Autumn Home Selling

autumn home selling
Autumn home selling

What was once considered a winding down period for the year’s home sales, has become housing’s second wind.  Autumn is not only a time when the leaves start falling, but it also has become a target selling season for home sellers who miss the spring market.  Autumn home selling is also a second chance for those who could not sell their home earlier in the year.  In fact, the fall has become an active home selling season.

The general consensus for the autumn home selling phenomenon is that home sale inventory is low.  But the truth is that the fall tends to be when home sale inventory begins to decrease anyway.  Many home sellers who didn’t sell their home during the spring or summer will be pulling their homes off the market.  Sure, new listings are available during the fall, but not as many as there were in the spring.  Fall is a time for home buyers and sellers to strike while the iron is hot.  The combination of fewer listings along with serious home buyers and sellers makes the fall housing market a brisk selling time. 

This year, autumn home selling may be different.  Existing home sales have declined year-to-date (compared to last year).  The National Association of Realtors reported that as of June, existing home sales are about 2.2 percent behind last year’s sales.  Year-to-date Montgomery County home sales are 2.1 percent below last year’s sales.  This decline actually started last fall.  The home sale drop-off stifled what could have been a record year for 2018 home sales.

Autumn home selling

If you’re selling a home this fall keep an eye on neighborhood home sales.  Setting a reasonable list price will be key to getting your home sold.  Keep in mind that although home sale prices continue to climb, monthly appreciation is slowing.  The S&P CoreLogic Case-Shiller Home Price Index (spindices.com) reported a year-to-date nationwide 2.29 percent increase.  You get a sense of the magnitude of decelerating appreciation when compared to 2018’s increase of 4.55 percent, and 2017’s increase of 6.24 percent nationwide.  The year-to-date Montgomery County average home sale price is about $554,932, which is only an increase of 1.2 percent from the same time last year (MarketStats by ShowingTime). 

Over pricing your home can be a disastrous mistake during the fall market.  Don’t be greedy, and be prepared to adjust your pricing strategy.  There are many storms brewing that can easily scare home buyers.  If the list price is too high, you may end up with low ball offers because of a protracted time in the MLS. 

Although having less competition makes it a good time to sell your home, it can also be challenging.  Fall weather can be significantly different day to day.  Be prepared to adjust the thermostat.  Make sure your HVAC system gets a fall service so it will be ready for colder temps.   

Don’t forget to keep up with your home’s curb appeal.  Although you may want to get lazy about maintaining your lawn, don’t let it grow too high.  Also, remove excessive leaves from the ground too, as this can also diminish your home’s curb appeal.

Make accommodations for home buyers to visit your home.  Many home buyers will probably schedule tours after work, when it will be getting dark.  Open houses are still a good option for a fall home sale.  Turnout may be scant, but fall open house visitors are more likely to buy.

Original article is located at https://dankrell.com/blog/2019/09/15/autumn-home-selling/

By Dan Krell
Copyright© 2019

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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.

Great time to buy a home

great time to buy a home
Should I Buy Now or Wait? (infographic from keepingcurrentmatters.com)

If you’ve been waiting to buy a home, now may be your time to jump into the market.  Maybe you’ve been wary of home prices, or concerned about mortgage rates.  Maybe you’ve been attempting to “time the market” to get a good deal on a home.  Regardless of your reason for waiting to buy a home, you shouldn’t ignore the current market conditions.  It’s as if a perfect storm of home buying conditions is lining up to a great time to buy a home.

The big news is that mortgage interest rates continue to drop.  National average mortgage rates have been declining since the fall, moving closer to the historic bottom!  The May 30th U.S. weekly average for a thirty-year fixed rate mortgage provided by the Freddie Mac Primary Mortgage Market Survey(freddiemac.com) dropped to 3.99 percent.  Mortgage News Daily’s Matthew Graham reported on June 3rd that mortgage rates dropped further (mortgagenewsdaily.com).  Graham’s title “Mortgage Rates Continue to Plummet” is telling.

