Tag: Housing Market

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When is best time to sell a home

Housing Market

Buyers aren’t the only ones looking for a deal.  Home sellers are also looking for a good deal – which means they want to sell their home for the most money.  As it seemed as if the housing market had strong sales this year, some sellers are still trying to decide the best time to sell.  But unfortunately, timing the market may not be as easy as it seems.

Some say that spring is the best time of year to list and sell a home, while others believe that summer is better.  Old time real estate agents will tell you about a time when there was a traditional selling season, which basically started in March and ran through June.  In recent history, it seems as if the boom/bust market from 2005-2008 rewrote those rules.  During the “go-go” market, the spring selling season couldn’t start early enough; home buyers made their New Year’s resolutions and shook off the winter fog in early January to begin their home search.  For several years, it seemed as if home buyers started their real estate searching earlier each year to stake their claims on real estate before other buyers got wind of the listing.

However, once the bubble busted, home buyer activity significantly slowed, those who wanted to buy a home became increasingly methodical about their purchase as well as starting their search later in the year.  It seemed as if the best time to list and sell shifted from the spring time to summer months.

Since the downturn of the housing market, sales activity peaked in the summer months.  June has been a consistent contender for year high sale totals – until this year.  The July 22nd news release from the National Association of Realtors® (realtor.org) indicated that June sales “slipped” about 1.9% from May.  Granted, June’s sales are significantly higher than June of 2012, but the slowdown may just be a fluke or an indication of something else.

Maybe the combination of increased inventory (NAR reported that housing inventory was slightly elevated from May to about a 5.2 month supply) along with rising mortgage rates (Freddie Mac’s June national average commitment rate for a 30-year fixed rate mortgage rose to 4.07%) is making home buyers pause.

And surely home prices are making buyers have second thoughts; bargain hunters are having difficulty finding bargains.  June’s national median existing home sale price increased 13.5% compared to last June.  Distressed home sales, foreclosures and short sales that typically sell at lower prices, accounted for 15% of June’s figures (compared to last June’s 26%) and are at the lowest levels since 2008.  And although it may sound like great news, the double-digit jumps in the average home sale price may be a statistical artifact due to declining distressed home sales.

If you’re waiting to list your home for sale this year, you may have mistimed this year’s market.

Research has demonstrated that attempting to time the market may not always yield the best results – timing the market is much easier in hind sight.  Market timing appears to be much more than looking at selling activity cycles.  You should rely on the expertise of your real estate professional for neighborhood sales data and trends to assist you in deciding the price and the timing of listing and selling your home.

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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.

By Dan Krell
Copyright © 2013

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Rising mortgage interest rates – what that means for housing market

by Dan Krell © 2013
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Mortgage lendingOver the last few weeks, the 30 year fixed rate mortgage has slowly climbed from the historical low we have become accustomed over the last few years to well above 4%, as reported by Freddie Mac’s Monthly Average Commitment Rate as of July 3rd. And although it’s still relatively low and not bad as interest rates go; keep in mind that the mortgage rate averaged over the last 40 years is much higher – some report it to be 8.75%.

If you haven’t noticed, average mortgage rates have been below 7% for about ten years. And even when the housing market was bubbling, rates were not as low as where rates are today. After the financial crisis, mortgage rates were kept low by the Federal Reserve’s commitment to purchasing mortgage backed securities; which was an attempt to stimulate interest in real estate purchases at a time when the housing market all but screeched to a halt. Shortly after the Fed ended the mortgage backed securities purchase program, a broader securities buying program began with the intent to stimulate the overall economy; commonly called quantitative easing, this was considered the second round, which targeted the purchase of U.S. Treasury Bonds. The Quantitative Easing program was extended into a third phase (QE3) through 2013, which many are speculating will begin tapering off by end of the year.

Recent Fed comments may have hinted to tapering off the QE program, which could have been the source of some Wall Street panic earlier this month that resulted in a volatile market; besides affecting your 401k, the result has been a jump in mortgage interest rates.

Of course, many experts are worried about mortgage rate increases and the effect on home buyers, citing a decreased home buying ability as well as the possibility of suppressing existing homes sales. For some home buyers, it might be true that increased interest rates could be a wrench in their home buying plans; however, the reality may be that increasing mortgage rates are a sign that the housing market is healthier than some think.

