Current Market Trends

by John Rice

It’s that time of year again.  When all the real estate Guru’s look back at 2011 and tell Realtors about “Current Market Trends.”  I never go to these seminars or classes.  See, if somebody has time to put together a Powerpoint presentation with a bunch of bar graphs and is looking backwards in time, then what they are telling you is called history, not current market conditions or trends.

I’m more interested in knowing what is happening right now.   All realtors should really, but I find that most of them can only recite what they have been told.  That’s why there are meetings and seminars for such things.  There are a few in town that seem to be able to analyse the market pretty well.  I like to talk to them because it gives me a broader perspective on the whole. 

So, if you want to know what happened last year, I have plenty of posts from 2011 you can read.  Want to know what is happening right now?  Our current market trends?

1)  This shouldn’t be news if you’ve read my blog recently, but every Monday I check to see how many houses got contracts and what closed.  Houses up to $150k are selling very good.  Then it slows down a lot the higher you go in price.  The closed deals show me what percentage of the asking price the seller is getting compared to their list price.  We’re still holding strong between 96% and 100%.  About the only time I see percentages less than that it is in higher priced houses or ones that the asking price was too high to begin with.  It does drop for surrounding counties.  The Lexington agents seem to want to price a house very close to what it is worth.

2)  Most of the foreclosures we are getting in Lexington seem to be cheaper houses these days.  I think that has really created two markets in town.  When foreclosures first started becoming a large part of our market, many buyers would look at normal sales and foreclosures.  I think we’ve run though most of the middle class and upscale foreclosures, so all that is left are the cheaper ones that investors rent or flip.  A lot of people were caught in a sinking ship when the economy changed back in 2008.  The 2009 and 2010 foreclosures were mostly those folks who were in the wrong place at the wrong time.   I think the foreclosures we are getting now are due to the easy lending practices of yesteryear more so than the economy.  I check the Master Commissioner site every week and it seems that most of the people on that site bought between 2004 and 2007.

3)  I am seeing more buyers staying at the lower end of their price range.  It use to be, and not too long ago, that every buyer would start looking at the bottom of their price range, then move up, up , up and then purchase at the top.  People seem to want to be more fiscally responsible these days.  I think that is a good thing, especially for those of you that own a nice, sensible home in Lexington priced between $100k and maybe $180k.  I’ve also had several buyers not want a lot of square footage.  People aren’t wanting to maintain, heat, cool and clean more house than they will use.  These are mostly the buyers in their 20’s and 30’s.  Use to be that was only something you heard from downsizing empty nesters.   This is bad news if you have a McMansion.

But here’s the truth about any market at any time……Houses that are priced realistically and show well sell.  Buyer’s always want the best house they can get for their money.  Good or bad, there will always be a market.  Location, condition and function play the biggest role in value.  Keep that in mind and you’ll always be able to make good real estate decisions.

Saw the listing online….think I’ll pass

by John Rice

I had something happen the other day that TOTALLY supports everything I’ve ever said about marketing a house these days.  I was talking to a client who said they saw a house online, but weren’t sure if they wanted to see or not.  See, the pictures weren’t that good and it was kind of hard to figure out much about the house from the marketing remarks.  This house is only a 20 minute drive from my client’s house.  Back in the day, a buyer would give the house the benefit of the doubt and go check it out.  That just doesn’t happen now.  (My client isn’t alone, buyers just don’t want to risk it being a waste of time these days 🙂

So, let’s flip this around and take a look at it from the seller’s perspective.  The seller of this house has hired a realtor to sell the house.  There is a buyer 20 minutes away who doesn’t know if it is worth it to come see it in person……all because the agent did a poor job of marketing the house in an appealing way.

After working with so many buyers, I’ve learned an important lesson about how they approach houses online:  Buyers are sitting at their computer asking the house “Why should I come see you?”  Since houses can’t talk, it’s up to the realtor to answer that question.   A listing that doesn’t answer that question through pictures and marketing remarks misses out on a lot of showings……even ones in the most desirable school district in town.

