Market FUD Appraisals Baby Back | Note from Jim
Happy best month of 2022.
I had a whole list of things to write about this month, but the market guided me to write about it since there’s a lot of uncertainty right now.
FUD: Fear, Uncertainty, and Doubt. That’s pretty much what we have in the Charlottesville (and national) real estate market right now.
The challenge is
No one knows what will happen with the economy or real estate market. Right now, all we have are questions and speculations. We know that the real estate market is changing, prices are sticky, and people still need shelter.
We’ve not seen this before — peak prices + peak mortgage interest rates + stock market crash + unprecedented velocity of inflation + a housing shortage + most homeowners having a significant amount of equity and not needing/wanting to sell. Plus a lot more.
Add to that list the fact that life continues to happen — marriage, divorce, kids, kids moving out, parents moving to be close to grand kids, kids moving to be close to grandparents, job changes, and on and on. Life happens. And it will continue to do so.
What my clients want to know is, “Should I buy or sell right now? Can I?”
The best answer is, “It depends,” and that answer will be refined after thoughtful and informed discussions, data, and analysis of all of the above.
My role for my clients is to provide the best, most relevant, and most accurate information so they can make the best decision possible for themselves.I half-joked with a client the other day, “My advice at 10:30 today is this; at 2:30 today, it might be different.”
What’s the market going to be doing in 12 months?
First, as above, no one knows.
One agent I talked to: prices will be down 25%
Another agent said: lots of cash still in the market. First-time home buyers and trade-ups will be hurt. He didn’t necessarily agree with 25% down.
Me: I (and most who I follow and learn from) agree that 2020 through the first half of 2022 are anomalies and blips on the historical housing chart. We need to get to lower interest rates, with volumes and pricing closer to 2018/2019.
I’m guessing prices may be down 12% to 15% from 2022, and that we’ll be at one-third of the volume of 2019. And, after three years, we’ll lose some Realtors.
Another question: If you buy today at a 7.25% interest rate, and you’re able to refinance in two years if (when?) rates are at 5.5%, will it have been worth it to you to have paid $X in “extra” interest to have lived in that home?
There are no easy answers right now, and I tend to start my conversations with buyers and sellers with the preface, “I don’t know,” and then I listen.
Here’s my “Call to Action” — If you’re thinking about buying or selling, or want to talk through the process, and whether now might be the right time for you, please reach out to me.
Getting Back Out There
I wrote years ago that one of the things that sucks about Charlottesville is that there’s always something to do. Now that my wife and I are empty-nesters, we’re slowly but surely re-exploring what Charlottesville has to offer.
Last week, we went to a stand-up comedy show at North American Sake Brewery downtown. The comedians tried very hard, but my favorite part was when one asked us what brought us out; my wife of 20+ years deadpanned, “It’s our first date.” I’m hoping she gives me a second one. :)
Perhaps the best part was when one of the comedians got on the stage, looked at me, and said, “I thought you’d be younger, based on how the others were talking about you.” Mean.
Charlottesville folks: Where do you learn about events besides C-Ville? I tend to see the ones I want to see on posters the week after the thing happened.
Appraisals - Part 1
This is what I tell buyers who ask, "Why does the appraiser get a copy of the purchase contract, and why does the purchase price tend to come in at the contract price?"
The answer is, as you would imagine, a story.
Many years ago I was sitting on a board of directors and I asked an appraiser those questions; I was new, and I like asking questions.
Fair market value is defined as what a ready willing and able buyer is willing and able to spend, and what a ready willing and able, non-distressed, arms-length transaction seller is willing to accept. That is fair market value.
The appraiser's job is to validate that number using the best available data that they have access to.
The appraiser gets a copy of the contract so they can see all factors that go into a contract, and use that number as their target.
That being said, humans do appraisals.
A long time ago I had a house that needed two appraisals. The first appraiser was great, on time, we talked about the market for half an hour or so, and the value was $385,000. The house is worth about $380,000.
The second appraiser was not very nice, canceled and rescheduled two or three times, and then showed up and did the appraisal, exterior only, without telling me. That value came in at $360,000.
Humans make things better and also screw everything up.
I shared in 2020 the story about clients and baby stuff. I’d forgotten how much stuff babies need. Now that we’re grandparents, and we’re lucky enough to have our grandson (and his parents) living 13 minutes away, we’ve re-accumulated stuff.
Jogging stroller (city strollers are not functional for our terrible sidewalks)
Food, cups, bowls, diapers.
And we wouldn’t have it any other way. I’d share a photo of him if I was allowed. :)
I can see why more Americans are not having kids. (Have you looked at the cost of daycare?!). Kids are expensive.
“Some 44% of non-parents ages 18 to 49 say it is not too or not at all likely that they will have children someday, an increase of 7 percentage points from the 37% who said the same in a 2018 survey.”
It’s been five years since I got rid of Facebook. I highly encourage doing so — your mental health will improve.
What’s Happening Next Door?
Someone asked me if a new road was going to go through near their house. The answer was, “Yes, and it’s going to happen very soon.”
Their response was troubling. “We were told it wouldn’t happen for at least fifteen years. Now, three years later, here we are.”
First, if you don’t own it, assume it will change faster than you expect or want. Second, there is no harm in saying, “I don’t know.”
The story about Dominion Power giving free power. More on appraisals, Flow, Opendoor, et al. buyer questions, seller questions, and maybe AirBnB.
What I’m Reading
A lot this month.
Creativity comes from the unconscious. We pretend we have more control over it than we do because that makes us look smarter. Some of my best ideas are when I’m on my bicycle.
US hurricane rebuilding rules must adapt to 'era of climate change': expert
Here’s How Weird Things Are Getting in the Housing Market (Apple news link)
(5/5) "Sellers should anticipate that buyers are unwilling or unable to pay a price similar to what their neighbor’s home sold for a month ago, and buyers should connect with their lenders to find ways to mitigate the impact of rising rates," said Redfin Economist
Both Black and White homeowners have a significantly higher propensity to move in response to receiving a new neighbor of a different race in the immediate vicinity. Link to study.
Seniors are stuck home alone as health aides flee for higher-paying jobs. Our country is in trouble.
This historic mortgage rate shock is both an affordability shock and a credit eligibility shock.
A large portion of Americans who will pay for news are rich. “Democrats are 14 percentage points more likely than Republicans to have paid for news. And college-educated Americans are about twice as likely to have paid for news as Americans who didn't complete four years of college." This is frightening.
What I’m Listening To
More market-focused podcasts this month.
Trying something new. What do you think? Until Elon destroys Twitter, when used well, Twitter offers great discussions, idea and knowledge sharing.
This is horrifying display of how dangerous huge cars are.
- why not advocate for smaller cars?
- more restrictive licensing requirements for these bigger cars.
had a long conversation with new buyer clients talking about Charlottesville bike-ability, public transit, Rivanna trail access, parks, and housing too.
I’ve said for years that I can usually you a house: it’s the where that matters most
I don’t have any answers, but I think you’re right… And I think also homeownership is no longer the number one goal for a lot of people, nor is it achievable. That said I think tighter lending standards are a big reason we don’t (yet) have more pain
Clients contemplating moving to Charlottesville/Albemarle from out west in large part due to droughts and fires. I’d like to say we’re completely safe, but we’re definitely safer.
Re-researching water plans, fires, earthquakes …
RE: Inventory in Charlottesville and Albemarle
Just a thought - if you have the opportunity to give to a local charity, please do. The two that my family chooses to give most to are the Blue Ridge Area Food Bank and Meals on Wheels.
Thank you, as always, for reading and sharing.