What Percent of Asking Price Should You Offer?

Most Realtors will tell buyers that the price of a home is negotiable. However, there is no set rule for what percent of a home's asking price to offer the seller. You don't want to overpay, but an offer too low may offend the seller. Your offer price should depend on a number of factors, including:

The appraised value. Whereas asking prices are determined by sellers and their real estate agents, home appraisals are determined by third-party professionals. They can help you determine the true value of a home.

The housing market. If the housing market favors sellers over buyers, you'll need to offer more in order to remain competitive.  Paying in cash also increases the competitiveness of offers. This situation is somewhat true of today's housing market, in which limited supply does not meet the high demand. Sales of nearby comparable homes can help you evaluate the market, which varies geographically.

Seller motivation. How eager is the current owner of a home to sell it? Consider a family that has been relocated due to a parent's career. The family has already moved, but its prior home is still on the market. Considering the family is losing money on maintaining the home, and not deriving any benefit, a lower offer stands a better chance than it might for a family that has not yet moved and faces little time pressure.

How long the house has been on the market. This is linked to seller motivation. The longer the house sits on the market, the more work it is for the owners to constantly clean it for showings, consult with their Realtor, etc. Also, sellers who are eager to move will likely grow impatient if buyers do not show interest in their house. Therefore, generally speaking, the longer a home sits on the market, the more likely its owner(s) will be to accept a lower offer.

Overall, many Realtors advise buyers to offer at least 90% of the asking price. However, as noted above, this figure is dependent on many moving parts. In some markets, buyers may even find it necessary to make offers above the asking price. This is one of the reasons that having an experienced Realtor familiar with the area in which you are buying is so crucial. Interested in buying or selling a home in Central Ohio? Contact me to see how I can help!

The Average American Home: Bigger than Ever

In America, you've probably heard the phase, "bigger is better." This philosophy is manifested in U.S. home sizes, which have steadily increased over time. According to the Census Bureau, the average home size grew from 1,725 square feet in 1983 to 2,598 square feet in 2013--an increase of 50%!

Many trends explain this phenomenon. First, the wealthily have gotten wealthier, and are buying bigger homes to show for it. The market for homes 4,000 square feet or more has increased from 6.6% in 2005 to 9% in 2013. Homes between 3,000 and 4,000 square feet have increased even more--from 15.6 % to 21.7% over the same time period. Director of Economic Services for the National Association of Home Builders Stephan Melman states that people who have invested in the stock market have seen their money double since 2009. 

On another note, first-time homebuyers are finding it more difficult to buy homes, thanks to student debt and trouble getting mortgages. Because first-time homebuyers make up the majority of the market for small homes, the market for such homes (1400 square feet and less) has decreased from 9% in 2005 to only 4% in 2013. The average first-time homebuyer in 2013 was 31 years old according the National Association of Realtors. 

Third, people are demanding more from their homes. Buyers want home offices, play rooms, walk-in closets and oversized bathrooms. Parents want their children to each have their own room. For many, a one car garage will no longer suffice. Therefore, alongside the increase in home size, the number of rooms in the average home is increasing as well.

Another trend that helps explain the increase in home size involves the current rental market. Rental rates have increased since 2006 by roughly 20%---turning many homeowners into landlords to order to help pay off home mortgages. People who move into a larger home are more inclined to hang on to their previous home as a rental given their low mortgage rates. Glenn Kelman, CEO of the brokerage firm Redfin, points out that every home converted into a rental means one less home on the market, contributing to low inventory and limited sales growth.

If you are interested in buying a home, be it small or large, contact me to see how I can help. I work for all types of buyers, from first-time homeowners to empty nesters. Click here to view my featured listings.

