Real Estate Weekly: January 20, 2023

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The average U.S. home value fell slightly from November 2022 to December 2022, but values are still up 8.4% compared to the previous year.

Source: Zillow, 2023

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What we can learn from the 2022 real estate market

By Erik J. Martin CTW Features

It’s been said that those who don’t learn from history are bound to repeat it. And that’s an axiom that applies as much to the housing market as it does to politics, sports, relationships, and other areas of life.

Hence, it can be constructive to look back on 2022 and assess how real estate matters transpired, especially if you are in the market to purchase or sell a home in 2023, the pros agree.

“It’s important to look back at 2022 because, even though it’s well known that real estate is cyclical, last

year threw some curveballs at us that are worth learning from,” says Kenon Chen, executive vice president of corporate strategy at Clear Capital.

Robert Taylor, the owner of The Real Estate Solutions Guy in Sacramento, says we learned that, when everyone is playing musical chairs with real estate, things are great until the music stops.

“When the music stops, everything changes quickly. It happened in the late 1970s during the Carter administration when the Federal Reserve raised the Federal Funds rate to 15%.

Demand for housing fell, and there was a rise in

foreclosures,” he explains.

“And it happened in 2022 when interest rates jumped significantly in the spring. Buyers faced with mortgage interest nearly doubling and housing prices already pushing the affordability ceiling eliminated many potential buyers from the market. And just like previous market cycles, it didn’t take years for it to happen –simply a few months.”

Even though the pandemic subsided in 2022, we also learned that low continued housing supply matters.

“Lack of housing supply, after years of home building pullback following the financial crisis, means that we still only have half the

number of listings we had pre-pandemic. This is further exacerbated by the fact that most homeowners have a current mortgage rate that is half of what is available now – so they are staying in place,” says Chen.

Indeed, with fewer sellers willing to list their homes, inventory remains tight.

Al Lord, founder/CEO of Lexerd Capital Management, points to declining new construction activity in 2022, which is also partially responsible for the current continued low supply.

Chen notes that the lack of housing inventory significantly contributed to the sustained increase in home prices observed in 2022.

“We also now know that 2022 was the year the largest generation in history would reach prime home buying and household formation age,” says Chen, referencing millennials.

Chen further points out that the massive transaction volume that occurred in 2020 through 2021 were really anomalies somewhat driven by Federal Reserve spending and incentives that put cash in people’s pockets while keeping rates low.

“In 2022, the record speed of rising rates and sustained home price appreciation definitely put the brakes on purchase demand while simultaneously making sell-

ers think twice about listing their home if they are going to buy in the same area,” he adds.

Note that the explosive growth in home sales in 2021 was followed by a decline of almost 19% in 2022 – “a swing that has consequences on households and investment portfolios,” adds Lord. Hopeful purchasers can learn from the mistakes made by others in 2022.

“First, don’t overbid on a home unless you don’t care if you lose money. If you truly believe you will never move again and don’t care how much you pay for the home, go ahead and overbid. On the other hand, if you know you might be moving in a few years, avoid overbidding,” suggests Taylor.

Additionally, never forget that most homes tend to sell in any kind of market. “Days on the market may change, but most houses will still sell. If you are planning on selling your home in the next few months, expect a longer time on the market, but don’t get discouraged if you don’t have an accepted offer in two weeks,” Taylor adds.

Lastly, look for the best bang for your buck when shopping for a home.

“Look for value in relation to increased costs of maintaining the property, including costs of financing,” recommends Lord. “A property located in an area of excess demand can be a good bet.”

Security systems in relation to home value

Question:

Will the installation of security cameras increase the value of my home?

Answer:

The sale of home security systems is a large and growing business. Their central appeal is that they deter burglars and the theft of home deliveries, cut insurance costs, plus they add to neighborhood security.

Home security systems can be installed by themselves or as part of a so-called “smart” home set-up with such features as smoke detectors, fire alarms, thermostat control, the ability to lock and unlock doors, and water sensors. According to TradingPlatforms, such systems have been installed in more than 50 million homes so far.

While security systems have been a long-time staple for commercial locations such as stores, offices, and warehouses, they’re a relatively new residential feature. Part of the reason for the recent popularity of such systems is that they can often be installed by owners, are frequently wireless, offer alarms and two-way communica-

tion, and preserve events online for the police.

Such systems can be seen as a way to monitor property and deter crime, but when it comes to sale values a distinct dollar impact is tough to measure.

However, camera systems can be highlighted as still another reason to buy the property, something to help in the selling process. Information that might interest buyers includes any monthly cost, whether warranties convey, and if systems are monitored by the property owner or a central station.

Camera systems may also lead to home insurance discounts. Depending on the type of system, significant discounts may be available according to the Insurance Information Institute. Speak with insurance brokers for details.

Be aware that home security systems may raise privacy issues, depending on your location. Some states have rules regarding the use of cameras while others do not. Also, there can be different rules for video cameras and audio recorders. Attorneys can provide specific information.

ASK OUR BROKER

By Peter G. Miller

Perhaps most importantly, camera systems can result in less crime. An intruder may see evidence of a system – say cameras or signs – and decide that properties without such protection are easier marks.

Cameras have a lot of practical value. Judging from online neighborhood pages, such systems can be used to see pets, deliveries, vandalism, and even actual thefts. Cameras at one home can often see events in public areas such as front yards and streets that can help police in the event of crime.

Camera systems also have their cons. Some people see them as invasions of privacy. Owners may not want to self-monitor, but professional monitoring services have a monthly cost.

For more information check various systems for the features you want, costs, local rules, and ask what neighbors who have such systems like and dislike.

Email your real estate questions to Mr. Miller at peter@ctwfeatures.com.

More

By Marilyn Kennedy Melia CTW Features

Persistence has its virtues, but so does quitting.

In this market, more sellers are calling it quits; with Redfin reporting that a record two percent of homes listed for sale were dropping out of the market each week last autumn.

In many cases, by pulling up “For Sale” stakes, sellers are acknowledging reality: They’ve priced too high.

“I think many homeowners were seeing outrageous sales prices and wanted to get in on the action. However, the market has shifted,” notes John Myers, of Myers & Myers Real Estate Inc., Albuquerque.

Watch the clock

Ideally, sellers should drop their price earlier, rather than de-list, says Brett Rosenthal, a Compass agent in Philadelphia.

But, since “the days of selling in the first day or two are over,” Myers acknowledges, how can a seller know how long is too long before a serious buyer emerges?

Attracting no or very few buyers wanting to see a home is one good indicator of an over-priced home, Myers says.

Also, statistics in your own market are a guide, says Myers. For example, in the Albuquerque area, the length of time from initial listing until sellers accept an offer increased to about 28 days in December 2022. Especially after being listed about two weeks

without a serious offer, the home is likely not competitively priced.

Wait a while

A home on the market past the local averages takes on a stigma. In his area, and especially for condominiums, where very similar units recently hit the market, listings past 90 days are “stale”, says Rosenthal. If a seller isn’t pressed to move, “pull it off the market for 60 days and then relist it so that the days on the market go back to zero,” he advises.

Mind your contract

Typically, sellers sign an agreement to list their home with a specific realty firm for a certain length of time. Sellers terminating early are subject to a fee. But firms don’t always enforce that, and sellers agree to re-list later.

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