Tag: Real estate tips

Reality of Selling in Today’s Market | What seller’s need to know

The Current Real Estate Market

Selling in this market is a little unusual. A lot of sellers are still hoping, or are in the mentality of where we were last year, where they list their home and it’s going to fly off with multiple offers and getting top dollar for their home. That’s not quite where we are anymore. In fact, a shift started happening around end of May- June of 2022, where we started seeing things drastically slow down. Obviously, the Feds raising the interest rates had a huge, huge effect on the way that buyers were pursuing homes.

 

We saw buyers take a sideline, but sellers still need to realize that the pool of buyers is a lot smaller than it was before. They are a little more weary, and don’t want to spend as much. So they’re seeing that if they wait, maybe these prices are going to go down.

 

Well, as a result of so many doing that, we have seen prices drop a little bit and we’ve seen days on the market increase.

It’s still a seller’s market, but it’s a little ironic because it’s kind of a buyers market as well. I’ll explain why. Typically a seller’s market, in order to stay a seller’s market, inventory months of supply has to be between 1-3 months. We are there. We are still at about a two months supply. 

 

Now, once it hits between 5-7  months, that’s where it’s a neutral market. And then after seven months and beyond, it becomes a buyer’s market, where homes are staying on the market a lot longer. And we’re talking months. We’re seeing right now 30 to 45 days in some areas as the average days on the market. 

 

The last couple years, what we experienced was an unusual market. I don’t even know if we can call that a seller’s market. That was pandemonium. That was absolute madness with homes flying off the market above asking within hours of going live. What we can say is that it is a seller’s market.

 

Inventory numbers are very low, so there are not a lot of options for buyers. There are opportunities, but not a lot of options. So if buyers really want to buy, they can. There’s enough inventory for them to make a decision and not a lot of competition necessarily the way it was last year. But it still gives sellers a little bit of leverage because inventory numbers are low.

 

Now, they can price it whatever they want, but that’s not what buyers are paying. The houses that are flying off, even in today’s market, are the ones priced a little bit below market value and that is why they get multiple offers.

 

Market value is a tricky phrase. You hear that thrown out all the time. What is market value?

Market value is what a buyer is willing to pay for a house. The end.

It’s not what a seller thinks their home is worth. It’s not what an agent thinks they should list the house for. It’s not even what an appraiser thinks the home is worth.

 

It is what a buyer is willing to pay. Which is why last year our market value/ property values all skyrocketed. Why? Because the seller wanted a number. The agent listed a number and then buyers said no, we’re willing to pay even more than that. And another buyer would say I’m going to pay more than that. That’s how that continued increasing prices and why it became a little bit like the wild, wild west of offers. That is not normal.

 

Never seen that before and I don’t think we’re going to see that again.

But what we do see is that people are constantly moving into Florida. Florida is not experiencing a lot of the same shifts that other markets are because we still have a lot of people coming in and wanting to live here. We also have an affordability problem and we have a housing crisis. We do not have sufficient homes for everybody that’s moving in.

 

We have so many people moving in on a daily rate in Florida that we cannot actually handle. So we are seeing that we have housing crisis. Rents are so high in our area in fact, some people are shocked when they hear that it’s comparable almost to Miami and to other metropolitan markets. But this area has become a place where people want to move and raise families and grow and have their careers.

 

Even if they can work remotely, they’d rather be in Florida, right?

 

Those drastic shifts that people thought were going to happen still haven’t really happened here in Florida because we have an amazing state that people want to live in. We have great weather, which a lot of people love. We do see a lot of northerners coming back or coming here because especially during this time, because they’re sick of the cold; they’re sick of winter.

 

So those are the considerations that people are looking at when they’re making a move. So with all of that, sellers have to be realistic about what they price their home if they want to sell.

 

Yes, there’s low inventory, yes, there are buyers, but the pool of buyers is much smaller than it was before.

