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Low Mortgage Rates, Low Prices – So Where Are The Buyers?

There’s very little debate over the fact that this is a “Buyer’s” Market” right now.  The thing is that this time around it’s a little different than in past market cycles.  There are plenty of homes to choose from, prices are low (still declining in many areas) and interest are as ever.

By all rights, there should be lots and lots of people buying houses right now.  There aren’t!  There are buyers and they are buying houses but not at the pace that the market conditions should justify.

Why not?

Here’s a short video that may be helpful in understanding part of the reason.

New “Quality” Guidelines for Fannie Mae Mortgages

I recently received the following doc from William Raveis Mortgage Company* regarding the new guidelines that went into effect on 6/1/20.

As you’ll see there are some new pieces of documentation that will be required for all FNMA loans. These are being adopted by Secondary Market Investors.

This does not necessarily mean that it will be harder to get through the mortgage process.  It does mean that you should be very vigilant in discussing ALL aspects of getting your loan with your lender.   Being prepared lessens the chances of last-minute surprises.

*William Raveis Mortgage Company is an affiliated company owned by the brokerage I work for – William Raveis Real Estate.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

Will “Shadow Inventory” Drive Home Prices Further Down?

First to start with a disclaimer: Even if the opinions and predictions in this article are 100% accurate – it does NOT mean you can’t buy or sell a home.  It just means you have to work with a Realtor who is staying on top of the dynamics in the market place.    It’s always been my feeling, in all walks of life, that most bad outcomes are the results of  “flying blind”.

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We all keep waiting for the  market to hit bottom and then rebound.  That may not happen for a while – a long while according to an article from Amy Hoaks of Market Watch.

Most of the theory and forecasting in this article come from a presentation that Stan Humphries, Chief Economist from Zillow.com gave to the National Association of Realtor Estate Editors (an 80 year old organization of Real Estate Journalists) in Austin Texas earlier this month.

SUPPLY ‘N DEMAND

The gist of the forecast is, always, about inventory.  Remember the Real Estate Market runs on the very basics of Business 101 – Supply And Demand.   When inventory is down, prices go up and vice versa.

There is much data to support that inventory is going to continue to go up dramatically over the next 18 – 24 months.  Humphries proejcts than even light of the slight up-tick in the national median home sale price – there are two large sources of inventory that likely will hit the streets soon.

SHADOW INVENTORY

The first is “shadow inventory”. These are homes that banks are currently holding but have not yet put on the active market. In addition there are a lot of homeowners who have not yet been foreclosed upon but likely will be. They are way behind on payments, or they are trying to handle a loan modification, which is still difficult for them to make payments.  There doesn’t seem to be an accurate number for this but the consensus is that it’s a big one.

SIDELINED SELLERS

According to Humprhies the other large group – which he estimate to be as many as 5 million homes – are people who have been putting off selling their homes for the last couple of years as they have waited for the market.  Due the plethora of “signs” that the economy is improving slowly, many of these homeowners will put their houses on the market because they really need to move, for whatever reason.

No one really knows what’s going to happen but I think it’s important to stay as informed as possible so you can make contingency plans to handle whatever is coming.

Here is the link to Hoak’s article.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

It is NOT a Good Time To Buy A House!

IT’S A GREAT TIME TO BUY —  OHHHHMMMMM

IT’S A GREAT TIME TO BUY— OHHHHMMMMM

To quote one my heroes, Simon Cowell,  “I don’t mean to be rude but….” SHUT UP ALREADY!

Yes prices are low!  Yes Interesting Rates are historically low!  Yes there’s a ton of housing inventory!

So let me qualify my opening about why everyone should not be jumping on the bandwagon and grabbing up some of the low-priced inventory with the low-interest rates.

It goes back to something that has been mercilessly pounded into our collective consciousness over the last 50 years.

REAL ESTATE IS A GREAT INVESTMENT!!!!

For many years, this was true.  In fact if you search through my blog archives you’ll find that I have taken my turn at chanting the mantra. If I were a politician, I might be called a flip flopper.

