Not a lot so far.
Everything is a bit slower, but my listings are still getting shown and there seem to still be houses getting listed and selling every day.
Some of my buyers are laying low to see how this goes and for how long it lasts.
I’ve been reading a few articles that have said this could be like the Great Recession where real estate prices fell. It won’t be. Why? We still have a shortage of houses for sale. That will keep prices where they are. Think of it this way: If there are 1000 houses for sale and 1100 buyers, it is really the same as having 100 houses for sale and 110 buyers. Supply and demand are the same. As long as there are more buyers than sellers, prices will stay stable.
If you are a Buyer:
Don’t be afraid to buy. Take advantage of great interest rates. Negotiate the best price you can. As I have always recommended, buy a house that will be easy to sell in any market. That means a good location, a good floor plan, as flat of a yard as possible, average or better than average performing schools. Don’t buy the biggest or smallest house in the neighborhood. Don’t buy one that doesn’t fit in with the others such as having a one car garage when every other house in the neighborhood has a two car garage.
If you are a Seller:
I would put my house on the market as soon as possible. In uncertain times, taking action now to prepare for the worst is always good. I think I might put a new listing on the market on a Friday afternoon and only allow showings on the weekends. That way you get the most people in all at once and can then clean things like your door handles, counter tops, faucet handles, garage door opener button afterwards and feel good about being home again…..and take your toilet paper with you when you leave for showings, lol.
It happens. More than you’d think.
I showed a house about a month ago to a client. There was a line to see it. It got multiple offers that same day.
My client didn’t like it. I didn’t like it.
Why? The floor plan sucked. It had a big two story foyer as soon as you walked in. The living/dining/kitchen area was open. All this sounds great, but the issue was that this was a 1733 square feet home that had no more usable space than a 1300 square foot home. The upstairs hall was wide. The hall from the front door to the living room was wide. The dining area was small but nobody could tell since it was vacant. All the rest of the rooms were equal to what you’d find in a 1300 square foot house.
It made a good first impression though. You walk in that foyer and see space. You walk down that wide hall and see the open living/dining/kitchen. You go upstairs and see that wide hall. The house felt bigger than it was just because when you are viewing a house, you are going through every room in about 15 minutes.
It sold for over $6k more than the list price.
It closed today. The new owners are probably moving in and glad it quit raining. Once they live there for a while, they will probably realize that much of their square footage isn’t usable. They will realize that what they have is a 1300 square foot home with 400 extra square feet of hallways and foyer.
Don’t know if you’ve noticed, but there are more and more houses being extensively renovated in medium priced neighborhoods that sell for waaaaaay more than anything else in the same neighborhood.
I think this is happening because of two things. One is that there just aren’t a lot of houses for sale. That will eventually change. The other is because we’ve just about run out of room to build new houses. That means the only choice for most people will be an existing home. People love new stuff in a house, so it only makes sense that an older home in a closer-in location that has been totally renovated is appealing. This won’t change.
The thing to watch out for is that you are not the first or even the second person in the neighborhood to drop $100,000 or more than what the same non-renovated house might be worth. Why? What if the house you buy ends up being the only on that gets that type of renovation? You’ll have the most expensive house in the neighborhood in a big way. What happens when those trendy finishes get a few years of wear and tear and start to go out of style? Well, you will have a house that is worth no more than any other house in the neighborhood that needs updating. None of these are good things.
Before you pull the trigger on one of these whole house renovations, look around and make sure there is a trend of this happening in the neighborhood.
I had an interesting thing happen this past weekend. I showed a For Sale by Owner listing in an area where few houses are listed with a realtor. It’s a popular area and about the cheapest route to get in a super desirable elementary school district.
My buyer did some of my job for me. They found pictures of the FSBO listings on zillow. I try not to use zillow for a main source of information because their data is often incorrect and they do not list if the seller paid any of the Buyer’s closing costs or if there were any other concessions…..but pictures are helpful to see the differences in the houses.
