Selling
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Theory: Low Inventory and Low Interest Rates Are Causing Some Overqualified Buyers To Willingly Overpay For Properties |
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 ALERT: Anecdotal Evidence Only! I like data. I use data quite a bit to better understand the dynamics of our local real estate market. But, sometimes I can't figure out a way to (easily) obtain data that would help to prove or a disprove a theory. So, from time to time, I'll propose theories of a current dynamic in our local market based solely on anecdotal evidence. This is one of them. Low Inventory and Low Interest Rates Are Causing Some Overqualified Buyers To Willingly Overpay For Properties I have seen this happening quite a few times on recent listings -- often where I am representing a buyer who has made an offer on a property, and misses out. Here's how that might play out, theoretically...
Two quick caveats...
So, why is this happening!? LOW INVENTORY - This problem (overqualified buyers overpaying for houses) is at least partially brought on by low inventory levels. If there were plenty of homes on the market between $350K and $400K then perhaps this buyer who can pay up to $400K wouldn't be making an offer on a house listed for $250K. LOW INTEREST RATES - The extremely low mortgage interest rates (3% on 30 year fixed as I type) are allowing buyers to afford more house than ever. This has lots of buyers able to higher on price than they could have in some past years when interest rates were higher. So long as we have overqualified buyers in the mix -- willingly overpaying for houses -- it will be hard for appropriately qualified buyers ($250K buyers wanting to pay $250K for $250K houses) to buy homes. OK, I'll stop there for now. It's a theory, after all -- overqualified buyers willingly overpaying for houses. What do you think? Have you seen it happen? Heard about it happening? Have you been a participant in such a transaction? :-) Drop me a line at scott@hhtdy.com with some details. Or, yes, if you disagree and think I'm totally wrong, email me with that feedback as well. :-) | |
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I Would Love To Sell My Home, But Where Would I Go? |
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 I don't have a universally applicable answer to this question... but it's a question and sentiment I hear from many these days... I Would Love To Sell My Home, But Where Would I Go? Why wouldn't a homeowner want to sell? Home prices are higher than ever, buyers are entering into bidding wars to try to secure a contract, buyers are waiving inspection and/or appraisal contingencies, and on and on... It is, truly, a great time to sell your home! But... ...presumably you still need a place to live. If you're selling and then will have to buy a home, you'll be right over on the opposite side of the table -- paying a higher price than ever, entering into bidding wars, waiving inspection and/or appraisal contingencies -- all to try to secure a contract on a house to buy. As such, many of my recent conversations with folks who want to sell but need to buy is all about what they would buy. We are often much more confident that we'll be able to sell your house than we are that we will be able to find a house for you to buy. So, if you're excited about selling your home and buying a new one -- great! Let's meet soon to talk about selling your home -- but even more importantly, devising a strategy for buying your next home! | |
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Nearly 500 Buyers Secured Contracts On Homes In First Four Months of 2021 |
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 As shown above, for three of the past five years, around 430 - 440 buyers signed contracts to buy homes between January and April. Two years ago, in 2019, there was a bit more contract activity than normal with 466 buyers signing contracts to buy homes. But this year -- in 20201 -- we set new records! Nearly 500 (499) buyers (and sellers) signed contracts to buy (and sell) homes between January and April 2021. You might ask -- how is this possible -- I heard inventory levels are super low!? It actually works the other way around. It is not remarkable or mysterious that this many buyers secured contracts to buy homes despite low inventory levels... The inventory levels are so low because so many buyers secured contracts to buy homes! Buckle up - this seems bound to be a fast paced year in the local real estate market! | |
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One High (or low) Sales Price Is Likely Not Enough To Justify A Pricing Strategy |
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 It's easy to accidentally focus only on one data point and to then be led astray to incorrect conclusions. "I know my planned asking price seems high... but there was that one house sold for..." Let's think about it a bit more thoroughly using the mostly fictional illustration below...
THE BUYER'S STATED PERSPECTIVE I know that your house is listed for $450K, but this one other home a few streets over sold for $350K last month, and it was a larger, so I'm not paying any more than $350K -- or maybe $375K -- for your home. THE LARGER CONTEXT Just a few items...
