|
Market Commentary
The best time to sell a home is… February!?
Corus uncovers the “February phenomenon.”
Conventional wisdom says that in the Mid-Atlantic, spring is the best time to sell your home. Certainly, this time of year has its advantages – the weather is great, flowers are in bloom, and the number of potential buyers is at its peak. However, we’re going to make the case that February is actually a better month – even with snow and cold weather.
Ours is a seasonal business. The market is busy in April and May, and December is our slowest month. All other things being equal, it’s rational to assume that the pools of home buyers and sellers act in tandem, with lots of active buyers and sellers in peak months, and a lack of both in the slow season. If the long-term supply / demand trend is neutral, buyer and seller leverage should be equal throughout the year and prices should remain flat.
But buyers and sellers aren’t in lockstep, and buyer / seller leverage fluctuates. Here’s our hypothesis.
Each November and December, the real estate market slows. Unsold homes begin to accumulate as buyers sit on the sidelines during the holiday season. The chart below shows this – whether the market is strong (2005) or weak (2006) inventory rises in the fall, peaking in November or December.
The situation changes in January. With the holidays over, serious buyers enter the market. At Corus, we’ve experienced some very busy Januarys as an apparent backlog of homebuyers actively searches for homes.
However, sellers don’t embrace the New Year the same way. Anecdotally, we’ve found that many potential sellers tend to wait until the spring to list their homes, avoiding the winter, perceiving April and May as a better time to sell. So, as existing inventory is bought up, inventory levels fall, reaching their lowest levels in February or March. Then, by April, homes are being listed at a faster pace than they are being bought, causing inventory levels to rise again, peaking later in the year.
With February inventory levels so low, sellers have maximum leverage over buyers, even in a slow market. Buyers have fewer choices and less power to negotiate, so sellers can potentially achieve higher prices or more favorable terms during this time. In April and May, increased inventory levels appear to remove some of that seller leverage.
We can’t predict the supply and demand trends of every year, and larger economic influences have the potential to trump seasonal factors across-the-board. However, we think that the evidence in favor of the “February phenomenon” is strong. If you have a home to sell, don’t wait for spring.
Mortgages & Finance
Negotiating with your mortgage lender.
Having trouble keeping up with your mortgage payments? You do have options.
It’s all over the news, and the statistics are scary – bank foreclosures are at high levels as many homeowners have had difficulty in keeping up with their mortgage payments. Some homeowners may have overextended themselves, have selected programs with interest rates that increase over time, or are simply having financial difficulty due to job loss or other personal circumstance.
Are you in this category? Know that in today’s climate, lenders are more willing than ever to work with a troubled homeowner. Lenders don’t want your house. And in general, conducting a foreclosure can be a costly endeavor for them. Even if the lender loses money on the deal, they would much rather not take possession of the home.
For the troubled buyer, it’s important to be proactive in working toward a solution with your lender – by contrast, simply discontinuing payments is a clear path to foreclosure. In half of all foreclosures, the buyer dodges the lender or “shuts down” out of fear. Try to overcome this anxiety and take action early in the process, while you still maintain some leverage and credibility with the lender. Also, each mortgage payment that you miss lowers your credit, limiting the lender’s flexibility in working with you.
If you’re at risk of missing mortgage payments, the most preferable solution is to simply raise or find cash wherever you can. Sell personal items or assets, or seek help from family. You’ll be making your payments, and there will be no impact on your credit.
If you have equity in your home, it may be possible to refinance your mortgage or to take out a home equity loan. This may provide you with additional cash to make payments, or may enable you to reduce your payments by stretching them out over a longer period of time. This action should not negatively affect your credit.
The lender may be open to the possibility of forbearance. In this case, the lender reduces or eliminates mortgage payments for a few months. Those payments are then added to future payments.
Lenders may also be open to reconfiguring the loan – modifying interest rates, the term of the loan, or other payment terms. With any such modification, it’s important for the borrower to achieve a sequence of affordable payments over the long term, rather than just pushing financial problems into the future.
Sometimes, selling the home may be the best option. If you have negative equity in the home, the lender may be open to a short sale. This means that the home is sold at a loss, and the bank forgives the difference between the loan amount and the proceeds from your home’s sale. A big negative for short sellers – the IRS taxes the amount forgiven by the lender. Also, if you have a first and a second mortgage on the home, you’ll have to negotiate with two lenders – not an easy task.
Some of these solutions can be difficult, may involve protracted negotiations, or may affect your credit. However, we would view all of these options as preferable to foreclosure.
Home Maintenance
Ten cheap ways to make your home look great.
Whether you’re selling or not, these simple steps can really improve your home’s appearance.
When we assist our clients in selling their homes, we’re often asked to provide advice on how the home’s appearance can be improved. In many cases, our clients are short on time or money, so we sometimes must look for simple steps that can create value easily and quickly.
We don’t see this list as only applying to sellers. Indeed, anyone who just desires to improve their home’s appearance can benefit. [Be sure to exercise caution on the electrical items. If you are unclear about how to properly rewire a socket or fixture, seek assistance.]
