New homes allure is neurological

new homes
New homes (infographic from candysdirt.com)

Last week I mentioned that new home sales jumped 18.7 percent year-over-year, which is a ten-year high.  It should come as no surprise that new homes are selling like hotcakes.  After all, existing home inventory has been and remains historically low, which doesn’t give many options to home buyers.  But there are other reasons for the allure of new construction.  Some of the home buyers’ motives are apparent and some are not so obvious.

The idea of buying new construction goes beyond the “new home feel.”  Buyers of new homes are attracted to modern designs and trends that are incorporated into new houses.  New home construction takes advantage of modern building techniques and materials that allow for the open floor-plan concept that many home buyers prefer.  Many of the materials used in new construction are “engineered” for efficiency and longevity.

Buyers of new homes like the feeling that there will be minimal maintenance for the first year.  Everything is brand new and there is sense of confidence that the home’s systems won’t need major repairs or replacement.  Being the first owner of a home also gives assurance that they won’t have to deal with the poor maintenance habits of the previous owner.  This is a plus for home buyers who don’t have a lot of financial reserves to address home maintenance emergencies.  Instead, they can begin to save and budget for future repairs and replacements that should be years down the road.

New home builders take advantage of current trends in green building practices.  Many new home builders tout their LEED certification, demonstrating their commitment to energy efficiency and sustainable resources.  Green building practices are not only used when the home is built, but is actually built into the design.  Home owners seeking LEED certified builders believe they will have a smaller impact on the environment and save money on energy costs.

A new trend that buyers are pursuing is the “healthy home.”  The healthy home concept emphasizes the quality of the air inside the home.  Home buyers are becoming aware of the physical and environmental benefits of good indoor air quality, which can improve their emotional well-being and reduce the potential for respiratory distress.

But there is another reason why home buyers are attracted to new homes, and it lies within the brain.  Research has demonstrated time and again that consumers respond to novelty.  This means that home buyers have a tendency to want “new.”  This can be interpreted into making an old home new by renovating a kitchen, bathroom, etc.  Or it can mean buying a newly built home.

new homes
the desire for new homes may start with the limbic system (infographic from success-mohawk.com)

The novelty seeking behavior of the home buyer isn’t just a choice, as some may argue, it’s neurological.  Basically, the desire for a new home lies within the brain.  A study conducted by Nico Bunzeck and Emrah Düzel (Absolute Coding of Stimulus Novelty in the Human Substantia Nigra/VTA; 2006; Neuron 51, 369-379) demonstrated that the hippocampal region of the brain responds to novel (new) stimuli.  The hippocampal region is part of the limbic system, which is noted for being responsible for memory and emotions.  It has also been associated with motivation.

The study also discusses the idea that novelty seeking behavior isn’t just emotional, but it is also rewarding.  This means that there is a behavioral loop for seeking new things, including buying a new home.

Home sellers need to take note of these findings.  Translating this study to home buyers may mean that a home’s feeling of “newness” is important, regardless if it’s construction, renovation, or even how the home is decorated.  Understanding what attracts and motivates home buyers can be the tipping point to get a home sold.

Original published at https://dankrell.com/blog/2017/12/08/new-homes-allure-neurological/

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.

Sign ban or boosting Realtors?

Sign ban or free speech
Sign ban or Free speech? (infographic from newseum.org)

A special thanks to the Montgomery County Council whose proposed sign ban will undoubtedly help local real estate agents.  Last week’s testimony about a zoning text amendment relating to signs and their location illuminated their place in the community as well as reminded us they are a form of free speech.

Of course the unintended consequences of a blanket sign ban in the right of way is yet to be determined.  However, it would certainly make it more difficult for county residents to sell their home by owner (without an agent), as well as home buyers wanting to go it alone without an agent.  The resulting lack of information that is currently provided by these signs would certainly compel consumers to hire a local Realtor®. Thank you.

Greater Capital Area Association of Realtors® (GCAAR) president Peg Mancuso testified: “From a real estate perspective, signs are an inevitable means of communicating with Montgomery County residents both new and existing. The proposed sign ban would be a tremendous inconvenience to community members who are in need of information for short term related events, such as open houses.”  She mentioned a Realtor® best practice (which most agents adhere to) of placement of open house signs just prior to and removal immediately after the event.  She also pointed out that many home owners are unaware how their properties relate to the right of way, as well as being uneducated about the permitting process of signs.  These logistical and educational issues would make such a sign ban difficult for home owners to advertise their homes.

GCAAR vice president and COO Bill Highsmith, Jr reminded those at the hearing that GCAAR not only represents local real estate professionals, but is also a voice for home owners on property rights issues.  He asserted that signs in the right of way have historically been a means of business advertisement, expression, and community engagement.  He stated that “…publically visible signs are an important method of communication for county residents, Realtors® and the broader real estate market.”

