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Market Commentary – 2015 February

Shoulda, Woulda, Coulda

When making the multitude of decisions required when selling or buying a home, it is helpful to think ahead to the consequences of each decision (or NON-decision). If you would have (“woulda”) done something different because you could have (“coulda”) been in a better position, then you should have (“shoulda”) decided differently. For example, a seller should have agreed to the buyers’ request for repairs because the seller could have had a firm buyer and, therefore, would have sold the house by now. Also for example, a buyer should have offered a higher price because the buyer could have afforded the difference and, therefore, would have won the competitive bidding.

These are not small decisions that buyers and sellers make during the process. However, being agreeable doesn’t make you a loser and may be the right thing to do so YOU can begin the next chapter of your life. Too frequently, transactions fail because someone either CAN’T continue or they decided it was a priority to best a seller/buyer rather than buy/sell their house. This kind of attitude creates animosity and hinders the achievement of the goal.

Economics Rule

The local market had a surge of activity since the second week of January, which will show up in next month’s data. The active buyers are getting clean and nice homes from sellers who have prepared and priced their homes to sell. There are competitive bidding situations and appraisers are holding the line. The aggressive appreciation is being tempered by a global lack of confidence, lack of job and wage growth, and the pent-up inventory from sellers who have waited years for some kind of equity.

Each seller and buyer comes with their own economic past, present, and future. Their employment is a big part of that. If a buyer is confident about their future sources of income, they can and should buy a home. So economics is strongly influenced by confidence. The cost of money is also a force that affects demand. When prices are moderate, other people’s money is available, product is of good quality, and the economics make sense, the market will allow more successful transactions. When there is an overall balance between upward and downward price momenta, the result is an equilibrium between supply and demand. This equilibrium and “sanity” in the market contributes a positive force back on confidence.

What matters, though, are the leading indicators which give me hope that the Spring Swing will continue and, for many sellers who finally have some equity, there will be buyers with an improving economic outlook. As a good lender will tell you, though, the economic outlook for a buyer is how loans are approved. But they don’t ignore the buyer’s economic history.

Sellers should have competent advice when evaluating the home’s needs, marketing strategies, and buyer strength. Sellers need a persistent and patient strategy AND a clean house. Call me if you want an honest, knowledgeable professional on your team. This will be a good year.

Seasonal Market Dip.

Sales decreased 33% for January to 874 single family home sales. This is down from 1,306 sales in December and the lowest volume since February 2008. Equity sales led the market, accounting for 83.4% of all sales. For the month, REO and short sales increased and conventional sales decreased 4.3%.

Of the sales this month, 20% used cash financing, 46% used conventional financing, 23% used FHA , and 6% used VA financing. The average DOM (days on market) for homes sold this month was 41, while the Median DOM increased from 26 to 34. These numbers represent the days between the initial listing of the home as “active” and the day it goes “pending.”

Breaking down the Days On Market, there were 474 listings that sold between 1 – 30 days, 223 listings that sold between 31 – 60 days, 145 between 61 – 90 days, 74 between 91 – 120 days and 98 sold after being on the market for over 120 days. These numbers included both SFH and condos.

The Sacramento median sales price:

  • decreased 3% from December, and
  • increased 6% since January 2014, and
  • decreased 35% since the August 2005 high.

A decrease in sales pushed the Months of Inventory up to 2.7 months. Despite this increase, the Active Listing Inventory actually decreased 3% since December although 41% higher than January 2014.

Product Preparation.

The top 10 home improvements are listed by the greatest return on investment (ROI):

  1. Cleaning and de-cluttering (586% ROI)
  2. Lightening and brightening (313% ROI)
  3. Home staging (299% ROI)
  4. Landscaping (258% ROI)
  5. Repairing electrical or plumbing (ROI)
  6. Kitchen and bathroom (172% ROI)
  7. Replace or shampoo carpets (169% ROI)
  8. Paint interior (109% ROI)
  9. Repair floors (107% ROI)
  10. Paint exterior (51% ROI)

What’s interesting is how consistently listing agents recommended the same home improvements. Nearly 100% of listing agents recommend cleaning and de-cluttering, while 97% recommended lightening and brightening and 80% recommended staging.

