The housing market has always been subject to supply and demand economics, and the current housing market upswing is a great example of how important these factors can be. In today’s housing market, real estate sales in many parts of the country are increasing – which has led to changes in inventory that affect pricing. How does housing market inventory drive pricing? Here’s what you need to know:
Inventory Down, Prices Up
With the spring market well underway, home inventory is less than “healthy” in many parts of the country, driving price increases. A “healthy” home inventory is considered roughly a 6 month supply; in many parts of the country, the real estate market currently only boasts a 3 to 4.5 month supply. Homes are in such high demand in some places that they’re being sold even before they make it onto MLS. This supply shortfall, combined with increased demand as the market recovers and interest rates remain favorable, has led to price increases.
This is particularly true of homes under $250,000, which is the key price range for first-time buyers and investors – the two demographics that are driving the housing market recovery. Most buyers are looking for homes in this price range, and there are a limited supply of them. This has resulted in multiple offers and escalating bids. This inventory shortage is great news for sellers, many of whom are finding themselves meeting their asking price – or even higher as bidding wars drive prices up. But buyers are finding themselves paying more, and being forced to snap up properties quickly before they’re gone, driving frustration for some buyers.
If you’re a seller, now is a great time to sell. If you price your home reasonably, you’ve got a good chance of selling, and you may even receive multiple offers that will drive up your home’s value.
If you’re a buyer, it’s important to go into the process knowing exactly how much you’re willing to spend, and how much a given property – or its features – is worth to you. Be prepared to put your best offer forward, and know when it’s ok to raise your offer, or when to bow out gracefully and look for another property.
With spring here, the grass is greening, flowers are blooming, and trees are flowering. It’s a beautiful time of year – but it’s also a nightmare for the one in five Americans who suffer from allergies. As the 2013 allergy season begins, experts are warning that it may be one of the worst in recent memory, with an unusually strong reaction due to increased tree pollen. Indoor pollutants often get overlooked with springtime allergies so prevalent, but as we spend an average of 90% of our time – or more – indoors, now’s a good time to revisit home improvement tips that can help you breathe easier.
Flooring is Key
Flooring is one of the biggest problem areas for asthma and allergy sufferers. Some types of new flooring installations can threaten indoor air quality, releasing noxious gases for days or even weeks inside your home. These emissions can have serious, long-term impacts on your health, as well as causing additional immediate suffering for asthma or allergy-prone individuals. Look for flooring that is certified “asthma and allergy friendly” when you replace your flooring. These flooring options don’t release noxious gases when they’re installed, and they have a low capacity for retaining allergens or releasing airborne allergens when cleaning.
PVC accessories can be the greatest source of noxious gases in your home. PVC shower curtains and liners have become extremely common because of their functionality and ease of cleaning, but they contain as many as 108 volatile compounds that can cause developmental, liver, nervous system, respiratory and reproductive damage. Replace your shower curtains with PVC-free products, and look for PVC-free accessories in other areas of your home.
Deal with Mold and Mildew
Moisture or mold buildups can cause a world of hurt for asthma or allergy sufferers. If you notice mold or moisture buildups on or around your windows, it may be time for an energy audit or a consultation with a building analyst to determine whether the windows should be replaced. Additionally, keep your home mold-free by addressing any water buildups promptly, and treating the areas of the home where mold is most likely to develop.
With all of the favorable reports, media announcements and analysts’ predictions, the housing market has gone from stagnant to sizzling in many parts of the country. For-sale listings are drawing offers from a large number of house hunters, with a significant percentage of those resulting in multiple offers. And what do multiple offers mean? Bidding wars!
Housing Markets Around the Country are Experiencing Bidding Wars
Bidding wars aren’t just occurring in a few select housing markets. Depending on where you live, anywhere from 67% to 90% of properties may be subject to multiple offers – which frequently drive up the price.
Major metropolitan areas, such as Boston, Washington D.C., Seattle and New York are generating bidding wars approximately 67% of the time. Some markets are up to 75% involved in bidding wars, while desirable places in California, such as San Francisco and Sacramento, are finding a whopping 90% of their properties closing on bidding wars. One property alone in a California subdivision received 62 separate bids. A set of two condo units in Cambridge, Massachusetts came up recently, and within two weeks, brokers had more than 250 bids on the properties.
The new reality is here – bidding wars are becoming more rule than exception.
How to Deal with a Bidding War
As a buyer, dealing with a bidding war can be very frustrating. There are a few rules of thumb that can help you navigate this tough market:
- Know how much you can spend. You may have a very attractive offer, but the buyer may be holding out for a little more. Know whether you can keep bidding or whether you should bow out gracefully.
- Lead with a good offer. Don’t lead with a low offer hoping to get a discount on the home. If you’re in a market subject to bidding wars, lead with an offer that’s at least the asking price – or maybe even above the asking price.
- Do your research. Find out how comparable properties are selling. Are they coming in above the asking price? If so, how much higher? If you do your research, you know how much you have to come up and you can lead with an attractive offer.
Bidding wars don’t have to spell the end of your home-buying dream – just be prepared to keep looking, and lead strong. If you’re patient, you’ll eventually find the right deal.
You’ve heard the news by now: home-buying demand is up, and supply is down. Many residential real estate markets have already made the switch to seller’s market, and if early indications are consistent, the rest will be making the transition soon. This is great news for sellers, but has left many home buyers scrambling to find a good property, get in an offer, have their offer accepted and successfully close on the home. Many buyers simply aren’t prepared for this “new reality in realty.” If you’re a buyer, what can you do to increase your odds of success in this year’s spring market? Become a nimble buyer, and you just may land your dream home.
What’s a Nimble Buyer?
Buyers are gaining an increased sense of urgency when it comes to the home shopping process, and that’s a good thing. It makes them better prepared to become nimble buyers. What does this mean?