Goodbye to my old Kenwick house

by John Rice

 

I use to live here.  Kinda.  back in the mid 1990’s my wife and I rented the little shack that sat on this lot and has since been relocated to the Fayette County Landfill.  I drive down this road frequently to get home after taking my son to school and one day the house was gone.  I would love to have been there to see it one last time before it came down.  It was originally a 4 room house that had a “Great” room addition on the front.  It had to be on the front because the house was built practically all the way back on the lot.  Many of the houses you see in Kenwick are like this.  I was told by long time Kenwick residents that there was some deed restriction loophole that allowed smaller houses to be built at the end of the lot.

I’ve actually lived in Kenwick on Lincoln Avenue twice.  My parents bought the house next door to this one when I was a sophomore at Henry Clay back in 1985.  My parent’s house had two little houses set way back on their lots on one side and another one on the other side.  My rental shack was on the side with the two small houses.  Since there was such a price difference between the houses, we had our fair share of neighbor issues…..this was in the 80’s before Kenwick became trendy.  Back then, it would have been the prime neighborhood to have shot an episode of “COPS”.   A neighbor on one side never fed his chained up pets and always blasted music.  After many friendly requests from my dad asking him to turn it down, he dared my dad to call the police.  My dad did.  When the police got there, the neighbor dared the police to arrest him.  They did.  That house was bought by somebody who remodeled it and it has since been featured in the Homeseller.  Go figure.

The 2nd house down on the other side was the same 4 room shack as my house before the addition.  It had asphalt shingle style siding that looked like brick, whereas my shack had been updated with asbestos siding in the 1950’s.  It always reminded me of the house where The Beverly Hillbillies lived before Jed became a millionaire.  It was torn down in the late 80’s and a wood shake sided house was built in it’s place.

My parent’s moved less than a year after we rented the shack next door to them.  I actually liked having my folks as neighbors except when my dad would fire up his BMW motorcycle at 6 every Saturday morning.  Where the shack sat so far back on the lot, their garage was about 10 feet from the bedroom window.  I’ve always credited my parents with having the foresight to see that Kenwick was on the verge of a transformation.  They were some of the first people to move in and fix up those old houses with something better than wall paper and paneling.  In reality, they wanted Chevy Chase but couldn’t afford it back then.  That’s how it goes for old neighborhoods.  Right now, there are people who’d love to be in the first block of Kenwick but can’t afford it, so they have settled for the second blocks.

I have a few funny memories of life in the house we rented:

1)  The mailbox was on a fence at the sidewalk.  I would park my car at the top of the driveway, get the mail, and then coast down in neutral to the house in my manual transmission car.  One day, I got back in the car, but instead of putting my foot on the brake, I put it on the clutch.  I didn’t figure this out until after I had rolled all the way down the driveway and crashed through the doors of the wooden shed at the end of the driveway.

2)  One night when my wife was away on a pharmacy rotation, a sheriff showed up after midnight to serve a warrant for the previous tenants.  After this house, I have always decided that any time I am thinking about moving to a new place, I would first randomly stop a sheriff and ask if he knew where the street was.  If he said he didn’t, then that would mean I wouldn’t mind living there.

3)  One day, I was doing some yard work and lost my wedding band.  That was kind of sad.  Some kid will be playing in the back yard 100 years from now and find it I bet.

Well, I am sad to see that old shack go.  I have a lot of good memories from my time on Lincoln Avenue.  I hope the people building this house enjoy their new place!

2012 Predictions & Where are the sellers going?

by John Rice

Every week, I check to see how many houses in different price ranges go pending.  I look at under $100k, $100-150k, $150k-$200k, $200k-$300k, $300k-$400k and $400k-500k.  I stop there because there are never many sales over half a mil and I don’t do too much work over that anyway.  I have been totally amazed at how many houses are selling in the $100-$150k range….even the week before Christmas we had a bunch of them.