Although economists express confidence in the economy, they attribute the movement in mortgage interest rates to the current trade wars and bond market activity.  The mortgage industry may also be anticipating a Fed rate cut at the next week’s meeting of the Open Market Committee.

Lower mortgage rates aren’t always a reason to take the plunge into the housing market.  But what about moderating home sale prices?  The FHFA Home Price Index (fhfa.gov) indicates that nationwide average home prices increased only 1.1 percent during the first quarter of 2019!  Compared to the year-over-year 5.1 percent HPI increase, the modest first quarter gain may indicate a more affordable housing market.   Locally, the Montgomery County year-over-year average home sale price only increased 0.2 percent, according to MarketStats by ShowingTime (getsmartcharts.com).  However, the average price per square foot decreased 14.3 percent!

Another factor making it a great time buy a home is the lackluster spring home sales.  Counter to what is expected, home sales have somewhat cooled during the spring.  A May 30th NAR press release titled “Pending Home Sales Trail Off 1.5% in April” indicates that national home sales have been declining.  In fact, the forward-looking indicator based on contract signings dropped 1.5 percent this past month.  The total pending home sales in Montgomery County dropped about 2.8 percent compared to last spring. 

There are increasingly more housing choices.  Although housing supply remains tight, there were about 2.5 percent more new listings this April compared to the same time last year.  Although many of these new listings go quickly, increasing new listings mean that there are more home sellers that are entering the market this year giving you more homes to consider.

Putting all the data points together signify a great time to buy a home.  Housing affordability has increased, partly due in part by increasing family incomes, lower mortgage rates, and moderating home prices.  Home sellers who are listing their homes for sale this spring are adjusting their sale price expectations.  Homes that have been on the market for an extended time may be an opportunity for you to negotiate a lower sale price.  According to mortgage experts, average mortgage rates have “plummeted,” giving you more flexibility and possibly lower housing costs. 

These home buying conditions may not last very long. But before you decide to buy, determine if buying a home is the right choice by consulting a Realtor and other financial professionals.

Original located at https://dankrell.com/blog/2019/06/08/great-time-to-buy-a-home/

By Dan Krell
Copyright © 2019

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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 mini-cycles

housing market mini-cycles
Housing market mini-cycles

In a statement last year, NAR chief economist Lawrence Yun discussed the housing market’s recovery since the Great Recession (Realtors Chief Economist Reflects on Past Recession, What’s Ahead for Housing; nar.realtor; August 28, 2018).  Citing increasing homeownership rates and addressing the recent home sale slowdown, Dr. Yun believes that concerns about a significant housing slump are unsubstantiated.  Instead, we may be going through housing market mini-cycles.

Dr. Yun is not the only one pointing to affordability (home prices and mortgage rates) and lack of home sale inventory as causes of market disruptions.  But his statement is almost trite: “…even as mortgage rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory and accompanying unsustainable home price increases…”

Housing market mini-cycles and the economy

The housing market, like the overall economy, goes through cycles of boom and bust.  It’s been about eleven years since the last recession, and many are saying we’re overdue for another one.  But if the economic cycles, as described in 1876 by economist Henry George and modernized by Glenn R. Mueller, accurately include recovery, expansion, hypersupply, and recession, there is no clear phase to describe recent housing activity.  Instead, what we are experiencing is housing market mini-cycles.

Most understand the concept of the broad economic boom and bust cycle. But most are unaware of the mini-cycle that manifests as repeat periods of short-term growth and slowdown.  Recessions typically have broad effects on the economy, where as mini-cycles are are fast cycling and specific to economic sector. So, a complete housing market mini-cycle can last several months or longer and may not spill over to other sectors.

Since 2013, the housing market has undergone at least three mini-cycles of growth.  These cycles peaked with record sales volumes, only to be set back by months of sluggish home sales.  The causes of the housing market mini-cycles are debatable and, like a recession, clear in hindsight.  Of course, Dr. Yun and other industry experts are likely to be correct saying that home prices (affordability) and inventory are to blame.  However, there may be other reasons worth exploring as well.

