2021 FALL REAL ESTATE UPDATE brought to you by John Rice REALTOR Berkshire Hathaway HomeServices
The Housing Market Is Showing a ‘V’ Type Recovery
One of the biggest surprises of 2020 is the resilience of the residential real estate market. Lawrence Yun, Chief Economist of the National Association of Realtors (NAR), is now forecasting that more homes will sell this year than last year. He’s also predicting home sales to increase by 8-12% next year. There’s strong evidence that he will be right.
ShowingTime, a leading showing software and market stat service provider for the residential real estate industry, just reported on their latest the ShowingTime Showing Index:
“Home buyer traffic jumped again in July, recording a 60.7 percent year-over-year increase in nationwide showing activity.”
That means there are 60% more buyers setting appointments to see homes than there were at this same time last year. The number of potential purchasers was also up dramatically in every region of the country:
- The Northeast was up 76.6%
- The West was up 56.7%
- The Midwest was up 52.1%
- The South was up 46.7%
The Housing Market Is Showing a ‘V’ Type Recovery
ShowingTime also indicates the real estate market has already come back from the downturn earlier this year that was caused by shelter-in-place orders. Here are the year-over-year numbers for each region on a monthly basis (See graph below):
We’re way ahead of where we were at this time last year. This data validates the thoughts of Frank Martell, President and CEO of CoreLogic, who recently noted:
“On an aggregated level, the housing economy remains rock solid despite the shock and awe of the pandemic.”
If you’re thinking about selling your house, this may be a great time to get the best price and the most favorable terms.
Source: Michigan Real Estate Updates
How To List Your Home for the Best Price
If your plan for 2019 includes selling your home, you will want to pay attention to where experts believe home values are headed. According to the latest Home Price Index from CoreLogic, home prices increased by 4.7% over the course of 2018.
The map below shows the results of the latest index by state.
Real estate is local. Each state appreciates at different levels. The majority of the country saw at least a 2.0% gain in home values, while some residents in North Dakota and Louisiana may have felt prices slow slightly.
This effect will be short lived. In the same report, CoreLogic forecasts that every state in the Union will experience at least 2.0% appreciation, with the majority of the country gaining at least 4.0%! The prediction for the country comes in at 4.6%. For a median-priced home, that translates to over $14,000 in additional equity next year! (The map below shows the forecast by state.)
So, how does this help you list your home for the best price?
Armed with the knowledge of how much experts believe your house will appreciate this year, you will be able to set an appropriate price for your listing from the start. If homes like yours are appreciating at 4.0%, you won’t want to list your home for more than that amount!
One of the biggest mistakes homeowners make is pricing their homes too high and reducing the price later when they do not get any offers. This can lead buyers to believe that there may be something wrong with the home, when in fact the price was just too high for the market.
Pricing your home right from the start is one of the most challenging parts of selling your home. Before you decide to list your house, let’s get together to discuss where home values are headed in your area!
Source: Michigan Real Estate Updates
The Housing Market is Doing Just Fine
There are some that think that housing affordability is a challenge. Historically, that’s not true. Others think that home prices are approaching bubble values. If we look back over the last sixteen years, that is also not the case. As a matter of fact, the numbers show that the U.S. residential real estate market is doing just fine.
Here are two articles and excerpts that make this point:
The Housing Market Is Finally Starting to Look Healthy – The NY Times
“It has been an excruciatingly long time coming, but the housing sector in the United States is finally getting healthy. Thank millennials and thank homebuilders who are starting to produce more of the starter houses young people demand.”
“Interest rates are so low now that a family can buy the median-priced U.S. home on income of less than $45,000 a year — about $11,000 less than the median household income. And half of America’s houses are cheaper than that.”
There are those worried that all this positive talk resembles what was being said in 2004 and 2005. Jonathan Smoke, Chief Economist at realtor.com, explains the difference very simply but effectively:
“The havoc during the last cycle was the result of building too many homes and of speculation fueled by loose credit. That’s the exact opposite of what we have today.” (emphasis added)
Source: Michigan Real Estate Updates
Q: I need a place to rent for a short term – what are my best options?
A: Today’s market has created a new scenario not seen a few years ago – the need for a short term rental….Typically this comes up in 2 scenarios:
1. My home is sold – where can I now go temporarily while I find my next home (or while our builder finishes building our new home.)
