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This Buyer thinks this Real Estate Market is Misery

 Question: I need some sound advice about the current market because I think I'm going crazy.

Just when I already thought prices in my area were already double what the average income qualifies for in mortgage payments, I'm now even more shocked to see new listings that are $50,000 or more overpriced in desirable areas according to online valuations.

Why are seller's agents overpricing the houses, according to fair market values from recently sold homes? How do they justify such prices? Why do brokers encourage buyers to invest at these prices, when common sense tells me, if rates go up, and people are shut out of the market, there will be even fewer qualified buyers, so prices have to go down! Do brokers have any code of ethics for the crisis they're creating in this market? Please tell me something to ease my misery about the current market!

Answer: You're not crazy. There are several answers.

First, why do you think online valuations are accurate? Do online sites have appraisers in your neighborhood who reported to them recently, or do they work by statistics which may be out-of-date, inaccurate and not reflective of individual properties? Online sites work on averages assuming all homes are alike. They even compare regular homes to foreclosed homes, which is ridiculous.

Second, imagine if you were a seller. Would you hire a broker to sell the property for less than market value? If brokers are over-pricing properties then buyers won't buy. Asking prices will soon fall if buyers just say no.

Third, home values are not based on a multiple of average incomes. They are based on what the market will bear. In effect, buyers are self-selected by their willingness to purchase at a given price and their financial ability to do so. Seen another way, homes are not universally affordable.

As a buyer you must use your own judgment. If prices make no sense to you, vote with your dollars and don’t buy now. Use the services of a Realtor, someone obligated to work in your best interest as a purchaser, to better understand local trends and to spot properties that meet your requirements.

Market Update

Market is still hot! Not quite as hot as a couple months ago, but still quite active.

Most Homes are selling within days.

Homes are getting many viewings and sellers are usually getting offers over list price.

Remember,  "List Price," is what the comparables (similar homes that sold) show.

Buyers who qualify for over the homes List Price, are offering over list price to increase their chances of the sellers accepting their contract. We warn the sellers that the property sales price may not be acceptable to the appraiser. Most Sellers are willing to take the chance.

We have a system that we use, that has helped us convince the appraiser that the home is worth what the buyer is willing to pay.  It's not 100% effective, but it is effective.

You may ask, why not just price the home $20,000 over what the comparables indicate?

If we did this, the number of showings would fall greatly. We have seen this in listings where the seller did just that. Showings were way down, the home sat longer on the market and the buyers noticed this. This actually created a situation where buyers were offering below List Price.

By pricing the home at market value, it creates a competition among buyers. This is what starts the bidding war!

Only Humans would do this

 

Home Appreciation Hits 30-Year High

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices rose 14.6% year over year in April. 

This is a 30-year high and even stronger than the already hot 13.3% annual appreciation reported in March. The 20-city index rose from 13.4% to 14.9% year over year, with almost all the cities showing strong gains. 

Phoenix (+22.3%), San Diego (+21.6%), and Seattle (+20.2%) continued to report the highest annual gains among the 20 cities. 

The Federal Housing Finance Agency (FHFA) also released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. 

While you can have a million-dollar home with a conforming loan amount, the report most likely represents lower-priced homes, where supply is tightest and demand is strongest. 

Click on Link.

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