Real Estate Recovery Myth's Unraveled

Like anything else, real estate has its urban legends, its stories that get told so often they seem like they must be true. But unlike urban legends about exploding Pop Rocks or the origins of Jennifer Aniston’s ‘Friends’-era haircut, real estate myths have the potential to create fear, panic, paralysis and all sorts of other decision glitches.

The recent market upturn, coming on the heels of 6 years of near-Depression, has given rise to its own set of real estate myths.  Here is a handful, along with some ways you can and should rethink them.

Myth #1.  It’s recovering too fast.  According to the Standard & Poor’s/Case-Shiller home-price index, American home prices increased an average of 10.6 percent between March 2012 and March 2013. Twelve of the 20 major metro areas tracked had year-over-year median home price increases in the double-digits. The list was topped by Phoenix, San Francisco and Las Vegas, all of which saw 20 percent or greater annual home price increases.

That seems crazy fast, to some. So crazy, in fact, that it’s created the fear that the current market’s exuberance will re-create the steep incline and decline in home values that we all remember not-so-fondly from the last boom-bust cycle. 

Here’s the deal: markets have cycles, period. So I can guarantee you that the ups and downs will repeat, though hopefully not to such extremes. Part of what made the last down cycle so extreme was the fact that lenders were greenlighting massive home loans to borrowers without requiring them to document their ability to pay for the property over the long term. Buyers, in turn, overextended themselves regularly. Today’s loans are allowing people to buy without putting much down, but I haven’t seen almost any examples of the fully stated income or so-called “liar’s” loans that really got people in trouble. (Yet.)

Here’s the other thing: the data can be a bit misleading.  When an area’s home values have been very, very depressed for long, it simply doesn’t take that vast of an uptick to generate double-digit percentage point increases. When you look at the top five recovery markets, according to the Case-Shiller, four of them: Phoenix, Las Vegas, Miami and Tampa – ranked among the hardest hit markets in the foreclosure crisis and resulting downturn. (San Francisco was the anomaly.)  When you look at other markets that skated through the recession relatively unscathed, like New York, you see the percentage point increase year-over-year was much less impressive/ less scary (depending on your outlook), at 2.6 percent.

Myth #2.  Investors are driving demand. In some areas, investors are buying up lots of low-priced homes. From big Wall Street investment groups to Mom-and-Pop investors, people who don’t plan to live in the homes they’re buying were responsible for about 20% of May home sales. But this number is actually on a downward path – investors were responsible for 22% of home sales in April, and investor activity should continue to decline as prices increase, putting a cap on the profits investors can realize. 

While investor activity is declining, buyer demand is increasing, as evidenced by increasing numbers of cash transactions, offers per property and speed of homes leaving the market. 

First-time buyers are responsible for 36% of current buyer activity and repeat homeowners for over 43%. Investors have been active, but by no means are they responsible for creating the intense buyer demand that now characterizes the market. 

Myth #3.  Sellers are stuck.  This time, let’s start with what’s true. Many, many sellers in hot markets are in the midst of an exasperating Catch-22:  they can finally sell their homes, which have been underwater for years. But now they struggle to buy, amidst the multiple offer mania – some report having to make offers on dozens of homes, or even having to rent a place until they can buy one.

As I see it, sellers aren’t stuck as much as they are being forced into being strategic about sequencing their transactions and setting up their deal points. During the recession, millions of sellers had no equity – or negative equity. That meant they couldn’t sell, which meant they didn’t have the money to buy – heck, many couldn’t even refinance. That’s what I call stuck. Now, they have the option to pull cash out to buy first, the option to refinance and stay put, and the option to sell – period.  So for my dollar, today’s sellers are nowhere near stuck, compared with the truly stuck sellers of yesteryear.

Most of the sellers who have recently, truly gotten stuck (i.e., sellers who’ve been forced to rent until they could successfully buy) ended up in that situation because they listed their homes first, unaware that the market truly had shifted and that their home would fly off the market. Now, we know. So, if you’re selling in a super-hot market, work with your agent to put a strategy in place. Consider buying first, if you have the means or can get them. Or list your home with a Seller’s Contingency or a rent-back agreement (where your home’s buyer rents it back to you for a short time), to buy yourself some extra time to score a new place.  Your agent and mortgage pros can help.

Myth #4.  Rates are through the roof.  Have mortgage interest rates gone up?  Yes.  Is the Fed signaling they intend to raise rates, too?  Yes - in 2015.  (Not exactly tomorrow.)