 

We have seen that sellers either are not realistic or they’re just not in a rush. They have equity in their homes and even if the market goes down, they still have equity because all home values went up significantly over the last few years

 

So people have equity. Even if the market drops a little bit, it hasn’t dropped to where we were pre-pandemic numbers. As a result, sellers are realizing they don’t have to move, so they’re going to sit right here on overpriced homes. And there are others that do have more of an urgency and motivation to sell and that’s where you’re going to find opportunity.

Is there opportunity? 100%.

You have to work with professional advisors like myself and my team that can help guide you through the process, help connect you with mortgage professionals and lenders that can help you get that 2-1 buy down that can help you get the best interest rates out there on the market right now and help facilitate a plan if it’s in the next month, or three to six months. We can help facilitate your homeownership goals and selling your home. So give us a call if you have any questions.

What Solar Panel Companies Don’t Want You To Know!

Here's why you should think twice before getting solar panels

Table of Contents

The idea that we can gain power through solar is fantastic. We promote solar power and think it is something we should look forward to what future technologies can offer, but the current infrastructure is not conducive for long term solar growth and is creating greater waste, especially when it comes to home solar systems. Let’s dig deeper.

 

This article is intended to educate an otherwise uneducated population that assumes the best of solar panels and the very insistent and persuasive sales people pushing this product. 

 

We’re going to look at this from a real estate, roofing, insurance, title, appraiser and lending professional perspective as well as discuss some very serious issues that consumers may be unaware of.

Real Estate Perspective

As a real estate professional in the industry for almost two decades, I saw the transition of solar panel systems becoming an affordable option for homeowners and a very slow adoption to residential sales.

From 2012 – 2015, we saw the cost of residential solar systems becoming cost-effective for the average American household. In 2015, more residential solar power was installed in the U.S. in over 18 months than in all the cumulative history prior to this.

Since that time, we have seen a tremendous growth of solar panel installments and an even greater number of sales people door knocking trying to convince homeowners that it’s a good idea.

Community solar panels

Let’s look at what this means for a homeowner when it’s time to sell.

  1. First of all, there are several things to consider if you’re thinking about installing solar. How long are you going to live in your home? The break-even point may not even be worth the hassle, insurance and other costs involved when you look at the big picture and not the monthly fee people get caught up with.
    For example, how does saving $50-100 per month on your electric bill make up for spending more than double that on a monthly solar payment? Financially, the numbers don’t make sense.
    If you plan on being in the home over a decade, I don’t recommend it because it takes an average of 9-12 years just to break even. But please consider this from a solar panel installation company. If solar can save you an average of $26K on electricity costs over 20 years but the system costs you over $30K and most people don’t live in a home past 8 years, can you explain how this makes financial sense?
  2. Those contracts are NOT written favorably for the homeowner. We’ve seen sellers stuck in their contract where they’ve either had to pay off the solar panels ($30K-70K – depending on the square footage) before selling or splitting with the buyers. Either way, this is a tremendous percentage of their equity out the window on a system that most people don’t pay off and see the break even point.
  3. Solar panels become liens on your property that MUST be transferred to another buyer and may disqualify a buyer that could have afforded your home because of the additional debt of the panels. When solar panels are present, lenders now have to make sure the debt to income ratio isn’t too high or financing will not be approved.
    “If you’re not buying your solar panels with cash, the manufacturer may place a lien or Uniform Commercial Code filing on your property to make sure you keep paying for them. Unfortunately, when you go to refinance or sell the property, it’s generally trouble to have any kind of lien on your home.” (Source: Rocket Mortgage)
  4. Appraisers are NOT adding the value of solar panels into an appraisal to compensate for the debt incurred, yet you are still paying taxes on the newly assessed value of your home after permits have been closed.
  5. If solar panels are leased, the leasing company has to approve the transfer and do a credit check. Selling a home can be complex enough without having to add this headache of yet another approval.
  6. Resale value with solar panels is not as exciting as homeowners may hope. As of now, the majority of home buyers appreciate that a home may have them (unless they understand the insurance nightmares we’ll discuss later), but they won’t add value to it when considering making an offer on a home.

