With Terry Story, 27-year veteran Real Estate Agent with Coldwell Banker in Boca Raton, FL
Terry Story always knows which way the wind is blowing in the real estate market and now, she reports, home prices are taking a turn after years of rapidly accelerating price gains.
The Case-Schiller Report shows home values still soaring in the northwest, but slowing down in other parts of the country because of a dwindling supply of inventory.
Prices can only go up so high since they have to keep up with incomes. If prices rise past the ability of those who buy these homes to afford them, they can get stretched which we saw back in the bubble of ’05. High home prices and low inventory are driving more people toward renting instead of buying.
Another problem Terry notices is that many lower-end buyers can’t find what they thought they could get for the money and so they become discouraged. Oftentimes, then, they’ll settle for a desired neighborhood and end up buying a house that needs fixing or renovating, which enables them to make it more like a new home, one closer to the original dream.
There is help with financing out there, Terry says. The FHA offers a 203K plan and, in Florida, this can get you a mortgage up to 340,000 which includes money for repairs, which often solves a problem especially for young first time home buyers who don’t have the extra 20 to 30 thousand dollars for improvements.
Fannie Mae also has a program called Home Style Renovation that lets you mortgage up to $417,000, but repairs can’t exceed 50% of the value after appraisal.
Terry has advice for how to prep your home for sale: Clean, clean, clean, she urges, and purge of your home of knick-knacks, family photos, and all other clutter. Make it as much like a model home as possible by de-personalizing the space and fixing items that are in visible need of repair. As a final note, she says to make your environment look and smell good—so deodorize, spruce up the landscaping, add fresh mulch and flowers, and present a clean and orderly garage.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s time for Real Estate Roundup. This is time every single week we get together with noted real estate agent Terry Story. Terry is a 27-year veteran with Coldwell Banker located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: After years and years of home price gains and almost at an accelerating pace, I think the tide is turning a little bit. Tell us about home prices these days.
Terry Story: You know, Steve, according to the Case-Schiller Report, they do analyze the 20-city home price index, there’s a little bit of a slow down. What we’re looking at, home values are still soaring in the northwest. That place is on fire, but we’re starting to see slow downs nationwide. Prices are increasing, but slowing down. However, they’re still increasing more than buyer’s incomes. What’s happening is we’re now getting into a dwindling supply of homes available. That’s just changing the dynamics a little bit. For example, homes in the northwest, they climbed at a double-digit pace; we’re looking at 12%. Cities in the Midwest, that was kind of a mixed bag. The southern areas, we saw stronger price gains like Dallas, Atlanta, Tampa area, and then the index plunged. The index did plunge after the housing burst in 2006. It actually plummeted by more than a third before the prices started to rise again back in March of 2016. We’re starting to see overall just a slow down in the price gains which is no surprise because there’s a ceiling. You can only go up so high. People’s incomes have to be able to keep up with this.
Steve Pomeranz: Yeah, I mean, trees don’t grow to the sky. There’s this thing called gravity and, in the financial world, gravity is a very powerful force. If prices rise past their ability, the ability of those who buy these homes to afford them, they can get stretched, and it can go on and on, and we saw that in the bubble back in ’05. Things are more normal now, and so prices are starting to reflect this resistance based on the fact that people aren’t making the wage gains that they used to be. However, we just did get a report last week that said that wage gains are very strong. I think the trend in wage gains is starting to pick up. On the other side of that coin because of that corporate productivity is going down which is a completely different other story. Nevertheless, homes are getting more expensive, and I think it’s still driving people to rentals, isn’t it?
Terry Story: Yeah. Absolutely. The key to this understanding is it’s a slow down in the home price gains.
Steve Pomeranz: In the gains.
Terry Story: It’s still gaining.
Steve Pomeranz: Prices are not falling.
Terry Story: They’re not falling. Slow down in the gains.
Steve Pomeranz: Talking about people buying homes, you know, you go out and you look for a home, and you can’t find a home that suits your needs, what are some buyers doing when they have that problem?
