With this icy weather I suppose real estate will have to wait till things are bit more hospitable outside. In the mean time may you and yours enjoy a warm holiday week and a Happy New Year.
Friday, December 16, 2022
I have brought this up in past winters and I'll bring it up again. Sellers with a vacant house to sell need to recognize that cold snaps happen around here from time to time and trying to save on the heating bill by shutting down the furnace is a recipe for disaster. We are in a mild cold snap now with temps expected to dip into the teens in outlying areas and highs barely above freezing. It only takes 2-3 days in a row like that to freeze pipes in home that has the furnace turned off. Enter exhibit A, I showed a vacant mobile home yesterday that was 39º INSIDE the home. The thermostat was set to OFF rather than just lowered to say 58º or so. Keeping the house heated to 58º will literally cost $20-30 a month, but the nightmare scenario of broken pipes will cost thousands, and you might have to fight the insurance company if they find out YOU turned off the heat. I called the listing agent and told her about it; I asked permission to set the thermostat to 58º which I believe to be the minimum in our damp climate. 58º is widely accepted as ideal for keeping a vacant house from suffering damage. She agreed and disaster was averted. The listing agent did not realize the seller had turned the thermostat off entirely.
It would have only taken a couple more days for the pipes to freeze and burst causing thousands of dollars in damage. Had this cold snap been a real bad arctic style event that we occasionally get they would have already been burst by the time I arrived. We do get deep freezes here from time to time. If the seller is hell bent on turning off the furnace then they should have the home properly winterized by a professional. That will costs a few hundred dollars but will save a lot of money in the long run. Even modern well insulated homes will suffer heavy damage if left without heat for a long period as our damp cold weather will allow for moisture to form on surfaces allowing mold and mildew to thrive.
I have shown houses that had burst pipes when I showed up, one time back in December of 2009 I showed a very expensive mansion that had been repossessed by the bank and they had not winterized. Power had been shut off to the home. The extent of the damage was monumental. Heated travertine floors had been pushed up and broken by pipes breaking underneath and water was gushing through the ceilings from the upstairs, ice everywhere. The house easily had $200,000 in damage. That was a $2 million dollar home by today's prices, I think the bank had it listed at that time for $900k or so.
The rule is easy, 58º or winterize. Violate the rule at your own peril.
Friday, December 9, 2022
This tends to lead to slower activity in real estate. But as I mention every year, December can be a busy month and people engaging in real estate this month are generally very serious and in some cases "need" to move. Both parties tend to be motivated to make the deal work and this can be good for all parties. Sellers need to make sure they keep their property clear of snow, mud, leaves, and other late autumn, early winter issues. Clean out the rain gutters and keep the house as presentable as possible during the darkest and wettest months of the year. Seller also should make sure all the light bulbs work inside the house and keep all the lights on during showings. Light and bright sells homes.
Buyers need to remember that this time of year may lead to some days or times that the seller cannot or will not show the property, flexibility could be the key to finding the right house. The slower conditions during the holidays also means that things like appraisals, and inspections may be easier to book in a timely fashion.
Both buyers and sellers however should also be mindful that their are more scheduled holidays, days, off and such in the supporting industries like, title and escrow, lending, and such that can cause some minor delays.
The holidays can be a great time to buy or sell, yes it is inconvenient to deal with all the fuss during this family oriented time, but it can lead to opportunities that may not present themselves in other seasons.
Friday, December 2, 2022
This week saw a little relief in the mortgage lending rates with the Fed softening their stance a little on rate hikes. I have one client that went from 7.125% to 6.625% which greatly improved his purchasing power. Buyers should be optimistic as sellers are now considering closing cost assistance which sometimes allows buyers to buy down their interest rates to make the payment manageable. Even if rates relax a little, buyers may still be able to push the rate down lower buying points to reduce the rate. Sellers can help with this in some situations.
I would advise buyers find a trusted pro in the lending business who will take the time to explain the pros and cons on buy downs. Every buy down has a cost and there is a specific amount of payments that have to be made before you recapture that cost. For example I have a client that just found a condo they like and are preparing and offer. He wants to soften that payment up to allow for some wiggle room on qualifying for the loan. The rate was 7.125% at the time he could spend an extra $1,700 to buy the rate down to 6.875% which lowers the payment on his particular purchase by $80. This is not an expensive property he is buying. It will take 37 months of payments to recapture that $1700. Since this is a first time home purchase it is highly likely he will remain in the home for more than three years so the buy down makes financial sense. However if the buy down is needed to qualify then it may make sense even if the recapture time is longer. Furthermore, if the seller is helping with closing costs then the recapture almost becomes moot.
I am old enough to remember double digit mortgage rates and when I graduated high school 30 year fixed rates were 17-18% which made those loans nearly impossible. All kinds of specialty adjustable mortgages came to market to try make the entry point lower and they were largely successful. Rates over the last 50 years have averaged about 6-6.5% and where we sit now is about average, maybe just a tick higher. For young people under the age of 35 these rates may seem high since their entire adult lives saw rates lower than they are now. This is the highest they have ever seen, and that is a bit of a price shock for them. Even older buyers have to be reminded that this is really pretty normal rates, we just came off a ten year period where rates were riding the bottom of the historical curve making homes more affordable. That however led to higher demand for homes and thus we saw prices skyrocket. In the end if the Fed gets it right and doesn't overcorrect, we may just see a nice neutral real estate market for a few years. Unfortunately the Fed does have a tendency to overcorrect. Let's hope they get it right this time.