retire in lexington

Nailed it! See how my predictions turned out

by John Rice

I’ll try to remain humble here, but I called exactly what is happening in the market today.

I have always said there will always be a market. There will always be demand. Some times the demand will be pent up with people sitting on the sidelines, but they are there, waiting to feel comfortable about making a move. (Typically these people wait until enough other people dive in and effectively end up jumping into a hot market, which is what they were hoping to avoid.)

I have been saying for months that I thought the market could still be very good with interest rates around 6% or less because historically, the past several super hot markets we have seen in our area had those rates and adjusted to average income, real estate values in our area are similar. I’ve said that rates over 7% won’t last forever. I’ve also been saying for years that once rates start going up again, people would be reluctant to give up their super low rates which would create a shortage of listings and would keep prices stable regardless of the market conditions.

I’ve suggested people buy real estate as soon as they are able regardless of the rate since you can always refinance when/if rates go down but you can’t go back in time to get yesterday’s home prices.

And now you know what stories are making the headlines? That mortgage applications are up recently due to rates dropping below 6%. That refinancing applications are up too. That rates are down. That prices aren’t really dropping in areas that didn’t see crazy stupid price increases.

I am seeing all this myself with my clients. I had two listings that went on the market right around Thanksgiving. One of them was modestly priced, totally updated and in a desirable neighborhood. I really thought it would go fast even though that time of year is usually slow. It hardly got any showings, which is very strange. Then once rates went down we had 5-6 showings in a matter of days and it sold. When I go to show listings to my buyers lately, most of the time there is another realtor showing the house when I arrive or one that shows up as I am leaving, sometimes both!

Are prices going to drop?

by John Rice

I’m reading a lot of headlines and seeing YouTube videos about the market crashing.

Is it going to happen? Short answer is NO.

Is the market slowing down a little right now? YES. It always does this time of year. People go on vacation and those with kids like to be in their new home before school starts. I always like this time of year because I can catch my breath and enjoy a break before it picks back up a little for the rest of the year. When I go to a track and I get used to doing 120 MPH in a straight, hopping on the interstate on the way home and doing 80 feels slow. Right now we are all so used to a crazy fast market, that even a strong but not super strong seller’s market feels like a major slow down.

Are we seeing more houses come on the market right now? YES. I think this is because all the sellers who would have sold during COVID now feel it is okay to put their house on the market. We started seeing more listings hit the market after the vaccinations rolled out. This makes me think that the sudden increase in inventory hit all at once. We will see if it keeps up. Really though, I sort of hope it does. I would love to see a balanced market where there aren’t 5 offers the first day on the market for a loser house and 15 offers the first day for an HGTV worthy house. Simple economics tells us that as long as there are more buyers than sellers, that it will remain a seller’s market. As long as it is at least a balanced market, meaning supply is equal to demand, prices will remain the same.

How my 4 houses helps me understand move-up buyers

by John Rice

My first house.

7 Ky Street

 

I loved everything about it.  It looked cute.  The mortgage was cheap.  It had two original fireplace mantles.  It didn’t bother me that it didn’t even have a driveway, or that there were some houses nearby that had been converted into cheap apartments.  It was my first home.  The threshold was low and I was happy.

 

My next house.

New outside

 

It was really a dump when we bought it, but I was so happy to have a garage, a master bathroom and to be the trashiest house on a nice street verses the best house on a trashy street.  I quickly grew to hate the trek from upstairs to the garage when I would take my kids to school, and the awkwardness of the split foyer design when people would come over.  The threshold for happiness was still low since having more space, that garage and my own bathroom were enough to get me excited.  It was better than the first house and that was enough.

 

My next house.

1217621_01

 

This is the one where we started getting more picky.  Doing things like wanting to know if any houses around it were rentals, checking out the pantry and school districts.  The first house was better than renting a house.  The second house was better than the first.  That type of thinking wasn’t going to cut it on this move.  I loved living here, although there was no storage or anything.  Also, I was told that my lot was the gravel pit for the neighborhood, which is why the grass never looked good in the front yard.

 

The current house.

1210113_01

 

We weren’t going to settle as much this time.  We looked and looked and looked at many houses.  The yard had to be flat.  There had to be more storage space.  The kitchen had to have a better pantry and more counter space.  The previous houses were more about finding a house we liked.  This one had to be in a certain part of town.  We didn’t have to move.  We wanted to move……which gets me to the point of this post.

And that point is that buyers who have owned several house and are now looking for their pinnacle house, the one they will live in before they start downsizing, are pretty picky.  And that is okay.

