It’s over……We’ve hit the bottom

by John Rice

I think it has finally happened.  We’ve hit bottom.  All the top analysts have been predicting it for quite some time.  I remember in 2006, they said we would see a recovery in 2008….then 2009….then 2010.  I don’t know what criteria they use for making their predictions, but here is what I base mine on, well, at least for Lexington:

  • Remember the glory days of real estate when everybody was wanting to flip houses?  Heck, several of my friends who know nothing about real estate were wanting to do it back then.  It was just on everybody’s mind.  Rapid appreciation was the motivation.  I am sure they are glad they didn’t!  Well, now everybody is talking about wanting to buy real estate as rental property.  It is on everybody’s mind, and low prices are the motivation. Just as the average Joe or Jane wanting to flip houses was an indication of the frenzied peak, I think the same people wanting to buy now shows we have hit the bottom. 
  • Buyer’s these days still want a bargain, but there isn’t the fear of buying like there was even last year at this time.  I think part of this is the change in attitude about real estate.  Nobody is viewing it as a quick money-making investment anymore.  People seem to view their home as just their home and a way to build equity by paying down principle over time. 
  • The market doesn’t have anything artificially stimulating it.  The tax credits are over.  We all know now what the market is like without any lipstick or botox.
  • I’ve seen a couple of houses sell for waaaaaaay more than they were worth.  I just had a deal where another buyer paid my client $5000 to walk-away from their contract…..on top of that, the buyer’s back up contact was for just over $20k MORE than my buyer was paying!

Despite all this, I don’t think we’ll start seeing appreciation or a return to a high volume of sales.  I think we’ll stay near the bottom for a while.  I’ll even go as far as saying that some newer neighborhoods may see a little more depreciation as the dust settles.   In the past, appreciation across the board made up for things like aging systems and the normal cycles of decline that a neighborhood goes through.  A flat market means that a seller isn’t going to be able to put 5-6 years of wear and tear on a house and get exactly what he paid for it.  I think it is more like mileage on a car-the less usable life you pass on to the next guy the lower the value.

It’s over, but you still need to make wise decisions!

 

Say yes to the…..HOUSE?

by John Rice

Okay.  I hate to admit it, but I do…..sometimes….watch “Say Yes to the Dress” with my wife.  Not that I am into wedding dresses or anything.  To me, I enjoy seeing the process a bride goes through when picking the dress.

Seems to me, most of them go in with a specific vision of what they want, but they end up with something totally different.  It is often the same way with shopping for a house. 

Often, people come to me, or any realtor I assume, with a list of what they want in a house.  Usually people give a bedroom/bathroom count, part of town, square footage range and their budget.  I then take them out and look at houses that match that criteria.  While I am there, I try to pick up on the non-verbal cues about what they like and don’t like.  What rooms they spend the most time in.  Even which rooms they go to first.  When a buyer goes straight through the house and into the backyard, that means I better make the backyard they want a high priority.  All this is one reason I never lead people around and “Show” them the house.  I shouldn’t set the pace nor the order.  There is just too much I can learn about them by letting them set the pace on those things, especially the first few times we go out to see houses.

Just like on the show, you can tell by facial expressions if the house is a hit or miss.  Sometimes people do say things that they don’t even notice they have said.  If a buyer makes a comment that it was dark in the house, and all the lights were on, I know I need to be on the lookout for fewer trees around windows or more/bigger windows….or suggest cutting down some of the trees if everything else is good about the house.

Picking a house is so much more than just a logical choice.  Even the most unemotional person still wants to like their home, which is a feeling.   Often, a buyer will not be interested in a house that is perfect on paper, because it lacks the vibe they want.  Just like with the dresses.  You never hear a bride who has found THE dress say the dress is beautiful, they always say THEY feel beautiful in the dress.  It is a vibe thing.

Unfortunately, the vibe factor isn’t something that you can search for on the internet when looking at house.  A lot of the time, it is a process.  Often a buyer doesn’t know the vibe they are looking for.  You really just have to go out and look, and eventually the vibe starts to get more defined. I have had a lot of buyers apologize to me for taking so long, or  for the time we spent while they discovered the vibe they really want.  I always tell them not to worry about that since I know this is a process that we have to go through in order to get to the right house.

