Confidence in Housing Stays Strong, but Weakens for Economy

Consumer confidence in the economy is wavering, but confidence in the housing recovery remains high, according to Fannie Mae’s National Housing Survey for March.

“Despite an uptick in concern expressed about the direction of the economy, it appears consumers believe that the housing recovery will march on,” said Fannie Mae SVP and chief economist, Doug Duncan.
The percentage of people who say the economy is on the right track declined 3 percentage points in March to 35 percent. At the same time, 21 percent of people said they expect their personal financial situation to worsen over the next 12 months, a 4 percentage point rise from the previous month.
Despite this increase in pessimism, Fannie Mae found consumers continue to view the housing market with relative optimism. Forty-eight percent of survey respondents expect home prices to rise over the year, unchanged from February’s all-time high for the monthly survey, which started in June 2010.
In contrast, just 10 percent of survey respondents anticipate falling prices, an all-time low for the survey.
Another survey high was reached in response to the home-selling environment. Twenty-six percent of respondents say now is a good time to sell a home, a 1-percent increase from February.
Duncan pointed out that while consumers share a positive outlook on the housing market, they are “cautious.” In fact, their predicted price gains often lag the market.
March is the 17th consecutive month in which consumers have predicted yearly price gains. However, they have continued to predict price gains of less than three percent.
In March, consumers predicted a 2.7 percent price gain for the following year.
“By comparison, main measures of national home prices in early 2013 posted year-over-year gains of at least double or triple that figure,” Duncan said.
About 46 percent of survey respondents anticipate rising mortgage rates, while just 6 percent anticipate further declines in mortgage rates over the next 12 months.
Forty-three percent think mortgage rates will remain about the same.

Seller's Asking Prices Move Higher and Rent's are Stable

Asking prices on single-family homes rose in March, while high inventory flattened out rent prices, according to Trulia's Price and Rent Monitors.

Based on data on for-sale homes and rentals listed on Trulia, the monitors take into account changes in the mix of listed homes and reflect trends in prices and rents for similar homes and similar neighborhoods through the end of March.

With the spring house hunting season upon us, Trulia reported a 7.2 percent year-over-year increase in asking prices on the national level (8.0 percent excluding foreclosures). On a seasonally adjusted basis, prices rose 1.1 percent month-over-month (1.4 percent excluding foreclosures) and 3.5 percent quarter-over-quarter (4.0 percent excluding foreclosures.

Regionally, prices rose annually in 91 out of the 100 largest metros. Once again, the West made the biggest splash in terms of price growth, with Las Vegas, Phoenix, Oakland, Sacramento, and San Jose showing yearly improvements of higher than 20 percent.

On the other hand, rent price growth—for single-family homes, at least—showed signs of stagnancy in March. Nationally, rent for single-family homes increased 0.1 percent year-over-year.

“Why have rents stopped rising on single-family homes? More supply,” explained Jed Kolko, chief economist at Trulia. “Investors have purchased single-family homes—including many foreclosures—and are renting them out. In fact, the number of single-family rentals nationally has increased by almost one third since the housing market last peak: that’s nearly 4 million more single-family homes rented in 2012 than in 2005.”

On the apartment side, rents rose 2.9 percent year-over-year. Taken together, national rents were up 2.4 percent year-over-year in March.
While oversaturation has hindered single-family rent price growth, it may provide a boost in the purchase market very soon.

“Rising prices and flattening rents change the math for investors and renters,” Kolko said. “Some investors will decide to sell the units they’ve been renting out, which would create new desperately needed for-sale inventory. At the same time, some renters watching prices rise will rush to buy before prices rise further, but those who don’t will at least get some relief from stabilizing rents.”

3 Myths of Real Estate

As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works.
Their assumptions may come from TV reality shows or watching their parents' house-hunting experiences. Maybe they've learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized "real estate myths." Here are three such myths that many less-seasoned home buyers and sellers assume are true.

Myth No. 1: Spring is the best time to sell a home
Historically, real estate seasons were tied to summer and the end of the school year. Families were the typical buyers or sellers, and they wanted to move during the summer so their kids could start anew in September. That’s how spring became the prime selling season. It’s true there are still more homes for sale in the spring, which means there’s a lot of activity and buzz. But spring isn't necessarily the best time to sell a home anymore.

