I thought it was a seller’s market?

It’s been an interesting week.

I wrote an offer on a house in Frankfort that was listed at $159,500.   Looked at the comps.  Thought it was about a $147-152k house.  Seller wouldn’t budge from $156,950.  It’s been on the market for two weeks now, which is a life time in today’s market.  Even at $152k, it will be the most expensive house to ever sell in it’s neighborhood.

I showed a house last night that is listed for $187k.  The exact same model house sold 6 months ago on that same street for $180k.  Sure, lets add 2% or so for appreciation and subtract a bit because that house that already sold had granite and was nicer.  Oh, the house I showed had a 22 year old roof.  The shingles were the 3 tab kind, which usually are good for about 15-20 years.  It needs a new roof like now.  So, this one is overpriced and needs a $7k roof.  That’s a hard pill to swallow for the first time buyers in this price range, which is why it is still on the market.  BTW, in Lexington, a house in this price range would normally get multiple offers, possibly over the list price if the list price were anywhere near realistic.

I showed another house that was super nice, super pricey and only had 2 bedrooms.  I think the listing agent expected lots of offers since most houses under $200k in Lexington go fast.  The agent even put a deadline for submitting offers.  About 20 minutes after that deadline, that statement was removed.  The house is still for sale, so I guess no offers came.

So, we have 3 listings that aren’t selling in the hottest price range in the hottest market ever.

Why?

Price.  Even in a great market, you can only get market value for your house.  Market value is what a ready, willing and able buyer will pay for a house.  You can’t get over market value, which is exactly what these 3 sellers are wanting to do.

I am sure all 3 of these sellers are thinking “But I thought this was a seller’s market??”  It is, but when your price is above market value, most buyers opt to just wait for the next batch of new listings.  Dear sellers of these 3 houses, you are not drunk with power, you are just drunk.

Bluegrass market update & fun with a calculator

I’ve always been a number person.  When I was a kid, my dad gave me a calculator.  I would make pretend budgets, figure out things like compound interest, and do things like type 77345 and flip the calculator upside down to see that I spelled ShELL.

So I guess I am not surprised that I get excited when my local real estate board publishes the statistical info once a month.

It is also nice to see if my own experience is echoing what is happening in the whole market.  It usually is.

For example, I hardly show any houses any more because there is so little for sale.  I used to be out 3-4 nights a week and ALL weekend just showing houses.  Now I may show 4-5 a week and have the same amount of buyer clients……on a busy week.  There just aren’t enough houses to show people, and buyers are making fast decisions because they don’t want to lose a good house while waiting for a great one.

In Fayette Co, sales from Jan 18- April 18 are down 11% from the same period in 2017.  Listing are down 9%.  You’d think a decrease in sales would be bad, but since listings are down by a similar number, it is still a super tight market, especially in the sub $200k range.

All the Bluegrass counties have a big decrease in listings.  Most have an equally big decrease in sales too.  Makes sense.  If there are fewer houses to buy, there will be fewer houses sold.  Unless you are in Scott, Madison or Jessamine Counties.  Those places are the only ones where sales have increased from this same time last year while listings have decreased.  I know, I know.  How can that be?  This is just my gut, but I think those counties had more on the market last year that just sat and didn’t sell.

I also feel like I am spending more time in surrounding counties than I have in a long time.  When I first got into this business, there were a lot of people moving to Jessamine Co in search of a cheaper house.  But then gas prices went crazy and nobody in Fayette County wanted to leave.  Now gas is fairly cheap and people have returned to moving outside of Fayette Co again.  Jessamine County has the tightest market under $180k.  There is literally next to nothing for sale there.

Just this past March, we had a net loss of 61 households in Fayette County.  Scott and Jessamine Counties were the only ones that saw much of a gain in new households.  Yep, Fayette County folks are back at it.

I still play with my calculator a lot.  Only now I’m using it to determine what a house is worth before listing it or making an offer.  Maybe with all this extra time I have from not showing houses every night, I can figure out some new words my calculator will spell?

How a hot market really sucks

As I was driving home today after a closing, I got to thinking about how the market is always  changing.

When I got into this, it was much like today.  Buyers felt lucky just to get a house and sellers were drunk with power.

Then there was the looming threat of a nationwide crisis.  We were convinced it wouldn’t  make it to Kentucky.  We all said things like “We didn’t see the crazy appreciation like California, Arizona or Florida did, so we won’t see any changes.”  Only we said that with the same fear in our voices as the kids from that Stephen King movie when they talked about Pennywise the clown.

Then “IT” happened. (See what I did there?)

It slowly went from being a seller’s market to a buyer’s market.

Nobody was happy.

Seller’s were bringing cash to the closing to payoff their houses.  Buyers were afraid their new house would continue to depreciate.  Buyers were hitting sellers up with big repair lists.  They felt the seller should just appreciate that they picked their house among the other 50 houses in the neighborhood for sale.