Housing Market Update

Jim Weiker writes in The Columbus Dispatch that recent trends continue: home shortages, increased home prices, reduced time on the market, and declining home sales. Why is the imbalance between buyers and sellers so persistent? Weiker reports that roughly 20% of central Ohio homeowners still owe more than the value of their home.  Others are worried that their house will sell too quickly, that they won't have anywhere to live when it does sell, and that interest rates (despite being relatively low) are not as good as the ones they are currently sitting on. Another problem is minimal new home construction. According to Lawrence Yun, the chief economist with the National Association of REALTORS, claims that new-home construction needs to increase by at least 50 percent in order to create a balanced market. Is this market the new normal, or is it just facing a slow recovery? Columbus REALTORS reports in a recent article that the number of central Ohio homes and condos sold in July 2014 increased by 11.4% from June 2014, but is still slightly down from June 2013 (by 3.3%). Promisingly, inventory is up 5.5% from May 2013.  Unfortunately, price increases usurp inventory gains: the average sales price of a home rose by 9.1% since just this May.

Overall, it's impossible to predict the housing market. It seems that gains have been made in past couple of months, but that the market is not as healthy (as of June 2014) as it was one year ago (June 2013), when central Ohio sales were 3.3 percent higher (2,952 compared to 2,856), the median price was 3.8% lower ($159,400 compared to $165,500), and the average number of days on the market was 16.7% higher (72 compared to 60). Despite a market that tends to favor sellers, 100% of central Ohio REALTORS classify the housing market as moderate to strong, and expect it to remain so over the next six months, according the latest Housing Market Confidence Index.

What to Look for in Investment Property

Buying a piece of real estate as an investment property can be tricky. It can also be quite lucrative. Today more than ever, the rental market is booming. Increasing student debts have pushed back the median age of the first-time homebuyer. With inventory consistently low, many people who would have bought a home in other market conditions are deciding to rent, instead. If you are interested in buying a home to rent out, consider these factors:

Numbers. The most important aspect of investment property is profitability. It’s important to gauge profitability more on current performance as opposed to future predictions. In other words, if a property generates little income now but the area is “expected to appreciate,” it may not be your safest option. The ideal income property will offer appreciation value and cash flow. It’s better to use growth potential as a differentiating factor between areas that offer similar cash flow rather than a leading indicator. Does the neighborhood plan to build parks, malls, gyms, etc? This is not only important because it is a sign of growth, it also signifies growing employment opportunities (and thus a larger pool of tenants!).

Be weary of places with prices that are too good to be true—cheap properties are often accompanied by a high number of risks and problems. Look for something that is listed for a price similar to market value or above. You’ll also want to consider property taxes and rate of return, or “cap rate.” Research market conditions before you determine what a “good” cap rate is; this number continuously fluctuates.

Source. Be cautious of homes that have sat on the market for a long period of time. This is rather unique in today’s market, and there may be a good reason no one has yet bought that property. Likewise, a reduction in price may be a red flag.

Location. Considering price-to-rent ratios, you will want to avoid buying a rental property in a city’s nicest location. Aim more for average-priced neighborhoods, but remember that your tenants will reflect the quality of the neighborhood in which you buy. Homes in reputable school districts with low crime rates tend to hold value over time. Also consider vacancy rates and average income.

Condition. Ali Boone, an author of Bigger Pockets, advises that investors buy turnkey properties. At the very least, hire a home inspector to examine the actual condition of any property before you buy it.

A Strong End for 2013

The 2013 housing market finished strong, and 95% of Central Ohio REALTORS expect it to remain moderate or strong over the next six months according to the Ohio Association of REALTORS's Housing Market Confidence Index. Why? Let's look at some key statistics:

• From December 2012, December 2013 saw a 2.5% increase in the number of home sales. At 1735, This is the most sales on record since the peak of the housing boom in 2005. 

• December inventory of 8,732 was the lowest its been since 2000. More specifically, 2013 had the lowest inventory on record for Central Ohio, at just 3.9%. 

• Overall, 2013 documents the second-highest sales year on record. It experienced a 17.1% increase in the number of closed sales since 2012. 

Contact me if you're interested in buying, selling, or renting a home. I have the experience and expertise to guide you through today's housing market. 

Behind the Scenes of Today's Rental Market

Harvard University's Joint Center for Housing Studies released a report in mid-December that included a number of shocking facts and statistics. Overall, demand for rental homes is increasing, leading to higher rental rates.