Furthermore, aside from all of these differences in the two houses --- the other ($350K) house is not available any longer --- and there aren't three other houses just like it that the buyer can decide to buy. In this case, by focusing on this one not-actually-that-similar sale, the buyer has put themselves in a situation where they might miss out on purchasing a great home because of how they are viewing the market based on one comparable sale. THE SELLER'S STATED PERSPECTIVE I am confident that I can sell my house for $450K. After all, my friend owned a very similar house and he just sold it in a week, with multiple offers, for $450K! THE LARGER CONTEXT Just a few items...
Again, by focusing on this one not-actually-that-similar sale, the seller has put themselves in a situation where they might miss out on selling their home because of how they are viewing the market based on one comparable sale. The Main Takeaway As a buyer or as a seller -- don't focus on just one comparable sale when deciding on a reasonable price to pay or to ask -- look for the larger context! | |
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Please, Oh, Please, Will You Sell Your Rental Property? |
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 If you own a rental property in the city of Harrisonburg, perhaps a townhouse or duplex or small single-family home, perhaps you are interested in selling it? :-)
I understand, there are plenty of reasons why you would not want to do so. Your long-term strategy may be to continue to rent out that property for many years to come, and perhaps you would not want to tax liability that might arise from selling the property, but maybe you have been thinking about selling the property for the past few years. If you have had any thought at all about perhaps selling such a property, now is an excellent time to do so. There is an extreme shortage of available lower-priced homes in the City and owner occupant buyers are pursuing such properties quickly and making very competitive offers when they do come on the market. If you would like to explore the possibility of selling a property that you have been renting out for the past few years, let’s talk about timing and logistics. You will likely be selling the property at a very favorable price with very favorable contract terms and you will be helping out the backlog of owner occupied buyers who are desperate to buy a home and settle down in Harrisonburg. | |
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Home Values Might Escalate Even More Quickly If Homes Closed In Five Days Instead Of 45 Days |
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 Have you heard that home prices are on the rise? :-) It usually takes about 45 days for a contract to get to closing -- and if this time frame weren't so long, prices might be rising even faster! Here's why, with a few fictional houses as an example... March 1 -- The owners of 101 North South Drive list their home for sale for $325,000. March 3 -- The owners of 101 North South Drive sign a contract to sell their home after having received five offers, with some of the offers "over asking price" per the seller's agent. March 20 -- The owners of 105 North South Drive list their home for $335,000 given that they had heard of the high levels of buyer interest in their neighbor's recently listed house. March 22 -- The owners of 105 North South Drive sign a contract to sell their home after having received four offers, with some of the offers "over asking price" per the seller's agent. April 1 -- The owners of 109 North South Drive list their home for $339,000 given that they had heard of the high levels of buyer interest in two of their neighbors' recently listed house. April 3 -- The owners of 109 North South Drive sign a contract to sell their home after having received four offers, with some of the offers "over asking price" per the seller's agent. April 15 -- The sale finally goes to closing for 101 North Shore Drive revealing a sales price of... wait for it... $340,000. Wait a minute... The owners of 105 North South Drive and 109 North South Drive would have **certainly** chosen higher list prices for their homes if they had known that the five offers on 101 North South Drive resulted in a contract price of $340,000! And thus...