The reality: The best time to sell is during the holidays and right after
Today, more than half of buyers aren't married, and their decisions aren't based upon school schedules. So spring isn't as relevant as it used to be. Instead, the best time to sell a home is in November, December and January.
It’s a supply-and-demand issue. Most sellers assume buyers aren't seriously looking during this prolonged holiday season. And yet, many buyers are looking at properties in person and online right up until Christmas Eve. If the right home goes on the market in mid-December, a serious buyer — and there will be a lot of them — will take note.
After New Year’s Eve, most buyers jump back into their routine with a resolve to get into the real estate market, even though many sellers wouldn't even consider listing in January. The net effect: Savvy sellers will face less competition for a still-strong pool of buyers during this period. And that makes November-January a great time to sell.

Myth No. 2: Always start with your lowest offer
There’s no generalized strategy for making an offer on a home anywhere, ever. A seller could have overpriced or underpriced the home on purpose. Some markets may be more competitive than others. But, somehow, in the back of the buyer’s head is good old Uncle Bob saying "never offer the full asking price." That strategy might work if you’re trying to buy a used computer on eBay. And it worked in some real estate markets years ago. But times have changed.

The reality: A low offer may get you nowhere fast
A buyer in a strong, tight inventory market today would be wasting their time making low offers right from the start. It’s likely a home that’s priced right and shows well can receive multiple offers, sometimes even over the asking price. In this environment, constantly throwing in low offers because that’s what your Uncle Bob advised you to do will likely lead to disappointment. Instead, work with a good local real estate agent o understand the market. You’ll quickly learn after a few weeks on the open house circuit (and maybe a disappointment or two) that starting low may not get you anywhere.

Myth No. 3: A cash offer trumps all
There’s an assumption that a seller, considering two different offers, will always go with the cash offer because there’s less risk. As a result, many buyers who hear they’re competing with a cash offer assume they won’t get the home. They may not even make a formal offer. At the same time, many cash buyers assume that because they’re paying cash, they can make an offer below the asking price, and it will likely be accepted.

The reality: A savvy seller may be more tempted by a solid financed offer
Consider a seller with a home priced at $399,000. The seller receives two offers: One is a cash offer of $375,000. The other is an offer for the full asking price, with 25 percent down, a bank pre-approval letter and swift contingency periods.
A good buyer’s agent, upon learning their client is competing with a cash offer, will arm the seller with lots of data supporting their client’s finances, such as a credit report and verification of income or assets. The agent might even arrange a call between the seller and the buyer’s lender.

Learn your market
When you become a buyer or seller, especially for the first time, the most important thing you can do is learn your market. Talk to a savvy local agent, and don’t make assumptions based on what you think you know. Real estate is local. Every market is different, with its own customs. If you believe there are general rules for real estate strategy that apply everywhere, anytime, you’ll likely be fooled — not only in April, but every other month of the year.

Surprising Real Estate Tax Consequences

It’s no surprise that owning a home automatically opts you into a new realm of tax advantages. In fact, in a recent survey of people who bought homes in 2012, 79 percent said the mortgage interest and property tax deductions were "extremely important" factors to their decision to become homeowners in the first place.  

But these two deductions are just the tip of the iceberg of all the real estate-related tax guidelines, advantages and disadvantages.  Because others get less press, it can be relatively easy for an individual American taxpayer to unwittingly trigger tax liabilities they might have been able to minimize or plan for, or to unwittingly trigger tax perks and fail to claim them.

This is why its essential to touch base with your tax pro before any and every real estate move you make, no matter how minor you think it might be. Sometimes planning and timing makes a major difference to the financial impact of a real estate-related tax; other times, just knowing the size and scope of the tax implications will impact the real estate decision you make. 

Here is a short list of real estate moves that trigger surprising tax issues, pro and con:

1.  Refinancing.  American homeowners have been on a refinancing spree this year, spurred by continually low interest rates and a new resurgence in home values and equity. When you refinance into a lower interest rate mortgage than you previously had, the focus tends to be on the fact that your monthly payment is lower or that you can pay your home loan off faster with the same payment every month.  

