The Real Story…
News and commentary about the real estate market and related topics.
Dave Parrish, ABR®, CSP, GRI, ePRO®,REALTOR ®, RE/MAX MarketPlace
The opinions expressed here are my own and don’t necessarily represent those of RE/MAX International.
Making the Decision to Buy or Sell…
Last week we spoke about the uniqueness or “individuality” (if you will) of each real estate market. By now, I hope you are aware of the fact that those national averages or extremes featured in the news headlines have little meaning to the individual home seller or buyer. We have also spoken to the fact that price alone is not the determining factor, as to what is happening or about to happen in the market.
So how is the homeowner thinking about selling or the prospective homebuyer to evaluate the market? Is it really the time for me to buy? Should I even entertain the thought of selling in this market?
It is my opinion that the most important single factor in the recovery of the housing market is JOBS. Even so, it is not the only factor to be considered.
The market will have established an upward trend long before jobs become a non-issue.
The upward tick in the historic interest rates (previously discussed here) should spur a flurry of activity during the first part of the year. Anecdotally, I can tell you that I have personally seen a huge increase in activity of the course of the last 4 to 5 weeks. This is occurring when inventory (the number of homes for sale) is at close to a three year low. Does that mean homes are selling for or near asking price? No! But homes are beginning again to sell following the dismal performance of the last half of 2010. That is good news … but not a recovery.
Don’t expect the current relatively low inventory level to remain… The last quarter of 2010 saw a significant reduction in foreclosures being released to the market. Expect that trend to reverse it self quickly, as the last of the moratoriums are removed. Even so, may of these properties are so much in the need of repairs from the angry departure of the previous owners that they are quickly dismissed by today’s buyers.
Speaking of today’s buyers, be aware of the fact that they are demanding and being fairly successful in getting what they want. Got a fixer-upper, expect extremely low offers… generally as low as 10% off an already reduced price. If more than one room needs painting, if the home has wallpaper, or a roof or HVAC older than 10 years…. Today’s buyers see it as a fixer-upper… No really… if it’s not move-in ready…it’s a fixer-upper that will generally be received by the market as over priced (regardless of the price) receiving offers as low as 10% off the current price with requests for the seller’s assistance with closing cost and pre-paid items in the 3-6% range of the purchase price.
So what does this mean? Sellers take the time and effort to perform all that deferred maintenance and get your home move-in ready before putting it on the market or expect to pay the consequences.
So why sell now? Because prices are continuing to fall! And appraisal issues are becoming more and more significant. No need or desire to sell in the next 7-8 years? Then Hold! Planning on moving up… You’ll probably give a greater hair cut to your prospective seller than you are about to get. Otherwise, you’ll need a life changing event to justify the move… job loss, job transfer, divorce, children, health issues, need to relocate, etc.
Buyers… Unless you’re paying cash, the cost of your purchase is more that the price of the home! Even though we are still near record lows on interest rates… the rising interest rates create a significant increase in the cost of home ownership. The value of the dollar in the international market but even more significantly in the Chinese market creates additional pressures on interest rates, regardless of the fact that the Federal Reserve is making money available to banks like it was water.
So, even though there may be additional price drops, the real cost of purchasing a home may not be falling a lot further, if you aren’t buying with your own cash. We have already returned to the point where it is again cheaper to buy than rent, which will also spur home sales… for buyers with jobs and decent credit.
If you’re interested in what’s happening in any of the local real estate markets, try this link: http://HomeValuesInTrussville.com. By providing the address of a property in the neighborhood of your home or the neighborhood you are considering you can get some idea of what is actually happening in a particular neighborhood in terms of what has sold, what it sold for, how long homes are taking to sell and what is currently on the market.
Don’t be fooled by the web address, you can use this site to explore any community served by the Birmingham MLS, which will include coverage of markets in the Jefferson, Shelby, St Clair, and Blount County markets. It’s a great starting point… but of course no replacement for an inspection and evaluation of the subject property by a qualified real estate professional.
My point is this: Just as each real estate market is unique, so are the factors that control the buying or selling decision of each individual buyer or seller. So, be sure to make those decisions based on solid information that considers the many factors that tell the real story.
May the market be with you.
