With Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, FL
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During this week’s Real Estate Roundup, Steve spoke with Terry Story, a 31-year veteran at Keller Williams, about the current housing market. They also talked about some tips for home sellers.
The Difference A Year Can Make
In October of 2018, the housing market suggested something was very wrong with the U.S. economy. Steve explained, “Basically, there’s an index that tracks home builders. At the end of 2018, these stocks fell 13 sessions in a row. At one point, the index declined in 23 out of 25 trading sessions. People were worried that this was the canary in the coal mine, that things were falling apart.” During this period of time, interest rates rose, consumer confidence declined, and the fear of tariffs on other things came together in a phenomenon that put the housing market under serious stress.
Now, we’re more than 12 months in the future, and nothing bad has happened. According to Terry, this is in large part due to the lower interest rates. Steve noted how important just a 1% rate drop is. A 1% rate drop basically means you can afford to pay 10% for a house. For example, that would be $50,000 extra on a $500,000.
So now, with more people interested and thus better consumer confidence, home builders are starting to build more homes. While there’s still somewhat low inventory, we’re getting back on the right track. New homes are selling at the highest levels since 2007. It’s excellent news.
Inventory And What It Means For Buyers And Sellers
In Terry’s marketplace, in regard to housing inventory, levels are low. But it’s better to look at inventory by price point. In her marketplace, under $500,000 is a hot market. Inventory is low because, she said, “Sales are faster, you often see bidding wars for the homes that are available. Actually, you can see bidding wars almost everywhere if the property is priced right.” When you look at homes priced over the million-dollar mark, there’s more inventory on the market.
You also have to look at days on the market. Across the board, days on the market is a bit longer. According to Terry, “In Palm Beach County, homes are on the market up to 92 days.” Steve added, “The average amount of time homes spend on the market in the country is 3.9 months.”
And because the country is at 3.9 months of inventory, it’s technically a seller’s market. At anything greater than six months, it’s a buyer’s market. Low inventory means prices rise and it’s better for sellers. When inventory increases, the seller’s position weakens, home prices drop, and it becomes a buyer’s market.
The Things You Need To Do When Selling Your Home
Steve turned the conversation next to advice for home sellers. Terry cautioned listeners, “Even though right now we talk about it being a seller’s market, overpricing your house is a big mistake.” The bottom line is that buyers aren’t going to overpay much over whatever the appraisal price is.”
Terry’s second point of advice to sellers is, “Avoid being emotional when selling your home.” You might be emotionally attached to your wallpaper or the dishwasher that works best for storage. But buyers are just looking for a home that’s priced to value and needs the least amount of changes or fixes. That’s why it’s a good idea to bring a realtor into the equation. They can remain emotionally detached.
Terry’s final note to home sellers was on the importance of staging your home. “Nothing big. Just make sure it’s clean, clear of unnecessary clutter, and that it looks nice.”
If you’d like to learn more about buying or selling a home, check out Keller Williams.
Disclosure: The opinions expressed are those of the interviewee and not necessarily of the radio show. Interviewee is not a representative of the radio show. 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 the radio show.
Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: You know, we saw an article from Yahoo Finance.
Terry Story: Yahoo! Yep.
Steve Pomeranz: The US housing market is taking off.
Terry Story: Yahoo! That’s what I got to say.
Steve Pomeranz: That’s pretty good. I can’t do that. I can’t yodel. Consumers save the day again. Howeve, October of 2018, the housing market was saying something had gone very wrong with the US economy.
Terry Story: Yep.
Steve Pomeranz: There’s an index which tracks home builders, and back then those stocks fell 13 sessions in a row. And at one point, that index had declined in 23 out of 25 trading sessions. People were worried that this was the canary in the coal mine, that things were falling apart.
Terry Story: Yep, and I remember that like it was like yesterday.
Steve Pomeranz: Yeah, well it was, kind of.
Terry Story: Well, it kind of was.
Steve Pomeranz: Back then rising rates, declining consumer confidence, fears over tariffs on other factors were conspiring to put the housing market under stress. Fast forward 14 months, and none of that bad stuff happened.
Terry Story: That’s right. And it was all because of the interest rate.
Steve Pomeranz: Interest rates.
Terry Story: They lowered the interest rates and holy moly, the market started rolling all over again.
Steve Pomeranz: Exactly. Well, I think 30-year mortgages approached 5% back then.
Terry Story: Correct, yeah.
