Local housing market changing

Lately, the housing market is definitely making noise and grabbing everyone’s attention, and not in a good way.  However, we won’t actually know how it plays out until it’s over.  As the idiom says “hindsight is 20/20.”   Nevertheless, if you’re currently in the market to sell or buy a home, pay attention to current local housing market conditions as they are critical to your decision making.

Here we go…

Changing housing market
More home are being listed for sale

The S&P CoreLogic Case-Shiller Home Price Index (spglobal.com) reported in a June 28 press release that average April 2022 home prices increased 20.4 percent from April 2021.  Tampa, Miami, and Phoenix led metro areas with 35.8 percent, 33.3 percent and 31.3 percent gains respectively.

We won’t really know if rising interest rates have any effect on home prices for several months.  Home pricing and sales data is reported in hindsight (data is reported three to four months behind).  The Case-Shiller release points out that mortgage rates just began to increase when these stats were being compiled (April).  However, the recent S&P CoreLogic Case-Shiller Home Price Index is already showing home price moderation (even before rising mortgage rates).  The Year-to Date S&P CoreLogic Case-Shiller Home Price Index for the US only shows an increase of 7.95 percent, while the 3-month index increased 6.66 percent and 1-month only increased 2.08 percent

Rising mortgage interest rates is only part of the economic story that is developing.  It was likely that home prices were already moderating as a reaction to the year and a half of sharp increases.  As I wrote last week, we are in the beginning of the shifting housing cycle.  Mixing in other economic factors, such as mortgage rates etc., can either make the housing market more sever or temperate.  And as I mentioned, we won’t know for sure until it has happened.

Bottom line

If you’re currently in the market to buy and/or sell a home, focus on the short-term local trends.  Speculation of future national home prices and home sales may be interesting, however is meaningless in the here and now.  You should hire a seasoned professional to help understand your neighborhood’s trend, as well as being informed about your potential competition and the local housing market inventory. 

If you’re buying a home, work with a seasoned real estate agent who can provide valid comps and analysis before you make an offer.  Also, consider having a thorough home inspection.  In the last year and half, home buyers felt forced to forgo the inspection to make their offer competitive.  However, in the changing market, home inspections will return.

If you’re selling a home, be aware that home pricing strategies that were lucrative last year won’t work to your advantage this year.  It’s nice to think that your home could sell for a peak price much like other neighborhood homes that sold twelve to twenty-four months ago.  However, in a changing market, overpricing your home sale could be counterproductive, driving potential home buyers to competing homes.

By Dan Krell
Copyright © 2022

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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 Pause, Slowdown, or Collapse?

housing market
Work with a seasoned professional to help navigate the local market

Is the housing market in a pause, going into a slowdown, or worse – headed for a collapse?  Looking back to an article I wrote an article in the summer of 2018 asking the same question, we were at a similar point then and asking the same questions. Just like today, the summer of 2018 saw decreasing home sales after a sellers’ and sharply rising home sale prices.  Instead of being in full swing, the housing market of the summer of 2018 was cooling down. 

During that time, it was common place to hear about the impending doom and gloom in a housing collapse from the media.   In hindsight, what occurred that summer was a normal reaction to an overheated market where stressed home buyers basically took a break. Even with the short pause, the housing remained an active and viable aspect of the US economy. 

Housing, like other facets of the economy, go through cycles of boom and bust.  Most are familiar with the extreme boom and bust cycles, such as what occurred during 2005-2007.  However, many are unfamiliar with the concept of the mini-cycle.  The mini cycle is a period of short-term growth and slowdown, modulating to maintain a relative balance. Instead going through a protracted cycle of expansion, hyper-supply, and recession, the housing market could be correcting itself via mini cycles

Prior to the lockdowns of 2020, the housing market was in the process of correcting itself from sharp home price increases during a hot 2017-2018 market.  At that time, home sale inventory was already at historic lows (which began in 2013).  As you can understand, the lockdowns further exacerbated the home sale inventory shortage and pushing the housing market and home buyers into an unprecedented situation.  The double-digit multiple offers and six-figure escalations pushed home buyers to the edge, exhausting and discouraging many.

After a year and a half of sensational activity and home price gains, it’s not unthinkable that home sales would correct itself.  As reported in the June 21st National Association of Realtors press release (https://www.nar.realtor/newsroom/existing-home-sales-fell-3-4-in-may-median-sales-price-surpasses-400000-for-the-first-time), May 2022 home sales decreased 3.4 percent from April, and decreased 8.6 percent from May 2021.  Home sale inventory continues to increase, and was reported to be about 2.6 months of supply, which gives home buyers more opportunities.

