LIST YOUR HOME FOR SALE BETWEEN THE BEGINNING OF MARCH MADNESS AND THE MASTERS GOLF TOURNAMENT IN THE D.C. MARKET: ZILLOW MAY PROVE CORRECT THIS YEAR.

 

During the past few months, listings in the area have dried up considerably, and the current market is one identified with more willing buyers than desirable properties available for sale. In other words, despite relatively light transaction volume overall, the pressure is coming from the buyer side of the equation, not the seller side.

As the weather warms up, and we approach the traditional D.C. area “spring market”, potential sellers are beginning to inquire about the proper time to sell.

In Chapter 12 of the book “Zillow Talk”, by Spencer Rascoff (CEO, Zillow) and Stan Humphries (Chief Economist, Zillow) the Zillow executives go into great detail analyzing their deep data base to study this question. Although each market is different, and the economic conditions vary from year-to-year, the overall data suggests that to both sell fast and make more money, sellers should, “Put your home on the market after you fill out your NCAA March Madness basketball brackets, but before someone slips on an ivy-green jacket at the Masters Golf Tournament at Augusta National.” 

What they are saying is that according to the data, the best time to list in this March-early April time frame. This is often the time when buyers begin to surface in a serious manner, and not too many listings have hit the market. So rather than wait for the traditional barrage of listings in April and May, get slightly ahead of the curve. To list any sooner risks have the home accumulate days on the market, but getting March exposure is likely to be the most advantageous from a supply/demand perspective.

From my intuitive and empirical observation of conditions in the Reston market today, and the markets in most of the D.C. area as well, the dynamics described above are in place.

I welcome a call from you to discuss this in detail. If you are thinking of listing your home for sale in the near future, I specialize in helping sellers reach logical economic decisions in how and when to list their home for maximum sales price in minimal time on the market.

 

5-star service and expertise

 

Ray Wedell, Zillow Premier Agent

Realtor, Samson Properties

Chartered Financial Analyst, CFA

703-855-7299

Ray.Wedell@gmail.com

www.RayWedell.com

 

BOOMERANG BUYERS TO HELP FUEL 2017-2018 MARKETS

The housing collapse and fall out for those caught in its crossfire is not yet a distant memory; however, millions of previous home buyers may be ready to enter the housing market over the next two years. This segment of the market has prematurely been identified as potential buying sources in the recent past; however, now that pundits have mostly turned away from them, clear factors are in place for a strong increase in buyer demand from previous homeowners recently shut out of the housing market.

What is a “boomerang buyer”? The general definition for a boomerang buyer is someone who was a former homeowner who was forced to go through a short sale, foreclosure, or bankruptcy in the past, and who has since been saving money and improving his/her credit rating to better able to qualify for a mortgage loan again.

What has precluded this group from stepping up and buying in the past few years? There are many factors here, and each case is different. The most often cited reasons are as follows:

  • The mortgage regulations are very strict in not allowing recent homeowners who have lost a home through short sale, foreclosure, or bankruptcy to re-enter the market using most of the available alternative lending platforms.
  • Mortgage qualifications have become much stricter in response to the market collapse of 2008-2010. Political leaders were lax to see the negative impact of overly aggressive mortgage policies leading to millions of “bad loans” being made, and the response to improve lending quality has resulted in much tougher qualifying standards for all Americans.
  • It takes time to rebuild, whether it be to rebuild individual credit scores or rebuild savings necessary for a down payment and closing costs on a home purchase.
  • The general shock and debilitating emotional effects of losing a home also impacts any potential buyers from re-entering the market as owners again. This factor is slowly eroding over time.

boomerang-buyers2

Why will sales to these people increasingly look to re-enter in 2017-2018?