The Numbers:

• The proportion of American households that rent increased from 31 percent in 2004 to 35 percent in 2012.
• From 2007 to 2011, approximately 3 million homes switched from owner to rental occupancy.
• Between 2000 and 2012, median rent prices nationally increased by 6 percent. 
• Also between 2000 and 2012, the median income of renters dropped by 13 percent. Note the inverse relationship between rent prices and median income of renters. 

These trends drain renters' financial resources, forcing them to cut spending on essentials such as food, transportation, and retirement savings. For example, monthly spending on transportation decreases from $158 with affordable housing to $55 with housing cost burdens.

Buyers and Sellers Remain Cautious

According to a survey by Redfin, an online real estate brokerage, only 28% of people feel now is a good time to buy a home. This is actually an increase from 24% in the third quarter. This is the first time since the fourth quarter of 2012 that homebuyer confidence has increased. Why isn't buyer confidence even higher? Buyers are frustrated with low inventory, increasing home prices, and increasing mortgage rates. Seller confidence is dwindling, as well. While 63% of survey respondents said "now is a good time to sell a home" in the third quarter, that percentage has dropped to 46%.

In November, Fannie Mae's National Housing Survey discovered that two-thirds of respondents think the economy is on the wrong track. Consumers are also concerned that they will get less money for their home than they would have during the summer.

Discouraged by today's housing market? Working with a professional, experienced real estate agent will help you achieve your goals in the least amount of time with the least amount of hassle. Contact me to see how I can help!

Market Update

Summary: The housing market is in a completely different state than it was this time last year, with steady price increases, more solid inventory, and strong demand.

Details:  Median age of inventory is 94 days. This is a leading indicator of demand and has declined by 11.32 percent from last year. In Columbus in particular, inventory is scarce, with a median age of inventory of 78 days—less than three months! Home prices, on the other hand, have risen. Nationally, the median list price increased by 7.57% year-over–year. The median list price for homes in Columbus, Ohio is $148,500. –a smaller increase of 2.77%. Overall, the market did not experience the seasonal slowdown typical of the fall months, leaving buyers, sellers, and Real Estate agents working full steam ahead.

In today’s recovering market, there is never a bad time to buy or sell your home. I assist both buyers and sellers in Central Ohio. Contact me if you are looking for a qualified and caring agent to address your specific home needs. 

Click here to see market statistics for a wide variety of other major U.S. cities. 

Life After Listing

Curious about what happens once you list your home for sale? It's always best to be prepared. Below please find some quick facts about the process that comes between listing your home and selling it.

After you list your home, your Realtor with enter it into the Multiple Listing Service (MLS), which feeds to hundreds of websites such as Realtor.com. You can expect to see a "for sale" sign in your yard and a lockbox on your door, which grants Realtors access to your home when showing it to potential buyers.

During open houses and scheduled showings, its best to be out of the house. This way, the people looking at it can better picture it as their own. Also, it allows them to make open comments about the home. Your agent may hold an open house for Realtors right away, followed by one for the public on the weekend. Thus, it's important that your house is show-ready when you list. This means clean, uncluttered, depersonalized, and photogenic. For ideas on how to stage your home, read my previous blog post, here.

Most people who view your home will do so in the first two weeks. Still, in a normal market, you can expect a home to sit on the market for 60-90 days. In today's housing market, this number is lower. Ideally, you should see interest in the first six weeks. If not, work with your Realtor to discuss strategy, pricing, and home improvements that will help market your home. If a buyer requests to see your home multiple times, that's a great sign!

Ready to list? Contact me. ... and congratulations!

Housing Market Cooling Off

This year has seen a hot housing market, featuring low inventory, multiple bids, and same day offers. While the market is still recovering, it's starting to even out. In much of 2012 and earlier this year, home prices were increasing faster than they are now, and inventory was near record lows, which supported a competitive atmosphere and high asking prices. In July, asking prices declined by 1/3 of a percent--the first monthly drop since November. In July, home showings dropped by 3.5 percent, and signed contract offers were down 11 percent when compared with June. For a brief, current update on the housing market, watch "This Month in Real Estate," below.

