lexington

Why NOW is the scariest market ever

by John Rice

I think right now is the scariest real estate market we have seen in a long time, for buyer’s at least.

I know, it seems crazy when prices are going up and there is a frenzy to buy any house as soon as it comes on the market……but that is what makes it scary.

When the market was so bad years ago, a buyer had their pick of dozens of houses.  They were able to make a good choice.  If the market dropped even further, you knew it would eventually come up.  You don’t have that luxury when you are at the top of the market.  You just hope it continues to go up more and more and more.  You never know where the peak is until it starts going down the other side of the hill.

I cut my teeth in real estate in the bad market.  Many people who did not use me as their buyer’s agent contacted me to sell their homes when times were tough.  Many of them had bought in the early 2000s when the market was hot.  They would tell me how they had lost several houses and they didn’t want to lose again so they bought the house they now wanted me to sell.  They’d say the market was booming so they didn’t think they could go wrong with a full price offer because that was the only way to get a house.  They were thankful to have even gotten their house.  The very house that at the time they were saying all this, had become a noose around their neck, preventing them from relocating for a better job, dividing families because one spouse had to start a new job while the other stayed behind praying the house would eventually sell.

The market they bought in was just like it is today.

While I don’t think we will ever see the market crash again any time soon, you know the market will go back and forth from being a seller’s market to a buyer’s market.

That is why I think being a buyer in today’s market must really make a wise decision.

Many buyers today, again, feel lucky to have gotten their house that backs to a business, is on a busy road, has a terrible lot.  They just feel lucky to have even gotten a house.  Period.  Many of them will call me when it isn’t as easy to sell because the agent that sold them the house is no longer in real estate.

I wish they’d call me now instead of using their uncle’s neighbor’s cousin’s babysitter who just got into real estate last month.

Here is what I would tell them:

“This market is tough.  There is no easy way to get a good house.  Yes, you will pay top dollar.  Yes, you may lose some houses.  Yes, you may even have to find temporary housing while we wait for a house that will be a good investment.  This market will cost you something-you can be burdened now and end up with a great house, or you can be burdened when you go to sell.  Whatever house you buy should set you up for your next bigger and better house.  You want to build equity to use as your next down payment.  You don’t want to have this house ruin your life should you have to sell in a buyer’s market.  So, let’s pick a winner that you will enjoy and that will be a solid investment for your future.  It isn’t going to be easy, but I am committed to making this happen for you.”

My Miata teaches sellers a lesson about color

by John Rice

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Ok, what is the first thing you notice about my Miata?  It’s the red top on a blue car, right?

I thought this picture may help on future discussions I have with sellers regarding their paint colors.

FYI, the top won’t always be red.  Plan is to paint it a metallic silver.  These original hardtops are hard to get, so you buy the first one you find.  This one happened to have come off of a red car.

So, this is my car.  I’ve gotten use to the red.  So much so that I don’t even really notice it, which is why I haven’t painted it in the 8 months I’ve had it.  Same happens with sellers with bold colors…..it is their normal and they don’t really see their house in the same eyes as a buyer.

But buyers notice bold colors just as the first thing you noticed about my car were the colors.

Do you care that the car only has 67k miles since 1990?  That all the suspension is new?  That it is all original?  No, you’re just giggling about the Wonder Woman/Superman/Papa Smurf color scheme.

Let’s say I wanted to sell it.  I might say that I don’t know what color the buyer would want it to be, so it is best to let them decide.  That is what a lot of sellers say when you tell them they need to paint.  The problem with leaving a boldly painted house alone is that you either need a buyer who can see past it or has your exact same taste, both are maybe 5% of the whole pool of buyers.  The most popular car colors are white, black and 50 shades of silver.  For houses, gray, beige or greige are the crowd pleasers.

I guess if I were selling it, I could offer an allowance for painting it.  Maybe $2000.  Then I still need a buyer who wants to paint a car as their first act as the new owners.  My experience is that people never know what painting will cost.  They are usually way high on what they think it will be.  So if you offered a $2000 allowance on your house for painting, most buyers will want twice that.

