home sale price.  Everyone agrees that curb appeal can increase home buyer traffic.  And most agree that curb appeal can increase the home’s sale price.  But is there a curb appeal science?

I often present empirical studies to help you understand if widely accepted real estate traditions and principles are accurate.  Unfortunately, curb appeal science is one of those subjects that doesn’t get much academic attention.  Notwithstanding, there are two very compelling studies about curb appeal science.

One of the first studies to empirically confirm the connection between home sale price and curb appeal was published in 2013.  Chen, Evans-Cowley, Rutherford, and Stanley (An Empirical Analysis of Effect of Housing Curb Appeal on Sales Price of Newer Houses. International Research Journal of Applied Finance. 2013, Vol 4 No 11, p1407-1419) examined how a home buyer’s preferences of a home’s exterior influenced the sale price.  Not a surprise, they concluded that there is a connection between a home’s exterior and the sale price.  They also quantified the relationship, saying that even small improvements to curb appeal can increase the value by as much as eight percent.

It’s not just the yard and exterior home maintenance.  Chen’s study also discovered that architectural elements also determine the home’s sale price.  They discovered that the demand for higher cost “modern” homes is relative to what’s contemporary.  Meaning that today’s highly desirable new homes and floor plans could be less desirable and sell for less in the future.

A more recent study went further and developed a measurement of a building’s curb appeal.  Freybote, Simon and Beitelspacher (Understanding the Contribution of Curb Appeal to Retail Real Estate Values; Journal of Property Research. 2016, Vol 33, No 2, p147–161) found that there are three dimensions of curb appeal that can be measured: atmosphere, architectural features and the authenticity of a building. 

A home’s atmosphere describes the general landscape maintenance as well as emotional aspects, such as how relaxing, inviting, and vibrant the home feels.  Architectural aspects rate the visual aesthetics of the home, highlighting modern design and interesting features.  A home’s authenticity relates to its charm and how “genuine” it feels. In other words, can the home buyer picture themselves living there? The study concluded that curb appeal and sale price is not only connected, but can also be accurately measured.  The two dimensions that affected sale price the most were atmosphere and architecture.  The authors also suggested that the atmosphere dimension has a social component (which may be associated pride of ownership). 

Although authenticity was not found to be as influential on sale price, it is notable.  A home’s authenticity (as described in this study) is probably one of the least thought of aspects when preparing a home for sale.  If the home staging, including landscaping and exterior elements, is over-the-top or does not portray the home accurately, a home buyer may be less interested in making an offer and negatively affect the home sale price.

Original located at https://dankrell.com/blog/2019/03/14/curb-appeal-science/

Copyright© Dan Krell

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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.

Housing market mini-cycles

housing market mini-cycles
Housing market mini-cycles

In a statement last year, NAR chief economist Lawrence Yun discussed the housing market’s recovery since the Great Recession (Realtors Chief Economist Reflects on Past Recession, What’s Ahead for Housing; nar.realtor; August 28, 2018).  Citing increasing homeownership rates and addressing the recent home sale slowdown, Dr. Yun believes that concerns about a significant housing slump are unsubstantiated.  Instead, we may be going through housing market mini-cycles.

Dr. Yun is not the only one pointing to affordability (home prices and mortgage rates) and lack of home sale inventory as causes of market disruptions.  But his statement is almost trite: “…even as mortgage rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory and accompanying unsustainable home price increases…”

Housing market mini-cycles and the economy

The housing market, like the overall economy, goes through cycles of boom and bust.  It’s been about eleven years since the last recession, and many are saying we’re overdue for another one.  But if the economic cycles, as described in 1876 by economist Henry George and modernized by Glenn R. Mueller, accurately include recovery, expansion, hypersupply, and recession, there is no clear phase to describe recent housing activity.  Instead, what we are experiencing is housing market mini-cycles.

Most understand the concept of the broad economic boom and bust cycle. But most are unaware of the mini-cycle that manifests as repeat periods of short-term growth and slowdown.  Recessions typically have broad effects on the economy, where as mini-cycles are are fast cycling and specific to economic sector. So, a complete housing market mini-cycle can last several months or longer and may not spill over to other sectors.

Since 2013, the housing market has undergone at least three mini-cycles of growth.  These cycles peaked with record sales volumes, only to be set back by months of sluggish home sales.  The causes of the housing market mini-cycles are debatable and, like a recession, clear in hindsight.  Of course, Dr. Yun and other industry experts are likely to be correct saying that home prices (affordability) and inventory are to blame.  However, there may be other reasons worth exploring as well.

Micro-economic factors are playing a large role in the housing market mini-cycle.  Take for example the increase in employee telecommuting.  There is an abundant research pointing to how telecommuting has affected the commercial real estate market.  These studies point to increased office space vacancies due telecommuting.  Companies are downsizing offices because of the reduced need for space as employees are working from home.  This trend is recognizable in real estate brokerages.  Real estate office spaces are shrinking as the industry becomes increasingly “virtual.”