Last week’s reported 30 year mortgage rates were 3.94 percent, and 15-year rates were right around 3%.  Given that the record low rates clocked in at 3.31 (30-year) and 2.62 (15-year), even today’s higher rates are not worth your worry.  Nor is an increase of rates likely to cause all the pent-up buyer demand of the last few years to dissipate.  My Dad used to remind me that people bought homes when rates were 14% in the 80’s, and they will buy them now, even as they inch up – because they need and want places to live.  

Myth #5.  Foreclosures are a thing of the past. Through the recession, many banks and mortgage servicers began to hold hundreds of thousands of foreclosed homes off the market to avoid flooding it, depressing prices even further than they already were. And even now, these institutions continue to trickle them onto the market, rather than creating a deluge of home inventory. Additionally, mortgage regulators now allow servicers to rent out REOs, versus selling them, and to hold them as long as 5 or 10 years following foreclosure, if needed. 

While we are seeing a steep decline in the number of newly foreclosured homes, we can expect to have a higher-than-average number of foreclosed homes – REOs – on the market for some years to come. This so-called “shadow inventory” had declined over 10% nationwide between January 2012 and January 2013.  And with the uptick in demand, we should continue to see this so-called “shadow inventory” of homes decline as banks take the opportunity to get these homes off their books.  

Price it Right the First Time

With house prices increasing across the country, sellers may think they can list their homes at a higher price and adjust if necessary. That may not be a good strategy. This is a post we ran last year by Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research. To view other research from FIU, visit http://realestate.fiu.edu/.

The Research

Are there any negative effects from changing the listing price of a property? This question haunts Brokers/Agents as well as sellers of property every day. At present, there does not seem to be a consensus answer to this question within the professional real estate community. Fortunately, this question was scientifically investigated by John R. Knight. Unfortunately, few know the results of Professor Knight’s research.

In Knight, the impact of changing a property’s listing price is investigated. Additionally, the types of property that are most likely to experience a price change are also estimated. The findings from this research indicate that, on average, properties which experience a listing price change take longer to sell and suffer a price discount greater than similar properties. Furthermore, bigger price changes are found to experience even longer marketing times and greater price discounts. Finally, as for which properties are most likely to experience a price change, Knight finds that the greater the initial markup; the higher the likelihood that any given property will experience a listing price change.

Implications for Practice

Sellers as well as Brokers/Agents should therefore be aware of the critical necessity of getting the price correct from the start. Sellers wanting to over list will ultimately take longer to sell and will sell their property for less, on average, according to Knight. Brokers/Agents’ desire to take a listing and get the price right later will ultimately lead to their working harder according to Knight, and they are not doing their sellers any favors. Thus, an initial and detailed analysis of the proper price is much more critical than many originally thought.

Interestingly, I have found in my own research that the direction (up or down) of the listing price change does not matter. A listing price increase and decrease both lead to similar results found in Knight’s work – longer marketing times and lower prices. Therefore, get the price right from the beginning. It is best for all.

Another Real Estate Bubble???

The recent jump in home prices (near record month-over-month and year-over-year increases reported for May by the National Association of Realtors ) has led to speculation that the rapid surge in home prices could be the sign of a new housing bubble similar to the one that led to the Great Recession.

Is it? The not-so-short answer is, not yet.

Indeed, through May the median price of an existing single-family home has risen by double-digits for seven of the last eight months (and in the eighth, the year-over-year increase was 9.4 percent). For comparison’s sake, note that in the run-up to the collapse in 2006, the median price of an existing single-family home rose by double-digits year-over-year for 11 straight months.

An increase in prices itself does not signal a bubble. An unsustainable increase, not supported by other data, however, would. In the run-up to the 2006 collapse, the higher prices—which had been trending up for four years—led to a sharp uptick in construction wholly unsupported by demographics. Baby boomers were aging, transforming home buyers into sellers, and there weren’t sufficient numbers of “echo boomers” to replace them.

Nonetheless, in the last 12 months, the year-over-year increase in single-family starts has averaged about 26 percent, four times the average year-over-year increase in the 12 months just prior to the bubble bursting in 2006. When housing prices fell when the bubble burst, the construction jobs they supported disappeared along with hundreds of thousands of others as housing wealth vanished, seemingly overnight.

