What is this going to do to the value of my house?

I just had a client who is going to sell and buy with me ask me to forecast the market in the short term.  Here is what I said:
I think that the market and prices will at least remain stable for the next 6-12 months.  All of the unemployment is probably the biggest concern, but a lot of those that have been laid off are renters and not home owners so I am not expecting to see a lot of foreclosures.
Like any market, real estate is about supply and demand.  As long as the ratio of buyers to sellers remains fairly equal, the market will always be strong even if the total number of sales is down.  What we had already been seeing in the pre-coronavirus market is that people are staying longer in their houses.  That is one reason the market has been so strong the past few years….there have just been fewer houses for sale.  In Lexington, we have another issue that plays a big role, which is that we are running out of land to develop.  Lexington cannot simply build new houses to meet the demand like other towns across the country.  Even though the surrounding towns are seeing a construction boom, Lexington will always be the most desirable place to live in the Bluegrass.
There is a lot of refinancing going on.  Usually people stay longer in their houses when they have recently refinanced.  I saw this several years ago when rates had hit a record low at that time.  If rates stay similar to where they are now, it won’t be too bad.  If rates go up past 4%, people would have to pay a lot more for their mortgage than they do now.  If a seller’s house has appreciated a lot and so has the house they want to buy, having more equity from the sale of their old house to carry into the new one doesn’t matter as much if their payment is still going to be a lot higher.  Most people base their decision on the monthly mortgage payment.
I think there will be plenty of buyers in the market for quite a while.  A lot of the older millennials have outgrown their starter homes and will be looking for a house like you have in Chilesburg.  The Gen Z buyers are entering the market now and from what I have read, will be 27% of the population.  These are people that will be buying based on a need, not just because they want to nicer house.  One thing I learned from living through the worst real estate market in history is that first time buyers drive the market.  It’s like a baseball game where the bases are loaded.  Every player standing on a base has a house to sell before they can buy their next one.  The first time buyer comes to bat, hits the ball and because they don’t have a house to sell, everybody on a base gets to move to the next one.
So, in Lexington, I think the limited supply due to people staying in their homes longer, the lack of new construction and the number of young buyer will keep our market strong.
Probably the single greatest threat to all of this would be if we saw crazy inflation and rates skyrocketed like they did in the 80s.  If that happens, the houses over $400k would be much harder to sell.  The cheaper houses should be safe because what will happen is that you will see first time buyers competing with all the buyers for smaller, affordable houses.

5 crazy realtor experiences

Since real estate is slowing down a bit due to, well, you know why, I thought I would tell you about some of my adventures in real estate.

 

WHY I HAD TO WASH MY CAR WHEN I DROPPED OFF THIS CLIENT

I was working with this couple many years ago.  I would meet them at my office and then we would go see houses.  The strangest thing to me was that both of them would always ride in the backseat together.  So there I am up front all alone.  Front passenger seat empty like I am a chauffeur.  One day I picked them up.  The wife wasn’t feeling too good.  We left my office.  As I was coming to the first stop light, I hear the back door open.  She puked.  Since I had not come to a stop yet, the wind blew her uh, discharge, down the side of my car.  They decided to hold off on buying a house after that.  I found out later that they bought with another realtor, probably because she was too embarrassed to see me again.  So I lost a sale and had to wash somebody else’s puke off my car.  Nice.

TALKING THROUGH THE WALLS

My client told me they were going to be a little late.  I had consumed several cups of coffee that morning and really had to use the restroom.  I saw an opportunity since my client would be late.  I went inside the house, right at the time of the appointment.  As I was using the restroom, I hear a voice asking if somebody is in the house.  LOL, it was the seller.  He had not left yet.  He was in the bathroom on the other side of the wall.  He got done and left.  I never saw him.  Heck, I didn’t WANT to see him.  Minutes later my client showed up.

WEARING DIFFERENT SHOES

For a while, I had two of the same pair of sandals.  One was leather and the other was suede.  I kept them both in the hall closet at my house.  On my way to show a house to a client, I put my feet in the closet and put a shoe on each foot.  It wasn’t until I got to the house that I realized that I had on one leather one and one suede sandal.  I no longer buy different types of sandals.

THE TOOTING SHOES

Probably back in about 2009ish, I had a really comfortable pair of sandals that I loved.  The only thing I didn’t love about them is that every once in a while, at what always seemed like the most inopportune time, I would take a step and they would make a tooting (okay, farting) sound.  I think it was the sound of my heel coming off of the sole of the sandal as I walked.  I never knew what to do when this happened.  The first several times I would try to make it do it again, as if somehow that would proof that I didn’t…..you know.  It would never do it twice in a row.  It didn’t take too many of those embarrassing moments before I decided to throw them away and get a new pair.

