Reading the real estate market in real time

One day this summer, I looked out across my backyard.  I do that every day.  All the time.  I love my backyard.

This time I noticed one of the pine trees in the corner had a bunch of brown needles on it.

I immediately reached out to my buddy Phil who knows just about everything there is to know about every plant there is.

He told me that usually once you see the needles turn brown, the tree is already dead.

I knew he knew what he was talking about, but just to be sure, I waited to cut it down until every needle had turned brown, fallen to the ground, and the branches snapped as crisply as the first Saltine cracker in the box.

That experience reminds me of the real estate market.  You never know exactly where the market is at the moment.  You just see the signs after the change occurred.

I got into real estate during the spring of 2005.  My first listing was in May.  I was so excited.  Houses had been selling for top dollar immediately.  I wanted to be a part of that.  The house took several months to sell.  I remember thinking, even as a newbie, that the house was priced right, had a good location, and statistically should have sold already.

Nobody knew it at that time, but the market was slowing down and was about to become the worst market in recent history.

After weathering that storm, I got to witness another change.  Early in 2013.  It felt like that first decent day in spring.  The one where you notice the sun stays up a little longer, you didn’t feel as cold as the day before.  Like that scene in Bambie where all the animals come out for the first time.

I was working with a really cool buyer named John.  He traded cars as often as I do.  He wanted the south end of town in an affordable price range.  We made a few offers on houses and lost them.  The offers we made were spot on within the recent comparable sales.  After the 3rd time, I told him that I felt like the market was improving, so all the sale prices for the recent comparable sales were going to be lower than what the value would be now.  We would have to made an adjustment.  Sure enough, as the ones we had made offers on closed, the prices were about 2% higher than the comps I had been using.  Meanwhile,  we had a backup offer on a foreclosure that he ended up getting.  He put very little money in that house and less than 6 months later we sold it for $41k more than he had paid for it.  By the time he sold it, everybody knew the market had changed.  The market had changed so much that even after the house sold, people were walking up and looking in the windows while he was home.  I told him to pull my for sale sign out of the yard and keep it in the garage until we closed.

So, where are we right now?  After such a hot hot hot market earlier this year, the market is really slow.  I don’t think it is in trouble or anything.  I just suspect that everybody who was going to buy this year did so in the first 10 months.  It has been a frustrating year for buyers.  I think a lot of them have given up on buying this year and are waiting until spring.  Sellers aren’t too happy right now either.  They have watched all their neighbors get multiple offers the first day on the market, but now they aren’t seeing the same thing happen with their house.

So, right now is a great time to get out and buy a house if you can find one you like.  We still don’t have a lot of choices, but you’re going to have more of a chance to negotiate and probably be the only offer the seller has on the table.  Historically, buyers come out of hibernation late spring and sellers start putting their houses on the market about a month later.  So you’ve only got about 8 weeks to enjoy this slow period.

The more of these changes I live through, the easier it becomes to notice them more quickly.

And now the same holds true for the trees in my backyard.

 

Best time to be a buyer?

It is right now.

Why?

Real estate is like traffic.  Do you want to be driving on Nicholasville Road at 2:PM or 5:PM?  Timing makes a huge difference.  This might be a bad example because personally, I don’t want to be on Nicholasville Road at ANY time of the day.

At 2:PM there is still a lot of people on the road, but fewer drivers.  By 5:PM, everybody who is going to be on that road IS on that road.

In the market, spring and summer are when there are the most buyers out snatching up houses.  It starts to slow down some about the time school starts.  Then it slows down more around Thanksgiving.  Then it really slows down around Christmas.  Then in January it starts picking up again.

We are in that sweet spot where buyer activity will be slowing down some and we are also seeing a good amount of new listings too.   Later in the year, buyer activity will slow down more, but there won’t be as many houses.  It will be like driving down Nicholasville Road in the middle of the night…..sure, there is no traffic, but that is because nothing except Wal-Mart and a few gas stations are open.

Also, sellers tend to get a little nervous the later in the year it gets.  The Lexington sales graph is like a gentle rolling hill.  It gently rises to it’s peak in the late spring and early summer and settles down in the fall/winter.  Some of the surrounding counties look like Mt. Everest.  Their market is dead, then they have 3 months of steep sales increases, then decrease back down to nearly nothing in the fall and winter.  Most sellers assume fall and winter are bad times to sell and plan accordingly, but it is a non-issue for Fayette Co sellers.

We still are likely to have more buyers than houses in the sub $250k range, so I am definitely not saying that it is going to change to a buyers market, just that you may actually have a chance of buying a house without competing with 5 other offers.  Over $250k with the exception of the most popular neighborhoods, you have a better chance of not getting in multiple offers this time of the year.

So be encouraged if you are a buyer and go get you a house!