Something more important than location?

Yeah yeah yeah.  We’ve all been told by real estate professionals for years that the single most important thing when picking a house is it’s location.  I’m telling you right now that there is something even more critical than that.

Let me tell you a few things about location first.  It’s subjective.  People pick where they want to live for lots of reasons:  Proximity to main roads, their job, schools, parks, low crime, etc.  It’s always a compromise too.  One buyer may be willing to be far from parks if their kid can be in a better rated school.  Another buyer may be willing to put up with a higher crime rate if it is super close to their job…..so, one person’s great location may not be as great to other buyers.  Also, locations are sort of price dependent.  What is considered a good location for somebody with a $100k budget will definitely be a bad location for a $400k buyer.

What do ALL buyers have in common though when picking a house?  They all want as good of a lot as they can get.  In all 15 years of my career, I have never had somebody say they wanted a house that backed to a busy road, had a steep driveway, lacked privacy or had a backyard that was unusable due to a slope.

Why is the lot so important?  For starters, it is often a buyers first impression.  If a buyer tries to pull in the driveway and their car scrapes the pavement, bad sign.  If they are out of breath before they get to the front door, bad sign.  If they step out of their car and can hear New Circle Road or the Interstate that is behind the house, bad sign.  Additionally, the lot affects just about anything you do with the property.

What should you look for in a lot?

  1.  As flat as possible is the biggest thing around here.  Lexington is pretty flat.  The severely sloping lot is unusual here.  Go to Richmond or parts of Scott County and it is more common.  For what’s it is worth, nobody has ever told me they didn’t like a house I showed them because the lot was too flat.
  2. A nice view is always a plus.  If you can’t get a good view, then no view at all is safe.  We don’t have a lot of greenspace views and even fewer water views in Lexington.  It is totally okay to just have a flat backyard that backs to other houses.  I would avoid backing to anything than other houses, such as businesses, apartments or a road…..and ideally it backs to houses that are equal or higher in value than the one you’re viewing.
  3.  Get a lot size and shape that is normal for the neighborhood.  If you are looking at a house that has a tiny or oddly shaped lot unlike any other in the neighborhood, don’t buy it.  The same doesn’t always apply for lots that are bigger.  Most of the time the biggest lot in the neighborhood is the most desirable unless it is in a neighborhood where the most likely buyer will be a retiree or somebody downsizing to get away from a lot of maintenance.
  4.  I would avoid a corner lot if possible.  There are a few buyers who prefer a corner lot but most people view them as twice as much sidewalk to deal with.  Plus, most neighborhoods only allow you to fence a corner lot from the rear edge of the house, meaning that you have much less space if you want to fence it in.  (I’ve got a good friend who looooves his corner lot and will likely find out I said this…..sorry Peter!)

Want to know my absolute favorite thing about getting a good lot?  It never needs updating and never goes out of style.

 

Real estate predictions for 2029

Just gonna jump right into this:

Gen Z will have a harder time getting a house than the Millennials did.    They are the biggest generation ever.  They will be entering the real estate market at about the time Millennials are selling their starter homes.  Great news if you own a 1300 square foot house in Masterson.  Times will be tough for them, but they will keep the market going strong.  Every seller of a starter home needs a first time buyer so they can move up.  That first time buyer is the oil that lubricates the whole market.

The Millennials will be moving up to their 4 bedroom houses on a cul de sac in a good school district because that is just a natural progression once you start a family.  This is great news for Gen X sellers who will be downsizing to medium sized houses in upscale neighborhoods.

What makes me think all this?  It’s not really crystal ball as much as it is history.  Everything I just described happens with every generation.  You buy a smaller house you eventually outgrow, you move up at least once to the house you raise your family in, then you downsize.

So what does all this look like for Lexington?  More gentrification as it becomes expensive to live anywhere in Fayette County.  I know it sounds unheard of, but the neighborhoods that nobody wants to live in like Cardinal Valley and Winburn may become the budget choice as similar neighborhoods with better locations become too expensive.  I know it sounds crazy, but when I was in high school, people didn’t want to live in Kenwick and now those houses equal Chevy Chase for price per square foot……yesterday’s bad neighborhood can easily become a tomorrow’s good location.  Plus, it isn’t like we are ever going to see brand new starter homes ever again.  All that can be done is update/remodel existing houses.  The people that flip houses need some margin to do this so they will buy distressed houses in whatever neighborhoods are affordable, just like they are doing now in downtown, Melrose, The Meadows and all those streets that begin with D around Pasta Garage.

Before long, I don’t think there will be any new construction in Lexington.  We are already filling in every spot big enough to stick a short row of townhouses.   This means that being in Fayette County will be even more expensive, and people will go to surrounding towns like Nicholasville and Georgetown even more.  One day, people will discover that Winchester is only 15 minutes from Hamburg and the interstate passes right through it.  I’ve never understood why more people don’t move to Winchester?

Remodeling will be hot too.  With not much new construction, people will start remodeling existing houses more and more.

Sort of some majorly huge economic melt down, I think housing is going to be strong for quite some time.

 

The real reason why sales are down

I’m seeing a lot of news articles with accurate data.  My issue is that I think most are drawing the wrong conclusions.

Most seem to want to make you think the sky is falling in real estate because sales are down.

You know who needs to care about the number of sales?  Appraisers, realtors, mortgage people.  Those of us who make money on each transaction.

