The buyers are coming, the buyers coming!  Why do I feel like Paul Revere on his famous midnight ride?  We have spent a great deal of time in the field with our buyer clients over the last three weeks.  With all this renewed activity, I had a couple of observations.  First of all, I don’t think the sellers were prepared for this type of bump in activity so early in the year.  Of course, this is what we were hoping for and the trends suggested as much.  The rates continue to hover in the mid to high-4% range, and buyers are hard pressed for a better time to buy than right now.   We have had several clients here recently that are renting their primary residence so that they can take advantage of the opportunities in this market.  After meeting with these clients, we have a clear cut strategy to help them achieve their goals in a short window.  I think, no matter the market, every buyer wants to feel good about getting a good deal on their home purchase.  Now that I’m in the business, I have a little different take on what value is and how I, as a buyer myself, determine it.  It’s not all about getting a seller to come off the purchase price at a ridiculous percentage.  It’s about getting the best house that meets specific needs at the best price possible – that’s value to me.

Part of our fiduciary responsibility as real estate agents is to provide accurate and helpful data that aids our clients in making sound business decisions so we can market homes to sell and find values for our buyers.  A lot of sellers think that a real estate agent’s interpretation of the market, as it relates to a list price, is a determination of value.  No, that’s an appraiser’s job.  It’s a tough position to be in right now as a real estate agent.  Sellers look at you like you have a third eye when you simply report the news.  We are empathetic with our sellers, but we wouldn’t be doing our job if we were anything shy of honest.  When we list a house, we are not listing it at it’s value neccessarily; the buyer determines the value.  We are listing it at the best marketable price to attract a buyer and ultimately an offer.  That’s our job.  As mentioned here before when Lesley and I list a home, we list it to sell.  We aren’t in the business of listing houses.  We’re in the business of selling houses.  As a general rule when pricing, we try and find that “worry price.”  I wish I could take credit for that term, but we picked it up from our broker.  Nevertheless, it’s an accurate strategy that I wish every agent proclaimed and every seller subscribed to.  Here’s how it works.  Buyers today are not just looking at 3 homes and making a decision.  They’re looking at 15+ houses and making a decision.  Therefore, it’s important to be the prettiest and most competitively priced.  You’re looking for that price that a buyer walks into your home, loving it, loving it, loving it, and then worrying that its not going to last long at this price.  When I look back on my own personal real estate purchases, I followed a similar logic.  It’s where emotional attachment meets reality. 

When trying to evaluate value in a home, we think it’s important to take into consideration everything you have looked at.  In a buyer’s market, you have to rely more on the active listings as competition when pricing as a seller and determining value as a buyer.  The ultimate principle at work here is that the home is worth what you think it’s worth, but just be careful with that.  The story about your buddy getting a home at 85% of list was about 4 months ago.  Those kind of deals just are not out there as much anymore in the resale market because prices have been falling, and agents have been busy adjusting.  Even on the foreclosures and short sales, banks are pricing properties to sell, and you won’t find them coming significantly off their prices.  If they don’t sell within a short period of time, the prices are adjusted lower.  If you are fortunate enough to get a home at 85% of list price right now, the home was most likely overpriced and/or the owner was probably already considering a 5%+ reduction before your offer came along.  The latest figures from the fourth quarter of last year suggest that 53% of all homes on the market required a price reduction.  That says two things to me.  First, as professional real estate agents ALL OF US have done a lousy job pricing property, and secondly, this market has changed enough that it has thrown everyone off. 

So, where does that leave us?  Values are down, sure, but let’s all think twice about that lowball offer on the prettiest and most competitively priced listing that you are so worried someone else is going to grab.  The worry price works with pricing property for listings, and chances are good that if you, as a buyer, like something out there because you think it’s a good deal, someone else thinks its a good deal too.  Move on it if all things add up because it won’t last long.  Always keep in mind that the best opportunities sell first and sell for the most money.