What many fail to calculate for is that the tax deduction based on your mortgage interest is the largest tax perk of home ownership. Most homeowners are eligible to deduct 100% of the interest they pay on a mortgage up to $1 million on their primary residence.  So, if you reduce the interest you pay, you also reduce your mortgage interest deduction.

Here’s some perspective on this.  Less than 30 percent of homeowners take their mortgage interest deduction every year. This is thought to be because at lower income and home price levels, the standard deduction is higher than the itemized deductions for which many homeowners would be eligible. That said, if you do itemize every year and/or you have a relatively high (or growing) adjusted gross income, you might be surprised at your tax bill the year after you refinance to a lower interest rate. 

The best practice is to loop your tax professional in so they can help you plan for this and adjust your withholdings, if necessary, to avoid big surprise tax bills post-refi.

2.  Becoming a landlord.  Smart real estate investors get up to speed on capital gains tax laws, as its no surprise that selling a rental property at a profit triggers taxes, unless you exchange it for another. What’s trickier is when you become a more or less “accidental landlord.”  It’s not obvious to people who are renting out a room for a few nights here or there, or who decide to rent out part or all of their own home for the longer term (e.g., deciding to hold onto your starter home when you move up, versus selling it) that there are tax implications for being a landlord that should be researched and respected.

For example, rental income is subject to all the regular income taxes, federal and state (if applicable).  As well, in some cities, you might also be required to obtain a business license and pay business taxes, as a landlord.  Additionally, some municipalities are cracking down and requiring people who rent their home or portions of it for very short time frames to pay hotel taxes, which might be a cost you can pass down to your short-stay tenants. 

3.  Remodeling. The conventional wisdom is that when you remodel your home, whatever you do, for the love of all that is sacred, save your receipts. And this is not a ‘save them until tax time’ recommendation, it’s a ‘save them until you sell the place’ mandate!  The money you invest into improving your home over time gets added to your purchase price, or cost basis, when you sell, bringing down the amount the IRS considers to be profit or gain and reducing your chances of incurring capital gains tax. (Single home owners can realize $250,000 of “gains” above the cost basis of their home tax-free; marrieds, $500,000.)

This is no surprise to most homeowners. 

Here’s where many of us do get surprised - many remodeling projects popular with homeowners these days trigger local and state tax credits. This is especially the case for home improvements that increase your home’s efficiency, from low-flow toilets and shower heads, to dual-paned windows and insulation - even solar systems and tankless water heaters. If you are remodeling and improving your home’s efficiency at the same time, visit your state, county and city websites to see what tax credits or other financial incentives you might qualify for.

And whether or not your remodeling projects are eco-friendly, if you use a home equity line to finance them, chances are good that you can deduct the interest from that loan (up to $100,000) on top of your home mortgage interest deduction.  Again, don’t forget to mention this to your tax professional.

4.  Renting. Here’s the thing - most of us just don’t think about renting as an intentional decision.  It’s something many people do until they can afford to buy a home, or know where their career will take them geographically speaking.  But there are people out there who have sufficient income, assets and stability to own a home, yet haven’t developed any sense of urgency around it, for various reasons.

I don’t believe in suggesting that someone who truly doesn’t want to own a home should do so, simply for tax reasons.  But if you’ve been ambivalent about it or have been thinking about it and procrastinating, you should at least be aware of the tax implications of your fence-sitting. Some personal finance experts estimate that the average American renter works through the end of April just to earn enough income to pay taxes, federal, state, local and sales.  As you move up the income ranks, consult with your tax professional about whether home ownership might get you some tax relief.

More and More Homeowners Say Now Is The Time To Sell

In Fannie Mae’s most recent housing survey, consumers maintained their optimism toward home prices, while the share of consumers who said now is a good time to sell reached a record high. However, consumers in the survey were less optimistic about the economy and their own financial situation.

Nearly half, or 48 percent, of respondents in the February survey said they expect home prices to rise in the next 12 months, up from 45 percent in January. On average, consumers expect prices to rise by 2.9 percent over a year, up from 2.4 percent the month before.

Seventy-three percent of respondents said now is a good time to buy, an increase from 69 percent the month before. At the same time, 25 percent also believe now is a good time to sell, the highest level since the survey’s June 2010 inception.

