Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey.
Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.
The results of their latest survey
Home values will appreciate by 4.1% in 2015.
The cumulative appreciation will be 18.1% by 2019.
That means the average annual appreciation will be 3.4% over the next 5 years.
Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 10.5% by 2019.
Individual opinions make headlines. We believe the survey is a fairer depiction of future values.
The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to look at where rates are headed when deciding to buy now or wait until next year.
Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.
Dr. Frank Nothaft, the SVP & Chief Economist for CoreLogic, had this to say in their latest MarketPulse:
“If you are thinking of buying a home and have the financial means to do so, this could be a good time to take a look at the neighborhoods you are interested in. We expect home prices in our national index to be up about 4.3% in the next 12 months, and mortgage rates are also likely to increase over the next year.”
If both the predictions of home price and interest rate increases become reality, families would wind up paying considerably more for their next home.
Even a small increase in interest rate can impact your family’s wealth. Meet with a local real estate professional to evaluate your ability to purchase your dream home.
In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them.
There is no “later.”
Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.
John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered the their price. In his article, Listing Price, Time on Market and Ultimate Selling Price published in Real Estate Economics revealed:
“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”
Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a buyer does make an offer, they low-ball the price because they see the seller as “highly motivated.” Pricing it right from the start eliminates these challenges.
Don’t build “negotiation room” into the price.
Many sellers say that they want to price their home high in order to have “negotiation room.” But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house.
Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000, but lists it at $425,000 to build in “negotiation room,” any potential buyers that search in the $350k-$400k range won’t even know your listing is available, let alone come see it!
One great way to see this is with the chart below. The higher you price your home over its market value, the less potential buyers will actually see your home when searching.
A better strategy would be to price it properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the “right” to purchase your house.
Look at it this way: if you only receive one offer, you are set up in an adversarial position against the prospective buyer. If, however, you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?
The Price is Right
Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. Look for an agent that will take the time to simply and effectively explain what is happening in the housing market and how it applies to your home.
You need an agent that will tell you what you need to know rather than what you want to hear. This will put you in the best possible position.