Buying or Selling Regardless of Market Conditions
I love this article. Buying or selling a home is emotional, let’s be honest. This article simply focuses on the best course of action to take in any mortgage environment to come out ahead.
via The Wall Street Journal
Buying a Home, No Matter the Market
An analysis of the top seller’s, buyer’s and second-home markets in the country, plus expert advice from real-estate agents and house hunters
Is luxury real estate up or down? Hot or cold? Buyer’s market or seller’s market? These are questions that seem impossible to answer, given the old truism that all real estate is local.
The Wall Street Journal decided to crack the code, working with Realtor.com to identify the top 10 buyer’s, seller’s, and second-home luxury home markets around the country. Active players in those markets—brokers, agents, buyers and sellers—offered their best strategies for buying smart. The result is the first annual Buyer’s Guide, a supply of current insight into today’s chart-topping areas, as well as some examples of effective buying strategies to deploy in any market.
The Seller’s Market
This May, Elaine Burrell pulled off what seemed impossible: She closed on a house she loved, within her budget of just over $1 million, in Contra Costa County.
“We were just really aggressive because we heard that you need to be,” said Ms. Burrell, a 34-year-old director of sales for an event company.
Contra Costa County in California represents the most extreme seller’s luxury market in the country, according to a recent analysis by Realtor.com (News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors). The supply of homes priced at $1 million and up in some ZIP Codes is so low, everything is snapped up within just over a month.
Conditions for buyers are nearly as constrained in Ashburn, Va., a suburb of Washington, D.C., where luxury homes are moving quickly. Parts of Sacramento are similar. Coldwell Banker agent Rich Cazneaux said it reflects “an exodus from the Bay Area.”
Boulder, Colo., is firmly a seller’s market, which makes Renée Berberian’s quest for a condo right off the Pearl Street Mall in downtown challenging. The 54-year-old filmmaker will need roughly $1.5 million to get what she and her husband want—and she’ll still have to renovate, she said. But they are also selling into this market. The 5,500-square-foot house they built in the heart of town is listed for $5 million. Houses like theirs, near both hiking and shopping, “have a good chance of selling,” said Ms. Berberian’s listing agent Karen Bernardi of the Bernardi Group at Coldwell Banker.
WHAT IS A SELLER’S MARKET?
In this analysis, a seller’s market means:
The market has more demand than supply, with low levels of inventory and a high absorption rate.
Sales prices in the top 5% of the market are growing at or above 4% year over year.
Positive yearly percentage change in both $1 million sales and absorption rates.
Realtor.com analyzed data from January to the end of April 2019, in markets with at least 30 monthly listings on average and at least three monthly $1 million sales.
Joe Gruttadauria, a 59-year-old software executive in Pompano Beach, Fla., is also both a buyer and seller in a seller’s market. He bought a waterfront condominium in a luxury building in 2011 for $1.2 million. Today, he has it on the market for $2.2 million, a price that reflects local development as well as the healthy seller’s market in surrounding Broward County, which includes Fort Lauderdale.
He is also looking for a smaller condo not just in the same strong market but in the same building, near the $1.1 million mark. His game plan is to work with agent Ed Cook of Continental Properties, who lives in the building, to scope out units before they come to market.
“The best way for me to grab a good price is to keep my eyes open and find a motivated seller,” Mr. Gruttadauria said.
As Ms. Burrell’s carefully executed strategy demonstrates, there are ways to prevail even in an extreme seller’s market. From her apartment in San Francisco, she started scouring real-estate websites in August. Next, she got fully preapproved for a loan.
Then, one day this spring, she awoke and went right to Trulia. There she spied a house that had been listed just a few hours prior. It was a charming, older, four-bedroom home with a pool in Walnut Creek, priced at $1.15 million. She immediately dialed listing agent Laura Wucher, of J. Rockcliff Realtors, and made an appointment to see the home before the weekend.
Ms. Burrell then brought her husband, Jeffrey, a 32-year-old technology executive, to the first, packed open house on Saturday. They returned with her parents on Sunday.
