Cats Zestimates Wane Transition | May 2021 Note from Jim
Every month is fun and interesting.
Happy nearly June, everyone. This market continues to confound, amaze, exasperate, and exhaust. Have a question about the Note, or the market? Ask me. 434-242-7140
Sold in 2 Days!
Easy, right? That doesn’t count the 10 years that it took to actually get it on the market.
The numbers don’t show the time spent working with clients over the years. Yes, that client might have called you seemingly out of the blue, but if I’ve been doing my job right, staying present and in touch, that call to list or buy on a seemingly random Tuesday is hoped for, but not expected.
Real estate representation is more than just the buying and selling of real estate; it’s building relationships built on trust, presence, and competence that lead to the random calls.
Learning, and Moving On
But sometimes things happen. You can spend over a year helping a client prepare for the market, prep, get contractors, cleaners, and devise pricing and timing strategy, only for them to “go a different direction” for any number of reasons, and in the process ignoring the 8:30 pm to 10:30 pm Friday night strategy session.
When I was an unseasoned agent, this would have hurt and the feeling would have lingered. Now, I chalk it up to humanity, learn from it, and move on.
When a client asks me why we sign buyer broker agreements, or why door knockers, receptacle covers, and shrubs are in the contract as conveying, I tell the story about the time a client did the wrong thing or the time that a seller took that tree after signing the contract.
Letters to Sellers
I’ve written about letters from buyers to sellers. I’ve seen pictures of the buyers, pictures of their kids, pictures of cats and pictures of dogs. This year, a buyer’s cats wrote a letter to sellers’ cats. Really
I am now advising all of my sellers to allow me to say in the agent notes,“Personal letters or photos accompanying offers will not be accepted.”
Buying a home is an emotional process. Selling a home is too.
I get it. A lot of buyers want to make that emotional connection. Some sellers want to sell to “a nice family” or whatever emotional conveyance is important to them.
Let’s keep the offers and contracts about the terms – price, closing, financing, etc. – rather than the who. Our history has shown the troubling results of choosing buyers based on who they are.
Answering Many with One
When one client asks a question, I’m pretty sure that many are asking the same question; that’s one of the many reasons I started my blog in 2005. Here’s a big one:
I would also like to say more broadly, in terms of this volatile market, what I'm comfortable with. I want to buy a house, but I'm not willing to do something unwise to get one. I was talking with my aunt who is a realtor in (Texas) and with our financial advisor about buying right now, the curve of the housing rates is like 2006 and it's petty freaky. I asked my aunt if she's seeing people buying houses that she doubts they can afford, like happened in the last crash, and she said no but she is seeing a lot of people pay more for houses than she thinks they are worth. Our financial advisor worried about the same.
One thing I really like about working with you is that you do not sugarcoat and you are a straight shooter, highlighting problems with houses or things that could turn into problems. I am an emotional buyer when it comes to houses so I will appreciate your saying to me, when the time comes, "This house is not worth this much money." I will obviously also never be one of these people who waives inspections, etc., which is also unwise.
If you think it's still possible to buy a house in Charlottesville without paying more than the house is worth and without doing things like waiving the inspection, then let’s keep going. But if that's what it's going to take, I'm going to rent and wait until things calm down.
Part of my answer
If you're looking to be in the house for at least 6-10 years, I think you're fine.
If you're looking to be there for four years or less, I always advise renting.
I'm not seeing the ridiculous mortgages that were one of the causes of the last crash, so that's not an overt concern.
Yes, prices are extremely high. Yes, the market will moderate eventually, but I also suspect that eventually interest rates will rise. Value may relax a bit, rates might go up, and buying power may stay the same. That said, we’ve been in a lower interest rate environment for over a decade. A client texted me one night that we have an entire generation of buyers who don’t know a world with higher than 4% interest rates.
