Fundamentals or a Bubble? | Note from Jim
Bidding Wars, Market Insight, a new email, and a move home.
This is a longer, more market-heavy note than usual because we are in an unprecedented market and there is a lot to talk about. Have a question? Email or call/text me. firstname.lastname@example.org or 434-242-7140.
This Market - Fundamentals or Bubble?
How about both?
There is a demand in this market unlike anything I have ever seen. Maybe it’s that so many people are now able to work from home permanently, or that Charlottesville - Albemarle is such a great place to live, or that interest rates are so low, or that COVID is pushing people to buy homes in different places for varied reasons, or that people are choosing to buy and stay for 10 years or more, or that new construction is not able to keep up with demand, and they’re building predominantly big houses … or a combination of all of those.
This is what I’m telling my clients, when we talk about, “How’s the market?”
For sellers, it’s the best sellers market I’ve ever seen. I’ve shown houses that I would never, as the listing agent, put on the market, only to see those houses go under contract in two or three days.
For buyers, it’s exhausting. I texted a friend last week, “Was thinking today at my 3rd home inspection; all of my buyers able to get under contract consider themselves extremely lucky.” And it’s true.
For multiple offer situations, this is part of what I tell my buyers: If you make an offer, make sure you’re comfortable winning or losing. If the asking price is $475,000 and you offer $480,000 and you lose, great. If you offer $575,000 and you win, will that really feel like “winning”? (Maybe next month: thoughts on winning bidding wars).
The market in two text messages from two different agents on two different houses I showed to two different buyer clients.
Should I Waive a Home Inspection in Order to Get my Offer Accepted?
No. That’s the answer. No.
The Market and Coming Soon Listings
I wrote about coming soon listings last year. These are properties that are listed in the MLS for a few days as “coming soon.” Once listed in the MLS as a coming soon, these can’t be shown until they are active in the MLS for everyone to see. (More on in-agency coming soons next month.) I talked to a potential buyer client recently who was trying to get a sense of the market; he called about one house that had just gone under contract. I’m leaving out the address, because it’s not relevant.
Above is the history for this property, which was similar to the one you called me about. It was listed as a coming soon, so agents saw it and were able to prep their clients. There were probably a lot of showings on the first day and the buyers were ready, both psychologically and financially. (Please, if you need a lender, use a local one, please. Here are ones I recommend). Digging in to more than the recent history tells a wider story.
The house was listed on and off since 2015. Specific prices aren’t particularly relevant; it was listed high, didn’t sell, and ultimately came off the market last time for lower than what it likely just sold for.
There is a lot going on.
Looking at non-new construction in Charlottesville and Albemarle data as of 15 March, about 30% of homes are selling for over asking price, for about 22% over asking. Something happened in 2021.
A Happy Move
Data says that "Consumers are relocating for a variety of reasons during the pandemic such as lowering their cost of living or being closer to family.” My older daughter, who works remotely, just moved back to the Charlottesville area after four years away. She’s close, but not too close, and that’s a great move for all of us (especially my wife and other daughter!)
Food for thought from a reader; I don’t yet have an answer (and won’t have the answer) but will have some thoughts next month.
First, I think when we talk about affordable housing, the implied assumption here is affordable housing for those of us who already live here. I've noticed that there seem to be a large number of what I'd call "discretionary buyers" that move here from NOVA and elsewhere who are retired or could just as easily have decided to locate elsewhere. Is there any way to quantify the impact of discretionary buyers on the market? Will it ever really be possible to provide affordable housing as long as one buyer from NOVA can swoop in and outbid everyone, since housing here is comparatively cheap for them?
Secondly, I do wonder if people have been too willing to discount the concept of induced demand. Planners have known for a long time that counterintuitively, more roads cause more traffic. I look at Crozet, which has expanded exponentially, and yet instead of housing prices going down they've gone through the roof. There is a notion among many affordable housing advocates that if only we could build X number of new units that suddenly housing prices would drop and our communities would become more diverse and equitable. In Crozet the opposite has occurred. It truly seems like the more houses that are built, the less affordable and less diverse the community becomes. Why? Is it possible that the housing type is more important than housing quantity in terms of affordability?
Lastly, let's say we could build enough homes so the housing prices dropped. Would that actually be a good thing? Wouldn't there also be some serious downsides to a drop in housing prices?
We did have an interesting discussion on Crozet Twitter about infrastructure and affordable housing. Two things I said:
More inventory + proximity to jobs + bikes (tax credits would be great) + infrastructure. There’s no silver bullet. And smaller, smarter houses. More square footage ≠ better house. But … that takes innovative builders who have $$ to be thoughtful & resistant to inertia.
I’m saying that solving affordable housing takes a broad, systemic approach rather than “affordable housing” or “bike lanes” or “jobs” or “child care” but rather an equation that incorporates all of those, and more.
Taking off Your Poopy Shoes
Taking off your shoes before showing houses hasn’t always been the custom. (It is now; thanks, Covid.)
Many years ago, I was showing a vacant house and the buyers and I walked through the house, then proceeded to walk around the back yard. Then we walked back inside, and after far too many minutes, I realized that one of my clients had tracked dog poop all over the house.
So, I called my mom (it was a long time ago, and she was a Realtor). She had no advice other than I was dumb for letting it happen.
My clients leave and I’m left somewhat distraught about what to do.
Damned if a carpet cleaning salesperson didn’t come down the street at that moment. I flagged him down, gave him $100, directed him to the house, and called the listing agent to apologize and tell her the solution.
I’ve been more careful ever since.
I just can’t get this segment done. Hopefully next month.
Analyzing specific markets is incredibly challenging right now, because it’s moving with such velocity, and in most market segments, the comps matter less.
Just a thought for this month; likely more in a later note.
When interest rates rise, how quickly will that tamp down on the market?
Gas prices in Charlottesville are about $2.80/gallon, up from just over $2 a few months ago; I certainly think about that when I get gas. There is a big difference between 3.5% and 2.5%. Even though anything under 5% is historically fantastic, the psychological impact will be very, very real.
After I wrote this, I read this: Households Priced out by Higher Interest Rates
On 25 February, I moved my email from Google Apps to Hey. Hey was created by the people who run Basecamp, which I’ve used for about a decade. I like it because it’s done by people I can talk to, if I need to. And they do Basecamp, which I’ve used for a decade.
It’s private, it’s different, it’s more functional so far, and it’s been a good shift.
On Email Privacy. “Email should be private, and most people assume, incorrectly, that it is.”
Moving From Gmail to Hey.
What I’m Reading
Real estate market continuing to boom, spurring buyer frustration; apparently my comment about making long term life decisions caused some consternation amongst some agents. Meh. Good Realtors are client advocates, not salespeople.
What I’m Listening
Jamelle Bouie Has Seen the Future of Transportation (it’s an e-bike)
Making contingent offers in this market
One of the #1 most important parts of an offer to “win” the offer
Coming soons in-house
A breath in the market and bidding wars
Working when you don’t - My wife was recently telling someone who had no clue what I do that I work when my clients don’t. It’s one thing to tell my clients that, and another to hear my wife say it.
Jim Duncan, Nest Realty, 126 Garrett Street Suite D, Charlottesville, VA 22902. Licensed real estate agent in Commonwealth of VA.