“Despite fiscal headwinds and political uncertainty, consumer sentiment toward housing is robust and continues to gather strength,” said Doug Duncan, SVP and chief economist at Fannie Mae. “We expect home prices to firm further amid a durable housing recovery, gradually reducing the population of underwater borrowers and helping to boost the share of consumers who say that now is a good time to sell.”

Along with the increase in prices, more consumers also think mortgage rates will go up, with 44 percent of respondents expressing this view last month compared to 41 percent in January. Only 7 percent believe rates will go down.

With the year-end HARP deadline looming ahead, Duncan explained rising rate expectations should prompt some borrowers to refinance soon to take advantage of more favorable mortgage terms. As a result, Duncan said this should “add to their disposable income, helping to offset ongoing fiscal drag.”

As for views on rent prices, 50 percent of consumer expects rent prices to go up in the next 12 months, unchanged from the month before and at the highest level since the survey began.

A large majority of respondents, 67 percent, said they would buy if they were to move rather than rent, up from 65 percent the month before.

When asked about the economy, 53 percent of respondents said the economy is on the wrong track, unchanged from January.

Consumers were more pessimistic about their personal financial situation, with 41 percent believing it will get better, down from 43 percent the month before. More respondents said they think their financial situation will stay the same, with 41 percent of consumers expressing this view, up from 37 percent.

The share of respondents who said their household income is significantly higher compared to a year ago decreased over the month to 21 percent from 23 percent. However, 31 percent said their expenses are significantly higher, down from 38 percent in January.

Fannie Mae’s survey polled a representative sample of over 1,000 respondents.

Five Tips From Sellers to Buyers

The conventional wisdom is that buyers and sellers go together like oil and water. That is to say, they don’t go together at all. Some say they are at odds simply by virtue of sitting across the bargaining table from one another, which - along with negotiation and legal issues that are par for the home buying course - create the presumption that they want totally different things.

The prime example of competing buyer and seller interests is this: the buyer wants to pay as little as possible, while the seller wants to get top dollar for the place. But there is another way to look at this entirely.  In fact, there’s a point of view from which the buyer and the seller want exactly the same thing:  the buyer wants to buy the place, and the seller wants to sell it to them!  And I’ve seen many buyers and sellers act cooperatively to achieve just that result.

Nevertheless, there are things that sellers can see from their side of the table that you cannot. Sellers have insights into their own mindsets that, if revealed, can be very powerful tools in helping buyers optimize their approach, offer and interactions with the seller to both buyer’s and seller’s benefit. So, in the interest of helping both buyers and sellers move closer to an outcome that helps them both achieve their mutual goal, here are a few of the insider secrets from the seller’s side of the bargaining table that they would tell buyers, if they could.

    1.    Trashing my house doesn’t make me want to sell it to you at a discount.  To a seller, their home is their castle. It’s the place where they’ve raised their children, and has been the backdrop for many of their memories. It’s the asset into which they’ve invested the lion’s share of their time and money, sometimes for years.  It’s an intensive expression of their personal tastes.  And it’s also the asset they must convert into as much money as possible to move forward with the next phase of their lives.

All that said, the average seller knows most things about their home that you can see with the naked eye.  So if you, as a buyer, think trash talking a home, pointing out obvious flaws or issues is a good strategy for getting the price down, rest assured that you are not telling the seller anything they didn’t already know when they set the list price. In fact, you might very well be doing your case more harm than good, as this “strategy” is highly likely to alienate and insult the seller whose cooperation you seek.  

If you feel strongly that something about a place makes it less valuable than the comparables the seller seems to have based the list price on, work with your agent on how best to communicate your offer price rationale to the listing agent in a way that is diplomatic and fact-based.

    2.    Knowing that you have cash makes me feel comfortable taking your offer.  With distressed properties, over-asking multiple offers, and the generally warm-to-hot seller’s market in many areas, it has become increasingly common for sellers to request proof of a buyer’s “cash to close.” (This usually takes the form of bank or other asset account statements, with the sensitive account number information blacked out for security purposes.)

Some buyers in competitive situations have begun to proactively offer such proof, even when it hasn’t been requested, and even for non-cash offers.

Other buyers, though, take offense. Why shouldn’t the mortgage pre-approval letter be enough?  Why should you have to jump through yet one more documentation hoop?  Is the seller just plain nosy? Why are they all in your business?

