The Art and Science of 'Right-Pricing' a Home

Of course, every home for sale comes with an asking price.

Where that price came from, how close it is to today’s actual value, and how likely it is a qualified buyer will pay anything close to that is another matter altogether.

Add to that whether the house has had recent, tasteful upgrades, has been staged like a model home, is in a prime location, has a swimming pool or a killer view and you’re into the difficult science of right pricing a home.

Add further into the equation factors some sellers pack into their desired sales price, and the difficult job of right pricing becomes an art more than a science.

Here are a few examples of right pricing challenges.

• Upgraded to sell: So you have a condo in a great location with an attached garage and you’ve kept it in exactly the same condition as you bought it. Now it’s time to move on and get it sold.

Bring in a designer and a good, reasonably priced contactor, and now you’re the bomb. Quartz. Stainless steel. White. Brushed nickel. Add $20,000 to the recent comps and subtract two months from the time to get it sold.

• Lipstick on the pig: When you have a desirable floor plan in a great location, but don’t have recent, fashionable upgrades, you might just want to replace your light fixtures with something more up to date, change out the cabinet pulls to match the fixtures, give it a new coat of neutral paint and you’ve got a fighting chance of getting a great offer.

As long as you price it closer to the recent sales in more original condition and avoid the lure to ask what the fully remodeled flip just sold for, which is the highest price in the history of the neighborhood.

• Flipping for the big bucks: When you pick up an older house with the most amazing lot in the entire neighborhood (end of the cul de sac, at the top of the hill, with a 180-degree view), you have a unique opportunity to push your asking price even higher.

Say it’s a 1972 home in original condition. Rather than go to market for slightly less than similar recent sales, use your previous flipping expertise. That means flawless design touches, adding a few windows, removing a few walls and hiring a staging company with the best sense of style and emotional appeal.

Do that, and you might get multiple offers and end up selling it for the highest price in the history of the neighborhood.

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Post-Election Rate Spike Will Reverse Course

Rest easy. No need to awfulize. Enjoy your Sunday morning hot cup of joe. The Trump win caught markets off-guard. This created a post-election spike in mortgage rates which are going to simmer right back down in the near term.

At press time Wednesday evening, compared to November 8th, lenders raised their conforming 30-year fixed rates between 0.375 percent and 0.5 percent.

What gives?

“Uncertainty is a piece of it,” said Lynn Fisher, vice president of research and economics at the Mortgage Bankers Association “Tax reform or investment in infrastructure stimulates the economy and helps push up prices, (causing) inflation to pick-up.”

Consumer mortgage rates and fees are derived from mortgage backed securities, which in hand closely mimic the 10-year Treasury rate. For the sake of perspective, the 10-year Treasury topped out on Nov. 15 at 2.23 percent, almost exactly where the 10-year was Nov. 18, 2015, when the rate was 2.27 percent.

The low point on the 10-year in 2016 was July 6 at 1.38 percent. That was less than two weeks after the United Kingdom unexpectedly voted to leave the European Union. When conventional expectations don’t come to pass, mortgage markets have spasms one way or the other and then tend to settle back to where they were.

Fisher said that total residential mortgage funding volume in 2015 was about $1.7 trillion. The MBA projects that 2016 will land at $1.9 trillion. It expects $1.6 trillion in 2017, with purchases climbing 11 percent and refinances falling off.

There is “nothing obvious to keep rates rapidly increasing,” she added.

The silver lining for home sellers is that interest rate events tend to get procrastinating buyers off the fence.

“There is a concentration of buyers that are ready to look because all of the talk that rates are going to go up,” said Candice Blair, broker of Niguel Point Properties.

Comparing a loan amount of $417,000 on a 30-year fixed rate at 3.25 percent of a few weeks ago to today’s rate of 3.75 percent, the mortgage payment increase is $116, or a principal and interest payment of $1,931. Yes, a big jump indeed.

If the Federal Reserve raises rates in December, adjustable rate mortgages will go up a tad.

I’m doubling down. My tea leaves and my crystal ball both show mortgage rates settling back down, at least between now and right after President-elect Trump’s Jan. 20 inauguration. If it were me, I’d float the rate and not lock in until you are cleared to close.

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Californians Fleeing State's High Cost of Housing

California’s warm weather, sunny beaches and world-class schools have lured people to the Golden State for decades, but rising home prices are turning that equation around.

Data analysis firm CoreLogic says that for every two homebuyers who moved to California from 2000 through 2015, five others sold their homes, packed up and moved out.

Arizona and Texas were the top destinations for people moving out of California, CoreLogic reported. Only New Jersey had a higher ratio of fleeing homeowners during that period.

“California had the largest number of out-migrants in 2015,” CoreLogic Senior Economist Kristine Yao said in a blog post published Thursday.

