Thursday, July 17, 2014

Listing Inventory

We spent some time this week going over our listings, to get a sense of what inventory we have for current buyers to see.  While we have more listings than we had six months ago, we found that we had the same distribution--a few new listings that are being shown a lot, a few short sales where the banks are taking so long to approve offers, or simply rejecting all offers, that they won't sell at all, and a bunch of listings that we know are overpriced, and are usually not even being shown.

In addition, we have recent anecdotal evidence matching what we have always known--houses that sell quickly for the highest prices are those that are perceived of as well-priced and likely to disappear if not bought right away.  We just sold a home in four days that had been listed twice before without success.  What was the difference?  This time the owners took the Realtors' pricing recommendation, had a lot of showings right away, started a bidding war, and ended up getting over the asking price.  One more notable fact about this house is that it is in pristine, move-in condition.  That's what buyers want now.  No more DIY projects, or deferred plans for upgrading.  What sells is what's perfect, or close to it.

So the bimodal distribution of inventory continues--a little bit of choice on great, well-priced, new listings, and a lot of signs on properties that aren't going to sell quickly.  Sellers, take note!

Tuesday, July 1, 2014

Do the Math

There is a famous aphorism that says that there is no certainty in life, except for death and taxes.  Taxes turn  out to be a big factor in the purchase of property, although we don't really see the certainty involved.  Yes, taxes go up over time, but do they go up at the same rate in every city and town?  Are they phased in the same way everywhere?  Are the same services included?  Are the school systems comparable?

People buying property care a lot about what the taxes are, since what they are really basing affordability on is the amount of the monthly payment of mortgage, interest, insurance, and taxes.  While they may know the first two calculations, if they get a fixed-rate mortgage, they tend to overvalue the current information available, and overrate the problem of uncertainty going forward, about all kinds of things.  For instance, if you take money out of your savings to purchase a home, and those savings were in the stock market, what are you giving up as an alternative return?  You don't know what the stock market will do over the long haul, although you do know that, like real estate, it's generally cyclical.  If you buy rather than rent, will the price of your home increase over the period that you own it? Again, you don't know, although that is usually true, especially if you hold it for a long enough time, and if you buy when prices are not at a peak.  Will your housing needs remain stable for the foreseeable future?  "Foreseeable" would seem to imply that you know what they will be, but life has a way of throwing curve balls, be it a new job, an illness or injury, another child or children, an aging relative, or any number of other variables.  You can't know up front what the market will be like when you sell.  If you wait to buy, will prices and mortgage rates hold steady?  Although we can't know, it's not likely, especially if you wait for a long time. How quickly will rents rise, especially in New Haven, the country's tightest rental market?

I could go on and on, but I've made my point.  So, what's a person to do?  One of the best things I learned in business school was how to make a decision tree.  Since this column does not include a tutorial in econometrics, I'll simplify.  Make a list of the uncertainties, then put them each in either the "Buy Now" column, or the "Buy Later" column, depending upon which way they are each likely to lead you.  Try to quantify the general risk of each one in monetary terms (e.g., interest rates go up 1% vs. taxes go up 8%), and you will get an idea of what the math tells you.  You should, of course, factor in your own particular risk aversion factor (that is, how much uncertainty will bother you), but the numbers will tell you something.  If you find yourself arguing with the numbers, you will be telling yourself something that way, because you will be revealing your gut instinct.  Whatever you decide, it's time to go with that, and act.

Friday, June 13, 2014

Weather or Not?

Spring was very late in coming this year, and it's been raining every morning this week when I went out to get my paper, so summer is late as well.  All around the country, real estate professionals were complaining about the effect weather was having on home sales.  We all expected that May and June would be crazy, and would make up for the lost winter, as happened last year after the blizzard in February. 

We're still waiting.  Yes, we're busy, but no more so than in the spring and early summer that follows a normal winter.  We are missing that catch-up phase, where buyers and sellers come out of the woodwork when the weather improves.  This part of the year has also been the same in many parts of the country, albeit the worst area has been the Northeast. 

In other places, it could be that anemic sales relate more to lack of supply than to lack of demand.  It could be that Connecticut, with its 50% recovery rate from the recession is lagging for economic reasons, while others tell a different tale.  We're not sure.  But we are waiting for more activity, and keeping our eyes and ears open for the cause of the delay. 

Action step for buyers and sellers:  Treat June as though it were April.  Make plans to list, which we see happening, and buy, which we're hoping will follow!
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