February, 2009

First: Don’t worry.

Despite the media frenzy, homes are still selling!  More than 4.9 million homes were sold last year, even with the market slowing down.  It’s true that we’ve passed the boom years of 2004, 2005, and 2006, but that doesn’t mean homes can’t still sell—with confidence, and the right advice.

The difference between a home that sells quickly and one that sits for three months, is a question of strategy.

Have the right strategy.

In a market like this, you have to have a strong strategy, starting with a REALTOR^® who knows your neighborhood.  They’ll help make sure that the property is accurately priced, especially when all buyers today are looking for a great deal.  Your agent will help you figure out the best price, but a good trick here is to look for listed homes that haven’t sold for months.  These homes often mark a ‘high-water line’– a price above which nothing will sell.

Have the right price.

In a buyers’ market, you shouldn’t use the old strategy of pricing your home too high, and accommodating buyers who are offering less.  This approach will cut down on your traffic, and ultimately your house could appraise for less than the asking price, which may force you to cancel deals altogether.

Dick Gaylord, 2008 President of the National Association of Realtors, has worked with sellers for more than 30 years, in all kinds of markets.  Listen to this week’s show for the entire interview! 

The $50 billion plan was created to help people who are behind on their mortgages, but we’re told it won’t address the ‘upside down’ mortgage crisis: The millions of Americans who owe more on their mortgages than their homes are worth, because of falling housing prices.

Additionally, this plan doesn’t provide enough movement on the homebuyers’ tax credit.  Many were hoping Congress would increase the current first-time homebuyers’ $7,500 tax credit to $15,000.  Instead, it was increased to $8,000.

On the upside, however, homeowners no longer have to repay that tax credit: an extremely positive factor of the bill.

There’s also good news for people buying in rural areas: the bill extends more loans to people buying outside of the cities and suburbs.  The National Association of Realtors believes this new law could result in another 200,000 homes sold.

Will this stimulus go far enough? …That’s the $787 billion question.

What’s hot in home features.

In the kitchen:
86% prefer a walk-in pantry
72% prefer a built-in microwave
69% prefer drinking water filtration

In the bathroom:
89% prefer a linen closet
88% prefer an exhaust fan
79% prefer a water temperature control

Extra rooms:
92% would rather have a laundry room
53% would rather have a sun room

Decorative extras:
83% prefer a ceiling fan
70% prefer built-in shelving
51% prefer window seats

Biggest selling points in a community:
49% would rather have a walking or jogging trail
46% would rather have a park area
32% would rather have a playground

What’s fallen out of style:

Fireplaces. While these were extremely popular in the nineties, fewer than half of new homes built today have a working fireplace.

Carpets.  Most homebuyers are looking for hardwood floors instead of carpeting.

Living room.  Over 30% of consumers are willing to buy a home without one; in this economy, fewer people have time for a purely decorative room.

Desks in the kitchen. When telecommuting first became popular in the nineties, a lot of people set up a desk in the kitchen.  But these consumers have realized that kitchen desks are often cluttered and too small, and are now looking for a separate home office.

Skylights.  Only 10% of new homes will include a skylight this year.

Granite countertops.  As laminate countertops have started appearing in more variety of style and quality, the expensive, hard-to-maintain granite tops are no longer de rigueur in an upscale kitchen finish.

Too many sellers make the mistake of saying, “My house is excellent as it is! Anyone would love to live here!”  But you have to see each room through the eyes of a buyer… in this market, you need every edge you can get.  The staging process, along with your REALTOR^®, helps make sure your house is the best-looking open house on the block.

You’ve probably heard the old tricks: replace all the bulbs with 100-watt brights and bake cookies whenever someone comes over so the house smells great, but there are three important steps to a real staging:

The first step is to remember why you bought the property.  Think about the features of your house that you fell in love with, and make sure that those stand out.  And if there is anything you wouldn’t like — old paint, a ratty piece of furniture, cluttered closets — get rid of it.

That leads us to the second step:  Clean, organize, and de-clutter everything!  This includes the insides of the closets, as prospective buyers take closet space seriously into consideration, and a well-organized closet often looks even larger than an empty one. 