One word: comfort. Over the last few years, the number of home sale transactions that went into - and fell out of - escrow due to last minute loan problems of pre-approved buyers hit a record high. While this is awful for buyers to go through, it’s even more disruptive for sellers, who are relying on the transaction to close in the time frame the buyer provided to move forward with their own lives. It’s also a worst case scenario for a seller who had 5 offers on the table to choose one and then have it fall out of escrow later on.

And sellers’ agents know this - often, the issues which derail a buyer’s loan can be resolved with money, extra cash down, extra cash at closing, extra cash to put in escrow for post-closing repairs required by the lender or the city.  So, proving that you have more cash than you appear to need to close the deal doesn’t necessarily set you up for the seller to ask for more cash - but it might help them feel that you’re the buyer most likely to sidestep mortgage obstacles and seal the deal.

    3.    It’s all about the Benjamins - but close-ability is a close second.  Buyers be on notice - all the love letters, cute dog pics and cookies in the world will not make your offer win out over others that are offering significantly higher than yours, financially speaking.  Now, please don’t write in telling me about the case of your cousin’s dog groomer’s tarot card reader who got a home for less than 10 other offers because she helped the little old lady seller take her garbage cans to the curb - most little old ladies need cash to get through their later years.

There is always an exception to the rule, and it does sometimes happen that a seller will take a slightly lower offer than the highest for one reason or another.  But if you’re trying to create a plan that stacks the decks in your favor in a multiple offer situation, your first priority should be to offer as much as you can, without spending beyond what is affordable for you and beyond the home’s fair market value.

That said, sellers also care - a lot - about how likely the offer they accept is to close escrow.  And when multiple offers get so numerous and so frenzied that buyers seem to be throwing money at a home, smart sellers pay attention to the fact that their home might very well not appraise at a crazily high price and focus on offers that seem realistic and close-able, which can mean offers below the highest.

Approval letters, proof of cash to close, the professionalism with which the offer is prepared and presented (see below), and even things like your credit score, your choice of mortgage broker/professional - all these things contribute to or detract from a seller’s estimation of how close-able your offer is.  If you’re competing against other offers, you should be maxing out both your price and your offer’s close-ability, as evidenced by these characteristics.

    4.    Your agent represents you to the world of sellers.  Choose wisely.  See above. A buyer’s broker or agent has a lot of influence on whether the transaction closes, and how smooth or bumpy the ride is. If your agent’s level of professionalism is lacking, it will show - and listing agents might actually rank your offer below others, in terms of close-ability.  If your agent’s level of professionalism is stellar, the opposite can occur.

Before you choose an agent, ask around your circle of friends and do a little online searching or even calls to past clients to see what you can find out about their reputation for professionalism.

    5.    Ask nicely - the old “flies with honey” adage is true. The conventional narrative about buyers and sellers is that they are adversaries. But I’ve been around this block a few times, and I think the average buyer would be absolutely gobsmacked at the number of times sellers are actually ready, willing and able to agree to their requests throughout a transaction. This is especially the case where:

1. the buyers’ requests are reasonable and not nickel-and-dime nitpicks
2. the buyers phrase their requests nicely, and
3. the buyers have been living up to their end of the bargain throughout the course of the transaction.

Compare this with buyers who try to hold sellers hostage to their requests with the threat that they’ll kill the deal if the seller doesn’t do every single penny-ante thing the buyer wants.  

I’ve seen sellers agree to leave valuable personal property behind, have repairs made, give thousands of dollars in repair credits or price reductions after a concerning inspection report - despite a hot seller’s market - all because they were good people, could afford to, and the buyer’s approach was more sweet than it was sour.

California Dual Tracking Ban

California’s “Homeowners’ Bill of Rights”, which became effective January 1, 2013, prohibits banks and mortgage servicers from “dual tracking” when a homeowner is pursuing an alternative to foreclosure.  However, the dual tracking prohibitions are quite different, depending on whether the homeowner is seeking a loan modification or if he is attempting a short sale.

Dual tracking is the practice by lenders of continuing the foreclosure process while at the same time negotiating with the borrower over a foreclosure alternative.  Regrettably, the real estate lore of recent years is replete with horror stories of foreclosures taking place within just a few days (or less) of the borrower being told that he has been approved for whatever foreclosure alternative he had been seeking.