The trend of out-migration was also noted in a separate trio of reports released earlier this year by Beacon Economics. Beacon noted that 625,000 more U.S. residents left California between 2007 and 2014 than moved into the state. The vast majority ended up in Texas, Oregon, Nevada, Arizona and Washington.

The search for more affordable housing is sending low- and middle-income workers out of the state, while higher-wage workers continue to move in, which argues against the theory that high taxes are driving people away.

“California has an employment boom with a housing problem,” said Beacon founding partner Christopher Thornberg. “The state continues to offer great employment opportunities for all kinds of workers, but housing affordability and supply represent a significant problem.”

Home prices and rents have been rising steadily for more than four years.

CoreLogic figures show Orange County’s median home price was up 42 percent in the four years ending in September. Prices were up 55 percent in Los Angeles County, 57 percent in Riverside County and 75 percent in San Bernardino County.

Although home sellers leaving California last year paid, on average, 36 percent less for their new homes out of state, they tended to end up in better neighborhoods, CoreLogic reported. Their purchase prices ranked in the 77th percentile for their new metro areas, while their sale prices ranked in the 62 percentile back home.

“Of the homeowners moving out of state, more of them sold in high appreciation, high cost areas and bought in lower appreciation, more affordable areas,” Yao wrote.

California home prices have risen in part because of a lack of inventory.

From 2005 to 2015, permits were filed for only 21.5 housing units per every 100 new residents in the state. That put the Golden State second to last behind Alaska, where only 16.2 housing permits were filed for every 100 new residents.

On the flip side, Michigan saw 166 permits filed for every 100 new residents.

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The Past, Present & Future of Home Prices

CoreLogic released their most current Home Price Index last week. In the report, they revealed home appreciation in three categories: percentage appreciation over the last year, over the last month and projected over the next twelve months.

Here are state maps for each category: 

The Past – home appreciation over the last 12 months

The Present – home appreciation over the last month

The Future – home appreciation projected over the next 12 months

Bottom Line

Homes across the country are appreciating at different rates. If you plan on relocating to another state and are waiting for your home to appreciate more, you need to know that the home you will buy in another state may be appreciating even faster.

Meet with a local real estate professional who can help you determine your next steps.

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Are Open Houses Worth It?

Between cleaning, getting the sellers out of the house, breaking out the cheese and crackers and uncorking a bottle of wine, open houses are a burden for you and your sellers. But what if you were to find out it’s not always worth the time, talent and effort?

For most of California, it is. But the truth is, having an open house doesn’t always help you to sell a home more quickly — or for a higher price.

Homes with open houses tend to sell for above the asking price and more quickly in California, according to a report by Redfin, a national real estate brokerage. The report analyzed sales data of homes in markets where Redfin is active going back to 2010.

However, the signals are decidedly mixed. Across California, the difference varies by region. In:

• San Francisco, 74% of homes with open houses sold above asking compared to 47% of those without an open house;
• San Jose, 65% of homes with open houses sold above asking compared to 47% of those without an open house;
• Los Angeles, 36% of homes with open houses sold for above asking compared to 29% of those without an open house;
• Oakland, 65% of homes with open houses sold above asking compared to 49% of those without an open house;
• Sacramento, 13% of homes with open houses sold above asking compared to 12% of homes without an open house; and
• Orange County, 18% of homes sold above asking, the same as without an open house.

On the other hand, homes in Ventura, Riverside and San Diego tend to sell for less when the agent holds an open house.

What accounts for the difference? Some homes simply present better than others in person, or are located in desirable areas with significant foot traffic. Further, take the above Redfin study with a big grain of salt: their data may be skewed by the fact that agents tend to hold open houses only for those homes that are in coveted locations and in prime condition, and therefore already more likely to sell for more and to sell quickly.

In other words, agents are more motivated to host open houses when they have an attractive listing they want to show off. And why not? Open houses are just as much about the agent getting to know the nosy neighbors who stop by as they are about trying to solicit interested homebuyers.

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Owners of High-End OC Housing Rush to Sell

Is there a summertime chill for Orange County's upper crust?

ReportsOnHousing says the local resale housing market is going through a pretty typical post-spring cooling, but its most dramatic slowing is for the pricier homes listed.

As of June 30, the supply of homes priced above $1 million had grown by 8 percent in a month. Meanwhile, demand for those homes -- measured as new escrows opened -- fell by 19 percent. ReportsOnHousing stats are a good indicator of how actual closings will progress in the next two months or so.

Slower dealmaking as sellers add listings means that Orange County saw a dramatic slowdown in one home-sale speed yardstick, especially for pricier homes. ReportsOnHousing measures "market time," how fast inventory would sell at current rate of demand. Any reading below 90 days is considered a seller’s market:

• For all Orange County homes, market time was 74 days on June 30 vs. 65 days a month earlier.

• Homes priced between $1 million to $1.5 million: market time was 143 vs. 102 days a month ago.