Even though the demographics haven’t changed—the 55-plus population is growing faster than the 25-34 population—builders in the last 12 months have completed 31 percent more single-family homes than they sold. Prior to the housing peak, completions were about 26 percent more than sales, adding to inventories and further depressing home prices.

While the “gap” between completions and sales was wider before the 2006 collapse than today, it has been expanding rapidly, growing in eight of the last 12 months.

So, what happened to the overall economy when the housing bubble burst? As prices and values dropped, so did consumer spending, a function of the “wealth effect.” According to some estimates, the decrease in home values reduced consumer spending by upwards of $400 billion and GDP by about 2.5 percent. That jobs fell as well only made a bad situation worse.

The slowdown in housing prices beginning in 2006 came just as baby boomers—born between 1946 and 1964—were approaching retirement, a time when they might be looking to use their homes as a retirement nest egg, finding themselves with more house than they needed. About a year later, employment began to sag along with wages and salaries, so there were fewer people with less money to spend on buying a home.

Despite the fact we still theoretically have more potential sellers than buyers, which should drive prices down, the inventory of homes listed for sale has remained low. That low inventory, combined with low interest rates keeping affordability high, has driven prices up.

That doesn’t necessarily mean a bubble unless sales increase with the higher prices, and they have even with regulatory changes in the wake of the housing collapse designed to stop banks from making loans borrowers could not afford. Just how effective those changes have been though is still open to question. According to the Federal Reserve’s most recent Senior Loan Officers Opinion Survey , mortgage demand is climbing and more banks are easing lending standards.

Those factors combine to drive prices still higher a cycle which, if incomes fail to keep pace, could inexorably lead to a bursting bubble.

Perhaps more significant than the question of whether we’re in or headed to a bubble and are we prepared for it to burst is what happens if prices again suddenly and dramatically collapse?

Many analysts contend the current prices are justified by low rates, which keep home affordable even as prices rise. This would suggest that as rates rise, prices will move in the opposite direction, a replay of the post-2006 economy. That’s not though what history tells us. If prices fall in response to higher rates, it would mean market behavior has changed, a phenomenon for which we may not be prepared.

Rising prices encourage fewer investor purchases and longer holding times

A recent industry survey found rising home prices are impacting investor activity in a few ways—most notably encouraging them to hold properties longer and to decrease their purchase activity.

The survey, conducted by ORC Internationaland released Wednesday byMemphisInvest.com and Premier Property Management Group, revealed more than half of investors plan to keep their investment properties for five years or more. One-third said they will keep their investment properties for at least 10 years.

Investors in these categories “realize the benefits of rising rents and low vacancy rates,” according to Chris Clothier, a partner at MemphisInvest.com and Premier Property Management Group.

“Cash flow is much more important than appreciation,” Clothier said.

Close to half—48 percent—of the investors surveyed in May said they will purchase fewer properties in the next 12 months than they did in the past year. This is up from 30 percent in the same survey conducted in August 2012.

Twenty percent of survey respondents said they will purchase more properties in the next 12 months than in the previous 12 months, down from 39 percent in the August survey.

Contributing to this trend, “[f]ewer foreclosures, rising property values and competition from hedge funds are making it tough to find good deals on distress sales,” Clothier said.

Rising prices are also affecting the method by which investors pay for their properties, according to Clothier.

Thirty-seven percent of investors said they will pay cash for their next property, up from almost 25 percent in the previous survey.

“Cash sales make sense when prices are rising. They lower investors’ costs,” Clothier said.

The increase in institutional investor activity may appear to be a hurdle for private investors, but the survey revealed a minority of investors—13 percent—have noticed an impact.

Fixed Rates Soar to Highest Level in Years

Encouraging economic data helped lift fixed mortgage rates to their highest level in the past year this week, according to surveys from Freddie Mac and Bankrate.com .

Freddie Mac’s Primary Mortgage Market Survey showed the 30-year fixed rate rising to an average 3.81 percent (0.8 point) for the week ending May 30, up from last week’s 3.59 percent. Since the beginning of May, the 30-year fixed average has jumped up nearly half a percentage point.

The 15-year fixed-rate mortgage ( FRM ) also soared this week, rising to 2.98 percent (0.7 point) from last week’s 2.77 percent.

Adjustable rate movements were mixed. The 5-year hybrid adjustable-rate mortgage ( ARM ) averaged 2.66 percent (0.5 point) this week, up from last week’s average of 2.63 percent. The 1-year ARM averaged 2.54 percent (0.5 point), a slight drop from 2.55 percent in the last survey.

