Real Estate for the Right Reasons

I know a guy who lived in a small apartment in Manhattan for years. He had a great job, and could afford a much nicer place, but just couldn’t bring himself to give up a rent-stabilized apartment. Eventually, his job took him to Europe for a few years, and he had to give it up. When he returned to New York, he bought a fabulous condo.
 
Recently, I talked with clients who are living in a house that really doesn’t work for them anymore, but because they have a mortgage with a very low interest rate, they resist buying another house.
 
I also know some folks who are hanging on to a house that is empty. No one has lived in it for years! Because it belonged to their parents, they don’t want to give it up. They pay the taxes and for yard maintenance, but derive little benefit for the expense.
 
Do you see a common thread here … ? 
 
Money and lifestyle choices both factor majorly in real estate decisions, but in all three of these examples, one factor is out of balance with the others. 

So, how do we do real estate for the right reasons? We get needs, wants, and ability into proper  balance. And other decisions get surprisingly easy.
 
Ability first. What can you afford? For most people that’s based on monthly expenses, because most people need a mortgage to buy a house. When shopping with cash, the decision becomes how much of your liquid assets are you comfortable living without – at least for the time being. 

Next look at needs. What do you need in a house to make life comfortable and good? I work with a lot of downsizers and one-level living is a big need among this group. For others it might be a given number of bedrooms, or a detached garage, or maximum commute time. Anything that makes your life reasonable, comfortable, and do-able needs to go on the list.

Finally, look at wants – the extras that bring you joy. What would make your life not only livable, but fun every day? What would bring you joy?
 
When these factors are in balance, the ups and downs of interest rates become less important. The type of house and the choice of location snap into focus. Finding and landing a deal in today’s market can still be a tough process, but clarity on your desires and abilities makes it easier. And it gives you permission to make a move. 
 
Last week I was out showing with a client, and as I dropped her off at her house, she asked the question I get so often, “Is this really a good time to buy a house?” My answer, “Of course it is! Look for what you need, want, and can afford, and the other considerations will take care of themselves.”

What, exactly, is going on out there … ?

I get asked about the market all the time – more-or-less every day. “How’s real estate?” “What’s going on in the market?” There’s never a simple answer, but over the past eight months or so, the answers have been less simple than usual and “exactly” has left my vocabulary.
 
With the spike in interest rates last year, the market was thrown into a tizzy. No one knew what to do. Sellers didn’t know where to price their property or whether to hold off selling. Buyers were unsure of what to offer, or whether to offer at all. And – while I hate to admit it – realtors were sometimes as confused as anyone. 
 
Well, things seem to be settling down a little, so a few – somewhat hedged – declarations and predictions. Be sure to tune in over the next few months to see if I was right.

The frenzied sellers’ market is over – for now
For sellers this means careful pricing is key. In our market, prices aren’t actually going down, but you can’t expect to simply pull a number out of the air and expect multiple buyers to compete with each other and bid above that. Buyers get a little breathing room to make a decision, but no one can drag their feet. It’s still a seller’s market and houses will sell promptly if they are reasonably priced.
 
Interest rates are likely stable
It’s very hard to make predictions about this – especially in light of the recent bank-failure turmoil – but rates aren’t going down to where they were a year ago any time soon. So, it’s time to suck it up and accept rates in the 6% range. And it helps to remember two things. One: 6% is, historically, mid-range, not all that high. Two: You can always refinance if the rates drop.

Inventory up slightly, buyers coming back
Available inventory is inching back upward from the lows of recent years, but mortgage applications are up significantly. With more buyers coming into the market, things may tighten up this spring. Which could lead to the market heating back up – not like a year ago, but warmer than it is right this minute. But, as with all forecasting, only time will tell …
 
Is this a good time to buy? Or sell?
Of course it is! I’ve said it before, and I’ll say it again: If you need or want to do a real estate deal, there is no time like the present – especially now that the market is more balanced that it has been for several years. Price it right, and it will sell. Buy now, enjoy the house, and refinance if rates go down. Or rejoice at your smarts and good fortune if they go up. 

Seasonal Gifts

‘Tis the season, as they say, of gift giving and gift receiving. While I always appreciate those that are wrapped and under the tree, the longer I live, the more I appreciate the kind you can’t wrap. 
 
The gifts that seem to endure are those that involve experiences, gestures of good will, laughs, and sometimes tears, arrivals, and sometimes departures. 
 
This year, not unusually, all kinds of gifts are coming at me from all directions. Tidings of comfort and joy, and grateful for all of it!

Just to name a few …
 
Arrival
On December 6th, Ruth Ann Virginia Paine was born to my son William and his wife Kristin. A long-awaited, healthy, beautiful, soon-to-be-bouncing baby girl added to our kin! Happy parents, ready to take on the task. Grandparents, great aunts, and a host of cousins and friends ready with open arms. Joy all round!

Comings and Goings
At ground level in yet another busy year in real estate – hallelujah! – is a bunch of lively, interesting people who chose to work with me as buyers, sellers, or both. Clients come into my life for a while, and once we close, go along their way – but often not for good. Many this year have become my friends. And that’s a good thing!
 
