Real Estate News and Commentary

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/

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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.

December 5, 2020November 23, 2021

Home Prices 2021

It’s almost inconceivable to think that the housing market will undergo a foreclosure crisis similar to what we went through back in 2008. How will home prices 2021 be affected by an impending wave of foreclosures?

If you remember, the 2007 housing market peaked as home prices skyrocketed. Homes were a hot commodity as home buyers and speculators seemingly could not get enough. But by the fall 2007, as if someone flipped a switch, inventory piled up. There was a reckoning in 2008 as the market was flooded with foreclosures. Home prices dropped to the lowest levels in a decade and days-on-market averaged in months. It took five years for home prices to stabilize and maintain solid gains.

Fast forward to the 2020 lockdowns. The housing market took off like a rocket during the summer and fall, after taking several months off. Pent-up demand was the catalyst for record home sales leaving inventory depleted and forced upward pressure on home prices. Housing is again economy’s workhorse.

A November 19^th NAR press release (nar.realtor) touting October home sales indicated that existing-home sales increased 26.6 percent year-over-year! Additionally, the median existing-home sale price increased 16 percent year-over-year. All this occurred as home sale inventory levels are historically low. Interestingly, it was noted that about 70% of homes sold during October, which means not all homes sold.

Additionally, October’s pending home sales point to a strong market into 2021. The NAR’s October Pending Home Sale Index indicated that although new contracts declined a slight 1.1 percent from September to October, the year-over-year new contracts increased about 20 percent!

With stats like this, many industry experts are expecting a strong housing market and increased home prices 2021. The high expectations for the housing market is demonstrated by a December 3^rd HousingWire report (housingwire.com) titled, “Even with low inventory, expect a strong 2021 housing market.”

And as many celebrate this hot housing market during a global pan-demic, some are raising concerns about the many home owners who are delinquent on their mortgages. Unfortunately, delinquent mortgages haven’t received as much coverage as it probably should have. Many home owners are unable to stay current on their mortgages due to lock-down job cutbacks. As a result, some are expecting a surge in foreclosure notices.

An October 13^th CoreLogic press release indicated that the July mortgage delinquency rate (30 days or more late) was 6.6 percent. Although the rate slightly dropped from June’s 7.1 percent, serious delinquencies (90 days or more past due) jumped to 4.1 percent (compared to 1.3 percent a year earlier). Serious delinquencies are the highest since April 2014. Troubling is that mortgages which are 120 days or more late surged to 1.4 percent – which is a 21-year high, eclipsing the 2009 peak! The metropolitan areas experiencing the highest delinquency rates are those where home price increases made the most gains (such as New York, Miami, Las Vegas, and Houston).

So, what does this mean?

An August 27th CoreLogic report made a case for declining home prices in 2021. There’s no denying it, there is a foreclosure wave waiting in the wings. It’s unclear when the foreclosures will occur because of the current pan-demic moratorium. However, if foreclosures are as numerous as they were in 2008, home prices 2021 will likely decline when these homes come to market.

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/12/05/home-prices-2021/

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November 28, 2020December 13, 2022

Real Estate Agent Personality

Many home buyers and sellers don’t give much thought in choosing their real estate agent. They may decide to work with an agent after meeting once or a phone call. But having the right agent by your side can mean the difference in having an event-free home buying or selling experience, or one that is full of pitfalls and non-communication. Besides professional expertise and experience, is there a real estate agent personality trait that gives you an advantage?

Lee Davenport conducted a groundbreaking study comparing real estate agent personality differences (Home Sales Success and Personality Types: Is There a Connection?; Journal of Real Estate Practice and Education; 2018; Vol 21, No 1; p29-57.) The study investigated the question whether there is a connection between successful real estate agents and their personality type. Success was measured through lead generation (e.g., meeting new clients). Although you might think there is a personality that is better suited for real estate, the study concluded that there wasn’t one specific personality type that correlated to real estate success. However, he suggested that there should be further research to understand why there is no difference in the success among real estate personality types.

Back in 2014, Graham Wood wrote an article for NAR that also questioned if there was a perfect agent personality (Are You Sure Your Agents Have the Right Personality for the Job? nar.realtor; April 11, 2014). Although the article was not a study published in a peer reviewed journal like Lee Davenport’s, it does provide food for thought and an obvious conclusion.

Wood, like Davenport, questioned which personality dimension on the DISC test was better suited for real estate. After testing himself, Wood believed his personality traits were not suited for a people-skills intensive field (such as real estate sales). However, after interviewing several brokers, he learned that there is place in real estate for pretty much any personality type. The DISC (discprofile.com) is a behavioral assessment tool that helps people be more self-aware, and increase productivity.

What should you look for when choosing your agent? First, make sure they are licensed in the area you intend to buy and/or sell. I can tell you that there are agents who try to do business over state lines where they are not licensed. It happens more than you think.

Second, what’s their experience and expertise? In today’s market, most agents don’t confine themselves to specific neighborhoods. The idea of “neighborhood specialists” is antiquated. Information is abundant to agents and consumers, and can easily be applied to any neighborhood. You can learn more about an agent by how they handle adversity. Instead of asking about how many sales they have or neighborhood experience, ask about specific transactions where they overcame obstacles.

Other considerations include getting a referral from a friend or relative. But referrals should be vetted. Just because your friend had a good experience with their agent, doesn’t guarantee success for you. Sometimes agents and clients connect and work well together, and sometimes they don’t. Just in case, make sure you can walk away from your agent by ensuring your buyer or listing agreement provides for termination without a penalty.

Also, it doesn’t hurt asking the agent for a couple of references from recent clients. You can get insight into the agent’s business by calling the references and asking about their experience with the agent.

