Monday, January 27, 2014

Conflicting Information on Prices--What to Do?

Yesterday's New York Times Business Section had some very interesting articles on the current state of the real estate market.  One of them took a few homes in different parts of the country, and compared the prices each had sold for at various points over the past twenty-five years or so.  They ranged from homes that had gone up or down very little, to ones which were now above the highest earlier sale, to ones where the value had not regained its earlier level.  This was excellent data, and is measured differently from the more often cited Case-Shiller Index.  The latter index is derived from taking the entire aggregate value of real estate prices in a city or SMSA, and comparing the whole package to the entire aggregate value of sales at another point in time.  That means that you are essentially comparing apples and oranges, although the sheer volume of data would indicate that it might be a pretty good predictor of overall values.

When you look at the history of one home, however, you can clear see the effect of any given downturn or uptick on whatever owner happens to be in place at a particular time, and it's so clear that the market is driving the price up or down, because, of course, it's the exact same house.  The NYT article included pictures, which always tend to make a story more compelling.  What was missing, though, for obvious reasons, was advice about how to apply such information to a personal decision.  How could it say what to do in Connecticut, when sellers all over the country were in such disparate situations?

Perhaps the best answer to the unspoken question of what to do in today's market is to focus on the overall variety of price levels, and conclude that there is no one right answer.  Which is, in itself, good advice:  Don't try to outguess every expert and every real estate seller or buyer.  If all the experts agree, and the whole country is in the same position, you are most likely too late to cash in on the upturn.  If it seems as though results are spotty, you conversely have a better chance, if you're a buyer, of landing a home that will increase in value over the next few years.

By pointing out that similar properties can have very diverse sales outcomes, the article reminds us strongly that a home is, after all, a home.  Buy what you love.  Live there because it enhances your life.  Sell when it's time for a change.  Hope that your timing is good, but don't plan everything on a certainty you can't achieve.  Sometimes people get lucky, and sometimes they don't.  It doesn't mean that you shouldn't be happy where you live.  We don't know what the future will bring, but the present beckons--buying now is a great option if you qualify for a mortgage at current rates, and can buy at current prices.  That's all you can know, and all you really need to know to take that first step!

Tuesday, January 21, 2014

2013 Year End Market Statistics

The Following are New Haven and Shoreline County Market Statistics for 2013.  Please click on the images below to view or click this link for previous market stats

Residential / Condominiums / Multi-Family

Residential Single-Family

Condominiums

2013 vs 2014
Residential / Condominiums / Multi-Family 
2013 vs 2014
Residential Single Family Homes
2013 vs 2014
Condominiums


Wednesday, January 8, 2014

Should you list your home early this year?

We are finding that levels of available listings in certain areas and price ranges are uncommonly low these days.  Most people wait for a spring market to list their home, thinking that most buyers are looking then, so their chances are greatest for selling at a good price.  Although this is true, there is another alternative, especially for homes that are in less than perfect condition, or in less than optimal locations, and that is to list when there isn't much competition.  Homes that are listed when someone needs or wants to buy will stand out if they are in a smaller number of new listings.

This is particularly true in our market, as we are so dominated by educational and medical institutions.  Those places work on a different calendar than most of private industry, and their season for making offers is earlier.  That means that, in Greater New Haven, early February kicks off the spring market for faculty and doctors beginning on July 1st.  That is substantially different from what sellers read in national media reports, where May 1st begins prime selling season.  Since buyers in our area are out sooner, they are searching when a smaller pool of choices is presented to them, and they may view new properties to the market more favorably than a bigger group of buyers would view one of a much bigger group of new listings, later in the year.  Many buyers tell us that they are expanding their parameters due to short supply, and a short timeline.  Your home can be considered, when it normally would not be, by those who need to make a move now.