Peace in the Marketplace
With the spike in interest rates over the summer, the market slowed down. The white-hot frenzy of the past two years has departed, cooling into a more balanced market – still active, but calmer and fairer. What a gift! Especially to buyers, but in reality, to all of us. 
 
A Successful Election
The freedoms and prosperity so many of us enjoy in this country rest in large measure on free and fair elections. This fall, we went to the polls and did our duty. Our election system was reaffirmed, and the election deniers and conspiracy theorists were mostly sent packing. Our Union is not perfect, but it is still alive, and this is victory for all of us – regardless of who we voted for! A gift!
 
Boom Town
I’ve said it before, and I will no doubt say it again, we live in exciting times here in Nashville! I came here 46 years ago, to a sleepy, backward, medium-sized city without much going for it. But in recent years, we have stepped into the spotlight as a booming city – a city of consequence (bachelorettes aside) and I love it! Growth and opportunity abound all around us! Another gift! 

Giving thanks, post-turkey

At this point I hope all of you are coming back to real life after enjoying a serene long weekend, full of good food, good company, and the counting of blessings. 
 
I know I did. On Thursday, I joined a group – a combination of family members and long-time friends – for the big dinner. Everyone contributed to the meal and, of course, I did the cocktails. We’ve been doing this yearly for more than a decade. I love this group. 
 
This was followed on Friday with a family visit to Cheekwood and lunch at Wendell Smith’s (always beyond merely delicious) and on Saturday with a family birthday dinner – for my 71st. Wow!
 
On top of all this, I’m about to become a grandfather for the first time, and I still have the best job in the whole world.
 
Simple stuff, all of it. Yet sometimes I can’t quite believe that after 71 years on this planet, I have so much to celebrate and look forward to!
 
So, how do we tie this to real estate? Let’s celebrate the simple things …

Less frenzy
Now that things have slowed down, life’s a bit kinder and gentler. As I wrote last month, buyers likely won’t have to make a life-changing purchase decision based on a 15-minute showing and a frantic call to their lender. For sellers, the market is still strong. If a house is priced right it will sell, and unless it was bought it in the past 15 minutes, it’s highly unlikely a seller will lose money on the deal. Plus, we realtors get a chance to actually pause and catch our breath. Everybody wins. Isn’t that a good thing!

Lower mortgage rates
It’s not a big one yet, but a drop from over 7% to the mid-6% range increases buyers’ purchasing power.  The rule of thumb is that every 1% change – up or down – in the rate means a change of 10% in what a buyer can afford. So, this week buyers can afford 7-10% more than they could a couple of weeks ago. Isn’t that a good thing!
 
Balance
It’s really not in anyone’s best interest to have a seriously out-of-balance market like ours has been recently. Frantic bidding wars, split-second decision making, and eye-popping, greed-inducing price increases lead to market distortions that don’t serve anyone in the long term. Yet, while things have slowed down, Nashville is still growing and demand remains strong. Sellers still sell, buyers still buy, and we can all calm down. Isn’t that a good thing!

Surfing the Wave

Wow! Change and uncertainty continue to continue in the residential real estate world these days.

Interest rates higher than we’ve seen in decades! Houses “lingering” on the market – going unsold for days! Even weeks! Zero traffic at Sunday open houses! Sellers holding back, waiting for higher prices. Buyers holding back, waiting for lower rates. Prices going up? Going down? Going where … ?

How do we surf this wave without a big wipeout?

Well, I have a few thoughts.

Are prices going down? In absolute terms, no. Or at least not yet. If you bought your house at least 12 months ago, it would likely sell for more than you paid for it. Yes, we see a lot of price reductions on active listings these days. Most of these were likely priced aggressively, expecting the multiple-offer stampede of six months ago. And that’s no longer happening.

Will they go down? Maybe. Time will tell, but it’s unlikely – at least in our market. Supply and demand remain out of balance and that won’t change any time soon. And people keep moving to Nashville. This is still a seller’s market.

What about these interest rates? Yes, they have sorta doubled in the past couple of months, and that’s been a big shock – especially to folks who’ve never experienced anything but the ultra-low rates we’ve seen in recent years. But, over the long haul, rates in the 7% range are only medium. I got my first mortgage in 1978 at 8.9% – and that was considered a great deal. Within a year, rates had gone into double digits and didn’t go back to single digits for nearly a decade. So, are these rates too high? Meh. I’ve seen worse.

Is this a good time to sell? Of course it is. It’s not good a time to pull a price out of the air and expect to get 10 buyers scrambling to offer more than that. But, if you want or need to sell a house, price it realistically and it will sell. There is still more demand than there is supply.

Or to buy? Do you need a place to live? If so, there’s no time like the present. Yes, interest rates have changed the game, but 7% is not usury. And these days buyers have a little breathing room. You probably won’t have to make a life-changing purchase decision based on a 15-minute showing and a frantic call to your lender. So, just do it! lt’s always smarter to pay on your own mortgage than to pay rent and thereby pay someone else’s. And remember this: buy the house, date the rate. If rates drop you can refinance.