Category: Real Estate Market

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Is there a best way to predict the housing market

predicting the real estate marketIf you’re like most home sellers and buyers – you want an edge over your competition.  What better way to get the edge than having a way to predict the market.  If you don’t have a working crystal ball, there are a few methods to forecast and measure housing (some of which have been used in empirical research).

Various studies demonstrate that you can assess and somewhat predict activity in a housing market; which, albeit in hindsight, can assist home sellers and buyers in determining whether it is a good time to sell or buy a home.  For example, I recently wrote about gauging real estate through divorce and premarital agreements; which discussed the implications of these life events to the housing market.  The increase in prenups could indicate an increased perception in the value of home ownership and possibly the overall housing market.

Another recent study indicated that it may be possible to determine home pricing through internet search data.  Beracha and Wintoki (Forecasting Residential Real Estate Price Changes from Online Search Activity; The Journal of Real Estate Research 35.3 (2013): 283-312.) set out to find out if keyword search engine data from Google could determine price shifts in various cities.  They concluded that this may be the first study that directly links “aggregated” search engine data to “abnormal crosssectional home price changes.”

Essentially, the research established that you can figure out metro housing market activity through Google Trends and Google Insights, which provide keyword volume measurement in internet searches.  The study examined the keywords “real estate [city]” from 2004 through 2011, and concluded that “…cities associated with abnormally high real estate search intensity consistently outperform cities with abnormally low real estate search volume by as much as 8.5% over a two-year period.”

And although the study’s authors discussed prior research linking internet keyword searches and consumer behavior, they caution that there are a number of keywords related to real estate that may be more relevant than the keywords used in their study.  Regardless, the authors assume that their results may be useful in home sales and purchases.  More importantly, it may seem as if their results may strengthen the link between specific search engine keywords (e.g, “real estate Rockville” or “real estate Bethesda”) and the ability to predict a housing bubble, or possibly home price peaks.

Generalized, “global” data, such as those described in Beracha and Wintoki’s study, and their meaning may be interesting; however, limiting yourself to such indiscriminate analysis for your home sale or purchase could be disadvantageous.  Global data does not distinguish the many factors that impact regional markets; nor can it sort out differences within a local market (neighborhood data within a region can vary significantly).

Using “global” tools may be useful; however, if you are planning a home sale or purchase – seek out the assistance of a local Realtor®.  Your real estate agent has access to local specific data that is reported through the MLS.  Using MLS data, your agent can prepare a market analysis that compares your home to recent neighborhood sales; the breakdown can put your home in perspective and can give you a price range to assist you in listing or purchasing the home.  Additionally, your agent can provide a hyper-local trend analysis so as to help you understand what to expect from the local housing market.

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by Dan Krell © 2013

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. Copyright © 2013 Dan Krell.

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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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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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Your real estate agent’s experience is more important than you know

by Dan Krell © 2013
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Why your real estate agent’s experience is more important than you think:

Real Estate AgentsThe National Association of Realtors (realtor.org) publishes an annual profile of home buyers and sellers that includes data and descriptions about how consumers go about choosing a real estate agent.  There are obviously many factors that are involved in the choice, but it is striking that an agent’s experience is not a major reason for their hire; it seems as if most buyers and sellers hire an agent who was referred by someone the consumer knew, and that many buyers and sellers did not talk to more than one agent.

Even though experience is not heavily weighted in agent choice, it may be one intangible that should be considered when you choose your real estate agent.  A recent research study by Bennie Waller and Ali Jubran (“The Impact of Agent Experience on the Real Estate Transaction.” Journal of Housing Research 21, no. 1 (2012): 67-82) highlights the intuitive notion that an experienced agent can yield a better result than an inexperienced agent.

They concluded that hiring a “veteran” agent will have a positive effect on your home sale.  The data indicates that “rookie” agents, those who have had their real estate license two years or less, sell homes for less, take longer to sell homes, and are less efficient during the process.  Data collected from their sample indicated that rookie agents sold homes for about 10% less than experienced agents, which according to their sample data yielded an average net difference of $18,000 (the average list price was $201,297).  Homes listed by “veteran” agents sell about 32% faster than inexperienced agents.  And, experienced agents are more likely to expedite the transaction to completion.

