real estate agent

Short term pain-Long term gain

by John Rice

I was showing one of my rental houses to a prospective tenant yesterday. This young lady said she was torn between buying and renting.

Know what I told her…..while she was standing in my house which was for rent?

I told her to buy a house if she could. I said that I think right now it seems scary and might not be any fun to have such a high interest rate, but in 5 years, she will surely look back and be glad she had bought something.

Why? Because history shows us that rates won’t stay high forever. It also shows us that prices won’t stay where they are right now forever. The odds are very strong that you will one day be able to refinance and the odds are even stronger that prices will at minimum rise slowly over time.

Also because when you are paying rent, you are paying down somebody else’s mortgage and are getting absolutely nothing in return other that getting to live somewhere for the next month. When you buy a house, at least part of your payment goes to building equity in an appreciating asset. Then, too, there is the fact that the principal and interest portion of your mortgage payment will NEVER go up, unlike your rent.

About the only time I advise people to rent is when they know they will not be in a house for more than 3-4 years. If you know you will need to move again in that short of a time, you may come out ahead by buying but the difference is so slim that it may not be worth the risk.

So pretty much, I told here that buying right now is a short term pain, but a long term gain. For her own sake, I hope she can buy a house.

You won’t believe what happened with their Zestimate

by John Rice

I put on a new listing last week. Like what happens a lot of the time, Zillow’s zestimate was way off of what a thoroughly detailed, comprehensive, professional opinion of the market value was. Usually once Zillow gets the listing from the local MLS, their Zestimate suddenly changes to something more in line with the list price.

Not with this house however.

My seller reached out to Zillow after unsuccessfully trying to claim their home on the site. Zillow was nice enough to send them an email that basically said Zillow has never been in the house, knows nothing about the house or its condition, but somehow is still happy to publish a value. More of a Guestimate than a Zestimate in this realtor’s opinion.

Knowing artificial intelligence is running Zillow, I told my seller that I would play around with the marketing remarks and see if somehow certain keywords might change anything. It was a long shot but it was all we had.

I put words like “Recently” in front of the word “Remodeled” when describing their primary suite bathroom. I removed the word “Original” when describing some of the cool character of the house. I removed the word “Traditional” in a sentence describing the homes in the entire neighborhood. I tried to used words like New, updated and fresh every place I could make it work without looking stupid.

And guess what?

The next morning the Zestimate was up nearly $90,000 and right in line with the list price.

I outsmarted Artifical Intelligence. What’s next for me? I am going to try to outsmart my dog, who seems to have trained me to do what she wants, when she wants.

How my fall is shaping up

by John Rice

I’ve been doing a lot of blogging about the market lately. Good stuff, but since I know most of you who will be reading this, I’ve been thinking I better give you all an update on what I have been doing.

I’ve been having a great time the past few weeks.

Yeah, the market is really slow. It’s there. It’s healthy. It is just slow. Few people want to buy and even fewer want to sell. That is okay for sellers and buyers. It is realtors, home inspectors and loan officers who this current gridlocked market affects the most.

I am not complaining though. I have more than enough work to stay comfortably busy.

I have several listings in the pipeline. All of them from people I know. A few buyers too.

I will be listing an amazing ranch in Versailles in a great location, with a great lot, and on a cul-de-sac. It is one of those rare houses that really has no negatives. I am looking forward to selling this for some friends who are moving out of state.

I’ve got a house around Southland that should be on the market sometime this winter or early next spring. It’s an older house with a really good floor plan and several interesting features. I have worked with the sellers several times. It might be the last one unless they were to move back to Lexington after this one sells.

I’ve got a very affordable ranch on the northend that I will be selling for a friend who has used me several times. He is an investor who is parting with several of his properties. I look forward to working with him and his family for probably most of the next year since they will sell one house at a time.

