seller

What’s the rest of 2022 going to be like?

by John Rice

Not fun, that’s for sure.

After working in bad, good and in between markets over the past 17 years, we are entering a period where buyers and sellers are not going to be happy. Buyers won’t like that they missed out on the super low interest rates. Sellers won’t like that they missed out on the absolute hottest real estate market in all of history.

Here are some predictions:

  1. Pricing a house will become difficult. Typically you look back over the past 6 months of sales of similar houses to determine value. Well, we can’t really justify using comparable sales from when the market was so hot that about any house went for way over the list price and had 5-15 offers.
  2. Price reductions. Let me tell you something. A price reduction does not mean the market is bad. It just means the price wasn’t right from the get go. Sellers will be in denial and will want to keep pricing their houses as if buyer’s can still get a 3% interest rate. Trust me, having been in this business during the absolute work market ever, I can attest to the fact that when priced right, any house will sell quickly in any market.
  3. Home inspectors will have to start waking up and working again after practically being unemployed for the past two years.
  4. Realtors will have a whole lot more free time since the number of sales are slowing. This does not mean the market is bad. What determines a good or bad market is not the number of transactions but the balance between sellers in the market and buyers in the market. Just about everybody other than clickbait Youtubers agree that the market is cooling into a slight seller’s market. If there are 2 sellers out there and 2 buyers out there, that is a good, balanced market. Realtors are the only people that care about the number of transactions out there. Why? Because we get paid for transactions.

Want to know what I expect for 2023?

Assuming rates don’t go crazy and the general economy doesn’t collapse, I think when buyer’s emerge next spring they will have acclimated to inflation, acclimated to paying around 6% interest and they will resume buying houses.

Things to remember in a slowing market

by John Rice

Yea, the market is slowing down. Everybody knows that. No big deal. That crazy roller coaster market couldn’t last forever and I’m sort of glad really. It will still be a good market for years to come, but it will seem like a let down compared to the last couple of years.

Here are some things to remember as you process the Doom and Gloom news cycle real estate is in at the moment.

  1. The “Average Days on Market” will be going up. Don’t be alarmed. Usually the way that works is that the worst houses that nobody wants stay on the market longer and bring down that average. Also, keep in mind that average is usually for all residential property types in all price ranges. If you have a $350k house, do you really care about what the market is like for a million dollar home? Or a townhouse at any price?
  2. The “Average Sale Price” is another one that can confuse people. An average is just that-it’s an average of all sales. If house sales over $500k slow down a lot, it will drag down the average sale price. This does NOT mean your house is worth less when you read silly headlines that say stuff like “The average sale price dropped by 2% last month.” When rates got super low, I saw more houses selling for $1,000,000 or more than I have ever seen. Now that rates are much higher, I totally expect to see sales at that price point slow way down, bringing down the average sale price.
  3. Values may stay flat after going crazy for the past two years, but prices will still go up. I know this sounds crazy, but hear me out. Let’s say you bought a house a year ago for $400k and we have had 8% inflation since then. Your house needs to sell for $432k today for you to have effectively broken even. That’s because it takes 432,000 of today’s deflated dollars to equal 400,000 of dollars a year ago. In other words, the price of your house has to be higher even if it got zero percent appreciation just because the value of the dollar has eroded. (This is a whole other post, but one reason prices have risen so much over the past year is because we saw massive appreciation and massive inflation. If prices went up 15% and inflation was 8% of that, then that means the real appreciation was 7%.)

I started my career just as the Great Recession began. I saw most houses in our area drop in value by 15-20%. I know to a lot of people, this market seems scary. Trust me, it isn’t. All that’s going to happen is that we have a more balanced market. It will be a good, but not the greatest time in history, to be a seller. It will also be good to be a buyer because you will be able to get a house that should be a stable investment for your future.

Being a realtor isn’t about houses

by John Rice

You’d think being a realtor would mostly be about houses, but it is really about relationships.

One of the things I am the most proud of is how many of my clients have used me multiple times. I always look forward to working with them over and over again. Since I have become friends with most of my clients, it doesn’t even feel like work.

Part of this relationship can sometimes be about keeping secrets. People often move when their life changes. I am often the first to know about a marriage proposal, job promotion, pregnancy. I am also sometimes the first to know about the less fun life events like a job loss, divorce and even a death.

