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The winter of discontent and real estate sales

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Winter is not usually a time of year when you would think of selling your home. After all, everyone gets into holiday and hibernation mode. Between Thanksgiving and New Year’s Day, home sale inventory is usually trimmed by an average of 50 percent and contract activity is significantly reduced.

But this winter will be different. Rising interest rates and pent up demand could make the housing market very active this winter.

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Change is in the air and all around real estate

 

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Change is not always easy. Sometimes we choose to change and other times we are forced to change. The Great Recession forced massive change to many aspects of our lives – mostly financial. Many found themselves out of work because of the recession, and many home owners lost their homes to foreclosure; while the rest of us searched for ways to cope.

As a result, the Dodd–Frank Wall Street Reform and Consumer Protection Act was quickly pieced together and signed into law in 2010. “Dodd-Frank,” contained over 2000 pages of regulations and rules, many of which were to be created at a later time by many agencies and unelected bureaucrats. Dodd-Frank also created the Consumer Financial Protection Bureau, which took over RESPA, lending and consumer finance markets enforcement responsibilities. The CFPB created the “Qualified Residential Mortgage” and “Know Before You Owe” rules that significantly impacted the mortgage and housing industries.

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And sometimes it's all about giving back

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It was about one month ago when I received the call from a local public relations firm. The voice on the other end of the line wanted me to write a column about their real estate agent client. They wanted to draw attention to the fact that their client started a program where they will be donating a portion of their commission to a charity chosen by the home buyer or seller.

Although I was pushed to commit to write the piece as well as provide a publication date, it seemed (at least for the moment) that seeking publicity about one’s altruism was ironic. In the ensuing weeks, I received follow up calls to write the piece. But rather than saying “No,” I told them it would most likely be a piece that is generally about real estate agents’ charitability. After all, we’re headed into the holiday season, and the timing seems right about bringing attention to those who give something back.

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And 35 years of careful profiling reveals...

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This week’s release of the National Association of Realtors® Annual Profile of Home Buyers and Sellers marks the 35th year of NAR’s analysis and description of home buyer and seller behaviors and attitudes.  Many of you may not remember what it was like in 1981, but the country was coming out of a deep recession.  The economy was still scarred with double-digit unemployment, inflation and interest rates.  Looking back, you can see how things have changed over thirty-five years and how things remained the same.

According to the US Census Bureau (census.gov), the median price for a new home in 1981 was $68,900, while in 2010 the average new home price was $221,800.  Freddie Mac’s (freddiemac.com) data indicates that the average mortgage interest rate in 1981 was 16.63 percent, and 4.69 percent in 2010.  Surprisingly, the cost of housing (when financing 100 percent of the sale price) has only increased about 17.5 percent from 1981 to 2010!

People want their space and privacy.  According to the American Enterprise Institute (aei.org), the median square feet per person in a home in 1981 was about 550sf, while in 2014 it was 987sf.  This expansion in personal space was expressed in the home size.  The median size of a home in 1981 1,550sf, while 2010 it was 2,169sf (according to the Census Bureau).  Also consider that the typical home of 1981 only had one and a half bathrooms, and the expectation today is that a home should have at least two and a half bathrooms.

An October 18th news release from the NAR (Five Notable Nuggets from NAR’s Home Buyer and Sellers Survey’s 35-Year History; realtor.org) provided some insight into how the housing market has changed through the years.  One noticeable factor is the reduced number of first time home buyers entering the market due to underemployment, student debt, lack of down payment, or delaying family formation.  Last year’s percentage of first time home buyers dropped the lowest rate since 1987; and “according to the U.S. Census Bureau, the homeownership rate for 18-35 year-olds is currently at 34.1 percent, the lowest level in records dating back to 1994.”

It’s apparent that the internet is not replacing the real estate agent.  Although a majority of home buyers use the internet to assist them with the home buying process, the NAR reported that 90 percent of home buyers and sellers surveyed for this year’s profile worked with a real estate agent.  As a result, for-sale-by-owner transactions were at the lowest level ever (FSBO transactions peaked during 2003-2004).