These buyers have lived in enough places to know what they want and more importantly, what they don’t want.  They know what they can compromise on and what they can’t.  The gray area that was okay for previous houses is gone.  There is no “Well, maybe that won’t bother me as much as I think it will.”

 

My next house??

640_1david_eichler_architectural_photography_1-1024x682

Maybe something like this.  I love windows.  I love looking out and seeing leaves blowing in the wind, and clouds, and birds in the air.  I want to feel like I am outside even when I am inside.  I want it bright.  I want a view.  Of something.  Trees, water, anything other than the back of my neighbor’s house.  I want to feel inspired by the architecture of my next house.

And the next house will probably be at the center of many posts about downsizing and empty nest buyers.

 

When do you know you’ve found the right house?

by John Rice

“We pretty much know as soon as we walk in.”

I was covering for an agent that was on vacation this week.  This is what one of her buyers said to me when I commented that they didn’t spend much time in the first house I showed them.  I often hear this from my own buyers.

You know what this means?

A lot of people base their decision on how they feel.

I’ve always said you could find a house with all of the items on a buyer’s must have list, but they still might not buy it.

This is why that first impression when a buyer walks through the door is so important.  If your house isn’t perfect, you are better to have the the rooms a buyer sees in the first few minutes looking better than the last few rooms they see. If a buyer likes what they see at the beginning, they are more forgiving of little things they don’t like later.  It doesn’t work in reverse.

I recently sold a house in one of my favorite neighborhoods.  It sold for about $3-4k more than it should have.  Sure, the market is hot, and we did get multiple offers…..but I think we got TOP TOP dollar for it because the seller’s decor was so attractive.   They had the right colors, the right furniture and everything else just right.  The house felt good.

And I bet the two buyers who made offers the first day on the market both  knew they wanted it as soon as they walked in.

 

Good deals in a seller’s market? (Depends on the seller)

by John Rice

The market isn’t hot enough for buyers to accept two things:

  1.  A nasty house.
  2. An over ambitious asking price.

If your house is nasty, no buyer is going to be able to imagine themselves in it.  I’m talking if it is dirty, messy, desperately needs paint or stinks.   Trust me, buyers just want to exit a house like this.  Even if you slashed the price in half, I bet most of the buyers would still say no.

I recently sold a nasty house.  It had been on the market for quite some time.  It was in a desirable neighborhood and actually priced right.  It has more updates than most in this nice neighborhood.  Problem?  It smells like dogs and has one of the nastiest bathrooms I have ever seen in a house for sale.  It was hard to get excited about the expensive tile in the remodeled bathroom when there was urine and hair all over the toilet.  Sorry to be so graphic…..I have a picture but decided not to include it, so I am holding back a little for those with weak stomachs.

My buyer is one of the rare people who can see past that and is getting a super nice house for a really fair price.  Added bonus:  It was one of the few times recently that I haven’t been in multiple offers with a buyer.  The house was so nasty that my client called me after the home inspection asking if I thought the seller was going to clean it when they moved out.  He just met with a home inspector and heard everything wrong with the house and the thing that was on his mind the most was how dirty it was.

Moving on, the next item is the overly ambitious list price.  A client bought a house for $400k that had been listed originally at $445k.  Nice house, just not a $445k house.  Maybe $410-415k based on the comps.  LOL, the way the market is going, it might be worth that now!  Anyway, it was reduced, reduced and reduced again.  By the time 170+ days had passed, it wasn’t on anybody’s radar.  Nobody cared?  Buyers today are focused on new listings.  If a house doesn’t catch their attention on Day 1, few will go back and reconsider a house.  They’d rather wait for tomorrow’s new listings.

My client actually passed on this house two times, then came back to it.  They were worried because it had not sold.  In today’s market, 6 months is an eternity of buyer’s saying “No” to a house.  Ironically, a house two doors down just sold for $405k the first day on the market.  It was 1200 square feet smaller and had a marginally more updated master bathroom.

While it is one of the hottest seller’s market ever, not all houses are selling immediately in multiple offers.  I always encourage buyers to seek out these good houses that are being held back by the sellers.  You can avoid multiple offers and get a good deal, even in a seller’s market.  My buyer with the nasty house might pay $400 to have it professionally cleaned but saved much more than that.  My buyer who made a reasonable offer on an overpriced listing didn’t have to immediately make a decision to buy it since there were no other buyer’s around.  It felt like a buyer’s market to them.