It seems no matter the economic climate, conversations about how the housing market is “doing” continue to be on the minds of many people. As a long-time realtor, I encounter this frequently when I casually meet someone during the day at my local coffee shop, supermarket, nail salon, etc. Almost everyone has curiosity about the real estate market, especially right now with the average 30-year fixed mortgage rate hovering near 8.0%. And for those who may be on the sidelines looking to buy or sell a home, find your comfy chair, along with your favorite beverage, and read on. There is almost always a “nuance” in the housing market that can work in your favor!
Why Real Estate Moves
In real estate, there are a number of significant life events that often “trigger” someone’s decision to make a move. If we understand why people move, then we can get a clearer picture as to how the current housing market is “doing”.
Here are 10 popular drivers of real estate.
1. Different Job. The great re-shuffling across the country continues as people get relocated for work, or simply choose to change jobs. Sometimes this results in both the sale of their current home and a new home purchase in the state where they are moving into. One of my clients recently sold their home in New Jersey and then purchased in Texas. Another client just sold their home in Virginia, then moved up to New Jersey and bought a home as part of their job relocation with their existing employer. And for some people who bought during the pandemic outside a major urban hub, a return-to-work office policy in many companies is prompting a “reverse move” closer to work.
2. Downsizing. Sometimes known as “right-sizing”, downsizing occurs when homeowners are looking for a change in lifestyle. Lifestyle preferences and needs change over time. For example, empty-nesters whose kids are grown and possibly starting their own families, may no longer want to take care of their large home, preferring instead a home that is the “right-size” just for them. Other homeowners may have health issues that are prompting them to move, perhaps to a home with no steps as an example.
3. Diamonds. While recent media headlines have highlighted the growing trend among millennials to purchase a home together without first tying the wedding knot, we can think of “diamonds” as a major life event that often leads to a home purchase.
4. Diapers. This probably comes as no surprise that when the size of a family or household changes with the addition of a new baby, the need for additional space becomes important. A number of my buyer clients have made a home purchase either right before of right after the birth of their baby. It’s near impossible to “time the market” when a baby is on the way!
5. Dogs. Yes, dogs! There are many people with a dog who want to purchase a home so their dog can enjoy more space and often a backyard. During the pandemic, for example, a number of people adopted a rescue puppy and a year later decided it was time for new digs!
6.. Districting of Schools. Another reason that is prompting a move by some home buyers is their desire to live in a specific school district. Education is frequently a very big driver of real estate activity. Many of my clients looking to purchase a home cite a “good school system” as one of their top search criteria in deciding which town they want to live in.
7. Diplomas. For a number of college graduates (undergraduate or post-graduate), the diploma may signal a time to find new housing, either on a rental basis or as a home purchase. One of my clients, after graduating graduate school, invested in the purchase of a multi-family home, where he lived in one unit, and then rented out the second unit. The rental income helped to offset his monthly mortgage payment.
8. Difficult Financial Situation. For a variety of reasons, some homeowners may find they are facing financial difficulty. Often the home is one of the largest financial assets that people own. If there is significant equity in the home, one may decide the time is right to put their home on the market. This may be their primary residence, or quite possibly a vacation home.
9. Divorce. For couples who own a home and get a divorce, the “un-coupling” can trigger the sale of their home, and quite possibly the purchase and/or rental of another place to live. Many of us probably know at least one or more people who have divorced and then sold their home.
10. Death. Sadly, death is inevitable. Homes frequently come onto the market after someone passes away. Many of these homes have had the same owner for more than a decade.
The Housing Market is “Micro-Local”
And as these top 10 (and more) life decisions happen, real estate transactions continue to flow. If we then overlay the economic factors of supply (inventory of homes available) and demand (potential home buyers), the dynamics of the housing market will lead to typically one of three traditional real estate scenarios: “seller’s market“, a “buyer’s market” and a “balanced market“. However, real estate is hyper-local. And right now, we are in what I describe as a “micro-local market.” So what is a “micro-local” housing market?