• Between $1.5 million to $2 million, 159 days from 137.

• Above $2 million, 322 days vs. 231 days.

Overall inventory of existing homes listed for sale rose by 8 percent in two weeks to 7,104, the highest since August 2015 and 7 percent above the year-ago level.

New pending sales dropped 3 percent in two weeks to 2,887, its lowest level since March and 3 percent below a year ago.

"Orange County housing is still a slight seller’s market, which is when sellers are able to call more of the shots during the negotiating process, but appreciation slows considerably," ReportsOnHousing's Steve Thomas wrote.

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Orange County Suffers SoCal's Steepest Homebuying Slowdown

The slowdown in Orange County homebuying for resale housing is the sharpest reversal in Southern California, according to one benchmark.

ReportsOnHousing calculates home-sales speed with it’s “estimated market time,” which compares new escrows opened to the number of homes listed for sale. As of June 16, Orange county’s market time was 69 days vs. 66 days four weeks ago and 60 days a year ago.

ReportsOnHousing considers any reading below 90 days to be a “seller’s market” – so the extended time required to sell is more a warning sign than a serious market challenge to date.

Still, the slowing pace – due to fresh supply rising faster than new demand – turned Orange County from an better-than-average regional performer to a laggard. The six-county average put SoCal market time at 65 days last week vs. 63 days both four weeks ago and a year ago.

In Orange County, market time has jumped because listing inventory rose by 601 homes (10 percent) in four weeks to to 6,868. New pending sales fell by 155 home to 2,989, a 5 percent drop.

“Basic Econ 101 tells us that when supply increases by 10 percent and demand drops by 5 percent, the pace at which homes sell cools. As a result, homes are not selling like hot cakes like they were a month ago,” wrote Steve Thomas of ReportsOnHousing.

The nine-day increase in Orange County market time since June 2015 is the largest one-year jump in home-seller length among SoCal counties:

• Ventura, up five days to 49 days last week.

• San Diego, up four days to 51 days.

• San Bernardino, up three days to 74 days.

• Los Angeles, up one day to 59 days.

• Only Riverside County showed improvement, with market time down five days to 91 days, worst in the region.

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Did April Home Price Beat the Bubble?

The median price of an Orange County home hit $644,000 in the four weeks ending on April 25 – just $1,000 shy of the all time high of $645,000 set in June 2007, CoreLogic’s weekly update shows.

When CoreLogic releases its final April housing report on Tuesday, Orange County’s market may be the first in Southern California to regain ground lost when the housing bubble burst in late July 2007.

The weekly housing number released Friday includes home sales for the final five days of March and does not include the final four days of April.

The median price is up 8.5 percent from the same four-week period in 2015 and is 3 percent higher than March’s median, or price at the midpoint of all sales.

But fewer people appeared to be willing or able to buy Orange County residences at April’s prices.

Transactions were down 3.5 percent in the period to 3,400 closings.

Even if April’s final median price meets or beats the 2007 record, housing here is still a bargain compared to the bubble once inflation is taken into account.

A home costing $645,000 today still is worth about $96,000 less than the amount paid in 2007 dollars.

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Looking For a Home Under $750k? 11% Fewer Options This Spring

It’s not easy being a house hunter in Orange County this spring, if you’re looking for a home priced under $750,000.

Shoppers looking for properties priced below $750,000 are finding limited choices and what’s available is selling extremely quickly, the latest edition of ReportsOnHousing shows.

As of last Thursday, 47 percent of the residences for sale in brokers’ listing networks were priced below $750,000. A year ago, this same cheaper end of the market had 54 percent of the listings.

How did we get here? ReportsOnHousing data shows:

• At the low-end, 2,559 Orange County residences listed were priced under $750,000, down 324 homes or 11 percent fewer choices vs. a year ago.

• Despite quickly falling supply, demand for homes priced under $750,000 – defined as new escrows in the last 30 days – was 2,119 as of last Thursday, off just 92 homes or 4 percent from a year ago.

• At the high end, supply grows: 3,481 Orange County residences were listed for sale at $750,000 and above. That’s up 506 or 17 percent from a year ago.

• High-end demand is keeping pace, though, with new escrows above $750,000 at 1,093 as of last Thursday, up 155 (17 percent) from a year ago.

As a result of the inventory turmoil, Orange County shoppers seeking cheaper homes must act quickly. Just look at ReportsOnHousing’s “market time” calculation that tallies how long it would take to sell the entire inventory at the current pace of demand.

The typical Orange County home priced under $750,000 is getting into escrow in 36 days as of last Thursday, according to market time math. That’s three days quicker than a year ago. Note that ReportsOnHousing considers any market time reading under 90 days to signal a “seller’s market.”

Pricier homes take almost three times as long to sell in Orange County. Market time for homes priced $750,000 and above slowed a day. Last Thursday’s market time was 96 days, one day longer than a year ago.