There were four houses that were all roughly the same size…..so close that we don’t even need to make any adjustments in value for 3 of them. All sold within a few months last summer. The range was $280-$330k. Everything is sounding pretty normal so far, but this is where it gets odd.
I’ll describe each house and let you pick the sale price:
- Sale #1 was 2400 square feet. It backs to a city park. It is all original and even has a green kitchen counter top which doesn’t look that nice with original cabinets that have been painted white. Did it sell for $302k, $280k, $330k or $310k?
- Sale #2 was 2300 square feet. It recently had $45k in updates including new white shaker style cabinets, trendy lighting, subway tile in the kitchen and around the fireplace. Did it sell for $280k, $330k, $310k or $302k?
- Sale #3 was a 2300 square foot house with different types of laminate flooring. It looks like the only newer thing in this place other than maybe the furnace filter was granite counters in the kitchen and bath. This one has an odd shaped lot. It is sort of a triangle so your backyard comes to a point. Did it sell for $330k, $280k, $302k or $310k?
- Sale #4 was just over 2000 square feet so it was a little smaller than the others. It might be worth $12-15k less just due to square footage differences. The kitchen was just remodeled and was equally as impressive as the one in Sale #2. This one had new flooring too. Did it sell for $330k, $310k, $302k or $280k?
Okay, you ready for this?
Sale #1 sold for $330k. It was equal to Sale #3, which sold for $302k. That means somebody paid $28k for the nicer lot. That is nearly a 10% premium. That is higher than anywhere else in town. This was a great deal for the seller and a bad deal for the buyer.
Sale #2 sold for $280k. Yes, the one with $45k in recent updates sold for the least. Bad deal for the seller and great deal for the buyer!!
Sale #3 sold for $302k. This was the house that had more flooring types than Home Depot offers and the worst lot out of all of them. This one was listed with a realtor. This was a fair deal for both the buyer and seller.
Sale #4 sold for $310k. A good deal for the buyer.
So, what is my point in all this? That these people needed the help of a realtor. As a buyer’s agent, I would have advised my client not to pay $28k more than an equal house just to get a better lot. I would have told the seller of #2 that their price was waaaaay too low. I would have told both the buyer and seller of #3 that they got a fair deal. I would have told the seller of #4 to ask for more.
What is the type of house that is the riskiest to buy?
(I’ll pause to give you a minute to think.)
I bet you didn’t come up with a brand new house as an answer, did you?
Now, new homes are built every day all around the country. Most of the time everything goes well. Probably like 98% of the time, but there are some risks involved that I always like to check out before a client decides to build a house. So, why is new construction risky?
- You don’t know what the neighborhood is going to look like until it is done. Ever drive down Wilson-Downing and see that one street with about 12 houses that are much bigger than the rest of Belleau Woods? Those were the first houses in what was going to be a neighborhood similar to Hartland. Until interest rates shot through the roof in the early 80s and the only thing that was selling were small homes. The people who bought their new houses on that street didn’t get what they expected.
- You don’t know what the value is going to be after you build. A brand new sale is a unique sale. It is never going to be brand new again. It will be a “Used” house for each subsequent sale. That is why when I have a client who builds, I like to look at the sales of other “Used” homes in the neighborhood so I can tell them what to expect.
- You don’t know what the builder is like. Building is like most industries where 99% of them are good honest hard working people. The rest are the ones that bring their whole industry down. Many many years ago, there was a custom builder who was flying first class to see every UK basketball game, using his customer’s money to live large instead of you know, building their house. He got arrested because he was telling banks that houses were nearly done so he could get more drawls from the construction loan. There were a few houses that were still vacant lots. This is why I like to check out my client’s builder to see if I think he is going to take their money and run. Usually a long track record of building homes and a good reputation goes a long way with me. I get nervous when the builder has only been around for a short time.
These are just a few things that pop in my mind when a client says they want to build. Like I said, most of the time you never have these issues, but I think it is always a good idea for you to have your own realtor involved.