Micro-economic factors are playing a large role in the housing market mini-cycle.  Take for example the increase in employee telecommuting.  There is an abundant research pointing to how telecommuting has affected the commercial real estate market.  These studies point to increased office space vacancies due telecommuting.  Companies are downsizing offices because of the reduced need for space as employees are working from home.  This trend is recognizable in real estate brokerages.  Real estate office spaces are shrinking as the industry becomes increasingly “virtual.”

Telecommuting is also impacting home sales. According to Global Workplace Analytics (globalworkplaceanalytics.com) “Regular work-at-home, among the non-self-employed population, has grown by 140% since 2005, nearly 10x faster than the rest of the workforce or the self-employed.”  Currently, there are about 4.3 million employees that work from home at least half the time.  As businesses are increasingly hiring a telecommuting workforce, workers opt to stay in their current residence rather than relocate near their new employer. 

Does housing market mini-cycles lead to recession?  Maybe the the mini-cycle is a brief market correction that helps avoid the broader effects of recession. Take for instance the three housing market mini-cycles that recently boomed in 2013, 2016, and 2017-2018. During these mini-cycles, home prices soared and home sales broke recent records (since Great Recession).

Current economic indicators (at the time of this writing in March 2019) point to a positive home sale season.  The Bureau of Labor Statistics (BLS.gov) most recent unemployment statement was 4.0 percent (which included government shutdown stats).  The Consumer Price Index remains stable (the CPI-U was last reported unchanged). Real average hourly earnings was reported to increase 0.2 percent from December to January.  And after a three-month decline, the Conference Board (conference-board.org) reported a rebound in the Consumer Confidence Index.  Given the winter housing slump, real estate may be on everyone’s mind again in this spring.

Original published at https://dankrell.com/blog/2019/03/10/housing-market-mini-cycles/

By Dan Krell
Copyright © 2019.

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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 bubble countdown

Housing Bubble
Cycle of housing bubble (infographic from estate123.com)

The March S&P/Case-Shiller U.S. National Home Price Index (spindices.com) was announced May 31st to reveal a 5.2% increase in home prices.  Although down from last March’s 5.3% increase, home prices seem to be appreciating at a regular pace, with the metro areas of Portland, Seattle, and Denver leading the way with double digit gains (year-over-year price increases of 12.3%, 10.8%, 10.0% respectively).  As home prices climb, so too are the claims that we are experiencing a housing bubble.

Those concerned about the next bubble have been ringing the alarm bells since last fall, when the combination of limited inventory, multiple offers, and rising prices created an environment in some regions that was reminiscent of the go-go market just prior to the last market bust.  And like the broken watch that is correct twice a day, those naysayers may eventually be correct – but it may not be for another eight years.

How to predict a housing bubble

According to Ted Nicolais, the real estate cycle has been steady since 1800 (How to Use Real Estate Trends to Predict the Next Housing Bubble; dce.harvard.edu; February 20, 2014).  Writing for the Harvard University’s Department of Continuing Education’s The Language of Business blog, Nicolais maps out Homer Hoyt’s cycles and found a regular 18-year cycle to the bubble and bust housing market (albeit two exceptions).

The 18-year cycle, as it turns out can be observed by analyzing trends.  An applying Henry George’s four phases of the real estate cycle (as modernized by Glenn R. Mueller), Nicolais can determine how and when the next housing bubble will occur.  (Henry George was a nineteenth century economist who studied the boom-bust cycle of the economy).