“Demand is so hot for starter homes that many buyers will not be able to purchase,” ReportsOnHousing’s Steve Thomas says. “There are currently far more buyers than sellers. Buyers need to be on their ‘A’ game in order to be successful and secure a home within these ranges today.”

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The Best Day and Month to List Your Home

Spring is traditionally the best time to put your house on the market, but when exactly? It’s changed: These days it’s May, while back in 2011 and 2012 it was March. The shift to later in the spring stems from the housing crash’s continued aftershocks.

Small wonder spring is the peak season for residential real estate sales: The weather is warmer and the kids are out of school, so people who plan to move find it easiest then – and they'll be relocated before the next school year starts. The housing industry has been through extreme gyrations over the past 10 years, but one constant remains: The end of winter still marks the start of the selling season.

Another standard motif is that Thursday is the best day to list because buyers are planning ahead for the weekend, says real estate company Redfin. The worst days: Saturday, Sunday and Monday. Trouble is, only 18% of sellers list on Thursday, to their detriment.

Beyond doubt, the housing landscape has changed. A big reason that May now is the optimal month to list in most states: There are 9% fewer homes on the market during the current spring buying season versus a year ago, according to Zillow, the online housing database firm. This inventory reduction has spurred more buyer competition, and pushed the ideal listing time later, as sellers no longer need to worry as much about unloading their places at a good price.

Broad Economic Factors in Home Selling

The slump in housing supply is a lingering ill effect of the housing bubble’s bursting. During the boom that preceded the crash, obtaining mortgages was easy and a lot of poor loans were made. The Federal Reserve helped by keeping interest rates low. The collapse, of course, produced a sharp downturn in new home construction, which has contributed to the lack of inventory.

Several other factors, growing out of the crisis, hold down the number of houses for sale. Large numbers of single-family homes, for instance, are still worth less than their gargantuan mortgages, taken out when times were flush and prices were far higher. That makes the homes’ owners reluctant to put out the for-sale sign.

Further, huge numbers of houses have been converted to rental units, as hedge funds, real estate investment trusts and individual investors bought them at distressed prices. That removes another big chunk of housing stock from the market.

Why Spring Is Peak Selling Season

Aside from the end of school and generally nicer weather for home shopping, spring still reigns supreme because houses look better and the days are longer, the National Association of Realtors says.

With the economy’s gradual recovery, qualified buyers have the money to compete for what they want. Thus, bidding wars are more likely to erupt, which pushes up prices. Plus, increased sales make for a self-reinforcing dynamic: When comparable houses in a neighborhood fetch higher prices than in the past, your own dwelling’s value is buoyed.

In the off-season, by contrast, low-ball offers tend to be the norm. In more northern climes,curb appeal wanes amid bare trees and brown lawns.

Differences Based on Geography

Prices on properties vary depending on locale. In the main, a study by real estate site Trulia found, the farther north you go, the later the prices peak. They hit the max in the South in March and April, except for Florida, which crests in May. The Florida high point may be linked to the large numbers of winter residents who take their sweet time going back north.

Certainly, planning for when to list occurs in advance of the actual listing. One report found that, according to brokers, buyers in Chicago and Boston were not deterred by cold weather as much as sellers, who control when to list. The sellers did not want to begin home repairs and other attempts to spiff up their domiciles when cold winds blew. Hence, they often list later in the spring. (For ideas on improvements you might make, see Do-It-Yourself Projects to Boost Home Value.)

Why Thursday Is the Best Day to List

By Redfin’s reckoning, a Thursday listing means a home is more apt to sell faster and above list price than one listed on any other day of the week. By Thursday, with the weekend looming, potential buyers are picking over what houses they want to see. Come the weekend, the planning phase is over and the legions of homebuyers are already fanning out.

How to Maximize Selling Points

To be sure, regardless of the season, any home that looks rundown will have a tough time getting any offers, let alone good ones. While opinions differ on when exactly is best to list your property, no one disputes that fixing it up will enhance sales appeal. There are professionals who advise you about “staging” your home for buyers, with the right placement of furniture, removal of clutter and adding esthetic touches like scented candles. (See also 6 Tips for Selling Your Home Fast.)

But you can also upgrade the house’s look with do-it-yourself remodeling moves like painting the front porch, putting new knobs on kitchen and bathroom drawers, and getting better lighting fixtures for the foyer. For more ideas, read How to Stage Your Home for a Quick Sale.

The Bottom Line

Home sales, despite some ups and downs, are inching back up. If you wish to sell your house, in most states, no month is better than May and no day is better than Thursday. With competition heating up in many markets, getting a decent deal for your home is definitely possible. Getting the best possible price takes planning and strategic updating if needed. Consult your realtor about what makes the most sense for the housing market in your area.

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