Define “normal” ...

Wow! Big changes in the real estate world over this summer! The sudden sharp rise in interest rates has caused all sorts of shifts in lender, buyer, and seller behaviors. What one hears most often among realtors lately is that we are returning to a “normal” market. 
 
But how do we define “normal”?
 
Well, the stats from August do tell a tale. As you can see below, in Davidson, Williamson, and Sumner Counties, inventory is up and sales numbers are down. The ratio of sale price to asking price has gone from a point or two over asking in early summer to a point or two below asking last month. The situation is identical all across Middle Tennessee.

What we’ve seen in the past four years is certainly unusual. Mortgage interest below 3%, bidding wars on virtually every listing, houses selling within two or three days, offers going well above appraisal value and the resulting need for appraisal gap guarantees. Delighted sellers sifting through a stack of offers. Depressed, bedraggled buyers, finally getting a house on the third or fifth or seventh offer – long after the thrill has worn off. Taking the long view, these conditions are certainly not typical.

Now things are cooling off. Interest rates are in the high 5% to low 6% range. Houses are staying on the market longer and buyers have the chance to weigh options. The bidding wars have largely ceased and sale prices are no longer averaging above asking prices. Increased interest rates have decreased buyers' purchasing power and the upward pressure on prices has declined. More typical of how things have been over the past 50 years or so.

So, was the former situation abnormal? And is the current situation normal? My answer is this: they are both normal.

Residential real estate is about as pure an example of supply and demand economics as you can find. Low supply and high demand drive prices upward. And visa versa. Things are worth exactly what people will pay for them – not a penny more, nor a penny less. So, everything described above is perfectly normal. Things are functioning as they should. Unusual doesn’t mean abnormal.

So what do we do with this? I say: take a deep breath and proceed as if nothing is wrong. Because nothing is wrong. Like all areas of life, the real estate market is subject to all sorts of external pressures, and nothing is constant but change.

And always remember that a house is first and foremost a place to live your life. Over the long haul you will likely make money on your investment – but you may not. And that’s where the “place to live” factor kicks in. Life is about so much more than dollars and cents.

It Takes a Village

I went to a memorial service last week. It was tough at times – as these events usually are – but at the same time, it was enlightening and, in a certain way, gratifying.

Jenn Garrett, a realtor and broker who had been with Village for decades, died after a year-long battle with a rare cancer. The turnout for the memorial service was huge. Jenn was well-liked in the community at large, and many of her friends from all sorts of connections were there. But there was an even larger contingent – Village realtors and others with Village connections.

Funerals are, of course, for the living. Among Jenn’s survivors are her brother, Teddy, a busy and successful Village realtor, and her mother Bobbie, for many years principal broker at Village and the guiding light for hundreds, if not thousands, of successful realtors both at Village and beyond. To Bobbie and her guidance, I owe at least 90% of my success.

After the service, the line waiting to share a word and a hug with Bobbie and Teddy was, at times, more than 30 people long – all waiting patiently. Both tears and laughs were shared. It was an honor to be a part of this crowd.

What does this say about real estate in general and Village in particular? I have a few thoughts. 

 It’s about life – in all its dimensions
The practice of real estate touches every facet of life. Birth, death, marriage, divorce, business success, business failure, departures, arrivals – any and all these things can come up in a real estate deal. It’s essential to remember that this is about so much more than dollars and cents. A home is where life unfolds – in all its ups and downs. And realtors are here to deal with it all.

Realtors take care of people
Despite what some say about realtors taking up too much space and not adding any value, we earn our keep by taking care of people – helping them get what they need, when and where they need it. It’s hard work, but so rewarding! You won’t find a successful realtor anywhere who doesn’t enjoy people and care about helping others.

At Village we look after our own
The huge crowd who came out to honor Jenn’s life and support her family makes it plain – Village is not just a business. It’s a big bunch of fundamentally kind and decent people, who are busy, but not too busy to step up and offer a hand to others.

In my rookie weeks as a realtor, I was in Bobbie’s basic training course at Village, and she said that real estate is a caring profession – like nursing. At the time, I thought she was nuts. But I have never forgotten that statement, and over the years, I have learned how very true it is.

Living in the Moment

I’m a big fan of Eckhart Tolle and his book The Power of Now. I’ve read it three times. And I’ll doubtless read it again. Were I to boil this book – and all Tolle’s other writings, and the wirings of others who think like him – down into one sentence, it would be this: Live in the moment – the right now – because the past is gone and the future isn’t here yet.

Expanding on that a bit, the right now is all we ever have. Too many of us, myself included at times, spend way too much time and energy dreaming of or regretting the past, and anticipating or worrying about the future. So much so that we often miss the magic in the current moment.

How does this apply to a real estate market in the throws of rapid change? As usual, I have a few thoughts …

The only constant is change
Nothing stays the same for long. At this moment, with mortgage interest having nearly doubled in recent months, we are shifting from an extreme sellers’ market to a more balanced market. A lot of buyers have been deterred – if not scared away – and prices are softening. But demand is still high and inventory is still low. And people who claim expertise are predicting interest rates will settle down in the low 4% range. So, what do these mixed signals mean? Since a real estate license doesn’t come with psychic powers, I say it means we deal with what’s happening in the right now.