The first phase is the “recovery.”  Home prices are at the bottom, and demand increases.  Real estate vacancies decrease as economic activity increases, which fuels the economy.

real estate bubbleThe second phase is the “expansion.”  Housing inventories dwindle, there is little is available to buy, and finding a rental becomes difficult.  Nicolais explains that an issue with real estate is that once demand increases, filling inventory takes a long time.  New development can take two to five years.  Until new inventory is added, price growth accelerates; and rather than valued at market conditions, real estate becomes priced to future gains.  During a real estate boom, people buy into the prospect of “future growth” and believe the escalating prices are reasonable.

Phase three is “hyper supply.”  When the completion of new development begins to satisfy demand, inventories fist stabilizes and then swells.  Price growth begins to slow.  Nicolais stated that the amount of continued development will determine the severity of the impending recession; while demand is satiated, new inventory comes to market and vacancies increase.  He asserted that “wise” developers stop building during this phase.

Phase four is the “recession.”  New development is stopped, while projects coming to completion add to a growing inventory.  Occupancy rates and prices fall; property values and profits dwindle.  Developments in mid-construction may not be completed because they are no longer financially feasible.

Following the four phases and the 18-year cycle; Nicolais stated that the great recession was not caused by external forces, but rather occurred on schedule!  He figures that the current housing market is transitioning from recovery to an expansion phase.  And with the exception of the occasional slow down, he predicts that the next housing bubble will be in 2024.

Original published at https://dankrell.com/blog/2016/06/03/housing-bubble-countdown/

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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.

Real estate bargains

real estateThe typical real estate investor and the average home buyer have something in common – they both are looking for a home that makes financial sense, a bargain if you will. After all, who wants to overpay for their home? Although the investor’s priority is purely financial, a home buyer’s priority is a mix of lifestyle requirements that fits a budget. Even with priorities in line, both investors and home buyers don’t always recognize a bargain when it presents itself.

Finding a bargain home is not as easy as some will have you believe. Bargain hunters typically look for distressed properties such as foreclosures (also known as “bank owned” or REO homes) and short sales. Although there was abundant opportunity to buying such homes immediately after the housing crash, many were hesitant due to lack of market confidence. However, as confidence was revived in the housing market, the courthouse real estate auctions were once again attended home buyers and investors looking for good buys. And as home prices increased, so did the price for distressed properties; making it more difficult to find the bargain home. Even “motivated” home owners may not be as motivated as you think in today’s market.

real estate bargains
from Trulia.com

This phenomenon is corroborated by a recent study of “bargain homes” by Trulia’s research blog. Ralph McLaughlin reported on January 7th (Where Is A “Bargain” Really A Bargain?; trulia.com) that advertised bargains were actually good buys in 55 of 100 housing markets. Furthermore, hot markets tend to offer less price discounting than cooler markets; home sellers are less inclined to make price reductions in markets where there is increased buyer competition. Locally, the Baltimore metro region was found to be in the top discounted markets for bargain homes (with an average discount of 11.3%); while the Washington DC metro region was found to be in bottom of discounted markets with an average of 4% discount on a bargain home.

It’s clear now that home prices were at the bottom during 2008-2009. At that time, home inventories swelled and there was an abundance of (what would seem today) “cheap” homes for sale. I wrote at that time (If Cheap isn’t Selling, What is?; May 28, 2008) about how cheap homes were not selling, and how home buyers changed their focus from “buy anything” to buying quality homes that impart value. Of course, one of the main reasons cheap homes were not selling quickly was that there was an additional cost associated with the purchase; most of the cheap homes were distressed and required rehab, or at the very least needed updates and minor renovations.

For most investors, the concept of a bargain home is strictly the result of numbers in a formula; and for some home buyers, the bargain may be about getting a good price. However, a bargain home could be more than just the price tag. Maybe the bargain home is also the “value added” home. Rather than just focusing on price, buyers should also be aware of a home’s potential. Of course there is always risk when buying a home, which we experienced during the financial meltdown eight years ago.

Regardless, many lament having not bought homes at or near the price bottom. But hindsight is 20/20. And what didn’t seem like a bargain just a few years ago, is in comparison to today’s increasing home prices and an active housing market, a missed opportunity.

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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.