Although mortgage interest rates are just one aspect of a multi-factor dynamic housing market; housing demand is not necessarily gauged by mortgage interest rates alone. For instance, the height of the housing bubble, mortgage interest rates were much higher than they are today. One sign that slightly increased mortgage rates have not negatively affected the overall market is a recent report by the National Association of Realtors (realtor.org) that May 2013 existing home sales (completed sales) increased about 11.4% compared to May 2012. Additionally, the NAR reported that existing home sales are the highest since 2009.

There has been criticism that the “artificially” low interest rates have helped home sale prices jump, especially during a time when there has been little housing inventory; some are concerned that increases in mortgage rates will pressure home sale prices lower. But just like the housing demand concern, these factors alone are not in a vacuum; factors today may warrant mortgage rate increases to thwart abnormal housing price spikes (which are common in bubble markets).

Of course, rising mortgage rates and the thought of paying more for a mortgage is not always good news to home buyers. However, given the circumstances and looking at the broader perspective, the result may be much better than anyone could imagine – a stable housing market.  But that is yet to be seen.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published the week of July 8, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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A balanced real estate market emerges despite fears of a housing bubble

real estate bubbleAs talk of a housing recovery is gaining traction, some experts are saying the recovery may be artificial and short lived. Warnings from economists and a former mortgage executive paint a picture of a possible housing bubble being caused by the source they claim is cause for increasing home prices.

Steve Cook, of Real Estate Economy Watch, revealed a recent survey of 105 economists, real estate experts and investment and market strategists. Although respondents predicted positive home price appreciation through 2014; the experts expect that home prices won’t fare as well during ensuing years through 2017. Furthermore, 48% of the respondents felt that current Federal Reserve monetary policy might be the reason for recent home price spikes; which may be creating a future housing bubble.

A majority of the expert panel suggested that requiring a minimum down payment in the Qualified Residential Mortgage (a provision to allow lenders to bypass credit risk retention rules) would create a long-term sustainable housing market. However, only about a third of respondents believe that a minimum down payment should be 20% or more.

An April 9th online article for The Wall Street Journal titled “Is the Fed Blowing a New Housing Bubble?” written by former Fannie Mae executive, Edward Pinto, explores the source for of the housing recovery. Pinto pointed out that although recent home price surges are the highest since 2006, data released by the Federal Housing Finance Agency (FHFA) indicate that home price increases may not be due to “broad based improvements in the economy’s fundamentals.” But rather, home price increases are being driven by low interest rates due to the Fed’s Quantitative Easing program.

Pinto compares current market conditions to those of 2006, when government policies also likely contributed to a housing bubble. During that period, like today, income is not keeping pace with home price increases. As an example, he cited FHFA’s conventional home-financing data that indicated new home purchase prices increased 9% during February 2013 and 15% during February 2013; while income barely increased 2% (keeping relative pace with inflation).

Pinto and his assessment of recent home price spikes are getting some attention. John Aidan Byrne of the NY Post wrote on May 6th (“Next Home Crisis”) about Pinto and his concerns. Because suppressed interest rates are pushing home sale prices up, Pinto surmises that when the Fed’s QE program ends, interest rates will rise creating an “inevitable housing disaster.” However, he concludes that to avoid a housing disaster: income must increase 33%, home sale prices will drop about 25%, or lending standards must loosen significantly. He points out that loose lending policies did not end well in the last housing bubble (http://www.nypost.com/).

Regardless of murmurs of another housing bubble, current market conditions might indicate a balanced market. The trend of monthly local absorption rates compiled from the local multiple list service has consistently shown to be in recent months between a buyer’s market and a seller’s market (absorption during a buyer’s market tends to be below 50%, while a seller’s market tends to be above 60%).

Even though there is little inventory, supply and demand may be in overall balance. However, that being said; supply and demand seems to be out of balance for well priced updated homes, which appear to the source of bidding wars and escalation clauses. Homes priced above the market and/or needing repairs/updates take longer to sell.

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By Dan Krell
Copyright © 2013

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.

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Hybrid housing market not for the squeamish

real estate trendsA “hybrid” housing market is has a little bit of everything. There are the multiple offers and escalation clauses, as well as the homes that sit idle for days (both could be on the very same block!); buyers willing to pay more than list and those offering less. The result is frustration among buyers and sellers who are disappointed by not having their expectations met; and even a few real estate agents are losing their cool. What is becoming increasingly apparent is that the current housing market is not for the squeamish!

Although few home owners are venturing to list their homes, those who do may be seeking a premium price; most likely due to the optimism permeating the air. Furthermore some are expecting the prize of getting multiple offers with escalation clauses. Owners of homes that do not sell within the first week of listing are anxiously wondering, “Why hasn’t my house sold yet?”