And yes, I do think we're going to see pain whenever this shifts, but there's no way that I know of that will predict when and how. I don't see a crash happening, at least through my lens, but I and so many others were wrong in 2006, 2007, 2008, so who knows?
I think that evaluating the purchase through the lenses of climate change and the local economy are important as well.
And yes, I’m biased. I earn a living representing buyers and sellers of real estate. But no, I can’t earn a living if no one can do either, and my role is to represent and to help clients make good decisions. Bias aside, I want what is right for my clients.
More to read (note: this is not the “what I’m reading section; that’s still to come)
Experts see little risk of the housing market's boom turning into a bubble. But that doesn't mean there's no reason to worry.
From November 2020 - Home Prices Are In a Bubble. Full Stop. He might be right, and we'll look to this as the person who called it.
Is the U.S. housing market heading for a crash? Here’s what the experts say
People are panic buying homes as prices skyrocket around the world
Reasons for a wane?
A few thoughts about a potential slowing, as the Charlottesville market seems to be heading that way. Some houses are getting two offers instead of six, some are sitting for weeks instead of days, and we’re seeing more price reductions and more houses coming to market.
Prices are up. This always happens. Prices rise, buyers slow.
Renters renewed their leases in late spring; it will be interesting to see how many come back in 2022.
And we’re also seeing houses sell for 10% over asking. This market is weird.
Zestimates and Charlottesville Market Values
A client texted me one night in April. “I noticed that my Zestimate just went way up.” And a week later, “Zestimate just gave me another +$15Kyesterday. I guess I made $15K yesterday right?”
Property 1 - Sold for $425K. Was a weird house. Zestimate is $475K.
Property 2 - A great comp. List was $395K, sold for $435K, zestimate is $439K.
Property 3 - Good comp as well. List was $449K , sold for $442K, zestimate was $444K; but it looks like they increased the zestimate when the house sold. Zestimate increased 75% in the past 30 days.
Property 4 - Listed for $425K, sold for $458K. The zestimate is $458K, a clear indication that they are tying the zestimate to the actual sales price.
Property 5 - listed for $529K, sold for $470K. Zestimate is $480K.
I didn't know before I started this exercise what the results would be, but my gut was what the results yielded – it's hard to tell actual market value until we expose the house to the market. Pricing too high will lead to longer time on market and a lower price, while pricing correctly-to-low will lead to a higher/correct market price.
I trust my gut. I trust data + professional instinct more.
Social Transition and Real Estate
Real estate agents are at the heart of periods of social transition in the 20th century – not an easy place to be in. (Academic historians have only figured this out relatively recently.) You can include the 21st century too.
A client texted me that recently and it struck me. Race, gender, sexuality, and so many more variables are in societal transition and evolution. Real estate agents see it all and are influential in how these transitions happen.
I’ve said for many years that what we do is about real estate, yes, but what we do is much broader. What we do is about life – the clients’, their families, their kids’, and grandkids’ lives -- and the community and larger society. When done well, what we do matters. When done poorly, what we do might matter more.
Always trying to do better.
Questions to Ask Family Before They Die
Adrenaline and Real Estate
“I don’t mean to be discouraging”
For new agents: set boundaries. Find time for an awesome midday hike to a favorited spot with your wife; this was one of the best parts of May for me. Start HOA doc collection.
What I’m Reading
How One Small Startup Is Tackling Apple’s Big AirPods Problem
Taking On Climate Change At Home: How You Can Cut Carbon Emissions
Wanna Move to a Mountain Town? Don’t Bother Without a Truckload of Cash
I wrote last month about Coming Soon listings; Brian Boero @ 1000Watt has great thoughts on them.
“Stupid” is an Ableist Slur: Breaking Down Defenses Around Ableist Language & Liberating Our Words
What I’m Listening
I’d not heard of this, but my wife turned me on to it; adding to the rotation. We can do the hard things.
Scott G continues to have some of the best and most insightful conversations
As ever, thank you for reading.