2. I am relocating to the area and need a place to stay for 30, 60, 90 days while I find a home to purchase, where can I stay?
…..There are some negotiation tactics that can be used to minimize your need for scenario #1 above – however not always…..
Both of these instances create a need for temporary housing. Now typically the thought is – “John, I get it – I need to get a rental….” However what people don’t often realize is that Grand Rapids is the number 1 ranked rental market in country FOR INVESTORS. What does that mean for potential renters? It means landlords are not usually willing to negotiate. It means a very low number of openings and it means tough competition for those open rentals. It means higher prices and almost no acceptance of short term leases (less than 12 months.)
So now what? Well there is a whole market based on the need for a short term rental; the temporary housing market. Is it a great solution for the long term? No typically you are paying premium to have flexibility to leave in 2 weeks, 30-120 days etc…However it does beat paying for a hotel room for that amount of time or not having a roof over your head at all. So if you find yourself in this situation or one of your options may point you in that direction, here are some options to consider:
When searching for housing in the Grand Rapids and greater West Michigan area, these are some great options to consider as a part of the overall plan. As always reach out to me with your questions and together we can craft the best possible strategy and solution.
Recently I worked with clients who had a very specific set of requirements in their new home. This was not their first home and their experience in their homes in the past helped them refine what they desired in their new residence.
After learning what they were in search of we started a 2 prong approach to achieving their goals:
- Vacant land suitable for their new desired residence
- Existing home that could be renovated to accommodate what they were looking to achieve
After an extensive search and touring homes with potential and walking lots with potential, it became clear that building was most likely the most efficient use of money for the area and lot they desired. With this in mind we met with custom home builder, Chad Christin, award winning builder and owner of Christin Homes LLC.
The next step in working with the builder was to determine the right floor plan, design, function and how that would fit into budget. Throughout this part of the process it is important to note that new construction lending is not offered by all banks – we have lenders we have worked with for years who are experienced in new construction and renovation lending to assist in making the process as smooth as possible. Once you have determined your budget, and the builder has an idea on the design and plan, 2 things occur:
- The builder prepares their “sworn statement” to the bank outlining how they will appropriate the necessary funds to build the home. This includes everything from materials, to labor, to the light switch plate covers…it’s everything.
- The details of the land acquisition are worked out. At this point, either the construction loan can be used to acquire the land or cash can be used and then the land becomes part of the equity used in the down payment on the overall construction loan.
Once this is complete, the bank takes over preparing the financing. No building starts until the loan process has been completed – that can take 60 days or more because of all the factors involved. Once the loan has been completed, then the builder is ready to start building.
How long does building take? Timing has a lot involved in calculating it. That said, most homes in the 3000-5000 sqft range will be 8-10 months; those that are larger make take longer. The shortest building time for most builders is 4 months with a builder who builds the same floor plan over and over. Custom home building will most likely be 6 months or more. Also the other important factor is the lot itself – answers the real estate agent and builder work on:
- Does it need any approvals from the city or township?
- Site prep – is it setup already for the desired daylight or walkout – or will additional site work be needed?
- Drive ways, electrical, gas lines and such – what does access look like? What will be necessary to ensure proper driveway and power reach the home?
- Septic, Well city water or sewer – what is necessary for the proper placement of these?
These are factors that are worked into the overall estimates from the builder and will be known early on for the sake of planning and timing.
In the case mentioned above, Christin Homes has been working diligently to ensure each step of the process runs smoothly and soon the clients will be enjoying their new home!
To see some of Christin Homes award wining work – check out their home from the latest Parade of Homes. This custom built home won several awards – including best kitchen and best interior! Click here
To talk about the best strategy for new construction and to put the pieces in the right order – let’s talk further about your needs and wants and craft the best plan to maximize your real estate dollars.
Download this handy guide to insurance and learn what you need to know about making sure your real estate is covered properly.
Q. How Do I Win A Competitive Bid?
A: In today’s market this question is coming up more and more often. As a bit of back ground – let’s set the stage: Imagine you have found the “prefect home” and you are all set to place your bid on it. However you are not the only one. You feel that others may also think its their “perfect home.” It is likely in this case that several buyers have decided to place a bid on the very same property you want to claim as your own. Now what? What’s the best way to “Win the bid?”