Did You Know?

The absolute best solar panels are only up to 33% efficient with the best inverter and completely brand new. Check out this article on the “best solar panel systems” and none go above 24.69% – please let that sink in for a second.  (Source: Solar Reviews)

Just why?

New homes are built energy efficient already and do not need solar panels, but unfortunately some developments have required solar panels to be obtained by the homeowner so there is no choice in the matter except a heavy added price tag, especially if damage to the roof incurs and a replacement needs to happen (more on that soon).

Here’s a sad story shared by a Realtor and like this one, there are hundreds more:

Solar panel issue with seller

There are so many other improvements to a home that can make a HUGE impact in your value, but this one has more expenses and risks that may not be worth it.

Roofing Perspective

Let’s start with the fact that roofing companies love solar panels because it means a new roof. However, when you ask a roofing professional their honest opinion, it paints a different story for consumers. Let’s begin with two simple questions:

  1. Why are solar systems harmful for a roof? “Holes in the roof can lead to leaks forming over time. With the presence of unexpected moisture, the possibility of water damage and mold growth becomes very real. On that note, damage to shingles and roof tiles from drilling or hammering during solar panel installation is almost guaranteed.” (Source: Solar Stack)
  2. What does it take to install panels? “Roof-mounted panels require workers to drill holes in your roof to install the platforms where the solar panels rest. The sizes of the holes depend on your roof’s foundation and material. These holes hold the fasteners which attach the solar panels to your roof. Like how roof construction normally works, solar panel installation requires workers to use flashing. Flashing is plastic or metal sheets that fit underneath the tiles or shingles of your roof. Workers then seal the flashing and the area around the fasteners to prevent the holes from allowing water to leak into your home.” (Source: Solar Alliance)

Because of the way the panels need to be installed, insurance companies have stopped the coverage of these panels and require a special coverage provided by the solar panel companies or an add-on from the insurance carrier.

Here are some concerns directly from a roofing professional:

1. Solar panel companies are not staying in business long enough to outlast their manufacturer’s warranty. This should be highly concerning for homeowners thinking about getting systems installed.

 
2. Solar cells dying after 15 years long with the converter not being able to convert the energy captured


3. Solar panel representatives sell you on the idea that energy prices will increase (which most likely they will), but they also don’t tell you that you won’t make your money back in the first 10 to 15 years. They initially sell you the idea that you’ll make your money back between the first 5 and 10 years but that doesn’t actually happen.

 
4. The tax credits aren’t enough to justify the savings you’re being sold.


5. If your roof is too old they can’t install the solar panels, so you end up having to pay for a new roof as well. Most companies will put the roof into the loan of the solar panels, thus incurring additional debt.

 
6. When you put solar panels on the roof, wherever there’s a solar panel it voids the roofing warranty of the shingles on that slope.

 
7. After solar panels die, they end up going to the landfill and they become hazardous waste due to the materials they are manufactured out of. So there are pictures of “solar panel graveyards”all across the United States.

Ironic how something that is supposed to be environmentally sound, is actually creating toxic waste.

solar panel graveyard
Stop solar panels

Insurance Perspective:

Insurance is not anti-clean energy, it’s just not good business to provide coverage. Why? Claims costs are the drivers behind the issues of insurance companies not wanting to adopt solar PV arrays.

It’s often not just as simple as taking them off and putting them back on when the roof needs replacements. The costs of replacing the roof with solar is tens of thousands for insurance companies:

  • Roof replacement from where solar was
  • Solar panels themselves
  • Storage fees (typically about 3 months and averages $5k just to STORE the panels)
  • Moving fees to the storage facilities while roof is getting replaced
  • Misc. fees

Insurance companies caught on rather quickly that this was an immediate liability for them to cover the roof where the solar panels are on. If they do, there is a premium.

Insurance is available but coverage limitations may vary from company to company. Importantly, don’t assume ALL insurance companies will take a home with solar. 