So it is a good thing that the California legislature adopted bills that, among other significant measures, prohibited the practice of dual tracking.  But it is not so good that they treat loan modifications and short sales so differently.  In the case of the latter, the dual tracking prohibition is of considerably lesser value.

In the case of a loan modification, the servicer cannot record a notice of default or notice of sale, or conduct a trustee sale, if the borrower’s completed application for a loan modification is pending a decision.  To be sure, seasoned agents will notice that the application must be complete, and they will wonder how or when that will be determined.  There are also too many stories about various applications (both for loan modifications and for short sales) that were never complete because this or that document was missing.  Even though it had been sent numerous times.  At least, under the California legislation, there is now a procedural requirement that the receipt of documents be acknowledged. And there are other procedural rules that should help.

So, let us say that a loan modification application is complete.  At that point, the foreclosure process stops.  Moreover, if the application is denied – and it must be done so in writing – there is then a thirty-day period during which the borrower may appeal the decision.  No foreclosure activity may occur during that period either.

In short, a person who applies for a loan modification may, after a complete application is submitted, has a period of about sixty days during which no further foreclosure activity may take place.

What about the borrower who is attempting to accomplish a short sale?  The provisions are considerably different.

Unlike applying for a loan modification, when a borrower applies for a short sale the stop on foreclosure activity does not begin when the application is complete.  It doesn’t begin until the application has been approved, plus other requirements.

Not only must there be written approval from all lien holders (e.g. 1^st, 2^nd, and mortgage insurer, as applicable), but also “proof of funds or financing has been provided to the servicer.”

Now, in a good short sale, you might have 1^st and 2^nd lien holder approval within 45 – 60 days.  Of course it could be triple that.  Then, and only then, would the buyer be likely to engage in the actual process of applying for loan approval.  These days, that could be another 30 – 45 days.  So, not until both of those things had happened (roughly 75 – 105 days) would the stop provisions apply to foreclosure activity.  All of which is to say, a foreclosure could easily occur during the attempt to bring about a short sale.

California short sale sellers who are counting on the Homeowners’ Bill of Rights to give them a break from dual tracking should be aware of this.  So should their agents.

5 Tips for Sellers From Buyers

It is a rare occurrence these days to have a home’s buyer and seller sit down around the kitchen table to make a deal. In some areas, they do still sit around the attorney’s boardroom table to close the deal, but by that time, the deal is done and the ship has already sailed on any avoidable mistakes.

So in the vast majority of home sales, buyer and seller never connect in person, never talk, and never exchange insights or information except in the most formal, written formats - despite being effective business colleagues in one of the single most important transactions of their lives. And here’s the rub: buyers sit on a wealth of knowledge that sellers crave to know, most of which could be filed under how to attract buyers and make them want to buy a home (or at least, not turn them off).  So, since buyers and sellers can’t get together, allow me to reveal a handful of helpful insider insights that the buyers I’ve worked with and connected with over the years would reveal to sellers, if they could.

1.    You should see what your home looks like online.  No, really.  If you did your due diligence before listing your home for sale, met with agents and reviewed their marketing plan they use for their listings, chances are good that you chose an agent who takes online marketing very seriously and said as much during your listing interview. But somehow, there are still hundreds of listings in every major city that receive a failing grade on their online presence, once the home has actually been listed.  

Every day, online listings are activated on Trulia and all across the real estate web with:

• only one or two pictures
• no pictures at all
• multiple photos that represent the home very poorly or show it in its worst light, in terms of the shots selected and included in the listing (e.g., photos focusing on the dumpster in front of the house, or the messy breakfast dishes on the table), or
• listing descriptions that bemuse us buyers, but would befuddle and even anger the homeowner, like the homes whose descriptions start off with the attention grabbing: “This place is a mess!”

Sometimes, there’s just a glitch along the production chain that it takes to get a property marketed; other times, there’s an actual error in judgment that took place. But it’s free for you, seller, to hop online and just do a quick audit of the way your home is represented in the same listings, virtual tours, and property websites that buyers will see.  And it’s often the only way these glitches will get caught, brought to the agent’s attention and rectified.  So you should.