Ms. Wucher got four offers on Tuesday morning. The Burrells had no agent, so they used one on Ms. Wucher’s team. They bid $1.175 million and asked for no contingencies—not even an inspection (the sellers had done an inspection, so they relied on that). They also wrote a letter to the seller expounding on their love for the house; as a cherry on top, they threw in their wedding pictures. The sellers asked to stay on in the house a couple of weeks after closing—free.
“No problem,” was Ms. Burrell’s response. “In this market, you say yes,” she said. Ms. Wucher said offers were higher than the Burrells’, but their flexible terms sealed the deal. They got the house in early May.
TIPS FOR BUYING IN A SELLER’S MARKET
Do the research. Scour real-estate websites and pump agents for data. Know what has sold for what price.
Pre-interview local contractors. To accept an as-is house, you need to ballpark how much repairs will cost.
Get preapproved. If you don’t have cash, show the seller that financing is guaranteed.
Act fast. Check for new listings daily and call the listing agent immediately.
Waive contingencies. It is scary, but sometimes necessary.
Write the seller a letter explaining why you love the house.
The Buyer’s Market
Karen Labatto waited years for this. Ms. Labatto, who bought a house in Southampton’s village area 10 years ago, has been looking for a larger, move-up house ever since. She found the property she wanted in the Estates neighborhood. Originally priced at $15 million, its price had been lowered to just under $11 million by 2017. Two years of negotiation ensued.
Then, things started to change, said Ms. Labatto’s agent, Erica Grossman of Douglas Elliman. New York’s Suffolk County, which includes the tony Hamptons, is today among the most dramatic luxury buyer’s markets in the country. Since the second quarter of 2018, inventory in the Hamptons is up 84.2%, according to a recent Elliman report.
SHARE YOUR THOUGHTS
What is the most effective buyer tactic you’ve encountered, either as a buyer or a seller? Let us know by joining the conversation below.
That created opportunity for Ms. Labatto, who finally closed on her target property in October for $8 million. She tore the house down and is now building a 12,000-square-foot, empty-nester home with a master bedroom on the ground floor, she said.
The term “buyer’s market” can be confusing: It refers to places where there is more supply than demand, but doesn’t necessarily mean places where property is cheap. On Maui, for example, there is an overhang of inventory over $1 million. But that is mostly because many condos are both outdated and expensive, said Ryan MacLaughlin, co-owner of Island Sotheby’s International Realty.
This fall, Thomas G. and Joyce M. Fitzgerald were looking for homes in Naples, Fla. Collier County, where Naples is located, is a buyer’s market. But the Fitzgeralds weren’t exactly encountering fire-sale prices.
WHAT IS A BUYER’S MARKET?
In this analysis, a buyer’s market means:
The market has more supply than demand, with high levels of inventory and relatively low levels of sales.
Luxury sales prices—the top 5% of the market—were growing less than 1% or declining year over year.
Negative year-over-year percentage change in both $1 million sales and absorption rates
Markets have at least 30 monthly listings on average and at least one monthly $1 million sale.
Realtor.com analyzed data from January to the end of April, 2019.
Karen Van Arsdale, their agent at Premier Sotheby’s International Realty, “showed us about 15 homes priced from $6.5 million to $15.9 million,” said Mr. Fitzgerald, 66, a retired banker and lawyer. “The lower-priced homes were nice, but not on the water.” They found a house listed for $10.95 million in a gated community near downtown and got it for $9.6 million.
In wealthy vacation-home markets, like Maui, the Florida Keys or the Hamptons, it can take a long time before a pile up in inventory starts leading to price reductions, because many homeowners paid cash and don’t feel pressure to sell, said Will Langley, principal broker at Berkshire Hathaway Keys Real Estate. However, an aging buyer’s market should eventually lead to a downturn in prices.
“In six months, you’re going to start to see price reductions,” said Mr. MacLaughlin, in Maui, particularly in condos built in the 1970s and 1980s that need work—which is expensive on a Hawaiian island.
Sellers are quicker to discount prices where local incomes have to justify prices. In Cook County, Ill., several commuter areas to Chicago are strong buyer’s markets. Many of the houses lingering on the market are large, suburban dream homes, such as a 6,900-square-foot Palladian villa-style mansion listed for $1.075 million, said listing agent Connie Antoniou, vice president of sales at Jameson Sotheby’s International Realty in Chicago.
