I have recently moved my business to be affiliated with COMPASS. They are a new hybrid of real estate company that is part proprietary technology company and part traditional real estate firm. The proprietary technology puts our group light years ahead of those that are relegated to the past, while also providing outstanding personal service to the customer. This is the combination that I was looking for as my own company's sales vehicle, as I am totally on-board with excellent communication and customer service. COMPASS provides every high tech sales tool that we were sorely lacking as independent Brokers. We are proud to be a part of this company and I intend to pass every advantage that we have gained on to our customers. Welcome to a new era in Boston real estate!
Definitely an aggressive headline. However, as the final data on the 2017 housing market rolls in, we can definitely say one thing: If you are considering selling, IT IS TIME TO LIST YOUR HOME!
How did we finish 2017?
- New-home sales were at their highest level in a decade.
- Sales of previously owned homes were at their highest level in more than a decade.
- Starts of single-family homes were their strongest in a decade and applications to build such properties advanced to the fastest pace since August 2007.
And Bloomberg Business just reported:
“America’s housing market is gearing up for a robust year ahead. Builders are more optimistic, demand is strong and lean inventory is keeping prices elevated.”
And the National Association of Realtors revealed that buyer traffic is stronger this winter than it was during the spring buying season last year.
The only challenge to the market is a severe lack of inventory. A balanced market would have a full six-month supply of homes for sale. Currently, there is less than a four-month supply of inventory. This represents a decrease in supply of 9.7% from the same time last year.
With demand increasing and supply dropping, this may be the perfect time to get the best price for your home. Let’s get together to see whether that is the case in your neighborhood.
Whether you are buying or selling a home, it can be quite an adventurous journey. This is why you need an experienced real estate professional to guide you on the path to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.
The 5 reasons you NEED a real estate professional in your corner haven’t changed, but have rather been strengthened by the projections of higher mortgage interest rates & home prices as the market continues to pick up steam.
1. What do you do with all this paperwork?
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true real estate professional is an expert in his or her market and can guide you through the stacks of paperwork necessary to make your dream a reality.
2. Ok, so you found your dream house, now what?
There are over 180 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to make sure that you achieve your dream?
3. Are you a good negotiator?
So maybe you’re not convinced that you need an agent to sell your home. After looking at the list of parties that you will need to be prepared to negotiate with, you’ll soon realize the value in selecting a real estate professional. From the buyer (who wants the best deal possible) to the home inspection companies, to the appraiser, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.
4. What is the home you’re buying/selling really worth?
It is important for your home to be priced correctly from the start to attract the right buyers and shorten the amount of time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to a study by Collateral Analytics, FSBOs achieve prices significantly lower than those from similar properties sold by real estate agents:
“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”
Get the most out of your transaction by hiring a professional.
5. Do you know what’s really going on in the market?
There is so much information out there on the news and on the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?
Dave Ramsey, the financial guru, advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of the most important financial decisions of your life without hiring a real estate professional?
We previously reported how a shortage of inventory in the starter and trade-up home markets is driving prices up and causing bidding wars, creating a true seller’s market. At the same time, in the premium home market, an over-abundance of inventory has started to see prices come down and put buyers in the driver’s seat, creating the beginning of a buyer’s market.
Last week, the National Association of Realtors released their Existing Home Sales Report which shed some additional light on the impact of inventory levels on sales in each price range.
The chart below shows the year-over-year difference in sales at each price range.
The under $100K range has shown declines in recent years due to the shortage of distressed homes available for sale (just 5% of sales this past month, compared to 35% in January 2012). Sales in the next two price ranges are no doubt being hindered by low inventory as buyers compete for the same home.
NAR’s Chief Economist, Lawrence Yun, explained:
"Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher."
The biggest surprise? This is the first time in years where the $1M and up price range had the highest jump in sales when compared to last year and to all other price ranges (29.1%)! The two price ranges right underneath the $1M range were a close second and third. As the price went up, so did the sales!
With additional inventory available in the higher price ranges, and the economy improving, many luxury buyers are finding it easier to find their dream homes. Yun commented,
“The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level.”
If you are one of the many homeowners who is looking to sell your starter or trade up home and move up to a luxury home, now is the time!
The housing market is really heating up and buyer demand is dramatically increasing as we enter the spring season. However, one challenge to the current market is a major shortage of inventory. Below are a few comments made in the last month by industry experts.
Lawrence Yun, Chief Economist of NAR
"Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau."
Jonathan Smoke, Chief Economist of Realtor.com
"Low inventories and tight credit will limit the gains we will see in 2016. However, given the level of pent-up demand evident in web activity and stated buyer intentions for 2016, we should see this spring materialize as the busiest season of sales since 2006."
Rick Sharga, Ten-X's EVP
"Inventory is too low to support much higher sales. There's virtually no inventory available at the entry level, and single family housing starts and permits continue to languish at levels far below where they should be at this point of the recovery."
David Crowe, Chief Economist of the National Assoc. of Home Builders
"Many sellers may not have an absolute decision as to whether to buy an existing home or a new home. So the low inventory of existing homes is locking them in place."
"Challenges remain, with low housing supply and declining affordability being a key concern in many markets."
