Real Estate News and Commentary

January 14, 2021December 13, 2022

Clean your home

“Clean your home” is one of the most underrated activities when preparing to sell your home. Although it’s seemingly the easiest thing to do to get a higher price and faster sale, it’s often misunderstood or shrugged off. because there’s so much going on when selling a home. Besides getting the home ready to list, you’re likely planning a move. With so much on your mind, it’s easy to put it off.

A New York Times piece by Tim McKeough (Market Ready; nytimes.com; July 25, 2012) gave advice from a real estate broker and a cleaning professional on properly cleaning before listing a home. The real estate broker commented on cleaning windows and floors; as well as polishing furniture. Paramount is the condition of home entry, kitchen and bathrooms. The entryway is important because it’s the area where the home buyer gets their first impression of the home. The kitchen and bathrooms get much of the home buyers’ attention, and should also be a focus of a deep cleaning. It’s advised that the entryway be decluttered, and the kitchen and bathrooms should be “spotless.”

Attention to detail is important, such as cleaning the oven/range, clean tile grout and a new shower curtain. Because dirty grout can leave a bad impression with home buyers, consider regrouting. “Horizontal surfaces” (such as windowsills, picture frames, baseboards, and shelves) should also be a focus of cleaning. Also, a deep cleaning should focus on areas where cleaning finger prints are found, such as light switches and door knobs. When showing the home, the sink should be clean and dishes put away, as well as putting away toiletries and making the beds.

When your agent recommends to clean your home, they mean to get a deep cleaning. However, home sellers often misconstrue “deep cleaning” as a routine cleaning. Don’t get me wrong, cleaning your home anytime is positive. However, a deep cleaning goes after dirt and grime that has accumulated while you lived in the home. A deep cleaning includes and goes beyond the basic cleaning. A deep cleaning typically includes (but isn’t limited to) shampooing rugs and carpets, cleaning grime from oven and range burners, cleaning bathroom grout, cleaning windows, cleaning baseboards and corners, and ceiling fans. If you have a pet, your deep cleaning should also focus on removing pet hair, dander and lingering odors.

Most home sellers hire a cleaning service for the “deep clean.” The Better Business Bureau (bbb.org) offers these tips when hiring a cleaning service: 1) Research the company. Ask friends, family members, and neighbors for recommendations. Interview at least three companies. Check if the company has complaints. 2) When interviewing the service, ask to also meet with someone who will be doing the cleaning to understand their process. Also ask what cleaning products are used, especially if anyone in the home has sensitivities and allergies. 3) Most important – check credentials. Check if their operating license is in good standing. Ask for proof of their bond and insurance. Request or conduct your own background check. 4) Ask for and contact past client references. 5) When talking about the cost, consider the time that will needed for the cleaning. Make sure that the service includes everything that you need to be cleaned. A home walkthrough is recommended to provide a service estimate. Although it’s typical to be attracted to the least expensive service, it may not be the best value. 6) When you decide on the service, get it in writing and make sure it’s specific as to what the service will do and the time they will be in your home.

By Dan Krell
Copyright © 2021

If you like this post, do not copy; instead please:
link to this article,
like it on facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector

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.

January 4, 2021January 4, 2021

Negative Interest Rates Redux

Negative interest rates used to be a controversial topic. However, countries such as Japan and those in the European Union entered into the uncharted waters to stimulate their economies in the years following the Great Recession. Back in 2015 there was speculation that the US was headed into negative interest rates too. But those thoughts quickly vanished as the economy rapidly expanded after 2016. But with the prospect of more economic distress down the road with on-and-off again lockdowns and business restrictions, are negative interest rates on the table again?

What are “negative interest rates?” A very rudimentary explanation is it’s when interest rates go below zero. Meaning that instead of borrowers paying interest on loans, the lender pays the borrower. It may sound backward to what we are used to, but it is a “tool” that central bankers may employ in times of severe financial crisis.

Although many economists contend that negative interest rates are a viable short-term option to respond to a severe financial crisis, it is uncertain the policy works as intended. Negative interest rates expose a vulnerable economy to future financial downturns. Additionally, some are concerned about long-term deflationary effects, while others fear it results in hyperinflation. Some experts point to the potential of a paradoxical effect of freeze community lending. This can occur if investors hold onto their cash, instead of depositing it with banks for zero interest (or even having to pay the bank to hold their money). This lack of investment has the potential will reduce banks’ available capital to lend.

The possibility of negative interest rates in the US is once again a hot topic. A 2020 NAR report discusses this option (Expectations & Market Realities in Real Estate 2020-Forging Ahead; nar.realtor):

“There is nothing stopping the U.S. from moving into negative interest rates, but several issues would arise should the U.S. decide to take that plunge. One of the biggest fears is that the FOMC [Fed Open Market Committee] would not have any tools left to employ when the next downturn occurs. Global investors might lose faith in the safety of U.S. government bonds as negative interest rates and other forms of quantitative easing may be perceived as a sign of weaknesses in the economy. In addition, the portfolios of millions of U.S. investors would likely be hurt. According to the Office of Management and Budget, $16.8 trillion of the government’s $22.7 trillion debt is held by the public of the U.S. A large portion of the holders of U.S. debt are retired or soon-to-be retirees who have their portfolios in risk-free U.S. Treasurys. Many federal programs, including Social Security, Medicare and Medicaid, are also heavily invested in Treasurys, meaning these public programs would most likely lose money on the aggregate due to negative interest rates.”
(Expectations & Market Realities in Real Estate 2020-Forging Ahead; nar.realtor)

Could we see negative interest rates in the US?