Drew Thaler, an operations manager, had just over $1 million to spend in Barrington, a town in Cook County, where he and his wife relocated for work with their two young sons. The couple, both 39, wasn’t tempted by the many mansions on the market.
“An extra thousand or two thousand square feet is just more house to maintain,” said Mr. Thaler, who also worried that a larger suburban home would be harder to resell. Instead, they bought a $1.15 million, 3,880-square-foot house in the village of Barrington, walkable to groceries, parks, and the train. They got the house for a discount off the $1.250 million list price and included a contingency for closing on their old home. They moved in mid-July.
“It is like being on vacation every day,” said Mr. Thaler.
TIPS FOR BUYING IN A BUYER’S MARKET
Let the market age. In the early days of a buyer’s market, inventory piles up as sellers continue to demand yesterday’s prices. With time, price declines kick in.
Make offers. Even if it is too low, sellers are often eager to get a negotiation started.
Concentrate. Don’t bid on everything just because you can; laser focus on what you truly want.
Buy top locations. These will be the first properties to bounce back in a recovery.
Talk to contractors. In certain markets, construction costs are too high to make some fixers good deals.
The Second-Home Market
Murray and Anne Marie Peretz have owned a home on Lake Geneva in Wisconsin for 22 years, using it as a summer getaway from their condo in Chicago. But when Clear Sky Lodge, a 100-year-old log cabin lakefront estate came on the market last year, they succumbed to the fantasy it represented and bought it for $5.2 million. Mr. Peretz, a 67-year-old commercial real-estate executive, said he was drawn to its woodsy, log-cabin style and “iconic and special” feel.
Fantasy is a big motivator for buyers of vacation homes. Part of Realtor.com’s hotness score is determined by how many times properties in the markets are searched on its website. Lake Geneva, an elegant second-home community where luxury home prices start at $2.48 million, is a place that inspires much dreaming. Linda Tonge, an agent with Keefe Real Estate, recently closed a deal for a client who had been searching for 20 years, she said.
The very hottest second-home destination is Palm Springs, Calif., once a retiree and golf community that now hosts hip events like Coachella, the music festival, plus activities focused on film, architecture and fashion.
“We had a listing at $2.2 million and it sold at the open house,” said Paul Kaplan of Bennion Deville. The house, in escrow now, hit the sweet spot for many buyers in Palm Springs: It was new construction, modern-looking, and within a mile of downtown.
WHAT IS A HOT SECOND-HOME MARKET?
Cities where 10% or more of purchases are for second homes
The top 5% price band is higher than the national top 5% price band.
ypical listing receives a higher number of views on Realtor.com and sells faster than in other markets.
Data was analyzed between July 2018 and June 2019
As in most vacation areas, buyers put a premium on new or renovated homes that will be easy to rent out short term, said Tony Halton, managing partner of desert division of Halton Pardee.
Serious buyers in vacation areas should vet agents carefully. These markets often have tons of inventory—Key West, for example, landed on both our buyer’s markets list and hottest second-home markets list. Knowledgeable insiders are key to separating motivated sellers from owners just testing the market.
Merriah Harkins, 48, a sales and marketing executive from Seattle, dreamed about owning a place in Palm Springs, but not just any house. She and her husband Mark visited at least 100 properties before spying a new listing for a $1.4 million, 3,150-square-foot, modernist three- bedroom home.
They flew to Palm Springs immediately and offered full price, hoping to compensate for the fact that their offer included a financing contingency in a market awash in cash. They closed in May and are now personalizing the house.
“Finding something we could both agree on was harder, because a vacation home is a want instead of a need,” said Ms. Harkins. “We knew this was the one, so we acted fast.”
TIPS FOR BUYING IN A SECOND-HOME MARKET
Prove you’re serious. Get preapproved or have proof of funds to show local agents you’re not just a dreamer.
Sign with a buyer’s agent. They’ll search for you while you’re back home.
Be open to fixers. Vacation-home buyers put a premium on turnkey properties; if you’re willing to do work, you might find a bargain.
Beware local anomalies. In Palm Springs, many homes are on leased land, which means homeowners pay rent on the lot. In Key West, all local contractors can be tied up with post-hurricane or storm work.
Buy off season. Typically, seasonal renters make up the biggest buyer pool; shop when there is less competition.