The home buying process now takes longer.  Putting aside recent changes to the mortgage process, the 2016 Home Buyer and Seller Profile brings attention to the amount of time a home buyer needs to find a home.  According to the NAR, the average time to find a home was relatively unchanged from the 1980’s to about 2007; which about seven to eight weeks.  The duration of the home search peaked at twelve weeks from 2009 to 2013.  However, since then the average time needed to find a home is about ten weeks.  The increased search time is due to a number of factors.  Brisk sales combined with periods of low inventory has not provided home buyers with much of a choice from which to select.  Not to mention an unprecedented amount of available information that has created a savvy home buyer.

Dan Krell is a Realtor® with RE/MAX All Pro in Rockville, MD. You can access more information at www.DanKrell.com

@DanKrell

 

 

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Limit your surprises following the home inspection

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The American Society of Home Inspectors (ASHI) often conducts surveys to measure home buyer satisfaction. You shouldn’t be surprised that most home buyers are typically satisfied with their home inspections. A 2012 ASHI survey conducted by Harris Interactive indicated that home buyer confidence was boosted in eighty-eight percent of respondents who had a home inspection before buying.

A 2011 survey revealed that about seventy-two percent of homeowner respondents indicated that their home inspection helped them avoid potential problems with their home (homeinspector.org).

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Sex, lies and videotape just part of today's ethics

Ethics-books

Allegations of sabotage, fraud, and collusion. A yearning for power and money. And let’s not forget about the sex, lies, and videotape. No, I’m not referring to this year’s presidential election – I’m talking about Realtor® ethics (although the similarities are intriguing). I’ve reported in the past about real estate agents who’ve engaged in fraud, sabotage and collusion while taking part in scams. There have also been the recent reports of alleged money laundering and extortion. And let’s not forget the agents caught on video in homes for sale engaging in sexual acts, rummaging through underwear drawers, and stealing.

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Reform of the Consumer Finance Protection Bureau

CFPB

Since its inception, the Consumer Finance Protection Bureau (consumerfinance.gov) has had many advocates and many critics. While many point to the CFPB’s staunch protection of consumers, some have argued that the independent agency has too much power with little oversight. And this week’s opinion from the United States Court of Appeals in the case of PHH Corp v, Consumer Financial Protection Bureau seems to side with CFPB’s detractors.

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Getting ready for your own domestic robot

Rosie the Robot

Today’s smart homes are still a far cry from the futuristic visions of the last century. Home automation has certainly advanced over the last one hundred years. Think about the washer and dryer, and even the personal computer. But what about robots? If you’ve seen episodes of the 1960’s TV show "The Jetsons," you remember how Rosie the Robot cooked, cleaned and was a companion for Elroy.  Rosie’s legacy has set the bar very high for domestic robots – and we are approaching that standard rapidly!

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Examining the future of mortgage relief

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CoreLogic’s (corlogic.com) latest monthly foreclosure report indicated a continued downward trend. In fact, July’s national foreclosure inventory rate of 0.91 percent was the 57th consecutive month (almost 5 years) with a lower number of foreclosures nationwide. Even the current 2.9 percent national rate of home owners considered “seriously delinquent” is also lower from last July. (Maryland’s foreclosure inventory and seriously delinquent rates are higher than the national average at 1.2 percent and 4.1 percent respectively.)  

Frank Nothaft, chief economist at CoreLogic, contributed the decline of foreclosure inventory to a combination of loan modification, foreclosures, and a strong housing market. Additionally, he stated that “The U.S. Treasury’s making home affordable program has contributed to the decline through permanent modifications, forbearance and foreclosure alternatives which have assisted 2.5 million home owners with first mortgages at risk since 2009.”

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Consumers at risk with new requirements

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Consumers are at risk with added statutory requirements

I have always found it curious that area agents feel a need to be licensed in three state jurisdictions (Maryland, DC, and Virginia) as if there is never enough business in any one area. I get the idea that it potentially helps them make more money. But are they putting their clients at risk?

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