The final step is to make it all look visually calming.  Walk through every room with your REALTOR^® and take an honest look at everything, from the furniture to the floors.  You may need to update appliances, or even change sheet rock.  The effort and money you put in to this process will make your home sell more quickly.

Most importantly, be tough during this process.  It’s hard to go through your house and criticize everything, so don’t take it as a denigration.  You’re just getting it ready for sale, and that means making your home into a blank palette that a potential buyer can imagine as his or her home.

Allyson Bernard comes from a family with a 50-year track record in New England Real Estate.  She is a Regional Vice President of the National Association of Realtors.

Gil:  Why housing?  Why do so many economists believe real estate will guide us out of the economic slowdown?

Lawrence:  Housing is the answer, immediate action is key.  Historically, housing has always lifted our economy out of slumps. But it has to be quick.  Immediate action is key.  At its core, the current crisis is the result of housing and mortgage market problems.  Stabilizing real estate markets will naturally be the core of solving the economic crisis.  That’s why the NAR has offered plan for Unlocking the Economy. It’s a vital part—really, it has to be the core—of any stimulus effort Congress passes early this session. Without calming jittery real estate markets, other areas of the economy can’t grow with any confidence. 

Gil:  What can Washington do to stabilize housing markets?  Congress can’t just go and pay cash to everyone who’s lost money on a home.

Lawrence:  Congress can make home buying easier by removing unnecessary roadblocks.  Right now there’s a $7500 tax credit available for qualified, first-time homebuyers. That’s a great help to people looking to buy…but it doesn’t go far enough!

Elements of the Stimulus package passed by the Senate:

• A $15,000 tax credit.
• Doubles the current $7500 credit… This is already in effect, but it doesn’t go far enough.
• Right now, every first-time homebuyer gets a $7500 tax credit.
• But they don’t get the money until they file their taxes.
• They also have to pay it back within 15 years.
• The tax credit is a great start, perfect for a strong economy
• But in today’s downturn, Congress needs to do a lot more.
• We believe ALL home buyers – not just first timers, should get the credit.
• We believe the repayment requirement should be eliminated.
• Because first time buyers need help, but so does everyone.
• Especially in today’s economy.

Gil:   What about people buying their second or third home?  Should someone get this tax credit for their vacation home in Maine?

Lawrence:  We have to stimulate sales.  These tax credits as they stand are not used enough.  The more the tax credit is used, the more effective it will be.  An increasing sale rate will boost the housing market, lifting a lot of people up and helping the whole economy get started.  The tax credit alone isn’t enough though.  We have to get mortgages rolling. Too many qualified home buyers are being “put on hold” or denied altogether.  If a buyer is qualified, with adequate income, credit scores and cash reserves, they should get a mortgage on a home that appraises for what they can afford.  We need to relax the mortgage approval process.

Gil:  But relaxing the mortgage approval process is partially to blame for causing the economic crisis we’re in now.

Lawrence:  That’s true.  But the problem was that people who couldn’t qualify for mortgages were getting them.  Now, almost nobody is getting them.  The pendulum has swung too far in the other direction.  The underwriting requirements have increased, and the credit score requirements are too high.  We believe in a reasonable approach.  Give loans to qualified buyers, no exceptions.

 Gil:  Well the problem as I understand it is that many mortgage companies can’t make loans, even to qualified buyers, because of the size of the mortgage.

Lawrence:  We need to raise loan limits so those lenders can give loans.  The truth is, many Americans live in markets in which everyday homes cost nearly a million dollars.  Mortgage loan limits dropped in the end of 2008, making these homes out of reach for many buyers.  That helped stagnate markets.  Now, these aren’t luxury homes.  They’re everyday family homes.  Homebuyers in those markets need higher loan limits—not drastically higher, just back up the limits they were at before the downturn.

Gil: So Obama has just taken office. He’s getting advice from all sides.  What’s your advice?

Lawrence:  Follow the NAR’s plan for Unlocking the Economy.  Our advice for Obama would be to keep America’s 75 million homeowners, and the millions of potential home buyers, at the forefront of any economy recovery plan.  Real estate can help bring the nation out of this recession.  We need to put real estate on the front burner.