2.    If your home is seriously overpriced, I’ll wait for the price to come down before I even come see it.  You might be thinking the best plan of action is to list your home high, planning on the fact that prospective buyers will want to bargain the price down. And, in fact, this might be true for your area - your agent can brief you on what the standard negotiation practices in your neck of the woods are, and you two can then work together to factor them into your pricing strategy.  

That said, even in an area where homes generally go for below-asking, buyers are willing to do some basic negotiation. They are not, generally, interested in correcting a seller’s belief system about their home and its value that are clearly not based in the realm of reality.  That seems daunting and like too much work to do - as well, there are so many properties to see, and buyers have to invest so much time, energy and emotion in making an offer, they don’t like to do that in cases where the seller’s list price is so bizarrely above-market that the chances of coming to a meeting of the minds about price are slim.

If your home is dramatically overpriced, compared to the others in the area or compared to it’s market price range, most serious home buyers in the market for a home like yours will either (a) never come see it, because it doesn’t show up in the price range they are searching online, or (b) not come see it unless and until you drop the price, because it simply isn’t worth their time and energy until you correct your pricing into the realm of the realistic.

3.    There are a whole lot of fish in the sea - I only have to find one.  Agents and mortgage brokers talk to buyers a whole lot about compromising, and what they can expect on the market as a whole, and such. But my reality is this: home buyers are not in the business of market analysis.  They are in the business of finding a home.  Only. One. Home. 

Yes, ultimately, every buyer has to make some compromises. No home is perfect, and every person who buys a home eventually gets that. But even in a heating market like the one we’re in right now, there are lots of homes coming onto the market every single day. Any given buyer only has to find one that works for them. To buy your house - any house - that buyer really does need to feel inspired by it enough to feel like it could work for their family, their needs and their life as their home.  

If you take shortcuts when it comes to primping and prepping your home for the market, it becomes super obvious to buyers when they scrutinize it, even if it’s really priced well.  On the other hand, the homes that were well cared for, prepared and priced shine above the others, at every price point.

4.    If I nitpick your house, that probably means I like it.  Every buyer’s broker has a horrific moment, at some point in their career, where they realize their buyer has been trash talking a home - its nasty wallpaper, vomitrocious carpet, silly stylistic choices, etc. and so forth - and the home’s seller has managed to overhear this diatribe.  The pool boy who was at the property turns out to be the seller’s son, the sellers turn out to have been next door or in the basement through the entire showing, or the teddy bear-cum-Nanny Cam has advanced audio capabilities.

Here’s why this horrifies buyer’s agents: the buyer that goes to all that trouble to dissect precisely what they would do differently if a given house belonged to them is a buyer who is thinking about making an offer on that very house.

The more questions, critiques, nitpicks, “What I would do’s” and such a buyer rattles off about a home, the more likely they are to make an offer on it.  Of course, the occasional curmudgeonly amateur designer likes to just rip other’s decor choices apart for the fun of it, but many otherwise lovely individuals do this when they get serious about a home as part of the exercise of visualizing the property as theirs, and envisioning themselves, their families and their stuff in it.  This is how buyers take a place that might not be perfectly move-in ready for them, and figure out how they might be able to make it work.

So if you happen to overhear a nitpicky buyer dissecting your home and verbally tearing down walls or ripping up carpet, don’t despair.  They might simply be mentally “trying on” your home as their home.

5.    When it comes to staging, the bar is high. Really high.  HGTV. Houzz. Architectural Digest. All these outlets which constantly publish beautifully designed and decorated homes have influenced what the average American expects their home to look like - and yours, for that matter.  Additionally, all the do-it-yourself publications and shows along with the advent of home improvement stores which double as DIY design emporiums have given everyday people of modest means the power to live in beautiful and functional homes, without breaking the bank.  

Beyond all this, professional home staging has taken off in recent years, as data has repeatedly shown that staged homes sell faster, for more, and more certainly than homes that are not staged, nor well-prepared by their owners.  So not only is your home competing with the homes buyers are seeing on TV and in the magazines, it is also competing with professionally staged homes for sale right in your own neighborhood - homes that the very buyers who will come to see your home will also have seen, possibly right before or after they view yours!

So, if you want to and can afford to have your home staged, do.  If you can’t, you should still take the preparation of your home very seriously, and include your agent or a stager you hire for an hour of advice in the process, taking their input on things like:

• what furniture to get rid of
• which improvements will get you the most bang for your buck with local buyers
• and what paint, flooring and other finish materials will appeal to the broadest buyer segment in your area.  

