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


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.




Great Time to Downsize/Retire in Lexington

It is always a good time to be in the market for somebody.

A few years ago anybody moving up had it made.  The price of their old house had dropped, but the price on their move up house had dropped even more.

Today, the winner is the buyer who is downsizing.   Sure, the house they want to buy is worth a lot more than it was a few years ago, but so is the house they are selling.

I’ve worked with several buyers who have been empty nesters or retirees.  Some already lived in Lexington.  Some have moved from out of state after discovering Lexington is a great place to retire.

Almost all of them want a ranch house less than 2000 square feet.  Some want an older house for the character.  Some want a newer house for maintenance free living.  Some have considered a condo, but none have bought one (yet).  They all have wanted to be close to shopping/dining/entertainment as well as health care facilities.  Many of them have family spread out in different states and tell me they like how Lexington is two hours to their grandkids, or 3 hours in the opposite direction to other family.  Guess having two interstates with Lexington in their crosshairs helps.

It is a lot of fun to work with these buyer, and it sure is a good time to be one of them!