Pricing Your Home
If you are a homeowner thinking about waiting until next year or spring to put your home on the market that might not be the best option. Don’t wait…price your home to sell and sell now if you want to maximize your profits AS TO today’s market value. Even though these types of properties are higher in other parts of the country they are still a concern locally in Richmond, Tri-Cities and Chesterfield County VA areas. Anytime a property closes as a short sale or foreclosure it is selling, on average, below the current market value rate.
From USA Today-Foreclosure sales are moving so slowly in half the states that at the current pace, it will take more than eight years on average to clear the 2.1 million homes in foreclosure or with seriously delinquent mortgages, new research shows.
That’s about twice as long as a year ago in the states where foreclosures go through courts — before the mortgage industry was upended by last fall’s disclosures that court papers in many foreclosure cases were improperly prepared. Since then, new checks have slowed the process. Read more…
I talk with 10-20 homeowners a day with regards to either their home expiring, being withdraw, or they have been released from the listing agreement with their previous agent. Ultimately, the number one reason these homes did not sell is the list price is not what the current market preceives as value, period. What happens with this group is the homeowner ends up becoming the highest bidder with their home. Something I don’t think any homeowner wants, was planning on or expecting.
Condition, location, exposure and price will determine when and if a home will sell. To be honest all 4 categories filter back to price. Meaning, if the condition is poor then the list price needs to reflect this. If a home needs deferred maintenance and the homeowner does not want to do this, not sure why in today’s market, then the price needs to reflect this. Each category reflects back to price. Maybe, exposure is not as price driven but again the longer it takes for a homeowner(s) to understand pricing the more money or equity they will lose. Without a doubt 85% of the homeowners marketing begins with price. It’s amazing to me how many homeowners have to go through the school of hard knocks to realize this. Hope over reality is what they have. I am not being disrespectful or mean. I work with more sellers than I do with buyers. In fact, 90% of my business is selling homes. I get it…values are down and the largest financial investment a homeowner has the equity is flying out the window like a bad draft.
If I had dollar for every time I have said what I am getting ready to share, I wouldn’t need to be in real estate. I say this over and over to the groups I network with and even to my clients, ” a homeowner who is going to put their hat in today’s real estate arena MUST price their home compellingly or DO NOT put the property on the market. Wait 4-6 years for the market to get better.” If the time frame is not realistic for the homeowner then NOW is the time to get the home on the market. Again, this is not me writing nonsense BLOG posts. I back what I am sharing with facts. Look at today’s headlines. Look at the BLOG post I posted several days ago…it’s happening and their is a reason why, click here.
New Home Sells Hits a 6 Month Low
(WASHINGTON) — Sales of new homes fell to a six-month low in August. The
fourth straight monthly decline during the peak buying season suggests the
housing market is years away from a recovery.
The Commerce Department said Monday that new-home sales fell 2.3 percent to a
seasonally adjusted annual rate of 295,000. That’s less than half the roughly
700,000 that economists say must be sold to sustain a healthy housing
New-homes sales are on pace for the worst year since the government began
keeping records a half century ago.
If you know of anyone who is thinking about putting their home on the market send them this post, they will not like it but in the end they will say thank you. Thank you for not giving me the smoke and mirrors but the facts.
A call to action for any homeowner who has their home on the market or is thinking about selling their home. Price your home to sell. Don’t go into a transaction with hope over reality because as you will see from the information below…it’s going to cost you money, headaches and more importantly…the property will not sell. Follow the advise of a professional REALTOR so they help you get what you want in the time you want.
Two separate housing reports came out in the last week which discussed different challenges facing the current real estate market. The first was CoreLogic’s Negative Equity Report and the second was JP Morgan Chase’s Home Price Monitor. Each report delivered some difficult news. However, if you piece both reports together, we can see future challenges are in store for home values.
Negative Equity-When a home’s current value is less than the existing mortgage on that home, the house is said to be in a ‘negative equity’ situation (other terms used to describe this situation are ‘underwater’ and ‘upside down’). The CoreLogic report stated:
“…that 10.9 million, or 22.5 percent, of all residential properties with a mortgage were in negative equity at the end of the second quarter of 2011… An additional 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the second quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5 percent of all residential properties with a mortgage nationwide.”