In their recent statement of the FOMC (federalreserve.gov), the Federal Reserve believes that although economic activity and employment are recovering, the health emergency has caused a tremendous human and economic hardship in the US (and globally as well). If extraneous events are unchanged, “Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.” However…“The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”

Original published at https://dankrell.com/blog/2021/01/04/negative-interest-rates-redux

By Dan Krell
Copyright © 2021

If you like this post, do not copy; instead please:
link to the article,
like it on facebook
or re-tweet.

December 27, 2020November 23, 2021

Home Sale Predictions 2021

Given the performance of the housing market this year, can we make home sale predictions for next year? The housing market had quite a year! It’s amazing how resilient the market is, which demonstrates the appeal of homeownership. Even after a significant spring slowdown, home sales rebounded to record levels in the fall. NAR’s Existing Home Sales and Pending Home Sale Indices for October 2020 increased year-over-year 26.6 and 20 percent respectively (nar.realtor). Even as we headed toward the holidays, NAR’s November Existing Home Sales increased 25.8 percent year-over-year. And year-over-year median home prices increased 14.6 percent.

While some experts expect the recent housing market activity to continue, others question if this intense home buying is sustainable. Making home sale predictions for the new year has always been predicated on recent trends. However, 2020 was different. Unexpected and unusual events occurred throughout the year affecting the housing market. First taking a pause because of an economic shock, home sales made up ground later in the year.

Recent trends suggest that home buying will continue at a healthy rate, as long as the economy remains relatively similar. However, being an election year there is anticipation for change. Even many economists, who are typically ready to offer their opinion, are ambivalent about the economy. This may suggest that the economic outlook for the near future is uncertain.

A main factor to watch in 2021, is employment. It’s a known fact that unemployment directly effects home sales. In periods of increasing unemployment, home sales decline. A 2010 Florida Realtors (floridayrealtors.org) survey demonstrated a correlation between unemployment and foreclosures. There is no coincidence that home sales strongly rebounded along with employment and the economy. If employment remains stable into 2021, home sales will continue to over-perform.

Other factors that will drive the housing market in 2021 include mortgage interest rates, home sale inventory, and home buyer demand.

Mortgage rates have been relatively low since 2008. At that time, rates hovered in the low 4’s, and were though to be “historically low.” Also, consider that mortgage rates were in the 18 percent range during the early 1980’s. Even during the go-go market of 2005-2006, rates hovered in the 6 percent range. But the most recent mortgage interest rate average of 2.66 percent for a 30-year-fixed rate is described as “another record low” by Freddie Mac’s December 24^th 2020 Primary Mortgage Market Survey (freddiemac.com). If mortgage rates remain low, home buyers will be incentivized to buy homes.

Another after-effect of the Great Recession, which continues today, is low home sale inventory. The Great Recession changed how consumers thought of housing. Since 2008, home owners have remained in their homes much longer. Many growing families make due with smaller spaces, rather than moving-up to a larger home. Many older home owners are deciding to “age in place,” in lieu of down-sizing. And telecommuting is outpacing job relocation. Home sale inventory of non-distressed properties will continue to remain low through 2021.

There is always “home buyer demand.” Meaning there are always active home buyers. However, the strength of the demand varies. Home buyer demand is typically gauged in hindsight through home sales and pending home sales. When you combine housing stats with other factors, such as employment, economy, and mortgage rates you can estimate the strength of future home buyer demand. If economic factors remain stable, home buyer demand will continue to be strong in 2021.

Original published at https://dankrell.com/blog/2020/12/27/home-sale-predictions-2021/

By Dan Krell
Copyright © 2020

If you like this post, do not copy; instead please:
link to the article,
like it on facebook
or re-tweet.

December 20, 2020December 13, 2022

Price is Everything

Home sellers want to get top dollar, and home buyers want value. This is a hard to truth to acknowledge, but regardless of your home’s condition, location, etc. it all comes down to the home sale price. Don’t just take my word on it. There’s plenty of peer reviewed research on the topic. For example, Han and Strange’s study that demonstrates how home price effects home buyers’ response and motivation to visit and/or make an offer on your home (What is the Role of the Asking Price for a House?; Journal of Urban Economics; Volume 93, May 2016, P115-130). The conclusion indicated that list prices that are consistent with neighborhood values (not overpriced) maximize home buyer engagement. Price is everything .

The “price is everything” concept applies to any housing market. It applies when the market is slow, and even when the market is doing well. Take for example this year, when it seemed as if any home that come on the market sold quickly. However, there’s a caveat: homes that were priced correctly sold quickly. Homes that were overpriced took much longer to sell. For those overpriced homes that sold, they sold for less than original list price.

