Rising home prices and low inventory is making it difficult for buyers to find the perfect home. What’s a great strategy? Buy a fixer upper!
There are real advantages to buying a home that needs work. Unloved or outdated homes don’t attract as many buyers, allowing you to mine the gold under the dirt. You’re getting the home at a discount compared with the rest of the neighborhood. You’re not paying top dollar for someone else’s improvements and you can make the home your own. You’ll wow your friends and family with the result.
Shop for the best neighborhood you can afford.
Look for the worst home in the best neighborhood. Usually that home is older, smaller and not as well maintained as other homes. You’ll build instant equity when you improve the curb appeal, so the home looks like it belongs with its neighbors.
Ignore the cosmetics.
Don’t stress over ugly paint, wallpaper, shag carpet or gingerbread trim. Your Berkshire Hathaway Home Services network professional can help you distinguish features that matter and which are easy to change.
Consider the bones.
You need to know whether or not you can open a kitchen to the den or add on a bathroom or other square footage. These updates can be costly but they add value to the home. Talk to your lender about loans that pay for remodeling such as FHA’s 203(k) program or Fannie’s HomeStyle Renovation Mortgage.
Housing inventory is low! Mortgage money is available! Interest rates are low! The Lansing area is in “Seller’s” market! So, why is your home not selling?
Overall, there are a variety of factors that can cause your home to not get any offers. However, by doing some investigation and keeping the following warning signs in mind you’ll be better equipped to know when it’s time to lower your home’s list price.
1. You’ve received multiple “low ball” offers
The first telltale sign that your list price is too high is if you receive multiple offers that you perceive as low ball offers. Receiving one or two low ball offers is expected in a buyer’s market where there is plenty of inventory. However, receiving low ball offers in a seller’s market could mean that your list price is too high. Don’t panic. Repeated low ball offers provides an opportunity to assess the offers that you’ve received to see what range they fall in, and adjust your list price accordingly to be more competitive.
2. There’s been high traffic but no offers
Another sign that your list price is too high is if you’ve had a ton of traffic at open houses and through private showings, but still have yet to receive an offer. High traffic means that at first glance your home is appealing enough for buyers to check out. If there isn’t a major problem that is scaring buyers off, it could mean that the list price is simply too high. Lowering your list price could put you in a position of receiving multiple offers from interested buyers, driving up the price of the home through competitive bidding.
3. Comparable homes have much lower list prices
One thing you and your agent should always keep an eye on is if comparable homes come up in your neighborhood. As this begins to happen, you could notice that your home is priced much higher than comparable homes in your neighborhood. This is another sign that your list price could be too high and scaring off buyers. Adjusting your home’s list price as more comparable listings become available will make your list price more competitive.
4. Your home has been on the market for multiple months
A final sign that your list price is too high is if your home has been on the market for a long period of time. This is especially true during the current seller’s market with low inventory and a surplus of buyers. Lowering your list price could make your home more appealing to potential buyers and help get your home sold.
The average sales price of Lansing area homes has increased $6,877 during the past twelve months. This due to low inventory favoring sellers and affordable mortgage rates giving buyers a unique purchasing advantage.
After a brief hike, Mortgage rates fall below 4%
Following two weeks of mortgage rates slightly above 4%, rates have fallen back to pre-July 4th figures around 3.84%. Did you ever notice that rates always go up during a holiday period?
Average Lansing Area home sales
The average sales price of homes in our market area has risen 4.6% from $149,374 in June 2016 to $156,251 in June 2017. Check out our Second Quarter Sales Statistics Link (below) for an update sales activity by community.
Second Quarter 2017 Sales Statistics
BHHS Tomie Raines sales exceed local average
While the average selling price of homes sold by all members of the Greater Lansing Association of Realtor is currently $156,251, the BHHS Tomie Raines average is $196,579. This is $40,328 above the local average and $20,000 more than our next highest competitor.
Low inventory has led to quick sales
The number of sold home (residential and condominiums) has increased from 3,163 in 2016 to 3,329 (5.2%) in 2017. This means that properly priced homes are being sold almost immediately after being offered for sale and closing within two to three months. As of July 22, the number of available homes in the five county Greater Lansing area was 2,022.
Buyers should expect to see higher price tags throughout 2017 and 2018.
When purchasing a home, you’re more than likely going to need a mortgage to assist you with the purchase. A main factor that determines the long term financial commitment of your mortgage is the mortgage’s interest rate. Interest rates can fluctuate based on many different external factors. Some fluctuations happen quickly while other times mortgage rates remain more stable over time.
One major factor in determining mortgage rates is economic growth. The economy will grow and fall based on many different factors including natural disasters, wars and other major events happening throughout the country. During times of economic growth the number of home buyers will typically increase creating a higher demand for mortgages. This will in turn increase mortgage rates. On the other hand if the economy is on the decline, mortgage rates will begin to fall due to reduced demand.
Another factor that comes with a growing economy and that can cause mortgage rates to fluctuate is inflation. Inflation happens when prices increase causing the purchasing value of a dollar to drop. This slows the economy. When this happens mortgage rates will rise because fewer people are able to afford to purchase homes.