That price range is where the first time buyers are.  Like I’ve always said, you need the first time buyers to drive the whole market.  You need them to push all the more expensive deals through.  I guess these low rates have brought them out.  Just for fun, I checked to see how many sales there have been in that price range in the past 6 months.  There were 432.  During the last 6 months of the tax credit season there were 552.  Right after the tax credits expired, there was no action in most price ranges, especially this one.  Glad to see it come back.  I knew it would.  Regardless of the economy, people are always going to graduate college, get married, start a family, take a job somewhere else, etc.  People will always be moving.

I am scratching my head over something.  If 15 houses in the $100-150k range go pending in a week, shouldn’t about 15 houses in the higher price ranges also go pending?  You’d think all those sellers were moving up.  In the past, these sellers moved up to the $175k-250k range.  Now, I am thinking that some of the sellers of more expensive houses are moving down, that some sellers aren’t buying houses much more expensive that the one they sold, and that some of them just are getting out of home ownership altogether.

Want to know what I see coming in 2012?  It is almost New Year’s Day, so I guess I better throw something out there.  If interest rates stay low, I see the $100k-150k remaining strong.  A lot of people have refinanced, so they will likely stay put for a while.  I don’t see the number of local sales increasing/decreasing much compared to 2011.  There has been a shift in how people view housing, so I think buyers will be a little more modest with their purchases…..meaning folks aren’t going to be shopping for the max amount of their pre-approval letter.   I think the over $300k homes will be hit by this unless the house is unique, has a great location or is in the better school districts.  I don’t mean to scare anybody.  It’s not like the prices are going to drop by much.   You just need to pick a winner.  Investors will likely keep snatching up the deals under $100k and turn them into rentals.  None of this is really earth shattering…..mainly just more of the same.  I also think that our local list to sale price will creep up a bit.  I’m not seeing buyer fear like in years past.  I think that will mean they may not start offers as low, or counter a counter offer multiple times.  They are just going to know they want the house and will be willing to pay a fair price.

That’s all I have for now.  Happy New Year!!

Before & After Shots of my house…..See what paint & carpet can do?

by John Rice

I’ve been pretty darn pumped up to do this post for quite some time now.  It gives me a chance to show off the work I did on this house and gives me a great platform to yell some more about what a difference carpet, paint and presentation can make.  Plus talk about investment property.

See, this is my house.  I bought it to rent it out…..gotta pay for college for my boys and keep my supply of cool cars fresh you know.  I paid $78k for it.  The foreclosures in this area go for in the mid $60’s.  In fact, an identical house to mine on the same street sold for $65k this summer…..So why am I bragging about paying $78k?  Well, I have been in the other one before and after its renovation.  That one needed a new kitchen and bath.  Mine didn’t.  That one didn’t have the wood trim wrapped in vinyl.  Mine did.  That one had a 27 year heat pump.  Mine has a 4 year old heat pump.  Once you get down to the nitty-gritty and compare apples to apples, I paid about $4k more for mine, but didn’t have to spend as much time to get mine ready nor did I have the risk of unearthing expensive issues during a major reno.   In the end, about the only visible difference between the two houses are color choices and I didn’t put in a dishwasher.  That house was flipped and just sold for $95k.  I think I did pretty good since that house was the same floor plan just about 5 houses down the same road….doesn’t get better than that for comparison sake!

These two pictures are of the same master bedroom.  Can you tell which one is the after?  All I did here was paint, carpet, an $80 ceiling fan, and new outlet covers…..and had a professional photographer snap the picture.

These next two are of the kitchen.  The cabinets and counter top were new just a few years ago.  Literally all I did was paint, a new range and a new ceiling fan….well, I did have an electrician add GFCI outlets just to make sure everything would be safe for my tenants.

These last two are of the bathroom.  All it got was a new toilet to conserve water and fresh paint.  The previous owner had recently redone the bathroom and made great selections!

So, there you have it……if this isn’t a testament to what paint, carpet and presentation can do, I don’t know what is.  I dropped about $3500 in paint, carpet, 5 light fixtures, 2 ceiling fans, a range and a toilet, but added at least $15,000 in value.  This is why I always tell sellers to do these little things because they can get such a big return not only in the sale price but also shorten their days on market.  (The other one just like mine was only on the market for a short time while being surrounded by others that have been on the market forever!)