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.

 

How good advice can be not so good

The first new car I ever bought was a 1996 Geo Prizm.  This was before the internet.  Back then, Consumer Reports was not only the most respected source for advice, it was about the only one.

They had a service where you could purchase the invoice cost to the dealer for whatever car you wanted.  They suggested bargaining up from the invoice rather than down from the sticker, and even suggested an amount deemed a reasonable profit for the dealer.

It all made perfect sense.

I thought I was being the wisest consumer ever.

I went into whatever the Chevy-Geo dealer in Winchester was called back then.  They had a dark green Prizm that my wife wanted.  We later brought our first born son home from the hospital in that car.

I sat down, told the guy what I would pay based on their invoice cost.  He immediately accepted.  Of course, it was about 7:45 PM by the time we got there.  I have since learned that showing up at a time when everybody is wanting to go home is the perfect time to walk into a dealership.

We got the car.

I felt like a hero for getting the dealer to accept my terms.

Later I realized that most of the Geo Prizms had been sitting on the lot for a long time.  This was when full sized truck based SUVs were gaining popularity.  There was a waiting list to get a Suburban since they couldn’t build them fast enough.  Gas was cheap.  A small economy car was not a hot seller.

I received great general advice that turned out being not so great for my specific situation, which is why the dealer was eager to accept my offer.

I see that happen a lot in real estate.

I wish there was a 3rd party in the deal that was looking out for me.  Somebody who could have given advice for my specific situation.  Somebody who would have told me that what I was wanting to buy was a car the dealers were having a hard time selling.  That they were more motivated to sell than I was to buy.  I wish there was somebody who would have told me that buying a small economy car at a time when everybody was buying Suburbans and Tahoes meant that it would depreciate rapidly.

I love being such a person for my clients.

 

 

My first lesson about real estate

1669 Elliot

 

This was my grandparents house.  1669 Elliot Avenue in Ashland Ky.

I have lots of good memories of this place.  See that lonely window on the right?  That use to be a screened in porch.  My grandfather made it into a bedroom and the house’s 2nd full bath.  I helped him build it.  Well, as much as a 6 year old can help.  I remember trying to help him do something with the new toilet.  Using a hammer on porcelain turned out not being the right tool.  The house use to have white asbestos siding and diamond shaped shingles.  It had much more of the 40s character back then.

See that gray house on the left?  It use to be white too.  The neighbors added an in-ground pool in about 1975 or so.  It has since been filled in.  That driveway is shared.  It use to have two concrete strips with grass in the middle.  It has now been filled in too.  Not only was this the location of my first real estate lesson, it is also where I discovered my love for cars.  The neighbor with the shared driveway had a red Camaro with white stripes.  Probably a 1971-1973.  Car was super loud.  Then I guess the gas crisis hit and one day it was replaced with a yellowish MG Midget.  I loved that car.  Probably why I love my Miata and M Roadster so much.  The car smelled so good inside.  It had that great British car smell, which I have since realized is probably a combination of leather, dust and mold from a leaking top.   My grandfather had a series of old Datsun Z cars too, so I would hang out in the driveway and just look at the cars, counting down my days until I could drive.

This house is also where the “Incident” occurred.  I was trying to get a garden rake that was hanging on two nails off the garage wall.  I was a little kid and could only reach the very bottom of the rake handle.  I was successful at getting it off the nails, but not successful at preventing it from falling, tines down, on the hood of my grandfather’s car.  So, if anybody sees a brown 1975 Datsun 280z with 5 little dents right in the middle of the hood, please apologize to the owner for me.

The only bad memory of this place was the morning of May 29th 1977.  I remember my grandmother crying and not knowing why.  The lady across the street, who we called Tink, had died the night before in the Beverly Hills Supper Club fire.   I didn’t know that it was one of the deadliest fires in history.  I just knew my grandmother’s friend wasn’t ever coming home.  It was strange to be outside playing and see her red Olds Cutlass still in her driveway.  I thought that was a cool car and always remember her every time I see one.

I guess I better get to real estate now.

My grandparents decided to move to Florida.  I was so unhappy about this.  They used an agent with ERA.  Being the 70s, I had no idea WHY the Equal Rights Amendment people were selling my grandparent’s house.

My grandparents timing was fantastic on this sale.  The house was in Ashland.  Like, when Ashland Oil was in Ashland.  It sold quickly and for top dollar.

A few years later interest rates went though the ceiling and Ashland Oil left town.  It was a double whammy for the local real estate market.  It took well over a decade for the house to be worth more than the buyers paid for it.

Supply and demand.  How interest rates and the local economy impact value.  What happens when more people are leaving town than moving in from another town…..Lessons I learned as a kid that benefit my clients today.  Other lessons I learned at this place?  Don’t throw a baseball through the neighbor’s window.  Don’t jump off the roof of a detached garage.  Every neighborhood has a grumpy old lady.   Your parents are the tooth fairy.