This is important because studies show that people in a negative equity situation are more likely to default on their mortgage payments than people who have equity in their homes.
Home Prices-Many experts believe that housing prices will soften through this winter. According to an article in HousingWire, analysts from JP Morgan Chase announced in their recent Home Price Monitor:
“Home prices could dip another 6% to 7%, before hitting rock bottom in early 2012.”
Let’s Combine the Information-The CoreLogic report said there are an additional 2.4 million households with less than 5% equity. The JP Morgan Chase report said that prices will drop another 6 to 7% in the next six months. That leaves an additional 2 million+ homes in the near future that will be faced with the decision to pay (or not pay) the mortgage payment on a house no longer worth the amount of that mortgage.
Bottom Line-History has shown that a percentage of those 2 million+ homes will enter the distressed property category as some families decide it no longer makes sense to pay their mortgage. Any increase in short sales or foreclosures will impact prices in an area.
This winter will see a softening of prices in most parts of the country. If you are considering selling your home in the near future, you should talk with me today, 804-980-7906. That being said, I want to explain the magnitude of the challenge.
The FHFA just released their third quarter House Price Index. In the titled they claimed: U.S. House Prices Fall 1.6 Percent in the Third Quarter; Declines in Most Parts of the Country
What is the FHFA HPI?
Federal Housing Finance Agency (FHFA) explains their pricing index this way:
The HPI is a broad measure of the movement of single-family house prices. It serves as a timely, accurate indicator of house price trends at various geographic levels. It also provides housing economists with an analytical tool that is useful for estimating changes in the rates of mortgage defaults, prepayments and housing affordability in specific geographic areas. The HPI is a measure designed to capture changes in the value of single-family houses in the U.S. as a whole, in various regions and in smaller areas. The HPI is published by the Federal Housing Finance Agency (FHFA) using data provided by Fannie Mae and Freddie Mac.
How widespread are price declines in the report?
The easiest way to explain this is to show the pricing map contained in the report:
The majority of states have experienced weakening in house values. Many experts predict this will continue throughout the next several quarters. If you are considering selling in the near future, call me today so we can determine where prices are headed in your neighborhood.
I was once told a good decision is only as good as the facts. I open this BLOG post with a question for every homeowner who is thinking about selling their home this upcoming spring…if you were to be honest…do you think property values will be higher this spring? This is a question anyone thinking about selling must ask. Should they sell now or should they wait for the spring? Most years that would be an interesting question. There is a belief that many buyers come out in the spring and, with that increase in demand for housing, prices may appreciate. This year is unlike any year in recent memory. Most experts believe there will be continuing depreciation of home values throughout the next 18 months.As I posted on recent BLOG post, there may be a window of opportunity throughout the rest of 2010 as the banks try to straighten out the paperwork on thousands of foreclosures. Once that paperwork is corrected, the flow of distressed properties coming to the market at discounted prices will begin again.
This was mentioned in the latest Home Price Expectation Survey. Robert Shiller, MacroMarkets co-founder and chief economist said this:
“Over the past month, the average projection for 2010 nationwide home price performance improved slightly among our experts, but for each year thereafter it deteriorated. One plausible explanation for this month’s more negative overall sentiment is recent news concerning foreclosure processing questions and the related possibility of extending the supply pipeline.”
Other experts are also reporting that prices will soften next year
In October’s RPX Monthly Housing Market Report, CEO Michael Feder commented:
“We are at a flex point in housing valuation. With record supply, already paltry demand and systemic threats to a possible correction, we remain terribly concerned about forward home prices.”
The very next day, in a special release, Clear Capital reported a “sudden and dramatic” drop in U.S. home prices:
Most recent data shows a two-month 5.9% price decline representing a magnitude and speed of decline not seen since March 2009; similar declines for September and October expected to appear in other industry indices in coming months.
If you plan to sell within the next year, you shouldn’t wait for the spring market. Price the home at a compelling price to make sure it sells in the next sixty days. I would welcome the opportunity to chat with you about your homes market value.