Telecommuting is also impacting home sales. According to Global Workplace Analytics (globalworkplaceanalytics.com) “Regular work-at-home, among the non-self-employed population, has grown by 140% since 2005, nearly 10x faster than the rest of the workforce or the self-employed.”  Currently, there are about 4.3 million employees that work from home at least half the time.  As businesses are increasingly hiring a telecommuting workforce, workers opt to stay in their current residence rather than relocate near their new employer. 

Does housing market mini-cycles lead to recession?  Maybe the the mini-cycle is a brief market correction that helps avoid the broader effects of recession. Take for instance the three housing market mini-cycles that recently boomed in 2013, 2016, and 2017-2018. During these mini-cycles, home prices soared and home sales broke recent records (since Great Recession).

Current economic indicators (at the time of this writing in March 2019) point to a positive home sale season.  The Bureau of Labor Statistics (BLS.gov) most recent unemployment statement was 4.0 percent (which included government shutdown stats).  The Consumer Price Index remains stable (the CPI-U was last reported unchanged). Real average hourly earnings was reported to increase 0.2 percent from December to January.  And after a three-month decline, the Conference Board (conference-board.org) reported a rebound in the Consumer Confidence Index.  Given the winter housing slump, real estate may be on everyone’s mind again in this spring.

Original located at https://dankrell.com/blog/2019/03/09/housing-market-mini-cycles

Copyright© Dan Krell

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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.

Climate change and your housing budget

climate change
Climate change and your housing budget (infographic from energystar.gov)

Saving the planet and acting environmentally ethical is good.  But there is a truth that human behavior is unpredictable.  Even in the face of the speculative disastrous effects of climate change, consumer demand for housing in effected areas is resilient.  Rapti Gupta pointed this out when raising the alarm in his RealtyToday article (The Looming Global Warming Catastrophe and its Effect on Real Estate; realtytoday.com; November 11, 2013).

If consumers won’t embrace climate change, government will. Making your home “green” seems to be going to another level these days.  Home owners have responded by voluntarily upgrading and conserving to help according to their belief. And although it’s not the first time, there is a nationwide push for local climate change legislation that is likely to impact your housing budget.

It’s been ten years, but you probably forgot about the American Clean Energy and Security Act of 2009.  The bill, also referred to as the “cap and trade” bill, not only focused on commercial properties but residential properties as well.  The bill would have established National Energy Efficiency Building Codes for commercial and residential buildings.  Additionally, it intended to retrofit all existing buildings to meet new standards.  Enforcement would have been through regular government inspections.

Climate change, CCA’s and your energy bill

Since the bill (and others like it) was not enacted, local communities have picked up the ball to make their communities “greener” through Community Choice Aggregation programs.  Although CCA’s have been implemented in some states since the 1990’s, the idea is gaining steam in others.  Montgomery County Executive Marc Elrich recently testified in support of CCA’s and the legislation (HB0730/SB0660) that is making its way through the Maryland General Assembly.

What is Community Choice Aggregation?  According to the EPA (epa.gov), “Community choice aggregation (CCA), also known as municipal aggregation, are programs that allow local governments to procure power on behalf of their residents, businesses, and municipal accounts from an alternative supplier while still receiving transmission and distribution service from their existing utility provider. CCAs are an attractive option for communities that want more local control over their electricity sources, more green power than is offered by the default utility, and/or lower electricity prices. By aggregating demand, communities gain leverage to negotiate better rates with competitive suppliers and choose greener power sources.

However, Severin Borenstein’s blog post for the Energy Institute at Haas (haas.berkeley.edu) points out the pros and cons of CCA’s (Is “Community Choice” Electric Supply a Solution or a Problem?).  Borenstein points out the local utility still does all the work of supplying and metering customers, and bills customers for their services. 

However, the CCA is contracting to purchase electricity on your behalf (supposedly from renewable sources), promising a better price.  But Borenstein points out that policy makers learned that “electricity is not always like other markets,” pricing and fees can be complicated.  He also pointed out that because of regulatory standards, the CCA buying of energy contracts from renewable sources doesn’t mean that the grid’s “total” green energy increases or that it will decrease greenhouse gases.  He states, “green energy claims deserve close scrutiny.

Borenstein concludes by saying that “Regulated investor-owned utilities are flawed organizations that operate under a distorted set of incentives. But local governments are also flawed organizations subject to their own set of distortions, a fact that is often less appreciated by the local government leaders who are promoting the CCA.  If your community is considering a CCA, you need to think about which organizational structure is most likely to have the sophistication and the incentives to serve you best.

Original located at https://dankrell.com/blog/2019/03/04/climate-change-housing-budget/

Copyright© Dan Krell

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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.