As a buyer and/or seller, the number of sales isn’t really important to you.  What you care about is supply and demand-the ratio of buyers to sellers in the market.  If there are 3 buyers in the market and only 2 listings, then we have a seller’s market.

I am seeing a lot of articles stating that sales were down in November of 2018 versus November of 2017.  Of course they were.  It happens every election year.  The market pauses until we see which set of morons we will be stuck with.

The ones that really bug me are the ones that say the affordability crisis will hold the market back.  I think they have it backwards.

Sure, we have an affordability issue.  Many people can’t afford to buy a house with rising prices and interest rates.  All I know is that every house under $200k in this town seems to go very quickly, which allows that seller to buy up to their next house and that seller to buy up to their next house and so on.

Back when the market was terrible, I said that it was like a baseball game where the bases are loaded.  The seller on first base needed a buyer without a contingency to buy their house so they could buy the 2nd base seller’s house, who could buy the 3rd base seller’s house.  The first time buyer needed to hit a home run and push all those sales through.

Back then a buyer had a ton of choices for their next home.  The issue was selling their old one.

Today, no buyer really has a huge selection of houses.

For that reason, I think our current market is the opposite.  There are a ton of first time buyers eager to hit a home run and push all those deals through, but what is happening is that the person on 3rd base doesn’t like home plate and has decided to just stand there until they feel like running.

The buyers with the most selection are the people buying their pinnacle home.  The one they stay in forever until they begin to downsize.  These are mostly Gen Xers.  They are in their 3rd base home, which is probably a fairly large home in the $250-350k range.  They want to move up to the $400-600k range, where there are plenty of houses for sale.

Their only problem is that most are just tarted up versions of their current house.  These buyers aren’t getting a better house, a bigger house, or a bigger yard.  They are just getting prettier finishes.  They find the houses in this price range, well, boring.  And we have a TON of them for sale.

So what do these Gen X buyers do?  They wait for the right house to hit the market.  Since they already have a nice house, they are in no hurry.  Because they aren’t in a hurry, that means the people looking to buy their house are in the same position….all the way down to that first time buyer eager to bid their heart out on their first home.

And, that is where we are today.  Sellers wanting to sell but not finding anything they want to buy.

Why rising rates won’t stop the market

Rates just hit 5%.  They haven’t been that high in many years.

It sounds like the sky is falling but it is not.

Many first time buyers are freaked out over this since they got used to lower rates.

When I bought my first house, I bragged to my friends that I was getting a 6.5% rate.  I locked as soon as they fell from 6.625%.  Most of my friends who had owned their houses for a few years had rates over 7%.

Several years later, I refinanced my third house when rates dropped to 5%.  I could not believe at that time how low that rate seemed.  I currently have a 3.375% rate on that house.

I’ve watched rates go up and down.  The market change from a seller’s market to a buyer’s market to a seller’s market.  If there is one thing I have learned is that the market keeps going.  There are always first time buyers.  There are always people getting transferred, married, divorced, retiring, and running out of space.  Those things will always happen.  The market is really about life and all the stages and events of it.

Something else I have noticed is that the market tends to pause when there is a big change, whether that change is interest rates, rising prices, dropping prices, etc.  It’s like we say “Now isn’t a good time to do this because it is different that it was.”  Then life happens, we get used to the “New” normal and we buy and/or sell.

We are in one of those times now.  Mortgage applications are down slightly, sales are down slightly.  We are entering what is believed to become a balanced market, meaning the number of buyers will be about the same as the number of sellers.  This won’t last too long because like I said, people will get used to 5%.  It will become the new normal.  The market will go on just as life goes on.

My dream place to live when I was 12

woodland-village-lexington-ky-primary-photo

I rarely go through campus any more, but I found myself stopped at a red light on the corner of Woodland and Euclid this week.  While I was there, I decided to look around rather than checking my phone since I had just done that at the last light.

I found myself staring at this apartment complex.  Back in the early 80s, I was sure I was going to go to UK and live in one of these super cool apartments.  It would be great.  All my friends would come over.  We would do all the things a 12 year old kid thinks college is all about.  It would be Porky’s or Fast Times at Ridgemont High 2.0.  (Google that if you’re younger than 35.)

As a grown up, it made me realize that living there now would be torture.  No way I would want to be on a busy corner with all those students around me.  As the light changed to green, I thought there has to be a blog post in there somewhere.

I kept thinking about the potential post.  As I was waiting to turn left onto Walton Avenue, it dawned on me.  The post should be about how you should always look a little into your future when making real estate decisions.

When I was 18, these 1 bedroom 1 bath apartments would have met every need I had at the time.

When I got married and needed more space than these one car garage sized apartments had, a 2 bedroom apartment met all my needs.

When kids came, I needed a house with a yard.

When we outgrew that, we needed more space and storage.

Now that I am close to being an empty nester, I realize I have too much house.  But I am not moving.  Why?  I am looking ahead.  I’ve had empty nester clients buy a much smaller house than they use to have, only to discover that once grandkids came along, their little ranch was too small.  Their grown children who lived out of town would come visit for a holiday and there was no room for everybody.

Always look ahead to the next phase of life to make sure whatever house you pick will work……unless you want to keep buying and selling for each stage of life.  Which is really okay with me since that is how I make a living.