A monthly conversation between Lane Hornung, President of 8z Real Estate, and John Rebchook, Editor of Denver Real Estate Watch and former real estate Editor of the Rocky Mountain News.
Consumers planning to buy or sell a home this year don’t have to look very far back to figure out what kind of market to expect.
They just have to look at 2015.
While the nationwide housing market was robust last year, markets along the Front Range and in the Bay Area of Northern California were firmly in record territory
John: Lane, what can home buyers expect this year?
Lane: For buyers, unfortunately, I think the market is still going to require a seatbelt and crash helmet. It is going to be another challenging year. They need to buckle up, put their helmet on and be ready to do battle.
John: Do you think the home buying public can learn anything from last spring, when multiple offers were the norm and prices soared to record levels?
Lane: I think that consumers and real estate professionals won’t be caught by surprise this year. It’s the new normal and for better or worse, everyone is used to it. Being better prepared, consumers and real estate professionals can map out a strategy well in advance.
John: Last year, especially in the midst of the frenzy, many would-be buyers cursed the market.
Lane: I think it is better to be less emotional about the market. The market is what it is. Nothing is really gained by hating on the market conditions. If your goal is to buy a house, you just have to play the game to win within the rules dictated by market conditions.
John: If 20 people were bidding for a home last spring, that meant there were 19 losers. It is unlikely that all of those losers bought a home later in 2015, when the market experienced typical seasonal cooling. What if you are not willing to go through that kind of process again?
Lane: If you really hate those kind of crazy, red-hot market conditions, get in now. At least in January, things are a bit less frenzied than in the spring.
John: The Fed, as everyone knows, finally raised its interest rates in December. What will that mean for buyers going forward?
Lane: So far, mortgage rates haven’t moved that much. There is no guarantee that mortgage rates will rise in lockstep with the Fed, but there is definitely more upward pressure on rates. The Fed has made it clear that it is likely to continue to raise rates, as the economy strengthens.
However, interest rates are still extraordinarily low by historical standards. So I don’t think rates will have a huge impact on most buyers, at least in the short-term.
John: Any good news for buyers?
Lane: I think the good news is that it is a bit easier to qualify for a mortgage.If you read the headlines, you might think that it is impossible to get a mortgage unless you have a perfect credit score. That is not the case. Yes, it might require a bit of work on your part to get pre-approved for a mortgage, but for most people, a mortgage is very attainable.
John: Lane, briefly for sellers. Will it be déjà vu all over again?
Lane: I think for sellers, 2016 is going to look very much like 2015.
Sellers really need to set the bar higher than just defining success as selling their home. They need to have a goal of maximizing the net price they receive when the home does sell. That means your house needs to be in perfect showing condition and priced to attract multiple offers.
You want the home that 20 people compete for, not the one where people kick the tires and take a pass.