Home prices, on the other hand, continue to increase.  As reported in the NAR press release, median home prices are 14.8 percent higher than a year ago! The $407,600 median home sale price is the first time the median sale price exceeded $400,000. 

Of course, housing is also affected by outside economic factors, which are concerning to everyone.  If you are in the market to buy or sell a home, look at the facts and make decisions that make sense for your situation. Finally, work with a seasoned professional to assist you to understand and navigate your local market.

By Dan Krell
Copyright © 2022

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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.

Home Selling Strategy

home selling strategy
What’s a Seller’s Market?

There is an idiom that says that the “Map is not the territory.”  One interpretation is that you shouldn’t confuse theory with reality.  And in real estate, that means you shouldn’t confuse the strategy with the market cycle. And as this seller market cycle continue, some home sellers are confusing it as the implementation of a brilliant home selling strategy.

Low home sale inventory seems to be the new normal since the Great Recession.  Home owners are staying in their homes longer, and first-time home buyers are putting off buying a home to save money.  And the current market cycle highlights how pent-up home buyer demand can drive home prices.  In this market, appropriately priced homes sell fast, usually within a week.  Many times, homes will get multiple offers and sell over list price.  The truth is that current conditions are a manifestation of the market.  However, home sellers come to expect homes to sell in a week for over list price, even when the market changes.  The answer to a successful sale in any market is to create a home selling strategy. 

Regardless of the housing market conditions, you need a home selling strategy (also known as a marketing strategy) to sell your home.  The marketing strategy will determine the best way to position your home to get your home sold in an expedient way at the best price.  It’s a map that you create to get you to a successful closing. 

Your home selling strategy research should be focused on your neighborhood, as well as competing neighborhoods.  Many begin with a comparative market analysis (or CMA).  A CMA is a process of determining a potential home sale price by evaluating neighborhood sales of similar homes in style, size, and age.  In a buyer’s market, when homes are taking longer to sell, you should get a 30-60-90 day analysis to determine the trend of sale price and days on market.  In a seller’s market, the trend is usually where homes sell relatively quickly.  However, the CMA can assist in understanding pricing trends.

One of the interesting aspects of a detailed CMA is the comparisons of characteristics and features between your home and other homes that recently sold.  From the analysis you can begin to see what makes your home stand out from the others.  You may discover your home has more or less amenities than other neighborhood homes, which should be considered in your pricing strategy.

List price is everything.  Your home sale strategy hinges on pricing your home correctly.  Regardless of market conditions, if the house is prices too high it will likely take longer to sell (relative to the average time on market).  Homes that are prices correctly tend to sell faster than over priced homes.  Many home sellers trying to reap “top dollar” have made the mistake of setting the list price too high expecting a home buyer to make an offer.  The truth is that buyers are savvy and will likely skip the over priced homes.  Your strategy, no matter how clever, can’t overcome overpricing.

Preparing your home should also be part of your strategy.  Decluttering and deep cleaning is a must for all home sales.  Whether or not you live in the home, you should consider staging. “Home staging” is a term that is used to describe the process of making your home as appealing as possible to potential home buyers to sell the house quickly. This may include rearranging and/or removing furniture.  Some home sellers rent trendy furniture to replace their own items. 

By Dan Krell
Copyright © 2021

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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.

3D Printing Home Building

3D printing home building
Healthy Home (infographic from hud.gov)

When you think of modern home construction, you typically think about (wood) sticks and bricks.  And it’s been that way for decades.  But since its introduction in 1983, tech visionaries thought about using the 3D printing to build houses.  What was once a futuristic dream of 3D printing home building is now a reality.

In his 2017 commentary, Sean Mashian lays out how 3D printing will change the landscape of home building and real estate (The impact of 3D printing on real estate; Cornell Real Estate Review; 2017. 15, p64-65.).   He discussed how the technology was used and the potential for the housing industry.  His assessment was that large scale commercial 3D printing technology was rudimentary and expensive.  Instead, the industry mostly used the tech for smaller projects, such as scale models for new home developments.  However, like any new technology, he expected large scale commercial 3D printers to become more commonplace as the tech emerges.  He predicted the potential of 3D printing growth, just as internet tech and e-commerce grew in the early 2000’s.

In order to grow the technology of 3D printing home building , pioneers like Apis Cor (apis-cor.com) are needed.  Apis Cor claimed to be the first company to develop and deploy a mobile construction 3D printer capable of printing a complete house on site.  About five years ago, Apis Cor made headlines when they “printed” a house in 24 hours.  Although. the one level 400sf home was rudimentary, it demonstrated the flexibility of the 3D printing technology.  The home was 3D printed completely on site and in mid-winter. 