Inflation. Is it our friend or foe? Well, we all know that dollar won’t get what it used to. I bought a jumbo sized package of Wrigley’s gum the other day and paid $1.69. It doesn’t seem like that long ago when it was 79 cents. Everything goes up in price. The same can be said for home prices. That’s why 30-year loans are so attractive. You’re buying and locking at a time in space that typically over a 30 year period will see massive amounts of inflation, positively affecting price and value.

Looking at this economy and the money that is being thrown around or proposed to be thrown around, one thing is obvious. We’re going to be printing more money folks and lots of it. The most likely solution to this economic dilemma is good old fashioned spending. Lots of spending. What’s President elect Obama calling for? Survey says, “Spending!” These events will sooner rather than later lead to a classic case of stagflation, for all you economic minded folks out there. All that means is that we will have an ecomony that isn’t growing while prices are rising. Unemployment will rise as well for a time period as the economy searches for a bottom. This infusion of dollars into our economy will dillute our buying power, costing us more and more to buy the things we want and love. That’s the negative. The positive is that it’s going to add value to our appreciating assets at a larger than life rate. In perhaps one of the most historic times to buy a home from an inventory, price, and interest rate point of view, we have something else to consider now in short term inflation. It’s bound to happen. It’s simply a matter of how much inflation we’ll see. The likely response to the stagflation is to spend more and more and more to a point that we out run it and get over the hump. The cash will eventually lead to more than an artificial boost to our economy. Meanwhile, property owners will see their home values rise considerably. Unfortunately, so will interest rates. The government has demonstrated that it is prepared to do whatever it takes to boost our economy. So fire up that money press, Mr. U.S. Mint, and lock those floating interest rates and lines of credit!

If you are taking a significant hit right now on the sale of your home, don’t sell. Rent. Keep your home. We have told many clients this here recently. We’ve told clients for months now to buy investment property.  Why not treat your primary residence as an investment property and buy your next home while the rates are ridiculously low, prices are painfully low, and inventory is incredibly high?  Nothing pains us more than to give bad news, but we are not going to expect or coach you to list your house below what you paid for it, if we can help it at all. The rental market is great with plenty of folks looking for a deal to rent that depressed valued home that either they can’t afford right now or are too scared to buy. Despite low interest rates, the lenders are ruthless in making you stand on your head to qualify for loans. In addition, first time homebuyers have to put down a minimum of 3% on the purchase of a home, which is downright hard to come by for some aspiring homeowners. I might argue that if you don’t have 3% to put down on a house, perhaps you should not be thinking about buying a home, but that’s a totally different conversation. By renting, you may not be in a position to get your value back to where you need it to be in the time frame you want, but it can’t get much worse, right? Give it a couple of years and let inflation help you out. I’m not cashing in my IRA right now just because it lost 25% of its value over the last quarter. By the way, that’s a true story. Whew! I’m buying real estate from now on as opposed to the stock market. Call me crazy, but at least I can do something to the real property. Improve it, rent it, something besides pray it goes up in the stock market. Hang on folks. This year is going to be historic for the economy, and the housing market will lead the charge back. We’ll be here whenever you need us.

Wow! Things here are busy – both personally and professionally! First of all, we took advantage of the fantastic 37-year low interest rates and refinanced our personal home today. Best yet – we’re going to save almost $300 a month. If you want to talk with a lender about a refinance, give us a shout and we can provide some great lender recommendations.

Professionally, we’ve been pulling 80+ hour weeks. We worked New Years’ Eve and rang in the New Year with dualing laptops on our sofa taking care of our clients. Tonight is no different. We have 4 listing appointments this week, 2 inspections for buyers, 1 closing, and more inquiries than we ever anticipated for the first week in January (I’ve lost count). To top it off, we had 2 great listings come on the market today – check them out below. And, stay tuned as we have a townhome with unbelievable skyline views coming on the market later this week. It’s busy out there – Spring-like in fact. If you are ready, willing and able – there is not a better time to buy new or refinance your current home! For the latest, up-to-date rate quotes, email Andy at Andy@ThePetersCompany.com to join our bi-weekly mailing list. Give us a shout!

They all say buy now. 

As is typical, Keller Williams is leading the charge with more valuable statistics and views on our real estate market.  This is a great short and sweet 6-minute update one what’s going on.  You should see this.