Which means that... If you are pricing your home based on recent closed sales with adjustments made for the time that has passed from when those homes sold -- and if you are taking into account the list price of homes that are under contract plus any anecdotal insight into those contract prices -- we might still be in a situation where our reasonable list price results in multiple offers over that list price. But, typically a seller in this situation isn't complaining to have multiple offers over their list price! :-) If you are ready to get your house on the market in the next month or two let's start talking now and start tracking home values -- both those that are sold and those that are listed for sale and then quickly go under contract! | |
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Will My House Really Sell For That Much?? |
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 It's a valid question. You see a few of your neighbors' houses being listed for big bucks -- more than you would have thought. Then, the sign says "UNDER CONTRACT" after just a few days. Wait, what!? Could *that* house really have sold for *that* much? If it did, what would my house sell for?? Many homeowners are surprised these days when they see what buyers are paying for houses on their street or in their neighborhood. It often prompts the question of... "Will my house really sell for that much??" The answer is often, yes, it probably will. Depending on your house and what "that much" is, of course. If you're thinking about selling this spring or summer we will need to be checking in multiple times on sold AND pending sales data. For example, if you will be putting your house on the market on June 1... March (now) - Look for homes that have sold in the past six to twelve months and those that are currently under contract to determine likely market value and to prompt potential pricing strategies. May 20 - Look again at sold data, and homes under contract at that time to again determine likely market value and to finalize our pricing strategy. You'll likely be delighted to see what other buyers have been paying for homes similar to your home -- and yes, that often can and will translate into a delightful sales price for your home as well! | |
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The Harrisonburg Area Real Estate Market Is As Strong As Ever Two Months Into 2021! |
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 Happy Thursday morning to you! It's been a busy week on my end, what with St. Patrick's Day yesterday, and my daughter's 13th birthday the day before (Happy Birthday Emily!) so forgive me for the slight delay in getting the news to you that... The Harrisonburg Area Real Estate Market Is As Strong As Ever Two Months Into 2021! Before I dive into the data below, a few quick links...
Now, on to the data...  As shown above, with St. Patrick's Day green numbers for ya, you'll note that...
So -- more home sales, at higher prices, selling more quickly! Sounds like a good time to be a seller and a bit less exciting of a time to be a buyer! What might develop as we finish out March?  You might notice that the 77 home sales seen in February 2021 was higher than last February (63) but was not the strongest recent month of February home sales. There were 81 home sales back in February 2018. Looking ahead to March, will we see more than 110 home sales close? It seems quite possible! Here's the data stacked up a bit differently...  As shown above, the January + February sales pace during 2021 of 182 home sales is the fastest start we've seen in the past several years. This is a good indication (though not a guarantee) that a relatively strong year of home sales lies ahead of us. You've seen a version of this graph below, but it surprises me again every time I see it...  The orange line (above) is tracking the number of home sales per year -- measured each month. Throughout 2019 and into the beginning of 2020 this was steadily increasing, from just below 1300 to nearly 1400. Then, Covid hit -- and within a few months the annual pace of home sales had dropped back down to 1300 sales per year. That's the downward dip shown above. Then, as we made it into the summer and fall (and winter) of 2020, the pace of home sales picked up incredible momentum, and accelerated beyond where we might have expected it to have been otherwise -- as shown with the dashed red line. All the while, the median sales price just kept on climbing, up to its current level of $247,700 as compared to $222,150 a year ago. So, Covid dealt us two surprises -- a rapid slow down and then a fast and furious rebound!  As noted previously, sales prices are on the rise. The median sales price of all detached homes (not duplexes, townhouses or condos) sold in Harrisonburg and Rockingham County (via the HRAR MLS) rose 12% in 2020 -- from $240,000 up to $269,000. If you bought a home in the past year, you likely paid 5% to 15% more than you would have a year prior. Not as fun for you as a buyer -- though the seller on the other end of your purchase transaction likely thoroughly enjoyed that increase! Looking ahead, again...  While we have seen a significant increase in the annual pace of contracts being signed (1364/year up to 1548/year) the number of contracts signed in February did actually drop off a bit from last year. Admittedly, the January 2021 contracts helped keep the Jan/Feb numbers higher this year than last, but this February did have a bit slower pace of contract signing than I expected. Maybe this smaller number of contracts has something to do with inventory levels??  A year-ish ago I thought it was quite something that we had broken through the 200 mark -- and all of a sudden we were in the 190's as far as the number of homes for sale in all of Harrisonburg and Rockingham County. But now -- we might break through the 100 mark?? A month ago there were 107 homes for sale -- now 106. Please, let's keep it to triple digits -- let's not get down to only 95 or 97 homes for sale!? One of the reasons buyers haven't minded (too terribly) that they were paying higher prices for homes over the past year was because mortgage interest rates were soooooo low...  But now, yes, mortgage interest rates are starting to rise a bit. It doesn't seem likely that they will rise dramatically through 2021, but the lows of being below 2.75% might be (??) behind us for good. OK -- I'll wrap it up there for now. A bit less than a month from now I'll send you another update on where we are a full quarter of the way through the year. My how time flies! Until then... Sellers - Even though the market is hot, you still need to prepare your home well, price it appropriately based on historical sales data and market it thoroughly and professionally. Buyers - Get prequalified for a mortgage, start stalking new listings, go see them on the first day they hit the market, and get ready to compete in a multiple offer situation. Seller / Buyers - If you need to (or want to) sell in order to buy, this will require a bit more strategery :-) than normal. It can be done, but we need a solid plan in place from the start. | |