Right now – it’s NOT a great investment.  Sure we’d all love to silently hope that the RE Market is going to “cycle back to normalcy” tomorrow – or next month, or next year.  Another Cowelism – “If I’m being honest..”  there really aren’t any indicators that home prices are going to “bounce back” anytime soon.

Of course no one really knows exactly what the future brings and I’m by no means an economist but I continually read just about everything that’s out there on this subject and nothing has convinced me that you can buy a house now and watch your investment grow.

One of the things that makes me believe this has to do with the next “wave of foreclosures” that is coming in the next 9 – 18 months.

So, if that’s the case, you might ask, why did I just spend several hundred dollars and renew my Realtor’s License?

Fact is, there are people who should and will be buying homes and with the market as complex and dynamic as it is right now, those people need a guide like me who knows the ins and the outs so they can make it all the way from their current home to the next as gracefully and smoothly as possible.

So who is it that should be buying?

Glad you asked.

There is only one valid reason to be buying a home right now – if you are looking for a new place to live and plan on staying there for some time. For those people it’s a great time to buy for all the reasons above (low price, low interest tons of inventory).

So what I’m suggesting is this: Be honest with yourself. If you need a new place to live in Connecticut – give me shout and I WILL  help you find it.   If you are thinking that you should buy a house because conventional wisdom has been drilled and drilled that it’s a good investment, you may want consider buying gold.

It IS a Buyer’s Market.  That merely means that there are more sellers than there are buyer’s – it’s just supply and demand. It doesn’t mean that everyone should be buying just to buy.  If you need a house, you can get a great value – a REALLY great value – but think about the house as place to live, not as a way to make money.

Right now in Northern Fairfield County, CT there are more than 2000 Single Family Homes and Condominiums listed for sale.  They range in price from the low $100,000’s to more than $8,000,000.   So there are a lot of options.  If you have a valid reason to purchase one, I’d be excited and delighted to help you sort it all out.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

Single Family Homes in Brookfield CT: Units Sales Level but Time on Market Way Down

The most recent data in shows that for the three month period ending 3/2010,  the number of single family homes in Brookfield CT that were sold is about level with the same period a year ago.

The time it took to sell single family homes in Brookfield is actually down quite a bit.

Video Tour of Bethel CT

If you haven’t had a chance to drive around and see the sights in Bethel CT, here’s your chance.

There are currently 157 single family and condominiums for sale in Bethel.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

The Risks of Killer Negotiation

I’ve written before on this subject and this may or may not be my final word on the topic of negotiation (you never know what’s going to pop into my addled, old brain at any moment.) It covers the subject of why it may be in your own best interest not to approach a home negotiation with the tactics of your character in Mafia Wars.

What is KILLER NEGOTIATION?

In a nutshell it means putting the other party in a vice until they crack. Pushing them to do what you want not by vigorous “give and take haggling” to make the best deal you can, but by testing the limits at which they will “break” and bend to your will.

This can apply to either side – the buyer or the seller.  In a depreciating (buyer’s) market the seller will typically be the target and in an appreciating (seller’s) market it will most often be the buyer.  Not always – it is sometimes about the market and sometimes it’s just about exploiting the other party’s sense of desperation.

KEEP YOUR EYE ON THE GOAL.

I’m in no way urging that you should pay more or take less for a house than the market or your individual situation dictates.  This isn’t about the results of bargaining – it’s about the tactics. Remember what your objective is and why you put yourself into this position in the first place.  The goal is the same for each side: To make the best financial transaction you can in the best time frame with the least amount of risk.

The part of that statement that everyone always zooms in on is the first part – the price!  The goal, however has more than just that.  It’s about your optimum time frame and minimizing your risk.

RISK?? WHATCHOO TALKIN ABOUT?

I JUST WANT TO BUY (SELL) A HOUSE!

BUYER RISK

Unless you are paying cash for a house and are not selling another house, there are pieces of the transaction that you simply have no control over.

