The U.S. economy has rebounded, and the Fed has increased interest rates to their highest point since 2008. For would-be home owners and sellers, the news brings mixed—and sometimes confusing—messages. Should they act now or wait?
Seeking direction, the frenzy of online analysis can boost confusion.
In Coastal Virginia, for instance, the Real Estate Information Network reports the region “has experienced decreasing inventory month after month,” with the trend culminating in December 2018 “with the lowest number of residential active listings since March 2006.” Of the region’s seven major cities, Portsmouth and Virginia Beach saw the steepest declines, at 10.65 and 13.99 percent, respectively.
Meanwhile, median sales prices have risen for 50 of the past 51 months, with increases averaging 1.47 percent year over year.
The National Association of Realtors reports existing-home sales dropped by 6.4 percent nationwide between November and December of 2018—signaling the lowest sales rate since November 2015. According to MarketWatch, home showings declined by 7.2 percent during that same period, marking “the fifth straight month of comparative yearly declines.”
However, mortgage guarantor Freddie Mac offered some good news. In a statement released on Jan. 17, it said 30-year fixed-rate mortgages dipped to 4.45 percent, a nine-month low. The 15-year fixed-rate dropped to 3.88 percent.
“The decline is very well timed going into the spring selling season,” an economist with Bank of America Merrill Lynch told MarketWatch. “Potential homebuyers who may have been scared from the market during the period of rising rates in the fall could see this as an opportunity to jump back in. Moreover, the labor market is currently very strong with a high number of job openings and upward pressure on wages.”
What does all this mean for buyers and sellers?
We’ve asked four of Coastal Virginia’s most trusted real estate wizards to sift through the information and offer some pragmatic advice. Below, you’ll find a list of pro tips aimed at helping buyers and sellers beat the 2019 market.
For most Americans, buying a home will be the biggest single financial purchase of our lives. On average, we do it just twice.
“The median home price in Coastal Virginia is presently about $233,000,” says Collin McDowell, vice president of Greg Garrett Realty. “For the majority of people, that’s a huge investment. You want to be smart and make a responsible long-term purchase, but there are just so many variables. That can give rise to a lot of uncertainty.”
On one hand, the prospect of home ownership is exciting. On the other, with the 2008 housing crisis looming in recent memory, buying feels riskier than ever before. Further boosting the stress factor is time investiture.
“You’re juggling a career, social life, family,” says McDowell. Add hunting for the perfect new home—and worrying about getting ripped off—and the act becomes much harder. There’s pressure to get in a place fast. “Furthermore, your average person doesn’t look at houses as material goods or commodities but as homes,” continues McDowell. “An emotional element is involved. And emotionality can make pragmatic decisions a lot harder.”
But don’t fret: The following three tips will help you stay balanced and make a smart financial decision.
“The market is always going to be fluctuating,” says McDowell. “Experience has shown me, if you sit around trying to beat trends, time passes fast.”
While it’s great to be a savvy shopper, chasing the mythical “best deal” can lead to a rabbit hole of indecision. Rather than play a guessing game with the future, McDowell assesses the playing field at the given moment and strategizes accordingly.
“There’s always a deal to be had,” he says. “If you’re working with a reputable agent, they’ll know what’s happening in the local markets and individual neighborhoods and will steer you in the right direction.”
Abby Smith of Newport News’ Abbitt Realty Company confirms.
“The Mortgage Bankers Association, Freddie Mac and Fannie Mae all project mortgage interest rates will increase by this time next year,” she wrote in a recent blog. Meanwhile, consumer information company CoreLogic predicts “home prices will appreciate by 4.8 percent by 2020.”
Though fewer homes on the market equates to greater competition, buying cheaper and locking in lower rates now means buyers will save big in the long haul. How big? Smith compares the long-term costs of a $250,000 home bought now to one purchased in 2020 at the rates projected above. Over the course of a 30-year loan, savings amount to more than $51,000.
Build the Right Team
While it may sound obvious, Coastal Virginia’s 2018 Realtor of the Year Seth Johnson says building a strong team is the most important element of purchasing a new home.
How do you do it? Start with online reviews.
“You’re looking for longevity and overwhelmingly positive responses,” says Johnson, an agent with AtCoastal Realty in Virginia Beach. Google and Realtor.com are recommended sites. “If a realtor has ripped somebody off in the past 10 years, it’s going to surface online.”
Step two is scheduling an interview. Prepare a list of talking points, including desired features, price range, neighborhoods and questions about the realtor’s expertise.
“You want someone that’s focused on excellent customer service and is a good fit for your situation,” says Johnson. If you’re seeking a home on the water in Williamsburg, your realtor should have experience in that area. “If you don’t feel comfortable, move on. Eventually, you’ll find the right match.”
Start the Search
Once you’ve found an agent who understands your needs, the next step is starting the home hunt. This process can be enjoyable but could also prove to be stressful if buyers’ expectations are unrealistic.
“Educating buyer clients from the beginning is very helpful so the expectations and process can be defined early,” says Jennifer Cool, a luxury homes specialist with Berkshire Hathaway HomeServices Towne Realty. “I find that many buyers expect the process to be similar to what they see on television.” By alerting clients to the differences between reality and produced house-hunting shows, Cool says it eliminates a lot of potential disappointment.
