December 2021 Note from Jim
Technology, lessons, two buyers and one house
This month: discussion about 2022 real estate market, technology, a couple lessons learned, two buyers and one house.
A million years ago (2001), when I started practicing, I came home and told my wife that I’d met some new clients, and they were looking to buy in three or four years. She responded something to the effect of, “we’ll need to pay the mortgage then, too.”
This is not a short-term business, and as I enter 2022, I’m remaining focused on what I can control, and being mindful of what I can’t. My goal for my clients remains the same: “I help my clients make the best possible real estate decisions. (sometimes that’s to walk away)”
Looking back at 2021
Most year-end reviews bore me, so I won’t do it. Let’s just close the 2021 chapter and look to 2022. Forward matters.
Predictions for 2022
Much the same as 2021. The pandemic will continue, inventory will be tight, and there will be a lot of competition for a lot of houses, and less for others. Similar story, different year.
Inflation, supply chain, labor, economy, etc. etc. etc.
Interest Rates (see below)
More buyers in the Charlottesville - Albemarle market are going to give up and either continue renting, or move away.
Climate change is going to affect *everything* including what we pay for homeowners insurance.
New construction costs
Have a question? Looking for representation? I’m here.
In 2004ish, people tended to buy and sell in three to five year cycles. Now, most of my buyer clients are buying with eight to fifteen year horizons; that pulls a huge amount of inventory off of the market. Also, “About a quarter, or 24%, of all first lien mortgages have an interest rate below 3%;” this is going to keep a lot of these houses off the market for a long long time as these homeowners keep these as investments when they move on.
A personal note
My older daughter just had her first kid, my younger one is nearing the completion of high school, and my wife and I are looking forward … 2022 will be interesting. And I’m looking forward to it.
And to my wife, for being here, thank you.
In 2018, rates spiked a full point overnight, and the real estate market stopped. As I recall, mortgage world could not keep up with the volume, and the rates shot up to slow the pipeline. I remember the nervous/scared client conversations, the discussions with lenders I trust, with other agents … it was an interesting time. Then things sorted, and all was ok.
If rates spike, there will be issues. If they creep up, we’ll be fine.
I tell all of my clients the same story. When I bought my first house, I got a 30 year fixed rate mortgage for 8.125%, and was thrilled/shocked that someone was loaning me $75K. My mom (former Realtor) was selling real estate when rates were 18%.
We’re going to be fine.
This chart is outdated, but recent enough to illustrate my point.
Things I read
I read a lot so that I’m better prepared to advise my clients; these are two that I read frequently.
Calculated Risk; this one about supply chain and inventory is interesting. This one too.
Altos. Inflation and inventory.
Mike sees the market from a national level, and I’m always comforted watching his weekly videos as they usually mirror what I am seeing, and what I have been telling my clients.
Technology and Moving Forward
There are algorithms and there are humans. I’ve yet to see an algorithm that can quantify whatever the equation is that leads to, “Will we be happy here?”
Algorithms know the data points that are available, and may be relevant. But as of yet, these algorithms are not able to ask relevant, contextual questions. ie: What’s the traffic like on game days? How will the morning sun affect the commute? What’s the noise like here? Are you going to have kids? How many? Are there enough bathrooms?
Many years ago a friend coined the term “unZillowables.” (Ignore Zillow’s recent attempt to be an iBuyer of homes). There are so many intangibles that come into the “will I be happy” equation, and when representing buyers, I often don’t know the questions to ask until we’ve seen a few houses together, had conversations about what they need and want, but also what the client doesn’t yet know they need or want.
Two related stories:
Two good things in 2021
There were lots of good things this year; two things that bettered my service to my clients, and my organization for my clients:
I bought a gimbal for stabilizing the videos I do for clients; it’s amazing, and for under $150 my videos are much better. I remember many years ago when I was first experimenting with videos and I hired a videographer with a steadicam that cost thousands of dollars and had to be strapped to his body. Technology is fascinating.
Titling emails with the property address I’m discussing; this is a lesson from a client and this tip has already made for a more organized business.
Two buyers; one house.
Much like single agent do agency in which I can’t represent both parties in one transaction, I can’t represent two buyers on the same house.
This market makes that harder. There are so few homes on the market that invariably, I’m going to have more than one buyer for some of the new listings.
I like round numbers and easy math.
If the asking price is $500K (426 homes sold from 1/1/21 to 12/18/21 between $450K and $550K; 323 in that timeframe in 2020), and I have two buyers. I know there are going to be many offers.
I’ll show the house to both, and tell both that I am showing it to another buyer. If both want to make offers, and I wrote both, and tell Buyer 1 they should go to $535K and don’t tell Buyer 2 that they need to beat $535K, I’ve breached my duty to 2. If I tell 2 about 1’s offer, I’ve breached my duty to 1.
Solution: be transparent, and refer one of the buyers to a trusted colleague who will write the offer.
A further complication: there are so few houses on the market, there’s a strong likelihood that the agent I’m referring to will have a buyer.
I’ve said countless times, “I hate this market,” and I mean it. One offer I wrote recently was competing again 18 others. One against 4 others. One against 8 others.
Nest’s scale … I tell my clients that when we started Nest I never thought I’d use our scale as an advantage. The scale we now have is a big advantage; more on this next month.
It was a year.
I was running comps for a client in Crozet, and saw a house that looked familiar. All the other listings’ text was black; this one was red, meaning it was my listing. For a moment, I was utterly confused. It was from March, seemingly a decade ago. And then I remembered my clients, and their story, and smiled.
It’s been a long, long year.
What I’m Reading
First, I Cried. Then, I Rode My Bike. I’ve read this three times. I’ll re-read it periodically.
What I’m listening to
Jerry Falwell Jr. and Liberty University; this is truly horrifying and difficult to listen to.