“Fixed mortgage rates followed long-term government bond yields higher following a growing market sentiment that the Federal Reserve may lessen its accommodative policy stance,” said Frank Nothaft, VP and chief economist at Freddie Mac.

“Improving economic data may have encouraged those views,” he added, referencing the week’s reports of increased consumer confidence and strong home price gains .

Bankrate’s weekly national survey saw the 30-year benchmark rate rising to 3.99 percent, an increase of 25 basis points week-over-week. The 15-year fixed was up to 3.21 percent.

Meanwhile, the 5/1 ARM rose more than a tenth of a percentage point to 2.81 percent.

Metro Area Home Prices Continue to Increase

Metro areas continued to post price gains in the first quarter, rising alongside national median price increases, the National Association of Realtors ( NAR ) reported.

Out of 150 metro areas the NAR tracks, 133 displayed price growth in the first quarter of this year compared to the same quarter a year ago.
In the last quarter of 2012, 133 metro areas also experienced price increases from the year before.

“Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum,” noted LawrenceYun, NARchief economist.

The association also provided first quarter data on national median prices and sales.

During the first three months of this year, the median price for an existing single-family home rose 9.3 percent from the year before to $176,600. The year-over-year improvement represents the biggest annual gain since the fourth quarter of 2005, according to the NAR .

At the same time, existing-home sales, including single-family and condo, rose to a seasonally adjusted annual rate of 4.94 million, a slight 0.8 percent increase from the previous quarter, but a 9.8 percent gain compared to the first quarter of 2012. First-quarter sales stood at their highest level since the fourth quarter of 2009 when they hit 4.95 million as a result of the homebuyer tax incentive, NAR explained.

Distressed homes, which NAR defines as foreclosures and short sales generally sold at discounts of up to 20 percent, continued to account for a smaller share of sales. Distressed sales represented 23 percent of first quarter sales, down sharply from 32 percent a year ago.

Even though prices are on the rise, Gary Thomas, NAR President and broker-owner of Evergreen Realty in Villa Park, California, says conditions remain favorable for buyers.

“Historically low mortgage interest rates and home prices that remain well below their peak mean most buyers can purchase well within their means, assuming they meet ongoing stringent credit standards,” he said.

According to the NAR report, to purchase a home at the national median price, a buyer making a 5 percent down payment would need an income of $36,500, yet the national median family income was $62,200 in the first quarter. The calculation assumes 25 percent of gross income would go toward principal and interest and a mortgage interest rate of 3.5 percent.

Despite affordability, the transition into homeownership is still a challenge.

“While we expect the single-family housing recovery to continue trudging along, the still-dropping homeownership rate and hot multifamily market suggest that the shift from ownership to rental is not quite over,” said Julie Zisfein, of Auction.com research.

On a regional basis, the NAR found the West led with the biggest annual jump in prices after the median price rose to $247,800, up 24.4 percent from a year ago. With low inventory continuing to limit sales, the region experienced 1.1 percent decline in sales from the previous quarter, while sales were up by just 0.6 percent from the year before.

In the South, the median price for an existing home rose 9.3 percent from a year ago, while existing-home sales grew by just 0.7 percent in the first quarter, but are up by 13.3 percent from a year ago.

Midwest experienced an 8.2 percent gain from the year before, while sales were up quarterly and yearly by 1.2 percent and 15 percent, respectively.

In the Northeast, prices rose by 2.9 percent from the year before, and sales posted a stronger 4.4 percent increase from the previous quarter and a 9.1 percent gain from the year before.

REO and Short Sale Fraud Continue to Change

Most mortgage fraud takes place in the short sales and REO space, according to Rob Hagberg, associate director of fraud investigations at Freddie Mac. “This area is ripe with fraud,” he said during a webinar hosted byCoreLogic.

While servicers and others in the industry have adapted to some fraud schemes and put measures in place to detect and prevent fraud, schemes continue to evolve as fraudsters find new ways to manipulate sales.

For example, many fraudulent REO and short sale transactions involved the use of a straw buyer who temporarily purchased a home at an undervalued price and then sold it to a third party at a higher price.

These transactions would be immediately suspicious to anyone reviewing property records, which would show a home was sold for one price one day and then almost immediately resold at a higher price.