When it comes down to finding the “perfect” home, buyers may find that such a thing doesn’t exist. “I have not had many ‘perfect matches’ in my 22 years in the business,” Cool says.
She advises buyers to make a list of required characteristics and a separate wish list. “If we can find a home that meets their required criteria but includes some of their wish list, that makes everyone happy. It goes back to a good education of expectation from the beginning so buyers are excited about the process rather than disappointed.”
Shop Around for Mortgages
According to McDowell, the housing market is trending toward a true seller’s market. This means increasing competition for buyers and sellers that are willing to make fewer concessions.
“But for lenders, the competition is steadily rising,” says McDowell. “With fewer buyers, they’re going to be offering more incentives to try and stand out.”
Lenders at the Norfolk branch of Howard Hanna Real Estate Services are no exception. This January, the firm launched its Lock & Shop program.
“Typically, you need a purchase contract before you can lock in an interest rate on a mortgage,” says Howard Hanna Mortgage President F. Duffy Hanna. Whereas, “this program allows qualifying buyers to lock in lower rates and protect themselves from increases while they search for a home.”
McDowell says such incentives will become par for the course in 2019.
Most local realtors agree: The market is ripe for selling.
“When regional home inventory dips below a three-month supply, that indicates a true seller’s market,” says McDowell. In Hampton Roads, REIN says the number is currently 3.51 months—down 10 percent from last year. “With fewer homes on the market, competition increases among buyers. As a seller, you can expect to make less concessions and get a higher price.”
The effect will be amplified in areas like Virginia Beach and Portsmouth, where home inventory has dipped below the three-month threshold. These tips will help sellers capitalize.
Modernize the Space
Though competition is elevated, Johnson says today’s buyers know what they want—and a project isn’t it.
“Buyers want a modernized, hassle-free home,” he says. “Ideally, they’re moving into a place where nothing will need upgrading for a long time.”
How do you make your home stand out? Start with a multiuse kitchen environment.
“Today’s buyers want a place to eat, drink and entertain simultaneously,” says McDowell. Taking out a wall, raising ceilings, and adding bar-seating and modern lighting can go a long way. Sweeten the deal with matching appliances.
A second focal point is the master bedroom.
“Make that area an apartment-like abode,” McDowell advises. Upgrade light fixtures, remodel the bathroom, add a sitting area or a door opening onto a deck. “Younger parents want a place where they can maintain their identity as a couple and as individuals. For millennials, that’s especially important.”
Know Your Limit
Certain updates will make a home more attractive to buyers, but how much should a seller invest in home renovations to make the house more market-ready?
“Having a seller maximize his/her return on their investment is an important step in the process,” Cool says. “Guiding them in the types of updates that may maximize their value while preparing the home for sale should be in the listing agent’s toolkit for immediate answers.”
She suggests doing research on Realtor.com (a digital platform offered by the National Association of Realtors) for an estimate on the expected return for each home improvement made. “Specifically, they recommend a seller should focus on exterior curb appeal, neutral décor and minor kitchen updates rather than taking on a large renovation,” she says.
Cool advises that several factors need to be discussed prior to a seller taking on a major renovation. “Are the plans to live in the home for a long enough period of time to gain some personal enjoyment of the renovations made, or are they only making renovations to get the maximum value of their home?”
She says that in some cases, flooring needs to be replaced, interior and exterior paint needs to be fresh and kitchen/bath renovations need to be completed. “Advising a seller upfront that they may not see a dollar for dollar return on most renovations is critical.”
So, what major improvements are important to consider? “Beyond the cosmetic updates, explaining to a seller the importance of making sure all systems, structure and roof are in good order needs to be the forefront of the conversation,” Cool says. “In many instances, these are the items that could prohibit a sale from going through.”
With more millennials (ages 18–34) looking to buy homes, technology can be a deciding factor. Though rarely a primary element, it’s often what tips the scales.
“If a buyer is on the fence and you show them how to remotely manage heating and cooling from their phone, that can be the difference between a pass and a sale,” says Johnson.
If you’re on a budget, smart improvements like app-controlled video doorbells, garage door openers, deadbolts and dimmable lights are cost effective additions. Up the ante with a whole-home Wi-Fi system, remote controlled shades, smart audio, TVs and more.
Time vs. Money
Despite the promises of a seller’s market, McDowell says it’s either time or money—never both.
“If you need to sell your home fast, expect to leave some money on the table,” he says. On average, it takes around 65 days to sell a home in the U.S. To beat that rate, “price slightly below your neighborhood market value. This signals to brokers you’re serious about selling but doesn’t suggest desperation.”
Ideally, the strategy leads to multiple offers. Subsequent bidding battles may drive up the price.
But what if your goal is to get top value for your home? That’s going to take time.
“You’re waiting for someone to walk in and say, ‘This is it,’” says McDowell. “If you get lucky, that happens right away. More often than not, it’s going to take longer than average.”
But if you’re patient and willing to wait? You’ll get your price.