Mr. Highsmith stated, “For Realtors® and the clients they serve, these signs are a particularly important way to communicate information about open houses and homes that are for sale.  While you may believe the internet is the primary way folks learn about opportunities to purchase a home, real estate signs are vital to let the broader public know about the real estate market in surrounding neighborhoods.”  He cited anecdotal evidence that many home buyers have bought the home they initially spotted from a sign.  He asserted that many consumers begin the home buying process by visiting open houses (especially first time home buyers).  And additionally suggested that these signs allow more county residents to become home buyers.

Allen Myers of the Maplewood Citizen Association (MCA) stated that these signs are useful to inform their residents of association meetings.  Collection of permitting fees for temporary signs would be cost prohibitive, possibly adding additional financial burden to the members of the association.  He asserted that the MCA believes that the signs are Constitutionally protected form of free speech.

It is reasonable to believe that many people agree seeing “shoe repair” signs are annoying.  And it is also reasonable to surmise that improperly planted signs can become a hazard.  Nonetheless, the takeaway for anyone attending last week’s hearing should be that these signs are beneficial to the community.

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Home pricing strategies focal point of 2016 housing market

2016 housing market hinges on home prices.

A home selling season has not been anticipated so much by home sellers since 2013. It’s not that 2015 was a bad year for housing, because it wasn’t. It’s that many home owners who have been wanting to sell since 2010 (some because of being underwater) may be in position to make the long awaited move.

Home Prices
CoreLogic HPI (from corelogic.com)

A central reason for the reanimation of the housing market is, of course, home prices. Several major indices concur that home prices have made significant improvements through 2015. S&P/Case-Shiller U.S. National Home Price Index (spindices.com) reported a 5.2% annual increase in October, while the FHFA House Price Index (fhfa.gov) revealed a 6.1% year over year increase in October. November’s CoreLogic HPI (corelogic.com) indicated a 6.2% year over year increase and project a 5.4% year over year home price increase next November. And as much as home values had healthy gains nationwide, the local Washington DC metro region’s home annual price increases were more modest: 3.1% according to CoreLogic, and about 1.7% according to S&P/Case-Shiller.

home equity
US Home Equity Report (from corelogic.com)

Although negative equity continues to burden many home owners, the good news is that the number of underwater homes is decreasing. Although home prices continue to edge higher throughout the nation, there are many who are still underwater. According to CoreLogic’s Equity Report Q3 2015 (corelogic.com), 256,000 homes regained equity. And although 92% of mortgaged homes now have equity, about 4.1 million homes continue to be underwater. 17.6% of mortgaged homes are considered “under-equitied” (less than 20% equity), while 2.2% are “near negative equity” (less than 5% equity). 29.3% of underwater homes in the US are located in five states: Nevada, Florida, Arizona, Rhode Island, and Maryland. While 87.9% of Maryland mortgaged homes have equity, 95.5% of mortgage homes in Washington DC have equity. However, the local Washington DC metro region (DC – VA – MD) records 89.2% of mortgaged homes with equity – leaving about 10.8% of mortgaged homes underwater.

If you’re selling your home this spring, you want to capitalize the market. Although you want to benefit from the current low inventory; realize that by late spring, the housing market gets into full swing and inventory surges while your competition intensifies. Also consider the home buyer: many consider themselves savvy consumers who are money conscious and more fiscally responsible than their 2006 counterparts. Most home buyers want homes that have new or recent updates, including systems (such as HVAC and roof). There are few who are willing to make repairs or upgrade homes they are moving into; much less budget for a new roof or furnace in the first years of home ownership.

Real EstateThe sensible way to make the most of your sale is to have a plan, and pricing your home correctly should be the focal point. Don’t fall into the trap of pricing your home by comparing national price increases or worse yet – media reports of hot markets. Real estate is a local phenomenon and you should collect data within your neighborhood (the closer to your home the better). Your real estate agent should be able to produce a detailed market analysis and explain how the comps vary and correspond with each other and to your home. Consider your home’s condition and amenities. You may have to adjust your price if your home is in need “TLC.” However, updates to the kitchen, bathrooms, windows, roof, flooring, and HVAC not only add appeal but also add value.

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Drone use takes off to sell homes

Real Estate Aerial pictures and video may seem cutting edge, but you should consider a number of issues before agreeing to have a drone flying over your home and neighborhood.

The Bulletin of Photography Volume 15 (published in 1914) includes an article about Des Moines, Iowa real estate agents contemplating a “scheme” of photographing homes. The photographs were to make touring homes easier for busy clients; agents were to have four photographs per home in their exclusive portfolios. Real estate photography has come a long way since 1914. Today, home sellers expect dozens of high resolution pictures and even video to market their homes. In addition to the typical media array, some agents promote aerial photography to capture different perspectives of large estates, farms, and acreage.