I’ve been working with a large family who has used me a couple of times before. I have really enjoyed getting to spend time with them. We found an ideal home in their existing neighborhood that will serve them well. This house has fairly new HVAC units, replacement windows and a literally brand new roof. I don’t see that Trifecta often. I should be listing their old house here in the next week or so. Their situation was very much like the “Love it or list it” show on HGTV. They loved their neighborhood but their old house wasn’t working. They were entertaining a big addition and remodeling the existing house.

I’ve been working with the mother of a woman that I went to middle school with. I have worked with her once before. Both her and her daughter are so much fun to be around. Once we find the perfect place, I will be selling her old house which is simply adorable. It is on about 3 acres in rural Franklin County. If you had told 6th grade me that I would be a realtor and showing houses to a classmate’s mother 40 years later, I would never have believed it!

Other than committing to wearing long pants every day, it’s shaping up to be an enjoyable fall for me.

Last nail in the coffin for the Pandemic era market

by John Rice

All throughout real estate history, we have had value differences due to location. Similar houses in the best locations got top dollar and the less desirable locations were worth less.

Except for the COVID era market.

During the pandemic, supply was so short and demand was so strong that pretty much the same house would sell for the same price regardless of things like what part of town it was in, what school district it was in, and even what condition the house was in.

This was especially true for the more affordable houses. Back then, a small 3 bedroom, 1 bath house without a garage was going for about $200k regardless of whether it was in a Grade A, Grade B or Grade C location. That was because the market was so tight that people didn’t have a choice in location. Buyers were shopping all over town, looking at any house in their price range. There were so many buyers doing this that location didn’t seem to matter much. It was about getting a house, not getting a house where you want it to be.

We’re not wearing masks. Rates aren’t 3%. That crazy market is in the past now.

Now that we are starting to see some houses staying on the market for more than a few hours, it’s back to location being important. As this happens, I think we will see the Grade A neighborhood prices remain stable. The Grade B and Grade C locations that recently had been getting the Grade A money…..well, they aren’t any longer. That is one reason we are seeing so many price reductions now. It just shows that the market is returning to normal. It isn’t crashing.

Back during the pandemic, I would have people ask me what a house was worth. I would tell them I can easily determine what it is worth, but the value and the sale price were not related for that brief time. I would tell my Buyers to view the sale price as paying what the house was worth plus a “Convenience Fee” for winning the house in multiple offers. Now that we aren’t seeing multiple offers on every single new listing, we are back to a house’s value and its sale price being the same.

What to expect for the rest of 2023

by John Rice

In 2-3 months, you will be reading that sales have dropped significantly. The news media will have you believing the sky has fallen. They will compare the stats to the booming pandemic years and/or the best of times……as if that was normal. Headlines will read:

“Sales down 20% (compared to last month.)”

“Mortgage applications fell to lowest level (since 2022.)”

The reality will be that the market has just returned to normal, seasonal cycles.

I think sometimes we forget to look back far enough to see the bigger patterns. It probably doesn’t help that the media people are only following real estate long enough to write their article. It also doesn’t help that so many real estate agents haven’t been in the business long enough to see a balanced or even a bad market.

This is what a balanced market looks like: Some houses sell the first day on the market in multiple offers. Some houses don’t sell quickly and need one or more price reductions. March through August are peak sales months. After August the sales gradually slow down and start picking back up after the New Year.

So, for the rest of 2023, I think we will see fewer and fewer sales. Yes, the interest rates are high and that is what is returning us to a more balanced market. However, that is not the only reason we will see fewer sales. Part of it will be that we have returned to a more normal cycle of sales slowing down due to the time of year. I think prices will remain stable. We will see a whole lot of price reductions on listings that didn’t sell the first day on the market. This doesn’t mean that values are dropping. It just means the seller and/or their realtor were just too ambitious on the list price. We are returning to a market where buyers have some choices. When there are not 10 buyers fighting for ever single house, it means the loser houses that nobody wants will have to reduce the price to even attract one buyer.