Know what you want and what you need
I’m not sure there is ever a time for a casual, tire-kicking approach to residential real estate, but whatever the case, this probably isn’t it. As things shift and change, the one thing that you can hold constant is your objective. Buy, sell, both? Timeline? Financial limits and imperatives? Get all this decided for your current situation and hold on tight. And if your current situation changes, adjust.

Surf the wave
Once you have your wants and needs decided, go out there (with your relator, of course) and work it – as the moment requires. Don’t like the interest rates? Remember that you’re marrying the house, but only dating the rate. If rates go down, you can re-finance. If they go up, you can rejoice that you locked in where you did. See a house you really want? Grab it! Go all out and get it now. If you hesitate you may not ever get the chance again. And don’t look back. Woulda, shoulda, coulda thinking will make you unhappy – and might cause brain damage.

And always know that a good realtor is also living in the moment, ready to roll whenever you are.

Nuggets of Good News

In recent years, I’ve made a concerted effort to view my life and the world around me from a positive lookout. Grateful for all the good things and letting go the stuff I can’t influence much less control. It works – amazingly well, in fact. But sometimes it’s harder to pull off than others.

Lately, with all the bad news coming out of Washington and Eastern Europe, continued Covid variants, fires, floods, heatwaves – to say nothing of interest rate hikes … Wow! It’s been tough.

But there’s always something good afoot if you look for it. So, in that frame of mind, the following …

Market Balance
It seems things are finally slowing down – a little. Rising interest rates have blunted the purchasing power of many buyers and this is beginning to show in pricing and days on the market statistics. Inventory is still tight and lots of buyers are still shopping, but supply and demand are coming, if not actually into balance, less out of balance. This makes buying easier – less of a frantic bidding war, and possibly not quite so expensive.

Change Will Come
There’s a quote going around real estate circles these days: marry the house, date the rate. The house purchase is a long-term deal like marriage, but the mortgage rate can change, like dating. If rates go higher, you’ll be glad you snagged a house at the rate you did. When rates go down – and they will because they always do eventually – you can refinance. Playing the long game means buying a house is never a bad idea.

VILLAGE Developments
We are bigger, badder, and better able to serve you than ever before! VILLAGE has long been among the largest locally-owned firms, but via two recent mergers, we have joined forces with Parks and Pilkerton, to become the largest by far – both in dollar volume and number of transactions. As a VILLAGE agent, I now have more than 1,600 fellow realtors in-house with whom to share expertise, advance notice of listings and buyer needs, and referrals. Three brands, all one company. There is strength in numbers.
 
Additionally, VILLAGE-Parks-Pilkerton has joined Leading Real Estate Companies of the World, a global affiliation of over 500 brokerages. This offers us access to nationwide and international marketing for our listings, and access to incoming and outgoing realtor referrals. This affiliation will become more and more important as Nashville continues to boom and assume its place on the international stage. 
 
The future at VILLAGE looks good!

Best Foot Forward

Despite recent signs of a softening, the sellers’ market continues to continue. Regardless of price point it’s still quite a challenge to actually win a deal on a house. So, it pays to put your best foot forward as you navigate the path.
 
Actually, it has always paid to put one’s best foot forward – in real estate as in the rest of life – but how we define the term is – as all things are – evolving and many-sided. 
 
“Best foot forward” in real estate starts with mindset and moves toward strategy and tactics. So, let’s start with mindset.

Optimistic 
Understand that the process may be long and discouraging. Sometimes things happen quickly, sometimes not. It may one offer, it may take five, it may take ten. Stay positive. Don’t give up. It will happen. 
 
Realistic 
You will not find a perfect house. No one ever does. Look for a house with zero issues, and you’ll still be looking five years from now. This has always been true, but in this market, even more so. These days, “perfect” will involve some compromises.
 
Emotion-free
The house-buying process always involves emotions. How could it not? It’s where you are going to make your home. But these days, it pays to remember that this is, first and foremost, a business deal. Getting your feelings hurt if you don’t get the deal, or if the sellers won’t offer any concessions is understandable, but not helpful. Take your feelings out of the picture and look at the business angle with a cold, clear eye.

As for strategy and tactics …

Full Underwriting
When competing with a bunch of other buyers, proving your credit-worthiness is critical. A pre-approval letter doesn’t carry a great deal of weight these days. It’s best to go in with your lender’s underwriters’ full approval, so the only major hurdle is the appraisal. Sellers are looking for this these days.

Shop Below the Limit
To get a deal, you’ll likely need to go over the asking price, and/or be able to prove you have cash on hand to cover an appraisal gap. Don’t torture yourself looking at houses at your price limit. You probably won’t be able to get one.

Highest and Best - Always
Unless the house has been on the market for a month or more, it makes absolutely no sense to go in with an offer that isn’t your highest and best. With multiple offers, sellers sometimes call for highest and best – sometimes, but not always. Why wait for them to ask? Decide how badly you want the house and go in loaded for bear.