Housing Market Conditions
A third factor that indirectly causes mortgage rates to fluctuate is the condition of the housing market. When the housing market is in a seller’s market there is a higher demand for mortgages. With fewer homes on the market either being built or re-sold this will cause mortgage rates to rise. On the other hand during a buyer’s market when there is plenty of inventory and less buyer demand, mortgage rates tend to decrease.
The Federal Reserve Board
The Federal Reserve Board is the central bank of the United States and collects economic information to make decisions about how money is allocated. With this economic information the Federal Reserve Board will determine how the money supply needs to fluctuate to stabilize the economy. Although the Federal Reserve Board can not directly change mortgage interest rates, their decisions have a trickle effect. For example if the money supply is increased there is downward pressure put on interest rates, and if the money supply is decreased there is upward pressure on interest rates. This is done in an effort to either stabilize the number of homebuyers by increasing mortgage rates, or spark economic growth by decreasing mortgage rates.
As the digital world evolves, there are a wide variety of resources online to aide your home buying or selling process. Because of the large array of tools available, and mostly for free, there can be some questions as to whether or not a Realtor is really necessary. Regardless of the tools available however, Realtors are extremely helpful and a necessary part of selling or buying a home in 2017.
1. Realtors have access to potential homes before anyone else
When searching for a new home, especially when the market is a strong seller’s market, it can be challenging to find the time to look at potential homes before they’re swiftly off the market again. That’s why a Realtor can be an incredibly helpful tool. Realtors will have access to homes immediately, and sometimes even before they hit the market. This gives them a chance to assess their customer’s needs and exclusively show them homes before others have the chance to submit offers. Realtors have strong relationships with other Realtors and community members making this a possible option during your home search. If you were to forego a Realtor, the chances of you having access to potential homes wouldn’t happen nearly as quickly, dragging out your home buying process even more.
2. Realtors know the ever-changing market
A large piece of buying or selling your home is to be able to assess the state of the real estate market. Understanding the state of the market will give you imperative information about when the best time to list your home or search for homes is. For example, during a seller’s market where there are a ton of buyers and low inventory, this is a great time to put your home up for sale to get top dollar. Seeking the assistance of a Realtor will help you expertly assess the market and will give you key information about when the right time to buy or sell is. This will help you get top dollar for your current home, or buy a home at a great price.
3. Realtors have expert negotiation skills
When purchasing a home, it can be overwhelming to consider potential work that needs to be done. On the other hand, when selling your home you want to get top dollar in order to afford your next house. Hiring a Realtor will help you get more house for your money or a higher price for your home by using their expert negotiation skills. Realtors who are experienced consider many factors, including past experiences, when finding a fair price for a home and know how to negotiate with other Realtors. Not all negotiations are straightforward monetary negotiations either. For example, let’s say you’d like to purchase a home but the carpet throughout the home is in bad shape. A Realtor will be able to, in this instance, negotiate either a lower price for the home or updated carpet as a contingency for the seller. These case by case situations are commonly identified by qualified Realtors, making them a valuable resource for your home search.
4. Realtors handle the behind the scenes work for you
Another reason to hire a Realtor in 2017 is for the work they do behind the scenes. There are many steps that take place throughout the process of buying or selling a home that a Realtor handles throughout the process. They will typically have relationships with mortgage lenders, title companies and other Realtors which will help them aide you throughout the entire process. There are many pieces of crucial paperwork that are ultimately required throughout the process from the initial seller’s agreement to lead based paint disclosure agreements for example that a Realtor knows like the back of their hand. Without their help it can be extremely cumbersome to ensure each detail is taken care of on your own.
By now, just about every buyer knows there simply aren’t enough homes for sale in the Greater Lansing market to satisfy the current housing demand. But despite the shortages, rising prices, and bidding wars, the number of homes to be sold in 2017 is expected to increase about 3.5 percent.
Mortgage rates continue to be below 4.0%
Contrary to earlier projections of higher interest, mortgage rates continue to be below 4.0%. This week’s average low of 3.85% is consistent with the 2016 rates which helped drive a huge spike in home sales. Thus far, 2017 sales have continued at the same pace.
Low inventory = strong seller’s market
The number of available homes for sales is currently at approximately 1900 units for the five county Greater Lansing Area. This is an increase of 200 units over the number of available home listed on April 1st, but well below the normal average of 2800 units. Buyers can expect homes to have offers within a few days of being listed for sale.
Home’s are increasing in value
Buyers should expect to see higher price tags on homes in 2017. First Quarter Sales Statistics from the Greater Lansing Association of Realtors shows that the average sales price of a home was 2.3% lower than this time last year and nearly 7.2% less that the average sales price reported in the Forth Quarter of 2016.
While the average sales price for the entire Greater Lansing Association of Realtors was $139,690, the BHHS Tomie Raines average was nearly $170,000.