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How Long To Prep Your Home Before Listing It For Sale |
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 Sometimes sellers want to wait until their home is absolutely 100% prepared to go on the market for sale -- or even 102% ready! It's hard to disagree with that in principle -- yes -- let's make sure you get your house 100% ready to go on the market before we put it on the market. But... If it takes (for example) six weeks to get your house 95% ready to go and another eight weeks to get it to 100% ready -- is it worth waiting those two extra months to list your home? Probably not -- unless those two months you are waiting are in the middle of winter when buyer activity would be low and when your home might not show its best based on dead grass, leafless trees, gray skies, etc. A few other points to consider in this regard...
Again, the main point of my ramblings today are...
Finally, a few examples of a 95% complete house...
OK, maybe those got to be somewhat extreme. :-) You get the point. Let's meet sooner rather than later and your house doesn't have to be 100% perfect to be listed for sale and to sell in a timeframe and for a price that is pleasing to you. | |
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Strategic Use Of An AirBNB When Selling Your Home In A Fast Moving Market |
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 OK, first off, the chart above is completely fictional. It is not based on actual showing data, it is based on my general experience of how showings are going these days of popular, well priced homes. I created the (completely fictional) graph to illustrate a concept. Forgive me. ;-) The point of said fictional graph is to call attention to the fact that you are bound to have the most showings per day for your house on the first few days that it is listed for sale. Those are all of the "backlogged buyers" who have been trying to buy for weeks or months and are super anxious to come and see your home immediately and consider making an offer. After those first few days, if your house is not already under contract after having received multiple offers, the number of showings per day is likely to decline significantly to be a slow and steady stream of buyers over time. So, what is a seller to do given this extreme number of showings that are likely to be requested during those first few days... OPTION 1 - Drive all around town, all day, while your house is being shown, wondering which bathrooms in public places might be open during a pandemic... OPTION 2 - Find somewhere else to live for a few days. This might be in an AirBNB, or a friend's house, or a family member's house, etc. The point is, if you can displace yourself for a few days it will allow the maximum number of showings to happen without those scheduled showings being an inconvenience to you. As with all market metrics, your experience may differ based on your price range, location, property type, etc. Before we list your home, let's talk through what we might expect for showings during those first few days and figure out a game plan to keep you sane amongst a possible barrage of requested showings. | |
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First Three Steps Towards Getting Your House On The Market This Spring |
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 It feels like spring time in the Valley this week! I hope you are enjoying the warmer temperatures and perhaps tackling a few outside projects around the house. If you are planning to get your house on the market this spring, here are a few "first steps" to be thinking about... [1] Outside Prep First impressions are important, whether a prospective buyer is driving by to check out your house prior to a showing or driving up your driveway for a showing. Perhaps some trimming and pruning and edging is in order. Fresh mulch always helps. Does your front door (on the trim around it) need fresh paint? How can we make the front of your house show best to entice buyers to walk through the front door? [2] Inside Prep Simplifying, decluttering, cleaning, what else? Sometimes it's removing furniture, sometimes moving it around, and sometimes just removing all the odds and ends that collect on surfaces around your house. We want buyers to focus on the house, not your belongings - so we'll want to simplify to the point that the interior of your home shows its best. Start with the first spaces that a buyer will see upon entering your home, and then the general living areas, and save the closets, garage and unfinished storage spaces until last. [3] Meeting & Talking & Planning Let's meet sooner rather than later to talk about plans for getting your house on the market this spring. I can provide some feedback and insight as it relates to your outside prep and inside prep -- and we can start to talk about timing and pricing. When will you be ready for your house to hit the market, and how should we price your home given recent sales trends. You might think you need to have all of the prep work done before we meet. You don't. I can look past the projects in process so if you're thinking about getting your house on the market in the next few months, it's not too early to start talking about those plans now. I hope you are enjoying these early glimpses of spring time weather as much as I am! | |
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Go Check Your Basement Walls For Cracks |
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 Sometimes during a home inspection, I wish I had a time machine. We'll see a crack in a basement wall -- but we don't know how long it has been that way. The general logic often then goes like this...