Oviedo solar panels

Here Are Some Things You Need to Know:

“If you have roof-mounted solar panels, the coverage on your homeowners policy may pay to repair or replace them if they’re damaged by a covered peril. Some insurers may not cover wind or hail damage to roof-mounted solar panels.” (Source: Progressive)

If the roof needs to be replaced, how does that affect the panels?

“If you run into a roofing issue, and need to replace the roof post-installation, there will be labor costs associated with taking the panels off your roof and putting them back on. Unfortunately, it’s hard to give specifics on the costs associated with this labor, as it can vary greatly. Installers will have different rates for their labor, and the cost can also vary based on the size of the system, how many panels will need to be removed, and whether you need a place to store the equipment. If mounting hardware also needs to be removed in order to replace your roof, this will add onto the cost. On average, residential installations tend to cost somewhere between $1,500 to $6,000 to remove and reinstall. (This is not inclusive of the cost required to replace your actual roof.)” (Source: Energy Usage)

People always want to know if solar panels will be covered in their policy. Because each insurance company is different, they have a variety of reasons they may or may not cover solar panels. Essentially, the cost of having solar panels is a huge risk and cost for insurance companies.

Let’s take a look at how particular insurance companies can be with solar.

Frontline Insurance

Frontline, for example, will accept solar panels (as long as they are not net metered). Those familiar with the inner workings of solar panels know that ALMOST ALL systems are net metered, meaning owners can sell back energy to the power company (not that they get much from this).

Florida Family Insurance

Florida Family will accept up to 20 solar panels on homes over 2000 sqft as long as it is no more than 50% of the roof area. Under 2000 sqft, it is limited to 10 panels.

Florida Peninsula Insurance

Florida Peninsula accepts solar systems up to Tier 1. What is a Tier 1 system? Up to 10kW, which is often the “magic number” in these systems.

American Traditions Insurance

American Traditions accepts solar panels and you can BUY BACK coverage for hurricane protection, which in Central Florida can cost typically between $450 for a $20,000 solar system.

AAA Insurance

AAA Auto Club is removing their coverage.

Many Others

Many companies cover solar but specifically exclude WIND, HAIL, or HURRICANE damage to such systems (Author note: Then what in the world do they cover??? Those are the main reasons people in Florida need new roofs).

Title Perspective

It’s important to understand how solar systems affect title:

  1. Most UCC-1 (Uniform Commercial Code-1 statement is a legal notice filed by creditors as a way to publicly declare their rights to potentially obtain the personal properties of debtors who default on loans) are effective 5 years after they are recorded
  2. It can be continued  – A “Continuation statement” must be filed 6 months before the expiration of the 5 years.
  3. UCC-1 is terminated with a UCC-3 “Termination Statement” at the time of the sale. 
  4. If the UCC-1 is not terminated, the UCC-1 will take priority over the buyer’s mortgage, and the interest conveyed to the buyer in their deed. 
  5. The solar system can be repossessed. 

Tips for homeowners with solar panels when looking to sell your home:

  1. Obtain a list of the Lease and disclose the Solar System in the MLS
  2. Review the lease to determine whether it is assignable or must be paid off at the time of the sale
    • Side tip: If you are planning on getting a solar system installed, request that these provisions be left out of the lease. 
  3. Know the balance owned, and factor it into the listing price. 
  4. If the system is paid off, gather proof. Title company will request this information. Having this ready prevents delays.\

From Appraiser Perspective:

Here is what’s important from an appraiser’s viewpoint. It’s important to know if the panels are owned outright or being financed. If owned outright without financing, then they are given more value. If they’re owned, the appraiser considers how big the solar unit is.

 

For example, is it just for the pool or the entire home. The contributory value of solar systems (owned) varies greatly on subdivision, location, total living area of improvement and age. 

If the solar system is being financed, the appraiser should know whether the panels can be repossessed if the loan goes into default. If they can be, then no value should be given in an appraisal.

 

Leased packages are NOT included in valuation per FHA, FNMA, and VA. 