NO THANKS ON THE COFFEE

When I was a newer agent, I had this great idea to go after for sale by owner listings.  I dropped off hundreds of fliers and only got one response.  I went to the house to meet the lady.  Her dog almost bit me.  She offered me some coffee.  I told her I loved coffee.  It was the most terrible, sour tasting coffee I have ever had.  I think she kept using old grounds to make new coffee.  Well, she of course decided to let me list her house.  When I came back for her to sign the documents (this was before we did it electronically), her dog almost bit me again.  As soon as we sat down, she says “I remembered you said you loved coffee, so I made you a pot.”  To this day she probably wonders how she saw me drink it but emptied a full cup when I left.  It was because I was just putting my lips on the rim of the cup.  We finally sold her house.  I could dedicate an entire post just to that sale.

Honorable mentions are all the times I have gone to closings or shown houses with my zipper down.  I think I once had a T-Shirt on inside out.

I have others of course, but I hope this takes your mind off of the state of the world and puts a smile on your face.

What’s this doing to the market?

Not a lot so far.

Everything is a bit slower, but my listings are still getting shown and there seem to still be houses getting listed and selling every day.

Some of my buyers are laying low to see how this goes and for how long it lasts.

I’ve been reading a few articles that have said this could be like the Great Recession where real estate prices fell.  It won’t be.  Why?  We still have a shortage of houses for sale.  That will keep prices where they are.  Think of it this way:  If there are 1000 houses for sale and 1100 buyers, it is really the same as having 100 houses for sale and 110 buyers.  Supply and demand are the same.  As long as there are more buyers than sellers, prices will stay stable.

If you are a Buyer:

Don’t be afraid to buy.  Take advantage of great interest rates.  Negotiate the best price you can.  As I have always recommended, buy a house that will be easy to sell in any market.  That means a good location, a good floor plan, as flat of a yard as possible, average or better than average performing schools.  Don’t buy the biggest or smallest house in the neighborhood.  Don’t buy one that doesn’t fit in with the others such as having a one car garage when every other house in the neighborhood has a two car garage.

If you are a Seller:

I would put my house on the market as soon as possible.  In uncertain times, taking action now to prepare for the worst is always good.  I think I might put a new listing on the market on a Friday afternoon and only allow showings on the weekends.  That way you get the most people in all at once and can then clean things like your door handles, counter tops, faucet handles, garage door opener button afterwards and feel good about being home again…..and take your toilet paper with you when you leave for showings, lol.

When people pick the wrong house for the right reasons

It happens.  More than you’d think.

I showed a house about a month ago to a client.  There was a line to see it.  It got multiple offers that same day.

My client didn’t like it.  I didn’t like it.

Why?  The floor plan sucked.  It had a big two story foyer as soon as you walked in.  The living/dining/kitchen area was open.  All this sounds great, but the issue was that this was a 1733 square feet home that had no more usable space than a 1300 square foot home.  The upstairs hall was wide.  The hall from the front door to the living room was wide.  The dining area was small but nobody could tell since it was vacant.  All the rest of the rooms were equal to what you’d find in a 1300 square foot house.

It made a good first impression though.  You walk in that foyer and see space.  You walk down that wide hall and see the open living/dining/kitchen.  You go upstairs and see that wide hall.  The house felt bigger than it was just because when you are viewing a house, you are going through every room in about 15 minutes.

It sold for over $6k more than the list price.

It closed today.  The new owners are probably moving in and glad it quit raining.  Once they live there for a while, they will probably realize that much of their square footage isn’t usable.  They will realize that what they have is a 1300 square foot home with 400 extra square feet of hallways and foyer.

Why that just renovated house might not be a good choice

Don’t know if you’ve noticed, but there are more and more houses being extensively renovated in medium priced neighborhoods that sell for waaaaaay more than anything else in the same neighborhood.

I think this is happening because of two things.  One is that there just aren’t a lot of houses for sale.  That will eventually change.  The other is because we’ve just about run out of room to build new houses.  That means the only choice for most people will be an existing home.  People love new stuff in a house, so it only makes sense that an older home in a closer-in location that has been totally renovated is appealing.  This won’t change.

The thing to watch out for is that you are not the first or even the second person in the neighborhood to drop $100,000 or more than what the same non-renovated house might be worth.  Why?  What if the house you buy ends up being the only on that gets that type of renovation?  You’ll have the most expensive house in the neighborhood in a big way.  What happens when those trendy finishes get a few years of wear and tear and start to go out of style?  Well, you will have a house that is worth no more than any other house in the neighborhood that needs updating.  None of these are good things.

Before you pull the trigger on one of these whole house renovations, look around and make sure there is a trend of this happening in the neighborhood.