 

Amazing What Furniture Can Do

by John Rice

I’ve got this client whose house I am selling.  I sold it to them when they bought it.  The house had been sitting on the market for a while when we wrote the offer.  I got them a good price on it, but I was a little nervous about selling it in a cooler market than when they bought it.  I told them before we bought it that it might be harder to sell since it had been on the market so long.  The agent that had it listed at that time did a decent job of presenting the house, so I couldn’t really blame it on her…..figured it was the casual floor plan in a neighborhood full of cookie cutter McMansions.

Well, just by word of mouth, I ended up with multiple showings before I even put it on the MLS……which was today.  It got 3 more showing today.  Granted, it ain’t sold yet, but it is in the top 3 houses for 2 different buyers.  Makes me think I have something really special here.

What gives?  How could a house sit on the market for a long time in a better market and be on the short list of two buyers now?  I think it has something to do with their furniture.  When they bought it, it was vacant.  I remember going in the house and thinking it was nice, but I had some concerns.  One of them was the “Keeping Room.”  When it was vacant, it just seemed so small.  I am usually pretty good about figuring out scale and all, but not this time.  Once the seller got furniture in the room it totally changed the vibe and actually made it seem bigger.  The house has a covered patio that is very nice, but once the sellers put out a table and flowers, it really made it seem like some place you’d like to vacation.

This past weekend, I was out with a young couple.  We went in two houses in the same neighborhood that happen to be the same floor plan.  There were some minor differences:  One had a tiled backsplash, the flooring was a different color, and the cabinets were different stains.  One had plain paint and was decorated with an older vibe……..guess I’d call it Early American Yard Sale.  One had furniture and paint that was much more hip.  Guess which one my young couple clicked with the most?  When the agent for the “Older House” called for feedback, I told her about this and suggested they make some changes since the target buyer in that price range and neighborhood is a twenty-something person (or persons!)

So, if your house is for sale or you are about to sell, think about all this.  Afterall, look at all the shows on HGTV where that lady from the Target commercial makes a few cosmetic changes and the house sells soon afterwards.  Think about your target buyer too.  I’ve noticed the twenty-something buyers like cooler colors like gray tones.  People older than that go for warm colors like beige since they remember the last time cool colors were vogue back in the 80’s.

And oh…..while I was writing this post, an offer came in on that house……a good offer.  Gotta go now!

Got $300-500k to Spend on a House? Read This

by John Rice

Want to take advantage of the market?   Need to know what price range is suffering the most right now?  Well, if you are buying in the $300-500k range, now is a pretty darn good time to pull the trigger……may get even better in the months ahead.

Let me back up a bit and give you the history of how this time came to be.  During the last half of last year, it was easier to sell a $300k house in Lexington than it was a $125k house.  The tax credit to first time buyers lured the whole years worth of them into doing it in the first several months of 2010.  Meanwhile, rates were crazy low.  During that time, many buyers thought that they’d part with their old house and move on up to their pinnacle home.

Flash forward to this year.  The first time market is back and the range that is seeing the most action is the sub $200k again.  FYI, Lexington is mainly a $120-180k town that moves up to $200-250k if they stay here long enough.  That is the bulk of the Lexington market. 

Soooooo, what about the $300-500k houses?  It is a little tougher in that price range now than it was last fall.  Rates have fallen, but still aren’t as good as they were.  The economy is a big concern.  People are wondering if they can make do with less.   Only the best ones that are priced right will sell.  Number wise, I think the first half of this year will be close to the last half of last year for this price range.  The month isn’t over yet, but if you include the pending sales, we’re down about 10%………BUT WE JUST REACHED THE PEAK MONTHS OF ACTIVITY FOR THE WHOLE YEAR.  SPRING SHOULD PRODUCE MORE SALES THAN A LATE SUMMER/FALL/EARLY WINTER MARKET, RIGHT??

So, what is my advice if you are a buyer who can drop $300-500k in a house?  Unless rates start to go back up some, buy now or hold out until fall.  I think if we have a pretty dry summer for the seller’s in that price range, we’ll see prices drop a bit.  Short of some other catastrophic economic event, I think it will be temporary.  I really think the low rates of last year created this lull  just as the tax credits did last fall for entry-level houses…….just sayin.