Savvy perpetrators are now eliminating the second buyer. Property records will not reveal a middle buyer, but they will reflect a higher price than the servicer agreed to.

Another growing trend in short sale fraud is what Hagberg calls the “short sale and stay.” This occurs when an underwater homeowner wishes to keep his or her home but wants to lower his or her loan amount.

The homeowner will recruit someone—often a friend or family member—to purchase the home through a short sale, and the original owner will remain in the home.

Sometimes, a wife will use her maiden name to purchase the home from her husband, and the couple will stay in their home.

Both short sale and REO fraud often require fraudsters to convince servicers a home is worth less than it actually is.

To accomplish this, fraudsters have attempted to bribe REO brokers, manipulate MLS data to lower the prices of comparable properties, and have engaged in reverse staging to make a property appear in worse condition than it is.

In cases of reverse staging, Hagberg has seen cabinet doors removed from kitchen cabinets, garbage left lying around the home, and sometimes old fish hidden behind refrigerators to create pungent scents.

Sometimes BPOs include false property stigmas such as high crime rates, and in a few instances Hagberg has seen properties undervalued by as much as $40,000 under inaccurate statements that the home had been a meth lab and would need to be entirely gutted.

Four Reasons Your Home May Not Be Selling

There are exceptions to every rule under the sun.  So, even though the current market climate is hot in most places, every neighborhood, town and county has those homes that simply sit on the market for days, weeks, even months longer than average. 

These are the outliers.  And being the outlier, in this particular context, is not a fun place to be. When all the other listings seem to be flying off the market and yours seems to be stuck, it’s easy to delve into fear, panic and even depression.  

Here’s a glimmer of hope:  there is a pretty short list of reasons that most slow-to-sell homes lag on the market. You’ve probably heard at least a couple of them before, maybe even from your real estate agent. But sometimes hearing things a few times, from different people and at the right moment in time can cause the shift in position that will power a shift in the situations that are keeping your home sale stuck - and your life plans stuck with it.

1.  You’re stuck on a too-high price. If your home has been sitting on the market for significantly longer than average, the market has spoken. And it’s saying: the price is too high vis-a-vis the current condition of the market and the property.  Period.

There are only three variables in this equation - which is helpful, because it means there are really only three ways to fix this situation:

• change the condition of your property
• wait until your market conditions change to support a higher price
• change the list price.

That’s it. That’s all there really is. For most sellers the simplest, most sensible of these three variables is to modify is the list price. This is especially so in cases where the home is in good basic condition, is well-staged, and other homes nearby are flying off the market.  The fact that you don’t want to hear that your home is overpriced doesn’t mean it’s not the truth. 

Today’s market is ascending in most areas, which simply means that prices are on the rise. Some sellers are waiting to list their homes, hoping that prices will be higher in the years to come. But if you want and need to sell your home sooner than later or you are hoping to sell in time to buy your next home before prices rise much higher, holding out for a higher price probably doesn’t make sense. 

In fact, your resistance to making a necessary price cut could backfire. Buyers often keep their eye on overpriced but otherwise nice homes, waiting until they suspect the seller’s desperation will make them more receptive to a lowball offer. 

2.  Your home is not be fully exposed to the market.  So the truth that the market has spoken on the matter of overpricing does have one caveat: it assumes the market has actually been exposed to your home.  If your home’s marketing plan has been limited to that red-and-black For Sale sign you got at the hardware store and stuck in the lawn, chances are good that your home is lagging because your area’s community of buyers and brokers have no idea it is on the market!  

Other common conditions of home sale-preventing underexposure include:

• Homes that are not listed on the area’s Multiple Listing Service or MLS
• Homes that are not listed on major real estate search engines, like Trulia
• Homes that are very difficult to show or are rarely made available for viewing
• Homes that are listed online with no, few or poor quality property photos.

If your home is lagging on the market and any of the above apply to your listing, they could be the culprit. If you chose a listing agent who has a strong track record of success selling homes, these sorts of listing issues can sometimes reflect a glitch in the system.  So, do a double check - Google your address and see how your home is represented online. If you find any of these issues, work with your agent to get them fixed.  

If you didn’t engage a listing agent at all and your home is simply not moving, it might be time to reconsider and course-correct your home-selling plan. 

