sellers market

Always think about selling in a Buyer’s Market

by John Rice

I am always sad when I see a house sell that has been sitting on the market forever.

Sometimes a house will stay on the market for a long time because the initial listing price was too high, or the house didn’t show well.  Both of those can happen to perfectly good homes.  The reason those don’t sell is because of the seller, not the house.  Often these houses sell once the list price gets reduced into the realm of reality, or the seller does some cosmetic repairs that make it easier for a buyer to want the house.

Any time I show a house like this, my client usually asks me why the house hasn’t sold yet.  If I check the listing history and see that they started out asking a crazy high price and have reduced it, I tell them it is okay to buy it.  If I look through old pictures or see fresh paint, new flooring, etc, I tell them it is okay to buy the house.  Sometimes sellers just need to learn how the market works at the expense of their days on market.

Then there are those houses that don’t sell because of the property itself.  Those are the ones that I advise my clients to not buy.  These houses usually have some odd feature like a crazy floor plan, a poorly done addition, a neighbor whose yard is full of junk or has a dozen dog kennels in their backyard, the house backs to commercial or industrial zoned properties, etc.  These houses eventually sell to somebody who doesn’t mind that particular negative.  Whenever I show one of these houses, I like to tell my client that while they might not mind the negative feature that has kept the house from selling, it will be extremely difficult for them to sell it when it is their turn.   The past 8 years have been a pretty strong Seller’s Market.  If a house took a long time to sell in a hot market, can you imagine how long it would take in a Buyer’s Market?

I have lived through lots of markets.  I have seen seller’s who paid too much in a hot market lose money when they needed to sell.  I have seen people get their dream job and move out of town, only to have to make two mortgage payments until their old house sells.  I have seen people who felt lucky to have gotten their house in multiple offers struggle to sell it in a Buyer’s Market.

I don’t want to see any of my clients go through any of this.  In real estate, you often don’t see the consequences of a mistake until years later when you go to sell.  Helping people avoid this mess is one of the greatest joys of my career.

Real estate predictions for 2029

by John Rice

Just gonna jump right into this:

Gen Z will have a harder time getting a house than the Millennials did.    They are the biggest generation ever.  They will be entering the real estate market at about the time Millennials are selling their starter homes.  Great news if you own a 1300 square foot house in Masterson.  Times will be tough for them, but they will keep the market going strong.  Every seller of a starter home needs a first time buyer so they can move up.  That first time buyer is the oil that lubricates the whole market.

The Millennials will be moving up to their 4 bedroom houses on a cul de sac in a good school district because that is just a natural progression once you start a family.  This is great news for Gen X sellers who will be downsizing to medium sized houses in upscale neighborhoods.

What makes me think all this?  It’s not really crystal ball as much as it is history.  Everything I just described happens with every generation.  You buy a smaller house you eventually outgrow, you move up at least once to the house you raise your family in, then you downsize.

So what does all this look like for Lexington?  More gentrification as it becomes expensive to live anywhere in Fayette County.  I know it sounds unheard of, but the neighborhoods that nobody wants to live in like Cardinal Valley and Winburn may become the budget choice as similar neighborhoods with better locations become too expensive.  I know it sounds crazy, but when I was in high school, people didn’t want to live in Kenwick and now those houses equal Chevy Chase for price per square foot……yesterday’s bad neighborhood can easily become a tomorrow’s good location.  Plus, it isn’t like we are ever going to see brand new starter homes ever again.  All that can be done is update/remodel existing houses.  The people that flip houses need some margin to do this so they will buy distressed houses in whatever neighborhoods are affordable, just like they are doing now in downtown, Melrose, The Meadows and all those streets that begin with D around Pasta Garage.

Before long, I don’t think there will be any new construction in Lexington.  We are already filling in every spot big enough to stick a short row of townhouses.   This means that being in Fayette County will be even more expensive, and people will go to surrounding towns like Nicholasville and Georgetown even more.  One day, people will discover that Winchester is only 15 minutes from Hamburg and the interstate passes right through it.  I’ve never understood why more people don’t move to Winchester?

Remodeling will be hot too.  With not much new construction, people will start remodeling existing houses more and more.

Sort of some majorly huge economic melt down, I think housing is going to be strong for quite some time.

 

Which builder would I pick?

by John Rice

Before I spill on which builder, let’s establish the criteria:  Priced between $200k and $400k and brand new.

Ok, you ready for it?

To keep me out of a lawsuit, lets just say it is the big one in town.  Four letters.  You know the one.

I can already feel the tension in the air.  It is because I get it all the time when people ask me who to use and I suggest this builder.

Sure, everybody in town knows somebody who knows somebody who knows somebody who has had a bad experience with this builder……but nobody ever knows “That” person first hand.  I own 3 of their houses myself and have sold 60 of them of all ages.

It has been my personal and professional experience that they build as good of a home as anybody.  Am I saying they are perfect?  No.  I am just saying that after selling new homes built by other builders and selling hundreds of “Used” homes built by other builders,  their homes seem to have fewer issues caused by the construction of the home.

Any house is something with thousands of pieces assembled by lots of different trades that has to withstand both time and mother nature.   Things go wrong with them.

I think one reason this builder has so many detractors is just because of their scale.  If you have build maybe 25,000 homes in the Bluegrass and 5% of those people had a bad experience, that is a lot of people.  If you are a smaller builder who has maybe built 100 homes in the Bluegrass, that same 5% complaint rate is only 5 people.