These pros often also have contacts with local handypeople, painters, landscapers and other vendors who can get your home ready for market in a time and cost-efficient manner.

Low Supply Points to Price Increases of 5-10% In 2013

The low supply of housing stock recently reported is giving Capital Economics reason to believe home price forecasts under 5 percent are actually conservative estimates.

Realtors in December expected prices to rise by about 3.5 percent over the next year, while consumer estimates were more modest at 2.5 percent for the same time period, the analytics firm noted in its monthly housing report. The estimates show a growing optimism among those groups.

For example, in March 2012, Realtors expected prices to rise by about 2.5 percent and consumers projected a 1 percent increase, according to a chart in the report.

But, with the low supply of inventory, Capital Economics anticipates much bigger gains. Recently, the National Association of Realtors reported existing home sales in December fell to a 4.4 month supply, the lowest level since May 2005, while the new home sales report from the Census Bureau/HUD says there is a 4.9 month supply of homes for sale.

“At face value, the 4.9 the months’ supply of unsold stock currently on the market in December points to house prices rising by as much as 10% y/y. For now, our forecast is for a 5% rise during 2013,” wrote Paul Diggle in the report.

The tightening in supply is not expected to continue, however. Capital Economics says it expects to see a rebound in housing starts and for the number of willing sellers to rise, which means inventory will hit a bottom soon.

The firm also noted the three major house prices indices— Case-Shiller, FHFA, and CoreLogic —posted yearly price gains at around 5 percent and as high as 7.4 percent in November.

Winter Season Slows Home Price Gains

National home prices continued to post strong yearly gains in January as lower-priced homes drove activity in the housing market, according to a report from Clear Capital. At the same time, prices showed signs of weakening on a quarterly basis.

On a national level, January home prices increased 5.4 percent from a year ago, but inched up by just 0.9 percent on a quarterly basis, the data provider reported.

Out of the four regions, the West maintained its lead with yearly gains and quarterly gains of 12.9 percent and 2.1 percent, respectively. As prices rise and REO saturation decreases (the portion of REO sales relative to total sales), Clear Capital expects price trends to moderate. Over the years, REO saturation has fallen in the West from the peak of 52.5 percent in March 2009 to 17.2 percent.

The remaining regions all saw yearly gains, with the South experiencing a 4.5 percent improvement in prices, followed by 2.7 percent in the Midwest and 2.4 percent in the Northeast. However, prices were flat on a quarterly basis in the three regions: South (+0.7 percent), Northeast (+0.6 percent), and Midwest (+0.2 percent).

Dr. Alex Villacorta, director of research and analytics at Clear Capital, explained the softened quarterly gains suggest “the budding recovery is not immune to the slower winter season.”

“What remains to be seen is if home prices will continue to rise, or remain stable through the winter. Regardless of what trends play out in the near term, we expect home prices to continue on a positive trajectory long term,” he added.

Clear Capital pointed to the low tier priced segment as the “main driving force in markets across the U.S.,” more specifically, homes that sell for $102,000 and less. According to the report, many of these lower-priced homes are REOs, which are attractive to both investors and buyers.

“REO sales continue to make an impact on the overall health and recovery of the housing market,” the data provided stated.

On a national level, the REO saturation rate has fallen from the March 2009 peak of 41 percent to 18.4 percent in January.

After measuring price trends in metro areas, Clear Capital noted one surprising occurrence-no Florida metros made the top 15 list for price growth.

“On a more micro level, Florida metros, namely Miami, Orlando, Tampa, and Jacksonville, were all missing from the top 15 performing market list. Since September 2011, at least one of these markets made the list,” said Villacorta. “While this isn’t confirmation that the recovery is finished in the sunshine state, it’s certainly something to keep an eye on.”

On average, metros on the top 15 list registered yearly gains of 13.4 percent, well above the national average, but reported quarterly gains under 5 percent. Six of the top 15 metros were in California.

Top Five Markets
(Based on quarterly gains)

1. Atlanta (+3.2 percent)
2. Phoenix (+3.0 percent)
3. San Jose (3.0 percent)
4. Las Vegas (2.9 percent)
5. Birmingham (+2.7 percent)