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The Bright Side of Real Estate

The real estate market is getting a lot of negative press at the moment.  From some “experts” calling for a housing crash (the same ones who have been calling for a dip for over 5 years now…maybe eventually they’ll be right after another 10%+ jump in home prices this year!), to headlines about bidding wars, absurd “over list” offers with people spending 6 figures over asking price, and other articles about the shortages of inventory we’re experiencing.  And yes, it’s a wild world out there in the real estate jungle, but there’s also a lot to be optimistic about!

 

For one, there’s appreciation.  YES, home prices are spiking, but in the latest data from NAR, year over year home appreciation as of February 2022 was 17.1%  – that means when homes were spiking last year, as long as buyers didn’t bid more than ~15% over list price, they’re already ahead!  The market is similar today – prices are going up, but that means if you buy a home today, odds are it’ll be worth more next month, and more the month after that.  Eventually, we expect appreciation to slow down (and in some markets, maybe reverse slightly), but that’s very hard to foresee because of that other word that’s been getting a lot of press – inventory!

 

Inventory is down, and even with the typically inventory-filling Spring season ahead, supply chain issues, delays in new builds, and homeowners staying put longer than in past years, inventory is going to remain very tight in the near future.  While that means finding a home and getting under contract may be more difficult, it also means that getting into a new home will offer near-immediate rewards in appreciation in most markets*.  The best advice we can offer buyers is to find a home that meets your needs and focus less on the wants.  Things like lot size, location, HOAs, cannot be changed.   Other things like paint color, flooring, and even square footage, can be updated and changed to your liking after buying.

 

And what should you offer?  In this crazy market, you’re going to need a rockstar real estate agent to help you craft the perfect offer, and if you’re using financing, you’ll need to go through our Buyer’s Advantage preapproval program, but once prepared, you may not have to offer as much as you expect!  According to NAR data, year over year sale-to-list price ratio is at 98% – that means that on average, homes sold for 98% of (under) list price.  While your market may demand going over list price to win a bidding war on a hot house, you may not need to break the bank as much as you think.  Appraisal contingencies, amendatory clauses, and writing contract addendums such as “We’re prepared to offer $______ over appraised value should the appraisal come in short” are some ways buyers can put out a competitive offer while protecting themselves.

 

Cash is another hot topic – with many cash offers out there and competition from investors, there’s been a lot of negative publicity around the topic.  With some markets experiencing 25-30% cash purchases, the thing to remember is that while these numbers are high, they mean that 70-75% of home sales are not cash, meaning you’re up against mostly other buyers that are relying on financing to get into their home.  On top of that, many investors and cash buyers still expect a cash discount due to their buying power, so if you’re up against cash, a competitive offer with a strong preapproval keeps you in the game!  Buyers shouldn’t be deterred because there’s a lot of cash out there – the cash coming from an investors savings account is no different than the cash your lender sends at closing when your offer is backed by financing.  The key is to be fully preapproved, or better, to have gone through our Buyer’s Advantage program where you’re not just pre-approved, but have already been fully approved and vetted by an underwriter.  This makes your offer nearly as good as cash, because your financing is contingent on many of the same things the cash offer may be – clean title, an appraisal, and the ability to insure the property.

 

Many of the negative headlines and publicity on housing can be countered with silver linings and looked at in a positive light.  For example, in the greater Sacramento area, inventory is slightly higher than a year ago.  14% of sales were cash, and while that’s a lot, it means 86% of sales are NOT cash.  In January, 59% of all sales had multiple offers – but that means 41% of all sales had only 1 offer.  54% of homes sold over list price – that means 46% sold at or below list price.  Bottom line is that if you’re a prepared buyer working with a savvy lender and real estate agent, odds are good you’ll be able to get into a new home, despite how crazy the headlines make the market appear.  The key is being prepared, understanding the market before making offers, and taking the advice of the professionals working for you to make your home ownership dreams a reality!

John Meussner | MLO NMLS 138061

Licensed by The Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. NMLS# 1141
MasonMac Corporate

Mason-McDuffie Mortgage

Office: (949) 247-7530

12647 Alcosta Blvd
Suite 300
San Ramon, CA 94583

Licensing:

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