The end of the year is well within sight and what a year it’s been. Closed sales reached a 12-year high, and non-inflation-adjusted home prices reached new all-time highs. Foreclosures and short sales make up only a small sliver of activity. So are we there yet? Is recovery finally over? If only it were that simple. Although prices and sales have recovered, there are critical irregularities that persist such as low inventory —particularly at the first-time homebuyer price points. This can weaken the affordability picture for many Twin Citizens and can even exacerbate the wealth gap.
….Rising prices typically incentivize more sellers into the marketplace, but the ownership tenure has increased from 6 to 10 years since 2009, and sellers aren’t confident about finding their next home in this competitive, undersupplied market. Unlike the Cubs’ win, neither the U.S. economy nor housing is “due” for a downturn simply because the calendar says so. Read the full report here. Source: MAAR
I have been asked recently whether it is a good idea to get a professional appraisal prior to putting a home on the market. Pricing a home can be one of the most difficult and important parts of selling a home. Sellers don’t want to leave money on the table by pricing their home too low or, if priced too high, exclude potential buyers, lengthen the time on market, and potentially end up with less money in the end. These concerns may drive sellers to look for an “objective” method to value their home by contacting an appraiser.
Let’s look at some reasons why this might not be a good idea:
- It’s expensive-The current cost for a typical appraisal in the Twin Cities runs between $450 and $500.
- An appraisal is an “opinion of value”-There is no such thing as an “objective” valuation. Appraisers use different techniques and methods to arrive at an “opinion of value”. Many of these techniques are based on the appraiser’s judgment; including, the selection of the comparable houses and the dollar amount of adjustments made for features and condition of a home. If you hire three different appraisers, you are likely to get three different values.
- A client recently had two appraisals performed on their home with two completely different values. Each appraiser picked different sold comps and adjusted their values in different ways. For example, one appraiser valued the presence of a fireplace at $5000, the other at $2000. These discrepancies contributed to significantly different opinions of value.
- Appraisals use historical data-Appraisers use data from homes sold in the past 6 months as “comps” to compare values. There are potential problems with this method. In times of low turnover or inventory, it may be hard to find comps that accurately reflect the home being appraised. Also by using historic data, the appraiser may not take into account current market conditions. In today’s low inventory environment, it is important to factor in low supply and high buyer demand when determining the market value of a home.
- Your Real Estate agent will probably do better-Real estate agents have access to the same data as appraisers (MLS, tax, and sold data). Typically agents who work specific neighborhoods or areas have intimate knowledge of the market and have been inside many of the comps. Agents also work with buyers on a daily basis and know what features they are looking for. This type of inside knowledge is essential in arriving at a accurate value.
- The market determines the value of your home not the appraiser-In another recent example, a client had an appraisal performed as part of a refinance shortly before selling. The first appraisal valued the clients home at $335,000. The clients then put their house on the market two months later and found a buyer for $350,000 and, unsurprisingly, the second appraisal returned a value of $350,000. The market determined a value for their home and the appraisal reflected that value.
While appraisers are highly trained in what they do, an appraisal is still an “opinion of value.” Save yourself the cost of the appraisal by hiring a competent real estate agent with knowledge of your neighborhood.
As anticipated at the outset of the year, demand has remained high through the first three quarters of 2016, propping up sales and prices despite heavy reductions in inventory and months of supply across the country. With rental prices and employment opportunities in a consistent climb, year-over-year increases in home buying are probable for the rest of the year, but not guaranteed.
In general today’s demand is driven by three factors: Millennials are reaching prime home buying age, growing families are looking for larger homes, and empty nesters are downsizing. However, intriguingly low interest rates often prompt refinancing instead of listing, contributing to lower inventory. Recent studies have also shown that short-term rentals are keeping a collection of homes off the market. Source: MAAR
Read the full report here.
How not to decorate for resale.
I encourage you to view the whole listing here. It’s something else.
Slowly backs out of the room.
As the humming of yellow school buses marks summer’s bitter end, most of our regular
metrics have also begun their seasonal decline. Both buyer and seller activity are beginning to cool compared to the busier months of the year, but are still mostly keeping pace with year-ago performance. In 2016, sales exceeded a 10-year high and the median home price reached a new all-time high. Many sellers are getting full price offers or better in record time. Supply levels remain thin, however, and could weigh on
sales activity as we lean toward fall. Read more here.
“It’s not my fault, Mom! I couldn’t see the toilet!”
New refrigerator included! Please do not move.
With all the panic created by Britain’s surprise exit from the EU, one positive has emerged for US home buyers, mortgage rates dropped to near the lowest levels ever recorded.
Read the full article here.
Fueled by record a record month for closed sales in May, Twin Cities home prices neared the all-time high of 2006. Home prices have been fueled by low interest rates and job growth, as well as, a historic low in homes for sale.
More homes should be hitting the market in the near future as home owners who had their equity levels hurt during the downturn will be looking to move. It is a great time to be a seller.
Read the full article from the Star Tribune here.