Happy Thanksgiving and Black Friday

Well it's Black Friday today and that means all the stores will be extra crowded today, oh goodie ;) I do hope you all enjoyed your Thanksgiving. Those of you thinking about buying or selling from this point forward to the end of the year, remember that it can actually be a good time to be either a buyer or seller in  during the holidays. I know, I know, I harp on this every year. But look-loo buyers tend to go away during the holidays, people have too much going on to waste time poking around at houses they are not going to buy. So seller's can capitalize on a smaller group of serious buyers. Meanwhile fewer sellers are in the market because let's face it, it's already a pain in the backside to have your home on the market and during the holidays that pain is much worse. Many sellers choose to wait till after the holidays to list their home or they pull it off the market until January.

All the rules still apply, keep the driveway and front walk free of slippery leaves or snow and ice. Salt the walkway on cold days and keep the rain gutters clear. Minimize clutter and don't make it difficult for buyers to show the home. Buyers you can take advantage of the fact that sellers during this time period tend to be a bit more motivated.

All in all our local market still favors sellers but only modestly so, sellers cannot count on multiple offers any longer so if you write something reasonable on a listed home, there is a solid chance you will get the home. 

Happy Holidays!

Holidays and Winter Weather Lie Ahead.

Yes the holidays are upon us once again and so my annual advice for listing homes in the holidays and winter months is due. I have said many times that the Holidays can be a good time to sell because often competing properties are either delayed until January or withdrawn for mt eh Markey until after the holidays. Buyers tend to be serious during this period of time as do sellers, so it's a good time for both buyers and sellers.

During this period of mid-Fall sellers need to be sure to keep the leaves clear on the driveway and walkways leading to the house. Be sure to keep rain gutters clear as well to avoid clogged downspouts that back up water and leave a wet dripping mess for your would be buyers. Leaving the nice leaves with their Autumn hues on the lawn is fine, but make sure your clean them up when they start to turn brown or get mushy. That which is beautiful can quickly become an eye-sore. 

As the season progresses and we start seeing winter weather, be sure to keep the driveway and walkways clear of snow and other debris that accumulates after big storms. You want your listing to be enticing and you don't want to lose out on a potential buyer because they feel they can't traverse the slippery surfaces that can arise in Autumn and Winter.

Will this Winter Season, Bring a Return to Neutrality?

I have been writing about the strange market conditions over the last year now where we have a combination of low demand and low supply. This has led to a massive slowdown in the sales of homes, but not a massive slide in prices. The market correction many have suggested is eminent, is currently being stayed due to a lack of inventory. Inventory however, has been slowly creeping up. As of the close of October local inventory levels are at 2.8 months. This is still an indicator of a mild sellers market, but it doesn't feel like a sellers market, it feels neutral. The old school rule of thought is that six months of inventory is a neutral market, anything less favors sellers, anything more favors buyers. 

This market is starting to feel neutral. We are still well into sellers market inventory and that is what makes these conditions seem weird. The recent run up on interest rates seems to have the remaining qualified buyers much more cautious. I have noticed that Millennials in general have been a more cautious group of buyers than their predecessors in Gen X and Boomers. Those two previous generations had a tendency to borrow as much as the bank would allow whereas Millennials have shown a tendency to be more conservative and not rush to borrow every last cent. 

So I think that is playing a role in having sellers market inventory levels yet neutral feeling conditions. As a Realtor® I certainly would prefer buyers borrowing every last cent, right? But it is also very comforting to see younger people using money wisely. Price pressure right now is downward at a time it should still be rising. The local median has been close to flat over the last twelve months. Sellers need to price their home competitively and the notion of floating a higher price for the first few weeks is no longer a winning strategy. Sellers need to be competitive from day one.

Buyers meanwhile should understand that interest rates have averaged in the mid-6s over the last 50 years. We had all time high interest rates back in the late seventies and early eighties and then after the 2009 crash, rates plummeted to all time lows. It is always a difficult adjustment coming from super low rates into more average and now slightly higher than average rates. I am confident that we are unlikely to see rates reach the horrific levels of 45 years ago, but they could creep up a little more before they start coming down. I would not expect to see another long term period of sub five percent rates anytime soon. 

Buyers obtaining a mortgage loan in the upper 7s to low 8s will likely have a refinance option in the low 6s at some point over the next five years. Of course life offers no guarantees, it is not an unreasonable assumption that we will see a softening in interest rates in the next several years. 

Market Crash? Should I Buy or Wait?

Some doomsayers are predicting another serious market correction is eminent. Now this is certainly a possibilty. Many of the conditions that precipitate a market correction are in fact in place right now. 

• Slightly higher than average lending rates. 
• Tightening of consumer credit by large lending institutions.
• Below average pool of qualified buyers.
• Hyper inflated prices after long aggressive rise.
• Unstable economic conditions.

These are all indicators of an eminent market correction. However there are also several counter conditions that are keeping the market stable in spite of the above bullet points. This certainly applies to our local market if not the market nationally.

• Extremely tight inventory levels driven by owners married to a low interest rate.
• High positive growth rates as more people moving in than out (Local Clark County).
• Continued high demand for rentals with inflated rental rates.
• Unstable conditions in other markets can drive investors back to real estate.
• High interest rates attractive to institutional investors buying mortgage paper.
• High overall quality of existing mortgage debt. Minimal sub-prime paper.
• Strong local economy helps us locally.

So the real news is that there is no news. Other economic conditions need to change for a traditional "crash" type correction. What we are witnessing right now is a very soft landing with prices flat or ever so slightly declining.

For buyers the decision should really be based on how long they intend to live in the house they might buy. If someone buys a house today and then decides or must sell it a year later, that is not a favorable situation and renting would definitely be the better option. In an uncertain market with a high probability of at least a modest correction I would recommend a five year commitment to any house purchase din the current market. 

I do not think a major hard crash like we saw in 2009-2012 is eminent. That situation was much bigger than real estate. Banks had been making really sketchy loans for over a decade and that led to a near collapse of the banking system. Those aggressive types of loans have been almost non-existent since the federal revisions were made by Congress in 2011. 

I'll play Devil's advocate and suggest that we have a repeat of 2009. What would that look like? Well suppose buyer Jones bought a house in 2008 for $300,000. By the time the market hit bottom around 2012 the house was worth about $175,000. Not good, not good at all if you had to move. The house returned to $300,000 in value around mid to late 2014. For the sake of being conservative let's say it was 2015. That is a seven year period from top to bottom and back to par. That my friends was the worst real estate crash since 1929 and the Great Depression. There is no reason that couldn't happen again, but it is extremely unlikely. 

Buyers willing to commit to a five year stay can rest assured that barring a catastrophic economic failure, they would be in position to sell with enough proceeds to clear the note and exit the property at the end of that period with maybe the exception of putting less than 5% down. Low down borrowers should add a year or two to the commitment window just to be safe. But in a mild correction even low down and no down borrowers would be able to sell and clear the bank note after five years. 

In general I wouldn't let higher rates or the threat of a possible correction stop me from buying a home so long as I am prepared to stay in that home for a minimum of five years. When rates settle down, and they will settle down eventually, buyers will have an opportunity to refinance the loan into a lower rate and save money in the long run.