3.  Your home has a glaring issue that needs resolving.  Many times, a big condition issue can cause a home to sit on the market unless and until the seller either (a) fixes the issue, (b) offers a credit or incentive to offset the issue or (c ) reduces the price so low that a buyer thinks the bargain is worth the hassle.  Some situations are too costly for a seller to fix (e.g., foundation needs replacing), and others are not fix-able (nuclear power plant next door).  In these situations, reducing the price might be the only resolution.

But other listings are sabotaged by highly fixable issues the seller simply might not be willing to admit are at the root of the problem.  You might love the highlighter yellow you chose to paint all of your home’s interior walls, the wall-to-wall powder blue sculpted carpet or the “rustic” look of the weathered paint, fences and trims on the exterior.  Or maybe you don’t love them, but you think buyers should just look past these issues.  

Your home’s slowness to move is a wake-call.  The average buyers’ tastes might simply differ from yours. Or maybe in your area and price range, buyers don’t have to look past issues to find a home that is move-in ready.  To concern yourself about what buyers “should” be willing to do is to live in a fantasy world - and as long as you’re there, your home won’t move in real life. 

4.  You’re not really ready to move on.  If none of your agent’s advice about how to shift your home’s fate makes sense, if everything on this list strikes you as outrageous, if even your friends’ and family members’ urgings to cut the list price makes you think the whole world must be crazy, ask yourself this question:  are you really, truly ready to move on?  

For Sale: 2BR/3BA Condo in San Clemente, CA, $1,275,000

For Sale: 2BR/3BA Condo in San Clemente, CA, $1,275,000

5 tips for regret free home buying this spring

If you read or watch many cooking shows or magazines, you might have noticed a trend over the past few weeks. They all seem to be focused on springtime cooking, entertaining, and recipes - how to welcome the change of weather with flower-laden tables and recipes that showcase the fresh flavors of the season.

If you’re watching the real estate market, you’re probably seeing a springtime recipe coming together right now, too, before your eyes. Yesterday, Trulia released a survey that vividly captures and quantifies the ingredients:
75% of consumers say it’s better to buy a home now than it will be a year from now
But only 1 in 3 consumers (32 percent) think it’s better to sell now than a year from now.
Mix in patient sellers, fewer foreclosures, and underwater borrowers and marinate overnight.

What do you get when you take this 2013 spring real estate recipe out of the oven? Housing inventory rates at a 12-year low, and a strong seller’s market.

While sellers sometimes make emotional mistakes, the reality is that a hot market like today’s creates massive competition among buyers, and can lead to a slippery slope of decision-making that leads to later regrets. Let’s take a look at the most common real estate regrets revealed in this new Trulia report, and what they can teach today’s home buyers about making real estate decisions they feel good about in the long run.

1. Get realistic and be aggressive. Time is of the essence. The number one real estate regret revealed in the survey was a regret of renters, not owners: 42% of of them said they wished they had bought, rather than rented, their current home.

The process of successfully buying a home on a market like today’s is laden with points at which every buyer must face the pain of some hard-to-swallow truths:
Truth: It might take longer to buy than you thought.
Truth: You’ll very possibly lose a few homes you love before you are successful.
Truth: Your home buying dollar might not afford you the mini-manse of your fantasies.
Truth: You might have to offer more than the asking price and compete with other buyers in order to make your home buying visions a reality.

The buyers who face these truths head on are those who position themselves to make reality-based, aggressive home buying moves like house hunting in a slightly lower price range so they can offer more than asking without blowing their budget. The buyers who avoid the pain of being realistic about these issues are the ones who will end up still renting next year, regretting that they didn’t align their expectations with reality sooner. Of course, every market is different - this is why it’s uber-important that you work with a local agent to understand the realities of your market and how you can optimize your house hunt for them.

2. Buy a home that will work for the household you envision 5 or 10 years down the road. I’ve long recommended that buyers kickstart their house hunts with a “Vision of Home” writing exercise, in which you actually write down your vision for the life you want to live in the home you’re preparing to buy. This is all about creating a vision for every area of your life, from your work (and how you get there every day), to your family and cohabitants (who you envision living with, not just now, but down the line), your activities and your families and even how you spend your spare time (gardening, entertaining, tinkering, yoga-ing, etc.)

This exercise helps avoid the number two most common real estate regret uncovered in the study: 34% of respondents said they wished they had chosen a larger home. It helps by course-correcting any overly limiting assumptions you might make if you based the size of home you should buy strictly around the number of family members you have now or in the near future. It helps you plan your space needs around the living and activities you’ll want to be able to do in the home, not just the sleeping areas you’ll need for individual family members. It also helps you take a longer-term view of family and space planning to anticipate issues like whether you’ll want to take in an aging parent, allow for a young adult child to come back home, or have space for a nanny or tenant.