Steve Pomeranz: They’re now in the mid-threes, maybe a little bit higher.
Terry Story: Yep.
Steve Pomeranz: That’s a lot. We talked about how much a 1% drop or rise in interest rates affects the price of the house.
Terry Story: Yeah, it’s about 10%.
Steve Pomeranz: 10%.
Terry Story: Either way, up or down.
Steve Pomeranz: So that’s $50,000 on a $500,000 house.
Terry Story: That’s right.
Steve Pomeranz: That’s a lot of money.
Terry Story: It’s a big difference. Sure.
Steve Pomeranz: So you can buy more house, and it just kind of frees everything up. However, we’re going to talk a little bit later, a little foreshadowing about the issues with all this demand for homes.
Terry Story: Sure.
Steve Pomeranz: But not enough homes on the market. All right. So adding to all this, though, we are starting to see that home builders finally are getting in the action.
Terry Story: Yes.
Steve Pomeranz: And they’re starting to build more homes and that the housing starts and building permits … So first comes the building permit.
Terry Story: Correct. You need the permits first.
Steve Pomeranz: Right. And so that’s a very good leading indicator as to what’s going to happen in the future. And then you actually have the housing starts, which is obviously, they’ve-
Terry Story: The construction.
Steve Pomeranz: The shovel goes in the ground.
Terry Story: Correct.
Steve Pomeranz: And all of those are selling at the highest levels since 2007.
Terry Story: That’s right.
Steve Pomeranz: So that-
Terry Story: So that’s good news.
Steve Pomeranz: Very good.
Terry Story: Yep. Excellent news. We need more housing.
Steve Pomeranz: More housing. So, investment in residential structures is likely to rise at a double-digit pace in the fourth quarter of 2019 and the first quarter of 2020. All of this is pretty good.
Terry Story: Yeah, it’s great news. It really is.
Steve Pomeranz: Now, what are you seeing in your marketplace with regards to inventory these days?
Terry Story: So, we’re seeing the inventory levels are low. And the way I like to look at our market is by price point because in our marketplace, say under $500,000, that’s a real hot market. So the inventory is low, the sales are faster, you see bidding wars. Actually, you can see bidding wars almost everywhere if the property is priced right. When we get to over the million-dollar mark, we’re starting to see a little bit more inventory coming on the market.
The other thing that I see all across the board, the days on market is a little bit longer. I was looking at the numbers just recent. We’re up to 92 days in Palm Beach counties, where we were in the 60-
Steve Pomeranz: Really?
Terry Story: 60-day range. So the-
Steve Pomeranz: Well, the average time that homes are on the market in the country is 3.9 months.
Terry Story: Right.
Steve Pomeranz: But if you’re saying 90 days, that’s three months.
Terry Story: Right.
Steve Pomeranz: 60 days is, obviously, two months. So relative to the average, that’s much tighter.
Terry Story: Right.
Steve Pomeranz: Yeah, I mean, the houses are turning over much quicker.
Terry Story: And again, it really, if you break down the segments by price point, it’s going to look a little bit different.
Steve Pomeranz: Yeah, well, the housing supply has been going down. As a matter of fact, I’m looking at a chart here, which all my listeners can’t see. But for the last 12 months, we’ve had a somewhat of an increase in inventory. But really, starting in July, inventory has been contracting. And again, this is the average for the country.
Terry Story: For the country, sure.
Steve Pomeranz: But in October, inventory was down 4.3%. I mean, we’re talking a lot of contraction, a lot of shrinkage in the amount of supply.
Terry Story: Correct. And technically, because we’re at 3.9 months of inventory, that’s a buyer’s market.
Steve Pomeranz: Yeah.
Terry Story: Anything greater than six months, it’s a seller’s market.
Steve Pomeranz: The other way around.
Terry Story: I said the other, yes.
Steve Pomeranz: Yeah. So when there’s low inventory, prices rise, it’s a seller’s market.
Terry Story: Correct.
Steve Pomeranz: Things are tight.
Terry Story: Yep.
Steve Pomeranz: And when there’s a lot of inventory, then the seller’s position weakens, and it’s now better for the buyers.
Terry Story: A buyer’s market. Yep.
Steve Pomeranz: Yeah. Okay. So the bottom line is if you’re thinking about buying a home, make sure you’re taking the right steps to begin the process, make sure you’re a top contender if you ultimately find yourself in a bidding war. And we’re going to talk about three mistakes to avoid when selling a home.