All I know is that if I were wanting a new home in the $200-400k range, I would rather go with a builder whose 50 year old houses are still standing verses somebody without much of a history.

The worst part of being a Realtor

by John Rice

I bet you are thinking I am going to talk about being on call 24/7 and other things realtors complain about.

Not quite.

To me, the worst part of being a realtor is seeing your client make a mistake you know they will regret later.  It is easy to do.  I mean, no buyer or seller really know the market like a realtor.  They only know what they read in the paper or hear their friends discuss.  Often buyers and sellers don’t totally trust their agent.  I recently told a client a truth about our market.  This client said none of her friends believed me.  I asked if any of them had recently sold a house in our area.  None of them had.

Here are the biggest ways clients can make a mistake:

Buyers:  There is nothing worse for a buyer than the first house they see being the most totally amazing house that has come on the market all year.  When this happens, buyers often assume every house is just as good.  They often decide to wait for a better one.  When they do this, they quickly realize the house they passed on was so much better than the other houses in their price range.  I dread it when this happens because I know that the buyer is thinking I am just trying to get them to buy the first house they see to make it easy on myself.

Another big buyer mistake is wanting to negotiate in multiple offers.  I often have buyers tell me they want to come in low and let the seller counter.  I tell them that if they had two offers, and one of them was lower than the other, which one would you counter if you were even going to counter at all?  When you are in multiple offers and you make the weakest offer the seller got, they simply do not counter your offer, even if your agent tells their realtor you are open to a counter.  I mean, they already have other offers that are better than your offer, they have no need to counter.  Always come in with your best offer in multiple offers because  you only get one chance at getting the house.

Sellers:  I feel for sellers.  I think they have it the worst.  I mean, they see in the news that prices are going up.  They know their neighbor got 5 offers the first day on the market.  They see what their Zestimate is on Zillow.  They often think their house is worth more than it is.  Like in any market, the most you can get out of a house is what a buyer will pay.   You can never get more than market value for your house.  It is just in a hot seller’s market, you might have 5 people all willing to pay market value for your house instead of hoping and praying that just 1 buyer will in a buyer’s market.

When a seller overprices their house, they lose the frenzy of having more than one buyer wanting their house.  When a house hits the market, all the buyers in that price range rush out to see it.  Buyers are afraid of losing it.  Once the house has been on the market for a bit, buyers are no longer afraid of losing the house, so they make less than full price offers.

Sometimes a seller will think the realtor isn’t doing enough to market the house.  Exposure is never a problem these days.  Houses get thousands of views on just zillow.  Once a house is listed you can google the address and see several pages of places the listing can be found.  There is no way there is a buyer out there for a specific house who does not know it is available unless they don’t have internet or don’t have a realtor.

So, those are some of the worst parts of being a realtor.  The 24/7 thing is something you get used to after a while.

The real reason why sales are down

by John Rice

I’m seeing a lot of news articles with accurate data.  My issue is that I think most are drawing the wrong conclusions.

Most seem to want to make you think the sky is falling in real estate because sales are down.

You know who needs to care about the number of sales?  Appraisers, realtors, mortgage people.  Those of us who make money on each transaction.

As a buyer and/or seller, the number of sales isn’t really important to you.  What you care about is supply and demand-the ratio of buyers to sellers in the market.  If there are 3 buyers in the market and only 2 listings, then we have a seller’s market.

I am seeing a lot of articles stating that sales were down in November of 2018 versus November of 2017.  Of course they were.  It happens every election year.  The market pauses until we see which set of morons we will be stuck with.

The ones that really bug me are the ones that say the affordability crisis will hold the market back.  I think they have it backwards.

Sure, we have an affordability issue.  Many people can’t afford to buy a house with rising prices and interest rates.  All I know is that every house under $200k in this town seems to go very quickly, which allows that seller to buy up to their next house and that seller to buy up to their next house and so on.

Back when the market was terrible, I said that it was like a baseball game where the bases are loaded.  The seller on first base needed a buyer without a contingency to buy their house so they could buy the 2nd base seller’s house, who could buy the 3rd base seller’s house.  The first time buyer needed to hit a home run and push all those sales through.

Back then a buyer had a ton of choices for their next home.  The issue was selling their old one.

Today, no buyer really has a huge selection of houses.

For that reason, I think our current market is the opposite.  There are a ton of first time buyers eager to hit a home run and push all those deals through, but what is happening is that the person on 3rd base doesn’t like home plate and has decided to just stand there until they feel like running.

The buyers with the most selection are the people buying their pinnacle home.  The one they stay in forever until they begin to downsize.  These are mostly Gen Xers.  They are in their 3rd base home, which is probably a fairly large home in the $250-350k range.  They want to move up to the $400-600k range, where there are plenty of houses for sale.

Their only problem is that most are just tarted up versions of their current house.  These buyers aren’t getting a better house, a bigger house, or a bigger yard.  They are just getting prettier finishes.  They find the houses in this price range, well, boring.  And we have a TON of them for sale.

So what do these Gen X buyers do?  They wait for the right house to hit the market.  Since they already have a nice house, they are in no hurry.  Because they aren’t in a hurry, that means the people looking to buy their house are in the same position….all the way down to that first time buyer eager to bid their heart out on their first home.

And, that is where we are today.  Sellers wanting to sell but not finding anything they want to buy.