When you’re shopping for a home, you may need to be prepared to drop everything and go right out to look at that new property that just came on the market. There’s likely to be some competition, so you can’t afford to wait until the weekend because it’s more convenient.
It goes without saying, you should run the numbers and know what you can and can’t afford before you start your search. Get pre-approved for a mortgage. Your offer will look more attractive to buyers if you have 20 percent for a downpayment, and you’re pre-approved – there will be less chance of an issue procuring financing if you’ve got all of your paperwork lined up. Have all the paperwork ready so you can lock in your mortgage as soon as you find the right property.
Finally, be prepared to make a quick decision and get an offer in quickly. Competition is great for sellers, but it’s deadly for buyers – you could easily find your offer passed over, or find yourself in a bidding war, if the seller waits long enough to get multiple offers. The sooner you’ve got an offer in and it’s accepted, the better for you.
Be a nimble buyer – have all of your paperwork ready and be prepared to jump on a desirable property when it comes along – and you may find yourself in a good position in this year’s spring market.
Most homeowners don’t start off by buying their dream homes. Instead, they buy a home that will serve as a good foundation, and make renovations or remodel until the home becomes the place they’ve always dreamed of living. When you’re shopping for a home, consider these top remodeling trends as a way to turn your fair prospect into your new dream home!
Uniting Kitchen and Living Space
Uniting the kitchen and living space is one of the most common remodels for homeowners today. Open-concept living has really taken off, and gone are the days of the formal living and dining rooms. Parents want to be able to keep an eye on kids while they cook, and a kitchen island is great for entertaining.
Pamper Yourself in the Master Bedroom
Stressed-out homeowners are making the master bedroom more luxurious and spa-like to give themselves a pampering retreat at home. Today’s master bedrooms often have their own seating areas and entertainment nooks, and they provide a personal retreat away from everything. Lush cushions, luxurious fabrics, soothing colors and beautiful window treatments contribute to the spa-like atmosphere.
Increase the Square Footage of Your Closets
Closet space is more in-demand than ever, and it’s not just for storage! Designers today are providing elaborate modular systems for rods and shelving to properly hang and hold clothes and accessories. Many of today’s closets are now also being tasked to serve as dressing areas, as well as holding more clothes and shoes. Walk-in closets with good storage systems are becoming a big draw in today’s homes.
Don’t just confine yourself to a very limited subset of homes that fit your idea of a dream home. Look for homes to serve as a foundation, and don’t be afraid to undertake renovations to turn it into your dream home. This gives you a lot more flexibility about location and home price, and the ability to get exactly what you want when you buy – because you’re creating the space you want yourself!
Property taxes are a big question mark for most new homeowners. Aside from the mortgage payment itself, property taxes are typically the next largest expense for new homeowners. It’s important to understand how property taxes are determined to plan for your property tax payment – and whether you might be better served to look elsewhere because property taxes are on the increase.
What’s the Aggregate Tax Rate and What Does It Include?
When you pay property taxes, you aren’t just paying a single tax. Your aggregate tax rate is a combination of all of the individual taxes that apply to your property. You’re typically paying a county tax, a township rate, something for the school district, a city rate if you live within an incorporated municipality, and rates for any special districts, such as fire and sanitary, which service the area. Your aggregate rate is a total of all of the taxes that apply to your property, and is subject to change if there is a change to any individual rate. It’s a good idea to look out for any big projects on the horizon that a district may elect to fund by raising your property tax.
How are Assessed Values Determined?
The property tax you pay is based on the assessed value of your home. Property tax assessment procedures vary depending on the assessing office, so you’d need to consult your local tax assessor to determine the exact formula used. Typically, assessors look at either the market value of your home, or the cost approach – i.e. how much it would cost to replace the structure with a similar one, plus the cost of the land – and determine the tax assessment as a percentage of this value. Some places assess at 100%, while others assess at a lower percentage. They may also look at renovations and improvements to the property – so if you’ve filed a permit but haven’t completed the renovation, your property may be over-assessed.
Cash-crunched home buyers who are looking to cut corners and save a few bucks often start by eliminating the real estate attorney. After all, attorney fees can be expensive, and if you’re buying a good home from good buyers with a good agent on your side, why should you need one? Unfortunately, this sort of mentality isn’t realistic – not everyone in the world is nice, and the people you’re dealing with in a real estate transaction all have their own interests in mind. When you work with a good real estate attorney, you can save thousands or tens of thousands of dollars, and you have the comfort of someone who is completely on your side in the complex home buying process.
A Real Estate Attorney is Dedicated to Looking Out for Your Interests
Aside from the real estate attorney, every other party in a home buying transaction is looking out for his or her own interests. If you’re a home buyer who is buying direct from a seller’s agent, for example, without the council of a buyer’s agent of your own, you’re dealing with someone who is explicitly representing the other party’s interests. Even if you do have a buyer’s agent on your side, some unscrupulous individuals are more concerned with making a commission than ensuring your interests are safe. When you work with a good real estate attorney, though, you’ve got at least one person on your team whose sole concern is your interests.
What does a real estate agent do? A good one can:
- Negotiate the real estate contract
- Renegotiate if a home inspection finds flaws or if an appraisal deems the house less valuable than the sale price
- Represents your interests at closing
- Does the lion’s share of the paperwork and coordination associated with closing
- Offers important legal advice that can prevent you from making a huge mistake!
You need someone on your side whose sole job is to look out for you. An experienced real estate attorney can negotiate a more favorable contract for you, and can prevent you from buying a home that’s overpriced or has an expensive flaw – saving you tens of thousands of dollars. It’s well worth the legal fees to have a good real estate attorney on your side, so don’t cut corners in this key area.