These top three categories cost just a little over $1,000, yet netted sellers as much as $5,734 at closing. As defined by HomeGain, the top three money-makers for sellers are:

  • Cleaning and decluttering: Remove personal items; wash and clean all areas inside and outside of house; freshen air; remove clutter from furniture, counters and all areas of the home; organize closets; polish woodwork and mirrors, etc.
  • Home staging: Add fresh flowers; remove personal items; rearrange furniture; add new props or furniture to enhance rooms; play soft music; hang artwork on walls, and improve aromas [eliminate odors].
  • Lightening and brightening: Open windows; clean windows and skylights inside and outside; replace old curtains; remove other obstacles from windows that block out light; repair lighting fixtures; make sure windows open easily, among other suggestions.

What Buyers Want.

Homebuyers are more interested than ever in purchasing an energy-efficient home. With the weather still shockingly cold in some areas of the country, people are looking toward the warm weather months ahead. Extreme temperatures also mean that buyers will be looking at a home’s cooling/heating costs and energy-saving features with a more critical eye.

There are several simple steps you can take to help lower monthly utility bills, increase your property’s overall appeal and reduce the impact on the environment. Here are just a few:

  • Contact your utility company to arrange for an energy audit that will show where the home is energy inefficient.
  • Caulk and use weather stripping to fill air leaks around doors and windows. This will minimize the amount of heating that is required to keep the house warm. It will also help keep the house cool during the summer months.
  • If you will be purchasing any new appliances, choose energy-efficient units that appeal to buyers because of the savings on energy costs.
  • For a major project like installing new windows, double-glazed windows are recommended because they help insulate the home from both hot and cold weather.

Check The Sunny Side.

There has some movement toward solar panels and, hopefully, relief from the rising cost of electricity. Some of the sellers who lease a solar system have not considered the “exit strategy” for this kind of investment. Ask your solar vendor some basic questions to better understand how you or the next owner will benefit [or not] from the panels, connections, and expenses.

  1. Is the system and lease contract transferrable upon sale of the home?
  2. Do your installers understand roofing structures and how to integrate the panels without affecting the integrity of the roof?
  3. Does your home have a good place for the panels?
  4. Do your neighbors (or HOA) need to approve your system’s placement?
  5. Will the system have a “storage” mechanism such that excess power is usable on a cloudy day rather than “given” back to the utility company?

This last question will probably not [yet] have an acceptable answer and, when this storage capability is available, the economics will drive many more users to the technology. But think about the “exit” in regards to how a buyer would value the system. If the buyer doesn’t like the structure of the lease, it may impede your sale or even affect your asking price. Don’t get stuck with handcuffs.

Deal Killers.

When you’re selling your home, you need every advantage you can get. And there are few homes that are magically market-ready without help. If your home needs a touch more than a little help, it’s time to get focused. After all, listing your home when it’s not in the right condition to sell will probably only end in frustration. And, in this case, frustration means: your home sitting on the market for months with no offers or the errant, offensive, lowball.

If you want to make sure you get home sold quickly and for the right price, you’ll want to avoid listing it with the following:

  1. Excessive Damage — prior rental; deferred maintenance
  2. Carpet in the bathroom — especially around commodes
  3. Big, nasty stains — get rid of them
  4. Bad smells — get rid of the source
  5. Loud dogs with bad timing — ask neighbors for help
  6. Your dead lawn — curb appeal is critical
  7. A bad agent — there are good ones
  8. Your sloppiness — buyers will make assumptions
  9. Unreasonable sellers — reality will win anyway
  10. Bad Taste — small updates can really help

A Worthy Publication

Every other month, many of my friends receive a magazine (American Lifestyle) full of color, creative content, and cuisine. American Lifestyle celebrates the flavor and flair of life in the United States, and takes readers on a journey through the nation’s sights, and sounds. The magazine doesn’t really contain food but comes with recipes and ideas for home owners.

If you would like a free subscription to my magazine, please call me. It would be my pleasure to send you your own.

My Gold Team

Another helpful item for you is my Gold Team. This is a list of professionals who I would suggest for many different kinds of services. Let me know if you would like to suggest a professional or if you would like to interview or hire anyone on my Team.

Houses live many lives as homes for many lives.”   – Jay Emerson

Call or text me: 916-517-9606

 

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