Most moves are part of a chain.  The number of links in the chain can vary. If you must complete the sale of your own home in order complete your purchase then you must rely on the success of your buyer.  If that buyer is also selling something then you must rely on the success of your buyer’s buyer.  And so on. The more links the more places something can go wrong.

The old adage about a chain only being as strong as its weakest link doesn’t have a better example than in a chain of home sales that rely on each other.

In addition, if you are acquiring a mortgage for your purchase there are a million things that can go wrong between the time you and the seller agree on transaction terms and the closing. The work flow of a mortgage is dependent on a number of laws that have specific intervals between critical dates as well as being dependent on the speed, work-ethic and efficiency of any number of employees and third party vendors that the bank may employ.

SELLER RISK

Unless you are selling your home with the idea of renting your next home, staying in a hotel while you travel for a while, or moving in with relatives and you do not need the net proceeds from the sale for living expenses, there are parts of the transaction that you have no control over.

The chain affects you as well – on both ends. In order to close successfully you are dependent on your buyer’s success and his buyer’s success. And so on.  In addition, if you are purchasing another home where  you plan to live, you cannot complete that transaction unless the people you are buying from close successfully – and they are dependent on the people they are buying from. And so on.

THE ULTIMATE DYSFUNCTIONAL FAMILY

Sellers, buyers, downstream buyers and upstream sellers are interdependent on each other for a successful move.   You start out as adversaries and then you all need each other to be successful. I’m not a mathematician so I can’t calculate the degree of risk but let’s just say that the more links in the chain the higher the odds that it will break somewhere along the line.

You cannot control anything that happens upstream or downstream.  You can’t even control much that happens with the two closest links, who are your buyer and your seller.  There is one thing that you can do to lessen some of the risk – at least at the closest point to you. You can control the level of goodwill between you and your buyer or seller.

SOME EXAMPLES

Work with your Realtor and come up with a price range that falls in within market value. Negotiate by making offers and counter offers. Try and learn what you can about the other parties sense of urgency and stick to numbers that you think will be accepted.  Wait them out if you have to.  Don’t go to a number that you don’t think is acceptable.  Go as many rounds as you have to, working with your Realtor’s guidance.

The key is to do it with respect.  (The following items are true – names changed to protect innocent).

  • Unless there is a valid reason – don’t tell your Realtor to inform the other party that if they don’t respond to a counter offer within a few hours, you are pulling out.
  • If you are the buyer and in your initial offer you ask for some item that was not in the listing – don’t press the issue if the seller replies that it’s an important item to them and they need to take it when they move.
  • If you are the seller and you settle on price around the time of a holiday weekend and the buyer can’t get an inspector to come out within 3 or 5 days as detailed in the offer – don’t inform him that his inspection contingency is gone
  • If you’ve gone through several rounds of offer/counter offer and you are now $800 apart on a $400,000 home, and the other party offers to move another $400 if you’ll do the same  – do it! Don’t come back and say you’ll do $350 if he’ll do $450

You certainly have the right to do any or all of the above.  As a Realtor, my job is to advise, but ultimately present any and all offers and demands my client makes.

The odds are, whatever side you are on, there is going to be SOMETHING you’ll need from the other party after the negotiation before the closing (These are all true)

  • A buyer is going to ask the seller to extend the mortgage commitment date in the contract by a week
  • A seller is going to ask a buyer if they can rent the house back after closing for 48 hour
  • Either side might need an extra day to execute the sales contract because their attorney was sick

There are a dozen other examples but you get the idea.  The bottom line is that if you put the other party in a box and squeeze the life out of him at the beginning of a transaction – I can assure you that he will remember.

As with most of things I write or talk to clients about – the operative phrase is “Accurate Expectations”.

The funny part of it is, very few strong arm tactics actually change the outcome of your transaction.  It’s almost never about the original goal (see above). It’s about winning.  As I’ve said before a truly successful negotiation doesn’t have to have a winner and a loser.