What happens if I were to do nothing about the paint and try to sell it like it is?  If selling a car with a bold color scheme is like selling a house with a bold color scheme, what will happen is that it would sit on the market for a long time and then finally get a low offer because the buyer wants a bargain price if he is going to have to do the work.

It’s a good thing I have no intentions of ever selling my Miata.  I’ve owned it twice.  I sold it to a friend and bought it back.  Unless you feel the same way about your house, you are wise to get rid of the bold colors.

 

Is building the answer?

by John Rice

A lot of people think that we need to build our way out of the shortage of houses for sale.

I don’t.

The only places left to build in Fayette County are on the edges of town at a time when there is more and more interest in living closer in.  No builder is going to use the little bit of land we have left for anything less than a $173,950 house, which is the base price of the cheapest model Ball Homes will build in Masterson Station.  A quick search on LBAR shows the cheapest actively listed new construction home is $202,900.

I think the problem is affordability for first time buyers.  I have always said that it is the first time buyer who greases the entire real estate market.  They are usually the only group that doesn’t need to sell a house in order to buy.  It is like the bases are loaded and the first time buyer is the one who hits the home run so everybody standing on all those bases gets to move.

A lot of first time buyers are and will continue to look outside of Fayette County.  They will look in Lexington neighborhoods they would not have considered 10 years ago to make their numbers work.   They might even consider a townhouse or condo.

Like my baseball example, the bases are loaded.  The first time buyer is waiting to hit their home run, only there are no balls being thrown.  If more affordable houses come on the market, it will make sellers in all price ranges less worried about finding their next house.  Sellers know they can sell quickly but are worried about finding a house.  Remove that fear and we’ll have more houses for sale.

I thought this was a seller’s market?

by John Rice

It is, but that doesn’t mean all price ranges are super hot right now.

I was doing a market update for a listing I have.  I try to keep my sellers up to date with what has been listed, pending sales, price reductions and closed sales that will become comps for an appraiser.

 

Check out these stats for single family homes in all of Lexington:

$100-150k has 34 listings.

$150-200k has 52 listings.

$200k-250k has 67 listings.
$250k-300k has 64 listings.
$300-350k has 106 listings.
$350k-400k has 68 listings.
$400k-450k has 38 listings.
$400k-500k has 40 listings.
If you’re a buyer in the $100-150k range you better do whatever it takes to get a house, your market is sizzling.
If you’re a seller in the $300-350k range, I would suggest a price reduction because you are not really in a seller’s market at the moment.
Why is this?  Nobody can say conclusively, but my experience is that most sellers in the $100-200k range move up to the $200-300k range.  Most sellers in the $200-300k range move up to the $400k and up range, so that leaves a vacuum in the $300-350k range.

The perfect day in real estate

by John Rice

I just love warm weather.  I love being outside.  Feeling the sun and seeing the blue sky.  Driving with the top town.  Meeting clients.  Looking at houses.

I had one of those perfect days this week.

It started out by showing a fixer-upper to some friends who want to get into the rental market.  We always have a great time and they always pick interesting houses.  The one I showed them this week had two baths, which is normally a good thing…..only the 2nd bath was where a closet use to be.  I am glad I took a picture because there is no way I could possibly describe it.

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From there, I drove with the top down in the M Roadster to see a house on 10 acres with a pool.  I had to wear a hat to keep my forehead from burning.  I normally would have been a little anxious about having “Hat Head” but the buyer is a repeat client that I really like….he knows I am no fashionista.

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I had a couples hours of down time before heading to Jessamine County to show the next house.  I took all back roads to get there because I’d rather have a pretty view and be moving than stuck in traffic.  This place sits on an acre and was a super cool house.  My clients have two young sons that are always a lot of fun to talk with.

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I wrapped up that showing close to sunset.  I had a nice drive home with the cooler evening temperatures on the same back roads, only this time heading towards home.

Great clients.  Great properties.  Great day!