The flip side is that although home buyers are plentiful (compared to the current home inventory), there still seems to be many home buyers who seek to buy a home at a 5%+ discount. Unlike the “bargain hunter,” many of these home buyers are more concerned with future home resale (which may be indicative of a lack of confidence in the future housing market).

Pressure on home buyers and sellers is likely originating from reports of bubble activity pockets that seems to be popping up, and recent home price indices that indicate increasing national average home prices. Regardless, there appears to be a lack of symmetry among home sales as well as a lack of consistency among home buyers and sellers.

So if you’re planning a home sale or purchase, what are you to make of this? You should understand that national home price indices are comprised of multiple regions, and much of the national home price increase is due to regions that had the highest home price declines over the last six years, as well as a few pockets of very hot activity (unlike the home price climb during 2004-2006, which was mostly due to high confidence in the housing market, easy credit, and a much different economy). Likewise, the Metro DC region is microcosm of the national picture, such that it is comprised of a number of counties that realized double digit home price decreases, as well as a few pockets of hot activity.

To add some perspective to local market trends, the average days-on-market of a home in Montgomery County is roughly 60 days (depending on the source). Additionally, Montgomery County single family home data compiled by the Greater Capital Area Association of Realtors® (gcaar.com) indicated that median and average single family home price decreased year over year for the last three consecutive months. And while the number of homes listed continues to decline, the number of pending home sales (homes under contract) has also declined in March year over year, as well as year to date.

Getting into the market requires solid data, a strategy, and an open mind. If you’re selling: consult with your agent about recent neighborhood prices; and stay informed of all activity, as it could be your cue to decisions made on the sale. If you’re buying: in addition to discussing comp data, you should consult with your agent about a strategy to deal with competition from other home buyers.

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© 2013

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.

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Get out of your way and negotiate to win

by Dan Krell © 2013
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Self defeating attitudes can  interfere with your negotiating tactics; so get out of the way and negotiate to win.

negotiating tacticsWhat seems like many years ago, I read a book titled “Get Out of Your Own Way: Overcoming Self-Defeating Behavior” by Mark Goulston and Philip Goldberg. If you don’t get the gist of the book by its title, the book describes how people can become obstacles to their own success. And although the book was about personal growth, the premise can apply to self defeating attitudes brought forward during negotiating a real estate transaction.

Obviously, the purpose to entering into a real estate transaction is to either buy or sell a home. However, buyers and/or sellers can sometimes become obstacles in their own path to success; they may lose sight of the bigger picture and can make poor decisions – especially in negotiating price, repairs, and other issues that may pop up throughout the process. For example, a home buyer who seeks a low priced bargain may become frustrated wondering why he is constantly outbid; while the home seller who insists on an unsupported high price might become disappointed when there are no offers.

It is common knowledge that “the first rule” of negotiation is to not be emotional. However, many decisions about buying and selling a home are often based on emotion; additionally, expectation and anticipation often influence home buyers and sellers. If emotions take over, the larger goal is often lost to a narrow focus on seemingly insignificant and petty matters.

Get out of your way by sticking to the facts. Armed with data and facts, there is less conjecture and you are more likely to be persuasive in your arguments. Additionally, concentrating on facts can also help you stay focused on the larger picture of buying or selling your home. For example, when pricing or making offers – use recent neighborhood comps and look for data driven market sales trends (rather than relying on what you hear on the news). Looking at all the facts can also help negotiate other items, such as home inspection repairs; having contractor estimates may assist in resolving an impasse.

Sometimes buyers and sellers go into a transaction with a “win-lose” attitude, where they expect that their position is always correct. Being “aggressive” towards your counterparts may seem the best way to get what you want; however, fighting for an uncompromising position may lead to all parties becoming inflexible and a transaction that does not close. In fact, being forceful and antagonistic about your offer may make others become ill tempered and even possibly hostile to further negotiation.

One of the definitive texts on warfare, “The Art of War” by Sun Tzu, has also been a guiding resource for top negotiators. “The Art of War” doesn’t talk about going to the enemy and forcing them “to eat steel.” Rather, it is a thoughtful treatise on dealing with people. The upshot is that the best way to “win” is to prevent war through positioning, data, and understanding of the counterpart. In other words, negotiating to get your way may require positioning of the facts and being persuasive (rather than approaching the transaction with a take it or leave it attitude).

Negotiating tactics are an often misunderstood part of the real estate process. Hire a savvy real estate agent to assist you in collecting data and persuasively presenting your position. For a successful transaction – get out of your way!

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published the week of April 15, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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