Then in late 2012/early 2013 we had this euphoric time.  Sellers were happy because their houses were selling in less than 6 to 12 months.  Buyers were happy because prices had stabilized.  Sellers were okay to do whatever repairs were requested since they were happy to have sold their house.  Buyers weren’t asking for as many repairs since they were happy too.  They knew the house wouldn’t be worth less by the time of the closing.  It was great!

Only it didn’t last.

Prices started going up.  Fewer houses were on the market.

Prices kept going up.  Even fewer houses were on the market.

Prices went up even more.  And even fewer houses were on the market.

And now we are back to where we were when I started, only a little worse.  Prices are sky high.  Buyers resent it but know they have to pay the price.  So, they are hitting up the sellers with big repair lists.  Sellers feel like they are doing a favor to the buyer just by accepting their offer.  They don’t want to do repairs.

Basically, nobody is happy right now.

What does this do to my property value?

I get asked that question a lot.

Believe it or not, most of the things we worry about don’t really have all that much effect on the value of a house….so no need to rush out of the neighborhood when there is a big change coming.

A friend of mine was upset because the city made part of his huge backyard into a retention basin to solve flooding issues.  He was worried that it would make his house worth less.

I told him that his backyard is so big, losing this space didn’t have any impact on how he or future buyers would use it.  There was still plenty of room for a pool, swing set, firepit or any outdoor thing people want in their backyard.  I told him that about the only person who might not buy his house now would be somebody who wanted to build a huge garage in that space.

I think part of what is hard for owners to realize is that the person buying your house when you sell won’t have the “Before” picture in their head of how it used to be.  Only the current owner will know what the good old days were like.

I had a friend say that Ball Homes building on the opposite side of the fairway from Greenbrier would hurt the property values.  I told her that while the view of a wooded hillside was preferable to seeing a new neighborhood, it was still nice to have a beautiful fairway to separate them, so it would not have any impact on value.  Only the current owners who remember the wooded hillside will ever know the difference.  The next buyers will say “Wow, look how pretty the golf course is” and how nice it is to have so much space behind your house in Lexington.

Then there are threats of new development.  Andover Hills and Andover Forest residents are afraid that if the foreclosed golf course fell into the hands of developers that their property values would plummet.  The residents of Squire Oak are concerned what several houses, townhouses and 3 story apartment buildings on the property along Armstrong Mill owned by Overbrook Farms would do to them.

There is no need to consider selling if you live in those neighborhoods.  Sure, it would be nicer to have less traffic, fewer homes, not lose the green space if you are lucky enough to back up to it…..but it will not have much impact, if any,  on property values.  Plus, Lexington is only going to become more dense.  We should all get used to it.  I often see houses with terrible lots sell for practically the same amount as houses with average lots.  There are several houses that back to New Circle Road, the interstate, a shopping center, a light industrial area.  They usually sell for within 1-2% of what the houses with average lots do.

This might be the time to discuss the difference between property values and desirability.  A house that used to back to a farm and now backs to a 3 story apartment complex had a prime lot and now has a below average lot.  The value might not change much at all, especially in a sellers market.  What it does do is make the house less desirable.  That just means it might take more showings before catching a buyer in a slower market.  Corner lots or houses on the main drag through their neighborhood experience this already but nobody notices.

Want to know something funny?  YOU have the most control over your own property value.  A clean, updated house that is move in ready will always sell for top dollar regardless of the market and what is around it.

Got $500k or more? It’s your market

Once a month the local MLS sends out the sales statistics.  Being into numbers, it is always fun to drop a K-Cup in the Keurig and check it out.

I guess the biggest news is that when you compare Fayette Co sales in September 2016 to September 2017, the number of new listings was down 16% and the number of sales were down 13%.   Hard to sell houses when fewer are for sale.

This whole year has been a frenzy.  Agents and buyers are struggling to find houses.  Everybody is talking about what a hot market it is…..but I think the word we use should be tight.  It’s a tight market.

The hot market was last year.  There were more sales in 2016.

January 2017 beat January 2016.  390 sales compared to 318.

Every other month in 2016 saw 40-90 more sales each month.

The fine line between a seller’s market and a buyer’s market has always been which side of 6 months of inventory we are on.  Less than 6 months is a seller’s market.  More than 6 months is a buyer’s market.  In Lexington, it is a seller’s market up to $500k.   It is REALLY a seller’s market under $250k.   Got $500k or more?  It is very much a buyer’s market.  That is why prices on houses in this price range have been pretty flat for several years.  It’s a great time to move into this price range, especially if you are selling something cheaper.

I just finished that cup of coffee, so I guess my closing remarks will be that it is an interesting time to be in real estate.