So, here’s the list:
-
Paint your front door. When a guest or prospective buyer is visiting your home, the few seconds they spend at the front door leaves a lasting impression. If the paint is peeling or painted, if the door is cracking, or if the finish is sloppy, other people will notice. Even if other parts of your home are in need of paint, at least make sure the front door looks good.
-
Mulch. Mulch is relatively cheap and easy to spread. In fact, some local municipalities give away bark or leave mulch for free. Your yard may not be professionally landscaped, and your shrubs may not be as healthy as they should be, but mulch definitely improves the appearance. It hides tree roots, diminishes weeds, and creates a smooth, even appearance.
-
Replace switch plates. Do you have switchplates around the house that are mismatched or painted over? Hardware stores sell basic white plastic or metal switch plates for as little as 10 cents each. They’re easy to replace and make a big impact. If you’re more ambitious and have basic electrical skills, replacing the switches and outlets themselves can further improve the look, and the hardware can be bought for about a dollar each.
-
Spruce up staircases. Areas around staircases get a lot of traffic, and the walls and baseboards in those areas tend to get easily scuffed and dented. Yet, they represent areas of visual focus when people ascend or descend stairs. Touch them up!
-
Declutter. When realtors “stage” a house, this is their number one piece of advice, hands down. Longtime homeowners sometimes lose sight of how much clutter they accumulate on tables, in corners, and on kitchen countertops. Put them away or remove them from the house.
-
Clean windows. Most newer windows have a tilt sash enabling them to be cleaned easily from inside the home. It can take a few hours, but window cleaning costs virtually nothing, and can make a dramatic difference in how your house looks from the inside.
-
Replace kitchen cabinet hardware. Older kitchens often have knobs and handles that are seriously out of style. But a wide variety of replacement hardware is available at stores such as Target, Ikea, Restoration Hardware, and Home Depot. Most hardware screws in from the back, so it’s easy to replace. When shopping for hardware, we suggest buying a few different “test handles,” seeing what works with your cabinet style, and then purchasing the balance of the handles in that style.
-
Paint kitchen cabinets. Replacing kitchen cabinets can be very expensive. But painting cabinets is one way to brighten a kitchen that has old, dark cabinets. White or ivory are excellent color choices. When painting, make sure you do a precise job – remove cabinet hardware, and ensure that you achieve a clean, even finish with no drips.
-
Replace your dishwasher. Standard-grade kitchen appliances are cheaper than people think. And it surprises us how many houses we visit that feature really nice, updated kitchens with old, unsightly dishwashers. A standard dishwasher only costs about $300. We think that in selling the home, the impact of the new dishwasher will likely be worth far more than the cost.
-
Replace old light fixtures. Old, outdated light fixtures from the 1950s, 60s, or 70s can make an entire house look dated. Home improvement stores such as Home Depot and Lowes stock a large quantity of attractive lighting fixtures for under $20 each. With a screwdriver and a basic ability to connect the fixture’s leads in the electrical junction box, it’s a simple process.
Market Stats
Today’s real estate market, by the numbers.
Our data show a market that continues to slow, particularly in the outer Washington suburbs.
Our statistical study of the Corus service area uses data compiled from April 2007, comparing home sale statistics to the same period, one year ago. Overall, the data reveal a slow real estate market across the entire Corus service area. While we view the current market as being stronger and healthier than late 2006, these statistics indicate that April 2007 represents a weaker real estate market than April 2006. Our observations:
-
Houses are taking considerably longer to sell than in 2006. Time required to sell a home increased 81% in the Washington DC suburbs. In the Delaware Valley, days on market increased 24%.
-
Listing inventory varied widely by region. Inventory in the Delaware Valley jumped 28%, with the City of Philadelphia experiencing a 67% increase in listings. In Virginia and DC, inventory was down. Most notably, inventory increased 87% in Prince George’s County, MD.
-
Transaction velocity has slowed across all locations. The number of new listings declined from last year, but in all areas except the District of Columbia, the quantity of new sales contracts slowed at a higher rate.
-
One piece of good news for sellers – home values stayed relatively flat, although some counties did experience price variations.
-
The outer suburbs of Washington DC show significant signs of a slow market. In Frederick and Prince George’s County, MD and Prince William County, VA, inventory is way up, active listings are increasing, and the pace of home sales is slowing.
-
Within the Delaware Valley, the City of Philadelphia has experienced the most significant slowdown in that region.
Understand that in many of these areas, the numbers don’t tell the entire story. Our Delaware Valley office reports that even though the numbers show that the market is weaker, there are some “hot” zip codes throughout the region. They report that competitive multi-buyer situations are occurring, and sellers are generally selling their homes within a few percentage points of list price. They also report that “lowball deals” are less frequent than one might think – although the market is weak overall, sellers know that if the home is priced competitively and shows well, their odds of attracting a willing buyer are high.
|