Terry Story: A lot of, especially the lower-end buyers will come in, and they have expectations of what they want in a house. They go out there and look, and then they get really depressed because they’re not able to find everything that they thought they can get for X amount of dollars.
What we’re starting to see is a trend where buyers are buying, let’s say they qualify for 350, they may buy a 275 house. Now at 275, and it’s the same neighborhood as a 350 house, you know it’s going to need a lot of work. It needs repairs. It has outdated kitchens, what have you. These buyers are looking at the lesser expensive properties so that they can put their own tastes and likes into a home and make it more like a new home.
Steve, there’s 2 programs out there, the Federal Housing Administration has a 203K plan. In Florida—and it varies from state to state—the amount, you can get a mortgage up to 340,000 which would include money towards repairs. That’s one of the biggest problems, young people, they don’t have, not even young people, lots of people, don’t have the extra funds. They can afford to buy the home, but they don’t have the extra 20, 30 thousand dollars to make improvements to the home. These programs are out there so that you can buy a home that needs substantial repair, and put the money into the house and tie it into your mortgage.
Steve Pomeranz: That’s a relatively new phenomenon. It’s one thing to get a mortgage to buy the house. It’s another thing entirely to be able to increase the amount of the mortgage to pay for renovations and repairs. That’s a new wrinkle.
Terry Story: Yeah. That’s right. Then there’s another program, Fannie Mae’s Home Style Renovation. That let’s you get a mortgage up to 417,000, but the repairs cannot exceed 50% of the value after the home is appraised. Then, unlike the other program, this is open to investors and second home buyers.
Steve Pomeranz: Basically, these programs are in existence to help people to buy what are, in effect, functionally obsolescent homes with only 1 or 2 bedrooms or 1 bathroom. This is a way to improve the housing stock as well.
Terry Story: Absolutely. Absolutely.
Steve Pomeranz: Okay. Now, other question. If I’m going to sell my house, what do you suggest, and you’ve been doing this for 27 years, what do you suggest that sellers do to prep their house, and especially what do they do about the garage? I know I’ve looked at houses where they wouldn’t even let me in the garage because all the stuff that they had before they put up the house for sale is sitting in the garage. Tell us what to do.
Terry Story: First, the most important thing is clean, clean, clean. You know, a lot of people’s homes are outdated, and that’s fine. You can’t take your house and update it to the point where it’s everything that everyone wants it to be. What people, when they walk in the house, clean. I don’t care how old the carpets are, get them cleaned. You want fresh smells. You want to thin out your closets, your shelving with all that knick knacks and pictures on the walls. You want to make it to a point where you feel like you’re walking into a model home. You want to de-personalize it so that anyone walking in can feel like this could potentially be their home. Fix obvious items that are in repair. It’s going to come up on the inspection report anyway. You’re looking at something, I don’t know, maybe it’s wood rot, take care of it. You’re going to have to.
Steve Pomeranz: You know, if you’re selling your used car, you clean it out. You’d wash it. You’d empty the trunk. You’d make it attractive for someone.
Terry Story: As best as you can. Right.
Steve Pomeranz: Clean the counter tops. Thin out your closets. Make it look attractive for someone else. Sell it.
Terry Story: Smell is so important. Deodorize the house, whatever it takes to have it smell fresh. Spruce up the landscaping in the front, even if it’s just the front. Fresh mulch, flowers, then the garage. Your question about the garage. Steve, that’s one of my pet peeves. Now that you’ve taken all of your things out of the house to make it nice and sparse, box it up, put it in the garage because that’s almost expected. Now the other theory is if your house is nice and clean and perfect, then have your garage mirror that if you’re able to do so. There’s nothing like walking into a garage where it’s spotless and immaculate, fresh paint on the floors, cabinets where you don’t see everything in boxes. People will actually stand in your garage and marvel over the garage because they’re so impressed that it’s so clean.
Steve Pomeranz: My guest, as always, is Terry Story. Terry is a 27-year veteran with Coldwell Banker located in Boca Raton, and she can be found at TerryStory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.