Distressed Properties Down as Market Recovers

This summer, supply of conventional homes has decreased while demand has increased. But what about foreclosures? According to In Contract magazine, the number of lender-mediated properties, commonly known as distressed properties (such as short sales and foreclosures), for sale in Central Ohio dropped by nearly 50 percent in the first three months of 2013. The inventory of distressed properties fell by 42.2 percent from the first quarter of 2012 to the first quarter of 2013. Meanwhile, distressed property sales increased by 19.9 percent. Perhaps more interesting, the number of closed sales for lender-mediated properties succeeded the number of new listings by more than 10 percent, meaning a good number of distressed properties that have been sitting on the market for awhile have been sold. Nonetheless, the sales mix is “shifting away from distressed properties and back toward traditional homes.” Supporting this claim is the that fact that the sales price of distressed properties has increased by 1.6 percent in the past year, while the sales price of conventional homes has increased by 4.2 percent (averaging $64,000 and $163,000, respectively).

These statistics speak to the market’s recovery, as Central Ohio has witnessed a very active market in the past couple of months. In fact, according the Housing Market Confidence Index released by the Ohio Association of REALTORS, 96% of Central Ohio REALTORS classify today’s market as “moderate to strong,” and all expect it to remain so over the next few months. Home prices and appraisals are largely believed to stay the same, or increase, in the year to come. Interested in buying or selling? Contact me--I would love to help. 

4 Stats Homebuyers Should Know

To have the most positive and successful homebuying experience, homebuyers should be as educated as possible about the market they are navigating. Knowing what you're getting into in advance will keep you from feeling too frustrated or overwhelmed. Trulia discusses four points that are good to know when searching for your new home:

1) The number of homes you'll lose before you win.
It's completely normal for buyers to lose out on a few homes before they are the prevailing bidder. When you lose a bid, move forward quickly in search of your next opportunity to make an offer. 

2) Average number of offers per listing.
Ask your agent about what is standard, in terms of competition levels, in the neighborhoods, price ranges, and property types you're looking for. In today's hot market, some people experience multiple offers, same-day sales, and above asking price offers. If this is the case where you are looking--you should know about it. 

3) Neighborhood "run rate."
A run rate mathematically tells you what home prices in an area would be in the future if the continued rate of rise continued for a year. While home price increases can be seasonal (with greater increases occuring in the spring and summer months), our market is still recovering from the recession, so it's quite possible that home price increases will continue to rise throughout the year.

4) Inventory rate and direction
How many houses are listed for sale, and is this number increasing or decreasing? If you're a more selective buyer with a long wish list, it may be hard to find your new home in a lower-than-average-inventory market such as the one we're experiencing today. Knowing this, you may have to sacrifice some of your "must haves" or up your budget. It's best to be realistic about what you can and cannot get in a certain area for a specified price. This will help you make well-timed, well-informed, competitive offers.

If you're not currently working with an agent, and would like to know more about these statistics pertaining to where you'd like to live, contact me. It would be my pleasure to help make your home buying experience easier and more enjoyable. 

Good News for Sellers: The Housing Market Continues to Pick Up!

It would have been hard to believe last year, but The Columbus Dispatch reports that lately buyers in certain areas have found themselves in bidding wars and same-day sales. Some even put in offers above asking price—which still isn’t always enough to guarantee them the home. The seller’s market in these pockets of Columbus is due to a low housing inventory, which shortens the time a house is on the market and increases the price of the home. While a six month housing supply indicates a balance between buyers and sellers, the Columbus area contains less than a 4.8 month supply. This trend shows no signs of stopping. As of March 2013, home sales had risen for 15 consecutive months. Perhaps even more encouraging, buyer traffic has increased by a quarter in the past year.

The bottom line:

Buyers—move quickly

Potential sellers—now’s the time! See how I can help.