CoreLogic's latest Equity Report revealed that one million borrowers regained equity in their homes in 2015. The outlook for 2016 remains positive as well, as an additional 850,000 properties would regain equity if home prices rose another 5% this year.
The study also revealed:
- 95% of homes valued over $200,000 now have a positive equity position
- 87% of homes valued under $200,000 have entered a positive position
- The 11.5% growth in home equity in Q4 marked the 13th consecutive quarter of double digit gains
Below is a map showing the percentage of homes with a mortgage, in each state, that have positive equity. (The states in gray have insufficient data to report.)
Significant Equity Is On The Rise
Anand Nallathambi, President & CEO of CoreLogic, believes this is great news for the"long-term health of the U.S. economy." He went on to say:
"The number of homeowners with more than 20% equity is rising rapidly. Higher prices driven largely by tight supply are certainly a big reason for the rise, but continued population growth, household formation and ultralow interest rates are also factors."
Of the 91.5% of homeowners with positive equity in the US, 72.6% have significant equity (defined as more than 20%). This means that nearly three out of four homeowners with a mortgage could use the equity in their current home to purchase a new home now.
The map below shows the percentage of homes with a mortgage, in each state, with significant equity.
If you are one of the many homeowners who is unsure of how much equity you have in your home and are curious about your ability to move, meet with a local real estate professional who can help evaluate your situation.
Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey.
Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.
The results of their latest survey:
Home values will appreciate by 3.9% by the end of 2015, 3.4% in 2016 and 3.1% in each of the following four years (as shown below). That means the average annual appreciation will be 3.2% over the next 5 years.
The prediction for cumulative appreciation rose from 18.1% to 21.6% by 2020. Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 13.8%.
Individual opinions make headlines. We believe the survey is a fairer depiction of future values.
There has been recent press regarding whether or not it makes better financial sense to rent rather than buy in today’s housing market. As an example, the recently released June Summary of the BH&J Buy vs. Rent Index reported:
“…as of the end of the first quarter of 2015, the housing market in the U.S. and all cities in the index are trending either closer to renting being the superior option or strictly favoring renting over purchasing a home.”
The summary goes on to explain that:
“The index conducts a “horse race” comparison between an individual that is buying a home and an individual that rents a similar quality home andreinvests all monies otherwise invested in homeownership.”(emphasis added)
Though the math may be correct, we are not as sure of the conclusion. Even if you check the methodology offered by the BH&J report itself, you will find that they realize:
“…any extra savings from renting might be spent on non-wealth enhancing goods resulting in any benefits from renting versus owning disappearing in a cloud of consumption spending rather than savings.”
The Concept of ‘Forced Savings’ and Wealth Accumulation
Many believe the wealth accumulation of homeowners is tied into the concept of “forced savings”. The New York Times late last year published an editorial entitled,“Homeownership and Wealth Creation, which discussed this concept. The article explained:
“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.”
“Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”
Many of the points that were made in the article are on track with the research done by the Joint Center for Housing Studies at Harvard University which agrees that “forced savings” is a major advantage of homeownership. In a paper, The Dream Lives On: the Future of Homeownership in America, they concluded:
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
The Truth is in the Historical Data
Edwards Deming once said: “Without data, you’re just another person with an opinion.”
Let’s look at the data on this subject. The Federal Reserve has conducted a study titled:Survey of Consumer Finances. The study found that the average net worth of a homeowner ($194,500) is 36 times greater than that of a renter ($5,400).
The New York Times editorial articulated it best:
“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth…As a means to building wealth, there is no practical substitute for homeownership.”
If you are a renter who is considering making a purchase, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!
When it comes time to put your home on the market, one key early decision is which real estate company will be your sales partner. Of course, you will choose someone you feel comfortable working with, but there are further hard-nosed criteria that can help guide your choice:
Experience in Our Market
There’s nothing wrong with giving a brand new real estate school graduate a try, but especially if it’s important to sell quickly, you’ll want to work with a professional with demonstrated local experience. For openers, those agents know more about the history and direction of home sales in this area—they’ve been participants! That’s first-hand knowledge that will be vital in helping you arrive at a smart asking price. You’ll find that the experienced agents also have a smart phone loaded with the kind of established connections that help accelerate any sale.
But your agent isn’t a one-person show. A lot of hard work goes into selling a property—from creating the listing on MLS directories to maintaining a web experience and promoting your property through the maze of marketing channels. The real estate company that’s your agent’s home base will determine the efficiency with which it all gets done.
Membership in the National Association of Realtors
One thing you will notice in your search for a realty company is that not all real estate agents are NAR members. Choosing an active member means working with a pro who is bound by the strict NAR Code of Ethics, who is also a member of the local Real Estate Board—with the accompanying connections and resources that bestows.
Proven Track Record
It’s also a good idea to aim for an agent with a history representing properties in your price range. A Realtor whose experience is confined to homes sold at the $250-300K price point may never have dealt with luxury properties. If that’s your market, you will want an agent—and a real estate company—with that kind of track record.
Finding a real estate agent to represent your home is just one of many steps that will lead to the successful sale of your property. I welcome the opportunity to meet to explore whether we are the right fit to get you top dollar for your home! Call us for a free Competitive Market Analysis (CMA) to get started in the right direction. 617-536-8000.