First time homebuyer essentials

first time homebuyer
First time homebuyer (infograhic from nar.realtor)

First time homebuyers play a significant role in the housing market and economy.  According to the National Association of Realtors 2018 Profile of Home Buyers and Sellers (nar.realtor), first time homebuyers represented 33 percent of home purchases last year.  Although their impact has decreased since the first time homebuyer credit was discontinued, first timers continue to drive home sales. 

Karan Kaul, of the Urban Institute, described how first time homebuyers recently surpassed repeat buyers in home purchases (First-time homebuyers will continue to dominate the mortgage market; urban.org; August 14, 2018).  Kaul pointed out that although first time homebuyers have been facing headwinds, their impact on the housing market has increased.  It’s no secret that first time homebuyers have higher student loan debt than other buyers and experience increasing rents, making it difficult to save for a down payment.  Low home sale inventory along with increasing home sale prices and mortgage interest rates make it challenging to buy a home.  However, despite the financial hurdles, first time home purchases significantly exceeded repeat buyers in 2017. 

Market conditions are getting better for first time homebuyers.  Lawrence Yun, NAR Chief Economist, pointed out that existing home sale inventory has been slowly increasing.  The expanding number of available homes for sale will likely stimulate interest from frustrated previous would-be buyers to re-enter the home buying arena. 

Another indicator the market is getting better for first time homebuyers is Freddie Mac’s February 14th statement indicating that mortgage rates are the lowest in twelve months (freddiemac.com).  Freddie Mac economists believe that lower mortgage rates combined with a strong job market will reawaken demand in the spring housing market.

If you’re a first time homebuyer, this spring could be a terrific opportunity to buy a home!  And although it’s a very exciting time, the process can sometimes feel like an emotional rollercoaster.  The home buying process can often be confusing and feel overwhelming. For this reason, getting appropriate guidance, advice and care should be top priority.

So, how do you take care of yourself as a first time homebuyer? Make a home buying plan and stick to it.  Take note of the following first time homebuyer hacks:

Make Your First Time Homebuyer plan

  1. Hire a Realtor

    Hire a Realtor.  It’s very easy in today’s digital driven home search to go visit homes on your own.  But the reality is that the agents you serendipitously encounter do not represent you.  And anything you tell them can be used to the seller’s benefit.  Take the necessary steps to find a Realtor you trust and with whom you are comfortable. 

    Regardless of where you find your buyer agent, some qualities you should look for include knowledge and experience. A knowledgeable and experienced agent can point out obvious issues in a home, can have knowledge of home buyer assistance programs, as well as maneuver through the new maze of buying a home.  Having the right Realtor by your side can make all the pieces fall into place.

  2. Get Pre-Qualified by a Mortgage Lender

    Get pre-qualified before you begin visiting homes.  Getting pre-qualified will allow you to understand how much home you can afford.  When looking for a mortgage lender, don’t just compare rates.  Finding an honest and accessible loan officer can help you facilitate your purchase when there are bumps in the road.

    Choosing a lender might seem as simple as looking on the internet. Don’t rely on mortgage interest rate teaser ads. They are meant to get you to call the lender. Check with banks and institutions with which you already have a relationship. Many home buyers, with whom I have had the pleasure to assist, either used their local bank, credit union, or already had a relationship with a loan officer from a local mortgage company. Whomever you chose, make sure they can deliver what they promise.

  3. Create a Housing Budget

    Create a housing budget.  Financial experts warn about borrowing the maximum pre-qualification amount to buy your new home.  Make a budget considering your income, debts and other financial obligations.  Don’t forget to include your hobbies and indulgences.  Your housing budget should not only be the mortgage payment (which is typically principal, interest, taxes and insurance).  It should also include any HOA or condo fee, utilities and a maintenance budget.  Keep in mind that some of these costs will likely increase.

  4. Home Inspection

    Don’t opt-out of a home inspection.  Don’t be pressured to forego the inspection under the guise of making your offer look better.  Besides possibly revealing issues in the home, the home inspection is an opportunity to learn about the overall condition and maintenance of the home.

  5. Understand your Home Warranty

    A common misconception is that a home warranty will unconditionally cover any problem and replace non-working systems and appliances without cost to the home owner. The truth is that home warranties have limitations to the scope of their coverage and services as well as conditions under which a home owner may make a claim.

    A home warranty is a service contract and in some cases the warranty acts like an insurance policy. Home warranty plans vary depending on the company offering the plan and level of coverage. Typical plans are renewable annually, however some companies offer multi year plans. Typical coverage may include appliances such as dishwashers, clothes washer and dryer. Some companies may offer coverage for furnaces, air conditioning, plumbing fixtures (such as hot water heater), and some electrical fixtures. Expanded coverage may cover hot tubs and pools (at an expanded price of course).

Original located at https://dankrell.com/blog/2019/02/26/first-time-homebuyer-essentials/

Copyright© Dan Krell

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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.