Yes, I know, those are sweeping generalizations, but... Because we don't have a time machine, most buyers end up needing to assume that every crack in a basement wall falls into the first category -- recent, and continuing to shift or change, and needing immediate and expensive remediation. But what if today, you installed a crack monitor for your basement wall -- and monitored it quarterly for the next five years -- and then when you were selling your house you could provide documentation that the crack had not changed at all (hopefully) in five years of monitoring... That, my friends, could change the game for a home seller with a crack in their basement wall. So -- check your basement walls for cracks -- and if you have any, consider installing a crack monitor! The photo above is the CRACKMON 4020A Concrete Crack Monitor Kit, which includes three crack monitors and the epoxy adhesive to install them. You can purchase the set for $100 on Amazon and that $100 could be some of the best money you spend on preparing for the future sale of your home if a prospective buyer finds themselves fretting over your cracked basement wall in the future. | |
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Comparing Home Pricing Strategies |
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 Above I have included an overly complicated illustration of an overly simplified comparison of two pricing strategies. A few key points for understanding the graphic above...
So... the two strategies... STRATEGY #1 In this scenario, the seller decides to price their home just barely above market value. If most would agree that a house is worth $315K, then maybe that is pricing it at $319K. Pricing a home so close to (but just above) what you believe to be its market value is likely to (in this market, now) generate a LOT of showings. A fairly priced house in a market with extraordinarily low inventory levels results in a lot of early showing activity. Houses listed for sale with prices very close to their market value also typically see quite a few offers, which leads to the most important differentiation between these two pricing strategies... With so many offers, you are bound to have a buyer or buyers who are willing to go above the asking price, maybe with an escalation clause, maybe with an escalation clause that goes up to a silly/high number, maybe without a home inspection contingency, maybe without an appraisal contingency, maybe cash, etc. You see where I'm going here. The more offers you have, the more likely you are to have an offer (amongst the many) with terms that will be very favorable to you. STRATEGY #2 In this scenario, the seller decides to price the house a good bit above the assumed market value, you know, because the market is strong! If most would agree that a house is worth $315K, then maybe that is pricing it at $329 or $335K. Even if most buyers (and buyer agents) suspect the price is a bit too high, you are likely still to have a good number of showings, though definitely not as many as if you had priced the home closer to its market value. Of the smaller group of buyers who looked at the home, you are likely to have a smaller number who make an offer. You'll have fewer offers because the price is not quite as realistic, and because some buyers will assume you won't come down much on your price since you just listed your home, which leads to that key difference again... Having priced your home a good bit above its market value, you are less likely to have full price offers, less likely to have escalation clauses, less likely to have buyers waive an inspection contingency or appraisal, etc. You will likely still have very good terms as far as price, but not great terms. Again -- this is an oversimplification of how to best price your home -- and every house and segment of the market is different -- but at some point you will need to decide what type of a strategy you will take in pricing your home, as to what results you are hoping to see. | |
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Getting Ready To Sell? Focus On Neighborhood Sales Prices First! |
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 If you will be selling your home this spring, you ought to start familiarizing yourself with which other homes are selling in your neighborhood, and at what prices. This will give you the most reasonable and accurate pricing expectations when we are then determining a target sales price for your home and setting a list price for your home. It is somewhat interesting to consider what other similar homes have sold for in very different neighborhoods but that will not likely be the primary factor in determining the value of your home. Start with sales in your neighborhood! If you live in a neighborhood the fastest way to get to this information is likely via HarrisonburgNeighborhoods.com where you can quickly dive into the home sales for your particular neighborhood, view interior photos of recently sold homes, look at longer term sales trends from the past five years, view current homes listed for sale and more. | |
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Who Is Winning In The Local Real Estate Market? |
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 Sellers are winning - rather universally. Every market metric works in their favor, making it a rather enjoyable time to sell.