I get lots of texts or calls about renovations. I’ve had people standing in the flooring isle at Lowe’s and asking me which floor will add the most value to their home. If you’re wondering, I usually tell people that if you think you’ll be in your house for more than 5 years, get whatever you want since styles will change and it won’t be brand new by then. If you think you might be there for less than 5 years, lets go with something buyers will like.

I get asked for contractor referrals a lot. This has gotten harder and harder to do since nobody seems to want to work any more. I recently had somebody who seemed promising at first and turned out to be a total loser. I am thankful that I have found a great handyman who was actually referred to me from a client. That doesn’t happen often! My HVAC person has faithfully been serving my clients and me for 13 years. Everybody loves him.

I get asked “What’s my house worth?” Sometimes people want to move. Sometimes they are considering refinancing and need to first know a number to see if it is worth it. Sometimes people just want to know how much equity they have in their house. Occasionally people have me over just to see their home after a renovation. It is always nice to get to see them, their home and have a cup of coffee with them.

Being a realtor is really a lifestyle. Yeah, its a business. It’s a job. But it is really about getting to know people and helping them any time they need something. I couldn’t imagine doing anything else.

Don’t believe the Chicken Littles in the media

by John Rice

I love YouTubers. Always a good laugh. Always predicting the market is going to crash.

They get a little nugget of data, like that the number of people refinancing their mortgages has dropped and draw the craziest conclusions. Well, when rates were between 2 and 3%, everybody rushed out to refi. Even if the rates had not gone up, eventually everybody who would have refinanced would have done so. That statistic was bound to decrease on it’s own eventually.

My favorite ones are those that predict a major housing crisis. It is just not going to happen, especially in Lexington.

Why?

The number one reason is that Lexington is almost out of land. Lexington cannot grow any more. The surrounding communities will of course grow. Lexington will always be the most desirable town in the Bluegrass and prices will remain higher than anywhere else around us due to that. (FYI-we will see a whole lot more remodeling in the future than we see building in Lexington.)

What else do I see in the near future? A slowing market, mainly due to interest rates and nothing being for sale. Right now everybody is complaining that 5% interest rates are the worst thing to happen to the market. I disagree. While rates being low were nice, it is the low rates that spoiled all of us and are affecting the market right now. We currently act like rates in the 2-3% range were normal and 5% seems excessively high. However, I don’t see prices dropping though. That’s because all those sellers who refinanced their mortgages when rates were under 3% are not going to move until they have a need. We need sellers in the market. When sellers are scarce, that means more demand than supply. People will likely only move when they outgrow their home, lose a job, get transferred, their family grows, Grandma needs to move in, or a divorce. You’re not going to give up a 3% mortgage on a cheaper house to get a 5% mortgage on a more expensive house unless you really need to move.

So, in Lexington at least, we have little room to build more houses, sellers who are less likely to move just because they want a nicer home, and higher interest rates. All of which means less supply at a time when we have Gen Z trying to get their first home and millenials needing to move up.

I guess if I had a YouTube channel, it would be pretty boring because you don’t get much attention by saying prices will remain at least stable and the market will stay slightly tipped in the seller’s favor.

My response to this always disappoints people

by John Rice

As a realtor, you wouldn’t be surprised that people are always asking me the best way to add value to their homes.

What might surprise you is my response.

There are no improvements or upgrades that get you more than a 100% return. All give pennies on the dollar. I know, you are thinking “Then how do people who flip houses make money?” They make money from buying the house below market value. You already own your house so spending money to sell it and getting back less than you spent is just wasting time. Usually you want to do the least you can do, and the best thing is to address the worst aspects of your home before selling it. If you have worn out carpet, replace it. If you have a rusting light fixture in a bathroom, replace it…..but what is the best bang for the buck in getting top dollar for your house when you are selling it?

The absolute best bang for your buck has always been and will always be a fresh coat of paint.

Fresh paint makes any room automatically feel better and cleaner. Fresh paint can be done in whatever the trendy color is at the moment, which gives your home an updated vibe. Fresh paint can be used to unify all the rooms in your house. Buyers will walk around every room in your home within their 30 minute viewing. Having the same color in all the rooms is soothing and calming. Buyers love that. In a vacant house, all you see in most rooms are 4 walls, a ceiling, a light fixture and the floor. Having 80% of all there is to see be new makes a huge impact.

So there you go! If you are getting ready to sell your home and want to know the wisest way to spend your money in preparation, hit the paint isle at the hardware store.