  • Most boomerang buyers are market savvy; they understand my basic Ten Reasons to Own a Home, and realize that in the long term, the benefits of owning outweigh the benefits of renting in most cases. They want back in.
  • Rent rise, and most boomerang buyers have seen increases in monthly payments for housing, whereas home buying provides an opportunity for stable payments for the life of the loan.
  • They understand the many tax benefits of owning versus renting.
  • Markets have stabilized, and many are showing early signs of a major rebound.
  • The elapse of time: Credit agencies are reporting that credit scores for large numbers of previous short sale victims are rising rapidly. In fact, 68% of people in this class have higher average credit scores than all others combined. As the length of time since losing one’s home increases, the effect of a negative, or derogatory, credit event on one’s score decreases or may even be eliminated. There are several timeline points to be aware of, and I welcome a call from you to discuss details. However,  for purposes of this essay, keep in mind that seven years is a key time elapse from time of short sale to one’s present circumstances to clear derogatory credit of this nature. And given the importance of a raw credit score to home loan qualification, this is probably the major reason for a buying surge from boomerang buyers in 2017-2018. Given the large numbers of short sales and foreclosures in 2010 through 2012, millions of those who lost their homes and have been renting, will be strong qualifiers for a new loan. Most of them know the mortgage qualifying from previous purchases, and want to be home owners, not renters.
  • Extended period of low interest rates: Most potential boomerang buyers are accustomed to much higher interest rates than what is available today. In fact, today’s long-term fixed mortgage rates are lower than the first year “teaser” period on ARMs that existed when they were homeowners. This is no small factor in terms of actual economic benefit, and psychological/emotional reasons previous homeowners will want to be owners again.
  • Prices increases could get boomerang buyers “off the fence” faster than other other buying groups: Prices have not increased in our area as much as one might expect given extremely low interest rates and higher rents. For the most part, boomerang buyers are well aware that the current market favors buyers over renters in most economic situations. Once they see a market that looks very active and threatens to bring back days of bidding wars and the like, they will likely jump in in much larger numbers.
  • The shear increase in those who will satisfy the needed required time frames since foreclosure/short sale to qualify again will drive up the potential buying pool, regardless of factors stated above. In summary, an elixir for more buyer demand may be brewing. The impact of this increasing buyer group, on the margins as economists are and of reminding us, should not be minimized.

 

I welcome all questions and discussion on this important topic and anything related to D.C. Area residential housing.

 

Ray Wedell

Chartered Financial Analyst, CFA

5-star service and expertise

Samson Properties

703-855-7299

raywedell@comcast.net

 

 

 

 

 

LOCAL REAL ESTATE OUTLOOK IN TIME OF RECORD UNCERTAINTY…2017

(rare night pic of Wash Monument)                                                 As we enter 2017, it is that time of the year for something I usually avoid: Annual Forecasts. Everyone seems to make them; how many ever pan out?

washingtonmonument                                 But the enormous change and uncertainty that people feel following the past election, and introduction of a new Administration increases uncertainty, compels me to outline where we are and where we are likely headed in terms of residential real estate in Northern Virginia and Washington, D.C.

First, according to a recent Inman survey, the gauge of professionals’ optimism is as follows, nationwide:

—- 27% of respondents claim to be “optimistic” about the overall housing market.

—- 52% say that Donal Trump will have a positive impact on real estate markets.

—-50% think unit sales will be higher in 2017 than 2016.

—- 75% believe prices will rise in 2017.

My followers know that I am always hesitant at a time of universal optimism or pessimism. The survey results indicate a very mixed bag, as most real estate surveys prior to any year have a slightly upward bias. So the above results are not too different from the norm.

Trends Which We Will Likely See in 2017:

—— I am in the camp that says the long period of incredibly ultra-low interest rates is over. I am somewhat surprised that we have not seen more price appreciation over the past few years given how low interest rates have been. I am also concerned that with today’s long term fixed rates at levels lower than most us us used to consider “teaser” rates on an ARM, new entrants to the market have become too complacent in assuming these rates continue. How buyers react to higher interest rates will be a major factor in real estate sales and prices in 2017. Housing as a form of stability and long term wealth creation will be re-introduced as a driving force for buyers in 2017.

Prediction: With inventory levels at extreme lows entering 2017, the initial move in prices will be up, as buyers scramble to purchase the better alternatives, and do so while interest rates are still extraordinarily low.