As home prices continue to appreciate, home sellers are eager to push the envelope when setting their list price. But home buyers are savvy and won’t overpay for a home, so creating a realistic pricing strategy is key to your home sale success. Things to consider include your home’s condition, your local market, and your competition.

The main tool to help you decide on a list price is the CMA (comparative market analysis), which you can get from your agent. The CMA is not an appraisal, but it is a snapshot of market activity for similar homes in your market area. The CMA can show how homes like yours (that are similar in size, style, age and condition) sell by price and days on market. Typically, the CMA is broken down into 3-month, 6-month, and 12-month segments to show how home sales are trending. Compare active homes to homes that sold as well as those that didn’t sell for sale price and days-on-market). Also be aware of any seller concession, which can affect your net sale. Finally keep track of neighborhood active listings, this is your competition that can also help you modulate your price if needed.

To help sellers understand how their homes compare to the competition, I used to advise clients to visit neighborhood open houses. This was helpful in understanding how to prepare their homes by comparing the homes’ condition and features. Although visiting open houses may not be practical for you these days, technology makes it easy to see the interior of home via HD pictures, virtual tours and floor plans.

Another pricing strategy that many home sellers use to get more buyer traffic is “just-below” pricing. Just-below pricing is reducing your decided list price below the rounded number. For example, if your list price is $450,000, the just-below price might be $449,900. This strategy was demonstrated through research by Beracha and Seiler (The Effect of Pricing Strategy on Home Selection and Transaction Prices: An Investigation of the Left-Most Digit Effect; Journal of Housing Research; 2015; Vol. 24, No. 2, pp.147-161). Just-below pricing works best the list price is rounded down to the nearest hundred or thousand.

Original published at https://dankrell.com/blog/2020/12/20/price-is-everything/

By Dan Krell
Copyright © 2020

If you like this post, do not copy; instead please:
link to the article,
like it on facebook
or re-tweet.

December 13, 2020December 13, 2020

Rent vs Buy 2021

Thinking of your Rent vs Buy 2021 question? Consider Quarterly Residential Vacancies and Homeownership released by the US Census (census.gov) for the third quarter of 2020 is very interesting. First the good news is that the US homeownership rate is the highest it’s been in a decade! The seasonally adjusted US homeownership rate of 68.2 percent recorded in the second quarter 2020, was the highest rate since 2007. In fact, the homeownership rate hasn’t had two consecutive quarters above 67 percent since 2009. As you remember, the homeownership rate progressively dropped through 2015 to hover in the 63 percent range, which was the lowest homeownership rate in several generations.

The story of the housing market this year has been nothing short of phenomenal. Initially thwarted by a dismal spring market, only to rebound at a record setting pace. Even with historically low existing home sale inventory and rising home prices, eager home buyers are actively pursuing homeownership.

On the flip side, the second and third quarter US rental vacancy rates are the lowest since 2008. And the mean US rental asking rent of $1,600 marks a high point as rents continue to creep higher. Of course, homeownership rates and rental vacancies will vary significantly depending on the region and locality. However, looking at the US averages is a good benchmark to see trends develop.

For many, comparing increasing rent versus a low interest mortgage rates makes buying a home the answer to the rent vs buy 2021 question. A November 8, 2012 article from Realtor Magazine (Rising Rents Press More Americans to Make Big Decision; magazine.realtor) describes the renter’s plight, by saying, “Rental price expectations continue to rise and are much higher than home price expectations…” This sentiment continues to hold true. Besides escaping rising rents, many home buyers are drawn to the touted benefits of homeownership, including increased well-being and wealth-building.

How do you know if renting or buying is better? First, when deciding on the rent vs buy 2021 question, there are many other considerations besides rising rents. Consider how long you intend to live in the area. Renting is often the housing solution if you think your residence in the area is temporary.

Next, if you don’t already have one, create a housing budget. Besides deciding on how much rent you can afford, talk to a mortgage lender to get prequalified to further help you understand how much you can afford to pay for mortgage or rent.

Once you have a budget of what you can afford, create an estimated renter’s and home owner’s budget to compare. Besides the basic housing payment (rent or mortgage), there are other items that need to be taken into account and can vary depending if you rent or own. These other items include (but not limited to) monthly utilities, insurance, and maintenance. To help with estimating the “extras,” start by asking the landlord and/or home seller for twelve months of utility bills (Montgomery County MD requires home sellers to provide this for owner-occupied homes). Ask your insurance agent for a quote to compare renters’ vs homeowners’ insurance.

Home maintenance is usually forgotten and not budgeted. Tenants typically have minimal maintenance, which is an attraction to renting. Generally, home maintenance for owners usually includes having seasonal or annual inspections on the home’s systems (e.g., HVAC, roof, etc). Additionally, you have to budget to repair and/or replace systems as they age.

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/12/13/rent-vs-buy-2021/

If you like this post, do not copy; instead please:
link to the article
like it on facebook
or re-tweet.