What does that mean for sellers in our region?  If you've been thinking about selling, and you don't have a lot of work to do to your property before you list, you might consider listing in the next month, and having your home exposed to buyers from around the country, who are looking now to move in May or June, instead of the traditional July or August.  If you do have work to do, don't wait another minute.  There is always more to do than you think, and it always takes longer than you think to complete.  (Another advantage to listing sooner:  Workmen are easier to hire in the off season.)  Take advantage of time, and make it to your advantage.  Act now!


Thursday, January 2, 2014

Why the Fed’s Easing of Stimulus is Good for Real Estate

There are two ways to look at real estate.  One can either see it as a “consumer good”, bought out of a desire to live in a particular style, or in a particular place.  Or, one can instead view it as a “producer good”, and think of it as an investment; in that case, sales would be based on what buyers thought would appreciate the most.  Either way makes sense, but would look at properties through different lenses.  The latter approach would argue that people make rational decisions, through calculating numbers and weighing alternative investments.  The former would say that buyers go largely with their guts, purchasing what appeals to them, in much the same way that they might choose clothes or entrees. 

In fact, I would posit, the truth lies in a combination of the two theories.  I think that people try to make real estate a rational investment, but those who view it purely that way often don’t live where they want to live, or buy when they want to move.  In the end, those who are happiest are frequently those who fall in love with a particular piece of property, and rationalize its logic as a good choice for where to put their money.  People who turn out to make the best choices, from a financial perspective, are to some extent those who are lucky in their timing.  Very few of us choose exactly the right time to buy, if that is our aim.  More likely, we get a job, start a family, or retire at a time that lends itself to a home purchase when prices are low, and end up selling when prices are high, for the same reasons.  In addition, there is one other factor:  it’s best not to be too greedy, because aiming to get the very most out of your real estate investment can lead to waiting too long to buy or sell; in a way, that argues that overthinking a purchase or sale can be a mistake.  Many good decisions turn out to be good in hindsight, even for those of us in the business.

So why does it matter what national fiscal policy is?  Since I believe in the power of the free market, I believe that having the government tell us to buy real estate doesn’t work, most of the time.  In fact, it triggers something in our brains that makes us suspect that, as with some other good reduced too far on sale, there must be some reason NOT to buy then.  What does work, conversely, is for prices to begin to rise, or for rates to begin to climb.  Once buyers see that their purchase will cost more, they acquire a sense of urgency that does far more for the real estate market than really low rates and prices could do.  And, of course, as soon as some people start rushing to buy, prices get bid up, and the sellers’ market conditions begin to feed on themselves.  Soon rates and home values begin to price some buyers out of the market, and lead others to overpay or stretch too far for something too expensive for their incomes.  We all know what happens then….
If people always did the rational thing, they would know that interest rates are almost always lowest near Election Day, and, yet, that’s not a busy time of year for real estate.  Springtime, when rates traditionally rise, is the season that tells the story as to how the market will fare for the rest of the calendar year.  Every year, then, we see the theory that the behavior of others affects our behavior more than logic does.  Other factors certainly matter, but some of them are also emotional.  The single biggest effect on sales, in my opinion, is the consumer confidence index.  One could buy when one believes it is peaking; however, I believe that most people act without knowing the exact number of that index, but because the climate that goes into setting the index affects their behavior.  That certainly happened around the country beginning at the end of August, when sales everywhere seemed to slow down at once, even though the economic indicators didn’t predict a dip. 

Professor Robert Shiller of Yale, winner of this year’s Nobel Prize in Economics, has written extensively on emotions and economic behavior, and we in the industry live it every day.  If the Fed eases up on stimulus, that should make people start to feel as though the economy is heating up, which should send them out to buy real estate.  Maybe not today, but certainly this spring.  So that would argue for a good market in 2014, caused by a combination of irrationality—seeing others buy—and rationality—seeing numbers that point to recovery and growth.  Together, that points to a good year this year, and probably, barring extreme weather, an early start to the spring selling season.  So here’s to a robust 2014, and may the buying begin!