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/11/28/real-estate-agent-personality/

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November 20, 2020November 20, 2020

Home Selling Magic

Your home selling magic is grounded in four principles: condition, preparation, price, and marketing. I know that it doesn’t sound thrilling or magical. But if you focus on these four concepts, you’ll see how your home sale plan magically comes together.

The first principle of home selling magic is “condition.” It’s a fact that home buyers want a turn-key home, meaning they want to move into a new or updated home. If you’re like many home owners who has lived in their homes for many years, chances are that there is some deferred maintenance or systems needing updates. You can decide to forego repairs and updates and sell “as-is.” However, if you want to get top-dollar for your home or not, you will likely have to some make repairs. You’ll should calculate your return on the investment of repairs and updates to help decide which items to repair.

The next principle is “preparation.” After deciding on your home’s condition, you’ll have to prepare for the sale. The preparation includes the repairs and updates you decided on, as well as decluttering and home staging. Decluttering our homes is something we all put off because it can be monotonous. But when you’re selling a home, it’s absolutely necessary (regardless of the home’s condition). Planning the time spent each day to declutter will make it easier.

What about home staging? Home staging is more than just rearranging furniture and pictures. It’s actually a broad topic that includes repairs and decluttering. Since you’ve already decided on repairs and planned decluttering, your home staging focus should focus on the interior and exterior spaces. Consulting with a home stager or interior designer can give you insight on how to create a vision to attract home buyers. Home staging can be expensive if you’re doing a whole home makeover. But it doesn’t have to be expensive. You can keep costs in check by focusing on a few rooms.

“Pricing” is probably the most important of the four principles of home selling magic. Pricing your home correctly means the difference of selling your home quickly and having it languish on the MLS. Avoid the biggest mistake home sellers tend to make, which is over-pricing your home. Over-pricing makes it difficult to attract home buyers, as well as soliciting offers from agents. Make sure you get a detailed market analysis (CMA) of similar neighborhood homes. Be wary of agents who mislead by comparing your home to larger higher priced homes.

The final principle is “Marketing.” Marketing your home is making home selling magic work through promotion. The truth is that most home buyers start their home search online. Buyers will decide on the homes they want to visit through the photos and descriptions. To get high quality HD photos, make sure you hire an agent that works with a professional. Ensure your agent enters detailed and accurate information. Although the MLS syndicates information and photos across the internet, it’s not always presented completely. Have your agent rectify all errors that appear on home listing aggregate sites.

Open houses are an additional marketing tool that your agent should use. Although many agents will say that open houses aren’t effective, the truth is that it’s usually how home buyers first see your home. A final thought is to be wary of gimmicks and new technology, as many such devices are designed as a marketing pieces for real estate agents instead of selling your home.

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/11/20/home-selling-magic

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November 13, 2020November 13, 2020

Home Buying Persistence

Before the health lockdowns, home sale inventory was already well below the volume to maintain a healthy housing market. Many home owners decided to put off their spring and summer home sales this year as a result of health concerns, further reducing the available home sale inventory. The result was that the number of home buyers competing for one home increased. Low home sale inventory continues to be an issue, and there is still a high probability of competing with other buyer offers on a home. As a home buyer, you are probably wondering how to win the multiple offer scenario. It comes down to home buying persistence.

The obvious way to win a bidding war is to make the most attractive offer to the seller. But that’s easier said than done. The reality is that beating out multiple home buyer offers means you need to be organized, and go in with your best offer. And if you lose out on the home, don’t give up.

Get organized.

First, talk to a mortgage lender before looking at homes. Have the loan officer review your credit and income to determine what mortgage program is best for you, and get pre-approved. Once you’re pre-approved, you can be confident about making an offer on a home. Your mortgage application should also be easier because you’ve already given documents to the loan officer. But the most important reason for a pre-approval is for the seller to feel confident with your offer.

When the seller reviews multiple offers, they usually rank offers with contingencies lower than the non-contingent offers. Rather than foregoing the home inspection, consider having a pre-offer home inspection. The pre-offer inspection will allow you to determine the condition of the home so your offer will be more attractive to the seller.

As a home buyer, you should try to gain some insight into what the seller wants . You may think that the seller just wants the highest price. But that’s not always true. In multiple offer situations, the home seller looks at all factors, including price AND terms (including deposit, closing date, contingencies, etc.).

Should you use an escalation clause? Maybe. In a multiple offer situation, a clean offer is usually best. This means making your best offer. But if you decide to use an escalation clause, make sure you are aware of the cap (limit to price), and your escalation factor. Make your escalation factor is worthwhile for the seller; meaning if you’re the highest price by $500 or $1,000, the seller may consider other factors in their decision. Also make sure that your escalation is in line with the estimated appraised value.

Don’t get discouraged if you lose out in multiple offer scenarios. Stick with it and have home buying persistence. Sometimes, reassessing your home buying strategy may be warranted. And your home buying persistence may mean that you look at alternative sales.

If you’re feeling a little skittish about encountering a multiple offer scenario, or already have lost a bidding war, look for homes that have little or no home buyer competition. Besides looking at “ugly” or fixer-upper homes, you may also consider FSBO (sale by owner), bank owned homes, and auctions. Ask your agent to canvas the neighborhood asking homeowners if they want to sell, as well as calling expired listings.

Fixer-upper homes have potential and the price can usually be negotiated. If you’re worried about the cost of renovations on fixer-uppers, talk to your loan officer about renovation loans, such as the FHA 203k. Renovation loans provide you the funding to acquire the property, and the funds to rehab the property.

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/11/13/home-buying-persistence/

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