Each property is different but here are some general points in a competitive bid:
First consider some factors:
1. Financing: What type of financing are you approved for? Typically speaking sellers prefer cash, a close second is conventional financing. Are you in a position to make an offer with either of these on your side? If financing what is the most you could put down? Often to a seller the more you are willing to place down the stronger they view you as a buyer. Side note about closing costs: Closing costs are an expense a buyer pays for. Asking a seller to “cover your closing costs” impacts their net. The strongest offer you can make is to find a way to cover your own closing costs.
2. Keys: What is your time frame for getting keys to the home. Are you able to wait? If so – this could really help you be in a great position. Many times in today’s market the seller needs time to move into their new home. If you are able to wait (or are willing to) make mention of that in your offer. Give the seller the possession time they are requesting. Sometimes buyers charge the seller rent for their time in the home after close – but you could consider waiving that fee or reducing it – again gaining favor over others.
3. Contingencies: Items such as survey, inspections other items are important to ensure you understand the home you are purchasing. It is very common for a buyer to request time to have the home inspected, and to obtain some type of financing. Not very many buyer will waive inspections – and its not something I recommend. However from the sellers perspective if an offer comes through with no inspections – that offer has one less contingency than the rest. A survey is often a very good idea to understand the property boundaries and potential easements. Protecting yourself is important but certainly you can write the offer that has you paying for the survey instead of the seller.
4. Price: We are speaking about price last, because frankly its one of the top things people consider. But price doesn’t always win. Its always a big factor but the about #s 1, 2 and 3 when written well will put your best foot forward in combination with price. In today’s market it is not uncommon to have prices go over and above the listing price on the home. Sometimes as much as 10% or more. So write strong (high) and write to what you feel is your top offer.
5. Timing – if you like it – don’t wait! This is more a tip than anything else – if you like the home and it feels right – put in your offer. Its better to take action then wait in today’s hot market.
The unique thing about a home purchase is that literally every piece of property is different and there are several other factors as buyer’s agent we do to ensure the best foot forward for our buyer. But the above are great areas to concentrate on when preparing your strongest offer. By concentrating on these before you are in this situation you can be the best prepared.
As we represent our buyers, we are always looking our for their best interest and welcome questions. Should you have questions about this or any other real estate topic, feel free to reach out.
Question: I need more space – now what? This remains one of the top reasons people make the choice to move. Many of the people I work with come to me with this question in mind. Curious about the next step and concerned that they take the right steps, at the right time to maximize their real estate experience and of course – keep a roof over their head.
With that mind consider the following:
Step 1. Start with understanding what you are looking for in your next home. Start with defining your budget. If you are paying cash for your next home you may have a very good understanding of what your budget will be. If you are looking to mortgage your next home, then the best way to fully understand your budget is to consult with loan officer. Being comfortable with the loan officer and working with one that has experience is important. To help I put together the following list:
You may decide not to spend as much as you are approved for – that is certainly fine and frankly many people choose not too. However it is much better to understand the numbers BEFORE shopping – so you know what is comfortable and therefore what the price range will bear that is the best fit for your budget.
Step 2. Determine the numbers on your current home. You can do that easily by visiting: www.easymarketvalue.com
Why do this BEFORE house shopping? In many cases it’s in your best interest to put together the full strategy before going shopping. It keeps your emotions in check right away – it’s painful to find “the perfect home” only to find out that 3 other buyers in line already sold their home and you did not get that far yet….The most beneficial reason is to understand fully the timing of what to expect and -yes- put your best foot forward when it comes time to make the offer on “the perfect home.”
Step 3. Check out what’s on the market – a great place to start understanding what is out there is to visit: https://johnricerealtor.com/move-buyers/
Once you have a feel for what is out there and that your budget and your needs/wants in your next home align – then its time for action.
Knowing and understanding each step and the numbers behind each will set you up for success and minimize stress and surprises.
No matter what price range you are considering, your income level or whether this is your first or fifth home – credit score matters if you are considering a mortgage when purchasing your new home.
5 Factors That Decide Your Credit Score
Credit scores range between 200 and 800, with scores above 640 considered desirable for obtaining a mortgage. The following factors affect your score:
1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.
3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.
Once a year you can obtain your credit report for free from: https://www.annualcreditreport.com/
Typically you need to pay a small fee to see your actual score, but knowing whats on your credit history is the first step – this part is free once a year on this site.