Aerial photography has been around almost as long as commercial photography. According to the Professional Aerial Photographers Association (professionalaerialphotographers.com), the idea of aerial photography was patented in 1855; however, the first known aerial photograph wasn’t taken until 1858. No one knows for sure when aerial photography was first used for real estate sales, but you can bet it that it probably coincided with the broad acceptance of real estate photography. Although aerial photography has been accomplished by helicopter, balloons, and even very tall poles, it is increasingly becoming the domain of drones (also known as “unmanned aircraft systems”).

Many tout the drone’s potential and value. However, as commercial and hobby drone use skyrocketed, many also began to see the threat to personal privacy and safety. There has been a dramatic increase in pilot reported close calls; compare the 238 sightings during 2014 to the 650+ sightings during 2015 – through August 9th (FAA.gov). Federal and local agencies have sought to regulate drone use by implementing rules for safe and ethical use. You may have read Rebecca Guterman’s article investigating this issue earlier this year in the Montgomery County Sentinel  (State explores new drone rules; February 25, 2015).

On February 15th, the FAA published proposed rules for unmanned aerial systems as a step forward to integrating drones in our skies. Jenna Portman and Josh Hicks reported in a June 30th Washington Post piece (New laws in Va., Md. and D.C. regulate drones, Uber, social media) that Maryland will propose drone use rules by 2018; and in the interim has prohibited counties and municipalities from legislating drones, giving “exclusive jurisdiction” to federal and state agencies.

Commercial drone use has soared, especially in real estate applications; such that Dronelife.com estimated that real estate drone use could generate $10 million by 2016. The National Association of Realtors® has been at the front of this issue, promoting and educating safe and ethical drone use to members. NAR President Chris Polychron stated in his testimony to the U.S. House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet: “Realtors® have shown a consistent interest in the safe, responsible use of drones in the business of real estate… (realtor.org).

It may seem cutting edge to integrate aerial pictures and video into your marketing plan, however there are some issues you might consider before agreeing to have a drone flying over your home and neighborhood. You should ensure that the operator is experienced and authorized to operate the vehicle. Make sure the drone operator is insured, as accidents and property damage can occur. Finally, confirm that any aerial pictures and video publicized are worthwhile; poorly executed aerial photography could detract from your marketing efforts, and interfere with a buyer’s appreciation of your home’s qualities and charm. For more information, visit Know Before You Fly (knowbeforeyoufly.org).

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The anonymity of the internet has made real estate more personal

HouseIt might not be a revelation that the initial news about Zillow’s acquisition of Trulia reverberated among the analysts as a game changer for the real estate industry. But you might be surprised that some commentaries, such as Brad Stone’s of BloomburgBusinessWeek.com (How a Zillow-Trulia Merger Could Finally Change the Business of Real Estate), expressed that the transaction of buying and selling homes has not really changed since the inception of these internet giants.

Compared to 2013, decreased sales volume has made 2014 a challenging year for many in the real estate industry. And contrary to what some believe, the Trulia acquisition may not necessarily be a sign of strength; but rather, it may be sign of continued weakness in the industry. Tim Logan comments on the acquisition in his July 28th Los Angeles Times article (Zillow deal to buy Trulia creates real estate digital ad juggernaut), “Neither is yet profitable separately, but they hope to save $100 million a year by joining forces and cutting duplicative costs.”

Regardless of the economics behind the acquisition, the significance of Zillow and Trulia (and other similar websites) cannot be underestimated. And although many believed these sites were to have changed the real estate industry in a manner similar to how the internet changed the travel and retail industries; Zillow and Trulia have been leaders in transforming the home buyer and seller experience. And instead of minimizing the importance of the real estate agent; MLS aggregators have become facilitators and part of the home buying/selling process by packaging syndicated MLS feeds and other related information to consumers in a convenient and eloquent way through the internet, while selling services to real estate professionals vis-à-vis subscriptions and advertising.

The general process of buying and selling a home is still somewhat the same as it has been for decades. Before internet access became prevalent, real estate agents mostly met with their clients in person to review available home listings, discuss financing and other related matters. Although many used the technology of the day (fax machine and telephone), the preferred meeting was face-to-face. As the internet flourished, technology adopters were able to correspond with clients via email, text messages, and Skype. And as the technology evolved, so too did the daily business of real estate. Searching for homes became increasingly streamlined, and the flow of documents became more efficient.

Some have made the argument that the internet and related technologies may have been an enabler of the real estate bubble of the early to mid 2000’s. However, the reality may be that the real estate bubble facilitated the growth of real estate aggregators and the use of internet technologies. The proliferation of information at that time, along with the effective use of new technologies, fed house hungry buyers who wanted to be the first to know about a home for sale before other buyers. Internet and cell phone applications were developed to automatically send listing alerts to buyers’ emails and cell phones (technology that is commonly used today and even useful in hot markets where homes sell quickly).

Buying and selling a home is still a personal business. Instead of eliminating the real estate agent; websites such as Zillow and Trulia may have forced the agent to evolve from the information gate keeper to the local real estate expert who can interpret information for clients into meaningful data that can be used to facilitate the buying and selling of homes.

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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. This article was originally published the week of July 28, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.