Flat sales due to historically low inventory during the First Quarter do not indicate a trend. Area home values are expected to increase 5 to 7 percent in 2017 and another 3 to 5 percent in 2018.
There has consistently been a housing inventory shortage in Mid-Michigan this season. This means the number of buyers outweighs sellers and the number of properties available, pushing the market into a seller’s market. With housing inventory shortages, an atmosphere is created where we see quick home sales that often result in an auction mentality, which can be difficult for homebuyers.
How low is the housing inventory in Mid-Michigan?
The absorption rate is what is used to assess the state of the market to determine whether there is currently a buyer’s or seller’s market. The absorption rate is the number of months it would take to sell all of the available listings on the market. A balanced market, where there is no advantage for buyers or sellers is usually an absorption rate of 6 months. However, currently the absorption rate has dropped to 2.5 months and in many markets at many price points is below 2 months. This means that there are few listings available, and when they become available they are getting purchased quickly.
What the housing inventory shortage means for homebuyers
If you’re considering buying a home in Mid-Michigan, don’t let the low inventory and seller’s market deter you. It’s still possible to get an ideal home in your price range, you’ll just need to be in the mindset to move quickly. Buyers need to work with a great agent with the best tools to be successful. Experienced agents will be able to get buyers in front of new properties quickly, and will be able to write reasonable and competitive offers to help get buyers into their dream homes. As a buyer in a seller’s market, it’s important to be patient and fast moving. You may find that for a period of time you won’t find a property that suits your needs and all of the sudden, within a few days, you’re bidding on multiple properties that suit your family. During a seller’s market you’ll most likely end up bidding on multiple properties until you make an offer that sticks.
A seller’s strategy during a seller’s market
If you are considering selling your home, but haven’t taken the plunge yet, now is an ideal time to put your home up for sale. When the market has a short absorption rate, seller’s will be in the driver’s seat leaving them in a position of multiple offers, higher bids and a shorter sale period. A seller will need to be completely ready to move in a seller’s market, because chances are their home won’t stay on the market for long. A seller should look for a qualified and savvy agent that helps them take advantage of the current state of the market. They should find an agent with the best tools available to market their home properly to extract the highest possible price, in the shortest time, with the least inconvenience to them.
“Severe” housing shortages are prompting existing homes to sell significantly faster this year, propelling home sales to the highest pace in more than a decade. In the Greater Lansing market, 48% of homes are selling in less than a month.
Lansing area buyers are finding available properties to buy is a strenuous task. Showings are occurring immediately after the listing appears and multiple offers may follow within hours. To secure a home, a buyer must have financing in place, be prepared to make a quick decision, consider a full price offer and expect the possibility of being in competition with other buyers.
Lower Mortgage Rates
Mortgage rates have dropped below 4 percent for the first time since November, with home buyers taking advantage of the lower borrowing costs. The average 30-year fixed-rate mortgage fell to 3.85 percent for the week ending April 20. “We are in the spring, and people are out looking to buy homes,” says Len Kiefer, deputy chief economist at Freddie Mac. “These low rates are really going to help out with affordability.
Smart homes can be susceptible to viruses, if homeowners aren’t careful.
A flood of inexpensive security cameras, thermostats, and other internet-connected devices have come to the market, and many of them are carrying minimal safeguards against remote hacking. This is a privacy threat allowing hackers to access internet-enabled cameras, infect digital thermostats, and attack computers where bank account information or sensitive data is available.
These are some of tips experts suggest for how to better secure a smart home:
- Do a hard reset: Some basic computer viruses that lurk on home routers and digital video recorders are unable to survive a hard reset. If an infection is ever suspected, power off the machine.
- Update your password: Don’t use simple passwords like “12345” or “admin.” Have a unique username and password to protect the machine from threats.
- Perform updates: Some companies offer software patches if a security vulnerability threatens a device. But the user is the one who has to initiate these updates. Enable automatic updates, whenever possible.
Establishing a home’s market sales price is equally important to buyers, sellers, lenders and real estate professionals. To help transactions proceed quickly and efficiently, Realtors and appraisers both utilize information from the local Multiple Listing Service (MLS).
The MLS is a professional member-based cooperative that contains a wealth of information including active listings, homes that have recently sold, tax roll data, historical data, and market trends such as how quickly homes are selling and how close they sell to the original listing prices.
Using this data, licensed real estate professionals prepare a comparative market analysis (CMA) to help sellers choose a listing price for their homes and to help buyers make offers. The CMA is a report that includes recently sold homes and homes for sale that are similar to the seller’s home in location, appearance, features, and general price range.
If the buyer is receiving financing through a bank, the bank will order an appraisal, using the same MLS data, but with some differences. A bank appraisal is performed by a licensed appraiser to determine market value. Comparable homes similar to those in a CMA are used to compare physical features, property tax records and recent solds to determine whether values are trending up or down.
In short, the CMA introduces consumers to the ever-changing marketplace of homes for sale and those properties that have recently sold. The appraisal determines market value for the bank so that the bank doesn’t lend too much money on a single property. Together, CMAs and appraisals help consumers buy and sell homes.