There are many variables that when combined together will impact the “sellability “of a home, i.e. the likelihood that a would-be buyer wants to make an offer on a home that a seller will accept. You may be familiar with the 3 primary variables; listing price strategy, overall condition of the home, and location (busy road, neighborhood, views, etc.). It is the combination of these variables, along with a host of others (e.g. style of home, layout, spaciousness of rooms, backyard size, number of garages, etc.) that will contribute to a buyer’s interest in the home. Making an offer on a home is a personal choice by the buyer. It is the buyer who determines the “market” for a particular home.
Many of today’s buyers are increasingly selective as each home for sale is more expensive in light of the higher mortgage rates. Not just any house meets the needs of a buyer. And this is why the real estate market is “micro-local“. It is all about one house at a time for the buyer. The sellability of one home in a neighborhood can be vastly different from another home for sale in a different area of town, or quite possibly on the same exact street! Two homes that are similarly priced may have very different buyer responses, with one home generating multiple offers and the other home getting showing appointments but no offers! What does this mean if you are a seller? It’s not necessarily a “seller’s market” if no one is making an offer on your home. In this scenario, a gap exists between the larger “seller market” that is happening in your city or state, and the “micro-local” market for your individual home!
Finding the Nuance in the Housing Market
In any market, real estate transactions are happening all the time. As mentioned above, there are a number of life events that can prompt one’s decision to buy or sell a home. Getting the market dynamics to be in your favor calls for finding the “nuance” in the housing market. You need to get “micro-local“. Focus on a particular house, not the wider market.
If you are a home seller, you will want to get certain that the home delivers value in the eyes of the buyer. Without this, your home may linger on the market. A good indicator of how well your home is positioned in the market is the number of showing appointments for your home. If your home is not getting many showings, most likely buyers are not seeing the value offered.
If your home has been on the market for a long time, here is something you may want to consider. Encourage offers using creative financing. For example, there are mortgage methods that allow buyers to “buy down” their mortgage rate over a 3 (or 2) year period, provided that they still qualify at the current higher mortgage rate. With average 30-year fixed mortgage rates close to 8.0%, this can be an excellent financing option that can help buyers lower their monthly payments in the beginning few years of the loan. The 3-2-1 mortgage buy down loans can be a great advantage to sellers whose homes are not selling. You will want to speak to a qualified mortgage lender about how this type of financing is structured and the seller cost associated with a 3-2-1 buy down mortgage.
If you are a home buyer, the 3-2-1 buy down mortgage may make a home more affordable. This means that you may be able to make an offer on a home at a higher price point. If there are multiple offers on a property that you are interested in, you may find that this financing method might help you make a stronger offer than you would have otherwise made because of the structure of the loan. Again, reach out to a qualified mortgage lender about choosing a financing method that is right for you.
If you are a home buyer and have concerns about rising mortgage rates, be sure to obtain more than one quote. The number of loans being transacted is much lower than it has been in prior years. And as mortgage lenders find themselves competing for your business, you might just secure a mortgage that has great terms for you!
With the ever-changing housing market, it is important to navigate the nuances that can make all the difference in achieving your real estate goals. By honing in on the “micro-local market” and focusing on a specific property, rather than the broader market, you can gain that much needed competitive edge in an already competitive market. Now more than ever you will need the expertise of an experienced realtor. Whether you are a buying or selling a home, a skilled realtor will help you uncover the nuances and opportunities that others may not see when getting “micro-local”. Real estate moves are happening all the time. So let me ask you, “Are you chasing the market or is the market working for you?”
Want to Get “Micro-Local” and have the Market Work for You?
For a limited time, I am offering a complimentary 20 minute “home strategy session” for buyers and sellers. Discover the valuable market nuances that can make all the difference while providing ease and grace in your buying or selling transaction. To reserve your individual session, simply click on the link to register:
Did you miss my previous article? Simply click on the hyperlink: Giddy-Up Home Sellers! The “Mini-Market” is Here
Got questions? Reach out to me at 908-239-9261 or via email: [email protected]. I’ve got you covered from coast to coast, as needed, together with my CØMPASS colleagues in over 300 offices around the country. My mission is to help everyone find their place in the world.
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