3. Be honest with yourself about your interest and ability to fix a home up, before you buy. Here’s a lesson I’ve learned from experience: if a new homeowner doesn’t make the fixes they plan within the first year after closing, chances are they won’t make them for many years - maybe even until they are planning to sell the place again! Obviously, there are exceptions - there are the folks who have a 15-year roadmap for home improvements in place before escrow even closes, and who execute it meticulously. But these are the exceptions - for most of us, human nature is to get comfortable or complacent with the way the home is, or to have life and everyday expenses get in the way of our remodeling plans and never end up doing all the fixes we plan.

Twenty-seven percent of survey respondents said they wish they would have done a more thorough set of remodel projects, renovations, updates or upgrades to the property when they bought it. But the way to avoid this regret is two-fold. First, you can make sure that you have a budget and a firm plan of action for the home upgrades you want before you close the deal, versus a vague sense that you need to “do something” with the kitchen. This might involve getting actual contractor bids during escrow and even having some or all of your desired work done after closing and before you actually move in, to maximize both your chances of actually following through on your home improvement plans and the enjoyment you get out of the upgrades.

The other way to avoid this regret is to simply be honest with yourself. If you’re not the type to follow through on a fixer-upper plan of action, take this into account when you choose your home so as not to end up in a place you’ll regret not fixing. Find a place, instead, in a condition you can live with, even if you don’t do much (or any) work to it, after you buy.

4. Ask every question - then ask a few more. And read everything you are given. Twenty-two percent of homeowners surveyed said they wish they had more information about their home before they decided to buy it. The fact is, much of the information homeowners regret not having is actually at every home buyer’s disposal - though it might take some work to get it.

For example, some homeowners wish they’d known more about their neighbors and neighborhood, which can be collected during the house hunt by knocking on doors, meeting the neighbors, google-searching and investigating the neighborhood online and even visiting the home and surrounding area at different times of day and days of the week/weekend.

Others might wish they’d known more about the property itself, or the Homeowner's Association. I’ve found that buyers miss out on valuable property information when they don’t attend their home inspections in person, or when they fail to fully read, understand, ask questions about or follow up on their home, pest, roof and specialty inspection reports. For instance, your home inspector might be willing or able to show you how to operate certain systems or use your emergency gas and water shut offs if you are onsite during the inspection - things you might wish you knew later on. Also, they can often verbalize valuable insight and nuance to the property issues they find, if you’re onsite during the inspection - you miss this information if you don’t attend. And if you fail to actually obtain any follow-up inspections the general home inspector recommends (e.g. plumbing or electrical inspections) you can be in for an un-fun surprise over the long run.

So read your reports and your HOA disclosures, even though they are long, tedious and some might say, border on boring. And be aggressive about asking your agent and your inspectors to help you understand how you can gather the information that’s important to you. There is more available than you might guess.

5. Focus your spring workouts on whipping your money matters into shape. The final two real estate regrets articulated by survey respondents were related: 18% wish they had put down a larger down payment on their home, and 16% wish they had been more financially secure before they bought a home. So much of what we talk about in terms of financial preparations for home buying is about doing the bare minimum to qualify for the sort of home we want, in terms of saving up the minimum down payment that will allow us to afford to buy at our desired purchase price, getting our credit together and making sure we have all our documents lined up and spruced up for a lender’s underwriter. But none of these things actually solve for the regrets these former buyers express. The only path to avoid these later issues is to view home buying as an opportunity to take a concerted deep dive into your finances and make an ongoing, lifelong commitment to financial integrity.

This means: really exploring your values and priorities in life, and aligning your finances with them in every way keeping a current financial or monthly spending plan that includes not just your mortgage but also carves out sufficient resources for saving, investing and other things that are important to your future, and staying accountable to these values and your plans, even through the process of becoming a homeowner.

There are dozens of books, resources and financial professionals who can help you ensure that you execute home ownership in a way that is ultimately beneficial to your financial well-being and not harmful to it. This includes timing your house hunt to align with when you’ve achieved certain financial benchmarks (e.g., paid off your student loans, saved up X dollars) or have cultivated particular financial habits (e.g., consistently save 10% of your take-home income, have paid every bill on time for three years or more).