Terry Story: Yes. So even though right now we talk about it being a seller’s market, overpricing your house is a big mistake. So what happens is sellers are like, “Well, you know what? I hear my buddy sold his house in five days,” and this and that. Yes, those are true statements. But buyers are not going to overpay. Not only are they not going to overpay, at least 50% of the time there’s a mortgage involved. So the house has to appraise. So even if a buyer’s willing to pay a lot more, doesn’t mean that the deal is going to go through, because then you have the appraisal that’s going to come in. And for the most part, they’re not going to pay above appraised value.
Steve Pomeranz: Yeah, so there’s a realistic limitation because the bank is going to do an audit of the value of the property so they can lend the appropriate amount against it.
Terry Story: Right.
Steve Pomeranz: And so there’s a basis of reality here, it’s not just a number that you can pull out of the sky.
Terry Story: Right. And the buyers are very savvy. 2006, 2005 was not that long ago in a lot of people’s memories. I had somebody tell me the other day, they’re like, “You know what? I really want to buy a house, but I really feel the prices are too high right now.” So we have gone back to those levels; 2006, 2007, whatever they were. We’re at high thresholds right now.
Steve Pomeranz: Yeah, but let’s think about the psychology of that for a second. Let’s say you have your house … Everybody remembers what their house was worth at the top of the market. “My house was worth $540,000,” you know? And, “I won’t accept anything less.” Well, that was 10 years ago.
Terry Story: Right.
Steve Pomeranz: All right, so number one, interest rates were much higher back then.
Terry Story: Right.
Steve Pomeranz: So really, the value of a house, it should appreciate at least maybe 3% a year.
Terry Story: Right. That’s fair.
Steve Pomeranz: The rate of inflation.
Terry Story: Yeah.
Steve Pomeranz: 2% to 3% a year. I haven’t done the numbers or anything, but if you really think about it, the price of the house really probably has not appreciated by the rate of inflation, if you’re just starting to break even today, number one. Number two: If, in fact, your cost to own the home has gone down by 30% or 40% because of lower interest rates, then the value of the house should actually be higher. So-
Terry Story: Right. That makes sense.
Steve Pomeranz: Now, I mean, it is nerve-wracking to buy at a time when prices are high. But actually, the time when prices are low is fairly rare.
Terry Story: Right.
Steve Pomeranz: Okay? And so you can’t wait around for that, you just have to pay … And just make sure it’s affordable for you.
Terry Story: Regardless, it has to be affordable. And interest rate, it’s the cost that’s important, like you just said.
Steve Pomeranz: Yeah, it’s the cost.
Terry Story: So take advantage of the market. The interest rates are extremely low.
Steve Pomeranz: Yeah. Okay. So overpricing your home, we’ve dispelled that problem. You just … But you have to be realistic. What’s the second one?
Terry Story: Letting your emotions interfere with a sale. So most homeowners have been living in their homes for many, many years, and they are personally attached to it and they love the purple walls because, I don’t know, for whatever reason.
Steve Pomeranz: Yeah. I mean, it has great memories for them.
Terry Story: You’ve got to remove your emotions from it.
Steve Pomeranz: Okay, well, that’s why having a realtor is a good idea because they’re totally emotionless people.
Terry Story: Correct. That’s right, we have no emotions.
Steve Pomeranz: You have no emotions whatsoever. You guys are like robots. And then finally, not staging your home.
Terry Story: Yes. You really have to put some staging in.
Steve Pomeranz: Yeah.
Terry Story: We’re not talking big stuff.
Steve Pomeranz: Right.
Terry Story: We’re just talking about decluttering, cleaning, thinning out.
Steve Pomeranz: Right. Cleaning up, painting, just getting things to look presentable, like you would go if you’re going to go out to the theater or something.
Terry Story: Right.
Steve Pomeranz: You know? Look presentable, right?
Terry Story: Do people dress up to go to the theater anymore?
Steve Pomeranz: No, they don’t do that anymore.
Terry Story: Remember when we would dress up for airplane rides?
Steve Pomeranz: That was such an old meme that popped into my head. You know—dress up to go to the theater, who does that? Nobody does that.
Terry Story: Sundays, church. They don’t even do that anymore.
Steve Pomeranz: No, I know. My guest, as always is Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, Florida. And she can be found at terrystory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.