—– 2017 will be seen as an unusual year marked with high unpredictability. There will be greater differences in demand from state-to-state, town-to-town, and neighborhood-to-neighborhood than we are used to seeing. I say this for two reasons: 1) The “Trump Effect” will reallocate areas of emphasis for capital that will be a boon to some areas and not to others; 2) The nature of real estate sales, and public awareness of alternatives, is changing on a daily basis. This trend is not going to decelerate in 2017. Such changes will make many of today’s cast-in-stone mantras less relevant and in some cases, obsolete. It is easy to say there will be significant change. Pinpointing what that change will be difficult, and how it will effect the overall industry remains the challenge. What will be viewed as uncertainty will actually be a progression from one way of doing business to another; of viewing alternatives in a different way than in the past.

Prediction: The era of the part-time real estate professional may be coming to an end. Technological changes and the need for knowledge will force those who hope to be successful to be on top of things everyday. This will become a necessity for those hoping to succeed. The pace of change and introduction of new technologies will increase, not slow down. So will demands on individuals and firms.

—– Higher interest rates are likely to free up inventory, which could lead to an explosive spring market. Granted, this is a bold statement and may be based on hope and intuition as much as facts. However, low inventories are the norm now, and many of those homes still for sale are on the market for a reason (poor condition; not showing well; markedly overpriced, etc.). Well-priced homes are selling almost immediately across-the-board. If interest rates begin to rise, sellers are likely to surface who do not want to “miss the boat”, given the traditional relationship between interest rates and housing demand. Buyers (and there are many sitting on their hands at this point) will respond to the improvement in inventory by stepping up before interest rates get beyond their affordability ranges. Fundamentals for an active spring market are very much in place. Potential sellers should take great care in choosing a listing agent. Buyers should use premier sites like Zillow and stay abreast of inventory in their desired markets.

Prediction: Changes in Administrations generally increase activity. Changes which fundamentally shift employment emphasis do so even more. Both factors are in place now, in addition to a long hiatus of low activity in a period of low interest rates. Volumes will increase. The chance that a “sling shot” effect takes hold is not to be ruled out; volumes could boom this spring.

—– The average age of first time home buyers has been increasing. This is no longer a young “millennial” market (aren’t we tired of hearing this yet?) but a very mature group of renters who are beginning to surface as real buyers. They are smart, know what their life style is, and have a keen eye to the future. This group will be significant buyers in 2017.

Prediction: Demand from new buyers, particularly at the middle and lower-middle price ranges, will be strong in 2017.

—– For Reston in particular: The overbuilding in new rental units will set the stage for future condominium conversions, likely in 2018-2020. The process of getting project approval, construction, and sales for major new projects is extraordinarily lengthy. Many of the buildings coming online now were planned during a completely different economic time. Today’s “rental squeeze” is becoming more of a mirage, and the likely introduction of over 2,000 new rental units in Reston alone in the immediate future will likely transform this market in ways people are not considering today. How do these periods of overbuilding/underbuilding always occur? For many reasons, but for the current crop of upcoming units, decisions to make these rental units were made years ago when investment capital was raised for their financing. Rising prices will likely generate requests for condo conversion in many rental buildings, but that effect likely will not take hold until 2018-2020. There will be a glut of “luxury” apartments that will rely on higher overall prices to correct an upcoming imbalance between rental housing and demand to own. Apartment managers will attempt to disguise the burden through aggressive move-in incentives and unpublished individual “deals”, but this is merely a response to an environment in which supply exceeds demand at builders’ desired prices, and one in which developers seem to be all building to the same price point rather than where the demand is likely to be. Keep in mind: This is NOT the prevailing opinion out there today, but my own conclusions based on personal observation.

—– Expect the unexpected. We are faced with a changing environment on almost all fronts, and the pace of change in many areas is simply mind-boggling. Those sticking firmly to a plan set in stone on January 1 to get them through the entire year will suffer, as quicker organizations/people identify changing trends and act accordingly.

Ray Wedell, Zillow Premier Agent

Realtor & Chartered Financial Analyst, CFA

Samson Properties

703-855-7299

raywedell@comcast.net

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