One possible explanation provided by the researchers is that the experienced agents are more likely to list higher quality property that typically sells faster and for more money.  Although they concede that they cannot substantiate this rationalization by this study, they suggest that veteran agents are more successful in obtaining luxury real estate and new home listings.

Real Estate AgentA more likely reason for differences between rookie and veteran agents is the mindset brought forward to the business of real estate.  The investigators discuss how those who consider selling real estate their career are more successful and have better outcomes for their clients than those who do not.  They also suggest that those who consider themselves as “part-time” agents are less likely to achieve as high of a result in their transaction as the full time counterpart; they contend that successful veteran agents are dedicated and devoted to their career.

Other possible reasons for their conclusions (but not discussed in the study) are that veteran real estate agents are more acquainted with the nuances of the housing market and have an increased ability to engage the parties in the transaction.  Full time agents are invested in being aware of listing and sale activity in their respective markets, and network with other agents to compare notes.  Additionally, experienced agents may have developed the ability to easily connect with home buyers and sellers; as well as have greater capacity to understand the specific needs of buyers and sellers – thus facilitating a smoother and successful transaction.

The business of real estate is increasingly complex and difficult.  Rapidly changing demands on home buyers and sellers can be challenging and frustrating for those in the market.  Your agent’s experience, both general and specialized, could make the difference in your success.

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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 8, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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When will move-up homebuyers return to the housing market

by Dan Krell
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© 2013

Move-up home buyers missing from housing recovery; when will move-up home buyers return to the housing market?

home for saleI recently came across an interesting article about “move-up” home buyers online titled, “Move-up Buyer Provides The Base For A Recovering Housing Market.” The piece, published by the Chicago Tribune, is not unlike the many articles you might find today about the missing move-up buyer in the housing recovery. However, this article is different – it was published August 17, 1985 (article can be found here: articles.chicagotribune.com/1985-08-17/news/8502240441_1_interest-rates-trade-up-market-home-resale-market).

The striking similarities between the current housing recovery and a real estate market that was recovering from one of the deepest modern recessions up to that time (during the early 1980’s), includes home buyer behavior and economic concerns. And of course, the affected move-up buyer sector and the dearth of inventory appear to be familiar.

Home buyer behavior doesn’t have seemed to have changed much as many would-be home buyers are trying to time their purchase with the market bottom. At that time, like today, interest rate pressures are helped home buyers decide to jump into the market; additionally, then like today a significant number of buyers were first time home buyers. Downward pressure on mortgage interest rates, combined with the fear of rising rates affected home buyers to get off of the fence. However, peek mortgage interest rates averaged about 15% in the early 1980’s.

Another similarity between both periods is the missing move-up market. The typical move-up home buyer is sometimes described as a home owner who decides they need more space, which results in the sale of their smaller home and the purchase of a larger home. Then like today, the move- up home buyer was the missing piece to the housing recovery; the move-up home buyer provides much of the housing inventory that first time home buyers seek. However, it seems as if a “psychological barrier” (as described by the Chicago Tribune piece) holds back many move-up buyers today as it did in 1985. During the current housing recovery, many potential move-up buyers have remained in their homes.

Like other housing recoveries, one of the main issues holding back the move-up buyer is housing appreciation. During an early recovery, home owners may have a difficult time rationalizing buying a larger more expensive home when the new home could depreciate the first year of ownership, let alone the thought of a perceived loss of equity in their current home.

As home prices stabilize it would be reasonable to think that there will be an increased presence of the move-up home buyer. A good example of this was in the housing recovery that took place during 2003-2004. At that time, low mortgage interest rates helped first time home buyers back to the marketplace, and the move-up buyer sector took off relatively quickly when rapid home appreciation was realized. Of course rapid home appreciation was a function of “easy money” that generated real estate speculation that produced the “go-go market” of 2005-2006, the housing bubble, and the subsequent financial/housing crises.

The similarities of a post recession housing recovery might indicate there is currently progress. However, the move-up home buyer sector may be one of the final pieces to the recovery puzzle; and until the move-up home buyer presence is felt in the marketplace, we may yet to endure a few more years of “recovery.”

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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 1, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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