The 3D tech is already being used in some manner in the housing industry. A 2013 article in Kitchen & Bath Design News (Design and the 3D Printing Revolution) reported on design companies that were using 3D printing to manufacture personalized home fixtures.  And in 2019, the National Association of Homebuilders reported that 3D printing tech is already being used by a small number of builders to produce architectural details for homes.

A January 11th National Association of Home Builders release discusses how 3D printing can change the industry (How 3D-Printed Structures Could Disrupt Housing; nahb.org).  Although the NAHB states the tech is still developing, there is a belief that it will address several concerns about housing:

First, it will make homes more affordable.  Currently, 3D printed homes are relatively small, which reduces materials and time to build the home.  Automation significantly reduces labor costs.  Additionally, some 3D printed homes can be built without a foundation, which also reduces time, materials, and costs. 

Second, home building will be more sustainable.  The technology inherently has little waste.  Each house is “printed” with the necessary material.  Besides incorporating green technologies, the structure is printed in such a way that it improves energy efficiency. 

Third, 3D printing home building designs are easily changed in an automated system.  The design flexibility can make numerous shapes that can address fast paced changes to the housing market.

And last, building delays are almost eliminated.  Whether the houses are printed on site, (such as Apis Cor’s technology) or built in a facility, the rapid building time reduces weather impact.  Depending on the home size and printer capability, a home can be built in as little as 24 hours or up to several weeks.  This type of productivity greatly reduces time and delay costs due to labor and materials.

By Dan Krell
Copyright © 2021

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Short Sale Home Selling

short sale home selling
Housing Market Expectations 2021

As you probably know, it’s been a sellers’ market with many listings getting multiple offers.  With such a strong housing market, it would seem unthinkable that some home owners would be underwater on their mortgages when selling their homes.  But the fact remains that there are many home owners who have to go through the short sale home selling process to sell their homes.

On the face of it, the January 14th press release from ATTOM Data Solutions (attomdata.com) seems to add credence to the housing market’s strength, touting that foreclosure activity is the lowest in sixteen years.  The report stated that default notices, auctions, and repossessions decreased 57 percent from the previous year, and decreased 93 percent from 2010’s peak would seem to be terrific news.  But the low foreclosure activity stats are actually a manifestation of a government moratoria on foreclosure activities that was imposed due to the pandemic emergency. 

Rick Sharga, Executive Vice President of RealtyTrac, an ATTOM Data Solutions company, stated “The government’s moratoria have effectively stopped foreclosure activity on everything but vacant and abandoned properties. There is a backlog of foreclosures building up – loans that were in foreclosure prior to the moratoria; loans that would have defaulted under normal circumstances; and loans whose borrowers are in financial distress due to the pandemic.”  Further commenting on the foreclosure backlog, Sharga believes that the foreclosure wave won’t be as bad as what occurred prior and during the Great Recession.  But he cautioned that we won’t know how large the foreclosure wave will be until the moratoria expires. 

So, in the face of a strong housing market, there are many home owners who need to sell (due to job loss, job relocation, divorce, etc.) but can’t because the proposed sale price is short of the amount needed to cover the costs of selling (which typically includes mortgage, closing costs, realtor & title fees, etc.).  This is where a short sale can be considered.

A short sale is basically when your sales net isn’t enough to pay the mortgage(s) on the property.  In many cases, short selling home owners don’t have the funds to make up the shortage needed at settlement.  Instead, they seek lender approval to allow a lower mortgage payoff in order for the transaction to close.  Because short sales have become a common form of transaction in the real estate landscape, the process has become more standardized since the Great Recession.  Although the typical time to complete a short sale can take three to six months, short sales can take as little as forty-five days.  However, it’s important to note short sale approval can also take more than six months. 

Although the core process is the same, lenders have different requirements when collecting information and conducting their due diligence.  Having a professional negotiator helps facilitate your short sale.  Seasoned short sale listing agents typically work with experienced attorneys to negotiate and handle the process. 

If you are thinking of short sale home selling, interview several experienced and local short sale agents.  Ask about their track record for successful short sales and how they work on your behalf to get the job done.  Also talk to their negotiator, and ask about their track record in successfully negotiating short sales.   

When considering a short sale, consider all your other options as well and get professional advice from an attorney and CPA to determine your best solution. 

By Dan Krell
Copyright © 2021

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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.