Buyers are losing - in most categories. Buyers are happy about low rates and low unemployment, but otherwise, all market metrics are working against them. Homeowners are winning - they are indifferent to most market fluctuations - but are glad that home values are increasing. | |
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As A Home Buyer, You Have Never Had Fewer Options |
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 It's a tough time to be a home buyer. In most locations and price ranges there are VERY FEW homes for sale! As shown above, the number of homes for sale at any given time has drifted lower and lower and lower over the past 13 years to the very lowest point EVER this month with only 107 homes for sale in all of Harrisonburg and Rockingham County. This shortage of housing inventory has quite a few impacts...
Moving forward into the spring season, which will eventually happen after another 5 to 10 snow storms...
So, welcome to yet another, stronger, seller's market as we look forward to spring 2021! | |
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How Quickly Are Homes Going Under Contract? |
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 Q: How Quickly Are Homes Going Under Contract? A: Quickly. As you can see above, more homes went under contract in the first 10 days of being listed for sale (808 houses, 54%) than went under contract anytime thereafter. This doesn't necessarily mean that you can or should price your home at a higher and higher price because there is so much buyer interest and so many homes go under contract so quickly. Instead, we should be pricing your home to get plenty of buyer interest right away, and to hopefully have several offers from which to choose to pick the terms that will work best for your selling situation. | |
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What Could Cause Our Imbalanced Housing Market To Balance Out? |
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 Several of my clients have recently commented on how our local real estate market seems out of balance - with so many more active buyers in the market than there are sellers willing to sell their homes. This dynamic often leads to many buyers making offers on well priced, well prepared, well marketed listings to hit the market in and around Harrisonburg. Sometimes it even leads to buyers offering above (or waaaay above) the list price for homes that they don't want to let slip away. So -- if the market is imbalanced, with sellers having the upper hand, what could help our local market come back into more of a balance? In some ways, it's hard to imagine how we work ourselves out of this imbalance, but here are a few real, imagined or fantastical thoughts...
In the end, there don't seem to be many certain paths forward that would allow for our local housing market to balance out in any significant way. As such, it seems relatively likely that our local housing market will remain strong and at an imbalance that heavily favors sellers. If you're seeing something I'm not - and have predictions for how our local market might balance itself out in the coming year - let me know! | |
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If You Might Sell Your Home and Buy A New One In 2021 You Probably Have These Three Questions |
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 I've talked with several folks over the past few weeks who are thinking about possibly selling their homes this year and it struck me that they all had the same three basic questions. As I have reflected further, I have concluded that these really are the three main questions you should be focusing on if you are considering the sale of your home in 2021...
So, if there have been any conversations floating around your house lately about "maybe we should sell our house and buy a new one" but you have had a hard time figuring out where and how to start thinking about that possible transition, I'll point you to the three questions above. As a starting point for answering those questions, I can pop by your house for a brief meeting to address each of the three areas above...
There are certainly many more questions that you might already have, or that you will have along the way -- but these three questions seem to be the big picture questions that most seller/buyers have when they are considering selling and then buying. Feel free to be in touch if you'd like to schedule a time to meet to discuss these and any other questions. Most folks in this situation don't really know if they will actually sell and buy - which is quite OK. I'm happy to help explore the possibilities with you so you can figure out if a move makes sense for you. | |
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Should You Sell Your Rental Property Now? |
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 This is not an uncommon train of thought of late...
So, how then should you think about whether to sell your rental property? It is, after all, a very strong sellers market. Some thoughts to consider...
Clearly, these are just some of the factors to consider when evaluating whether to sell your rental property. I'm happy to talk through your particular scenario with you, and we may also want to connect with your financial planner or accountant as well. Feel free to touch base if I can be of help to you as you think through these decisions. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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