Best undervalued neighborhood in town

My first new car was a 1996 Geo Prizm.  Green.  Because green was a hot color for everything in the mid 90s.  We bought it because it was mechanically the same thing as a Toyota Corolla.  General Motors and Toyota had a joint plant back then in California where they produced the Geo Prizm and U.S. market Toyota Corollas.

They were the same car, only the Prizm was cheaper.  Few people knew that you were essentially getting a Toyota Corolla for less that what a Toyota Corolla cost.

Neighborhoods can be like that too.

If you are the type to have picked the Geo Prizm over the Toyota Corolla, then you should check out Old Paris Place.

This is a Ball Homes neighborhood.  It has the same model houses as any other Ball Homes neighborhood, only they are cheaper than you will find in other neighborhoods like Masterson Station.

If you are looking in the $125-160k range, this neighborhood should be on your radar.  The same houses will cost you $140-175k in other similar neighborhoods.

Here is what I like about it:

  1.  You are close to the interstate if you need it.  Close to Hamburg too.  Close to all the cool things on the north end of downtown.  And not a terrible drive to the south end of town either.  My kid’s school is very close to Old Paris Place.  I remember rushing to pick them up from a house I was renovating waaaaay out Harrodsburg Road.  It mentally felt like I was super far away, but I would hop on New Circle at Harrodsburg Rd and before you knew it, I was turning left on Old Paris Pike.
  2. You are closer to restaurants, banks, gas stations and grocery stores than you would be if you lived in Masterson Station and paid more for your house.  You’re 10-15 minutes away from Hamburg too.
  3. Several of the lots back to a wooded area owned by the HOA.  Many back to two farms.
  4. I have had a couple of clients live in this neighborhood and have met several other residents.  All say it is a friendly place to live.

Right now,  this neighborhood is a little undervalued.  Most people wanting a 10-15 year old home in this price range default to Masterson Station for their search, just like most car shoppers knew about the Toyota Corolla but not the Geo Prizm.

 

What is it worth?

What is it worth?

That is a question I get asked a lot.

Sometimes I can do a little quick math in my head and come up with a ballpark number.  Most of the time my default answer is that I need to study the recent sales….AKA “The Comps.”

When the market was flat, it was easier to do it all in my head.  I could think “Oh, I sold that house over there a couple years ago, and I remember showing that one down there last year and it sold for this much.”  The past couple of years the market has been appreciating so much that the best answer is to look at the comps.  When values are going up (or down) you should always look at the most recent sales to determine value.  It’s a big purchase for a client and they need an agent who will put in the time to make sure they don’t over pay.

I love studying the comps.

Some times they are easy.  Like in a newer neighborhood developed by a mass builder.  Most of the houses are the same age and in the same condition.  It doesn’t take long to come up with a pretty accurate value.

It gets harder when the house is more unique.  Like an older house where every house in the neighborhood has a different floor plan,  and all are in varying conditions.

I think the most challenging ones are rural properties.  I LOVE rural properties.  Part of my reason for enjoying them so much is purely selfish.  I love driving out in the country so it is always a treat just to get there.  It is also interesting to see these properties, whether listing them or working with a buyer.  No two are alike.  Also, there is a relationship between the house and the land that must work.  I often have buyers who like the house but don’t like the land, and the other way around.  That is why I always try to depict both when I list rural properties.  I know that is important to the buyers.

Here are some of the things I look for when determining value for rural properties:

  1.  Location-The closer to the subject house the better.  This can be a challenge because there are fewer properties and fewer sales in the country.
  2. Age-You often find a wide range of ages in the country, which also means a wide range of floor plan types.  If I have a mid 90s house that I am trying to find the value on,  I try not to use a brand new house or one from the 1960s even if they are next door.
  3. Lot size-The closer in size to the subject house the better.  If I’m trying to find the value of a house on 1 acre, I might use houses on up to 3 acres.  If I have a 5 acre lot, I might compare up to 10 acres.  Most 1-10 acre buyers just want to be in the country.  Most 1-3 acre buyers just want a big yard.  Some 5-10 acre buyers have horses or need that space.  Over 10 acres and you are often looking at somebody who wants a working farm.

A good rule of thumb when using recent sales to determine the value of a property is the fewer adjustments you need to make, the more accurate the value will be.  Looking at the comps is really studying buyer behavior.  You are saying a buyer paid this much for this house, and the house I’m trying to figure out the value on is 300 square feet bigger, so it should sell for the same price PLUS the value of that extra 300 square feet.  That is why beginning with the best 3-4 houses is key to ending with an accurate value.

I showed a house last night to some friends of mine.  They asked what I thought it was worth.  I pretty much told them everything you have just read.  When I went to look at the recent sales this morning, I found 3 houses on the same street that had sold within the past year that were all on similar sized lots, and were similar sized houses that were all built around the same time.

Sometimes comping rural properties can be easy too I guess.