If there are panels that are being financed and they are not fixed to the real estate, then they should not be given value either. 

The most challenging part of Solar, is to find comparable sales to support market value that includes similar systems. It would be helpful to find comps with similar panels if possible so that there is no need for a separate adjustment. 

 

Fortunately, it’s becoming more prevalent, but still not common enough in this area to always be able to find good comparable sales. 

 

FNMA 1004 Form does have a line-item on the grid for Energy Efficiency which is the line item adjustment typically made for this type of improvement. 

Remember, the benefit of a Solar System is to reduce the Cost of power over the long haul, the contributory value today is NOT cost to purchase and install. (Author note: Did you hear that??? It’s not the value of what you paid for it, it’s the potential long term savings which so far does not come close to the cost involved).

From a Mortgage Lenders Perspective:

Lenders need to be made aware of any additional liens or mortgages on a property that would be required to be taken over by a borrower as it affects their financing ability. 

 

When a home is encumbered with a solar system that needs to be transferred to a buyer for the remaining balance of the loan, it can take their debt to income ratio out of the range approved by the lender. 

For current homeowners, we have seen clients that had a mortgage that was affordable, but after installing a solar panel system, their taxes increased due to reassessment which in turn affected their monthly mortgage because taxes are included in escrow. Several clients are on the verge of losing their homes because they’ve seen a significant increase in their monthly payment. 

A local Oviedo lender shared that they had clients in Oviedo who can no longer afford their mortgages as a direct result of solar panel installations.

 “One lady purchased solar panels for her home and unfortunately due to a recent divorce, her husband had her file bankruptcy. In addition, due to the solar panels, her property was reassessed and with the panels and taxes, her monthly payment went from $1700 to $3000 monthly. She's unable to refinance as a result of the bankruptcy so she’s in a bind. We’ve had 4 clients this month come in with similar issues of being unable to pay their mortgages as a direct result of solar panels.”

-Oviedo Mortgage Lender Tweet

Tips when considering buying a home with solar panels

When it comes to protecting buyers looking at properties with solar panels, here are some really important items to consider:

  1. Prior to viewing a home with solar panels, ask if they are leased or owned
  2. If the solar system is leased, ask the seller for a copy of the lease: Does the lease require payment upon sale of the home? Is the lease assumable by the buyer?
  3. Does the buyer qualify for the assumption? Remember, buyers CANNOT be forced to assume the lease. Seller may need to pay it off if the purchase contract requires marketable title to be delivered to the buyer. 
  4. Ask about assumption fees. (Author note: There is a transfer fee that we’ve seen in the thousands of dollars that solar panel companies charge just to transfer from one homeowner to another). 
  5. Ask seller to disclose (in writing) how much remains to be paid.
  6. If there are payments and fees owed on the Solar System, buyers should take this into consideration.
  7. Ask about warranties that can be transferred to the buyer.
  8. Commercial clients – “no right to sunlight in Florida”. You may need a solar easement so that the solar system remains operational. 

There are several risks and negatives for getting solar panels in this stage of the technology. Here’s another risk to consider: fires. Design flaws, component defects, and faulty installation generally cause solar rooftop fires. As with all electrical systems, these problems can cause arcs between conductors or to the ground, as well as hot spots, which can ignite nearby flammable material.

Here’s a post from a fellow realtor that experienced this and hundreds of comments of others that have had similar experiences in their towns or with clients:

Solar panel fire

Final thoughts:

If you want to get solar panels, don’t do it for financial savings, but more for back up electricity if power goes out or because you want to support solar power growth.

 

I believe we need to create a tax incentive for solar systems instead of reassessing taxes which in turn penalizes  homeowners thus increasing their taxes.

 

Ideally seeing tax incentives for homeowners would be the best route, since we all know the electric companies are not truly giving credit back for energy savings. That’s become its own complication for solar panel owners.

 

At this point, we need to get better technology that will not create hazardous toxic, non-biodegradable waste in order for this to not be a self-defeating move in what should be a positive direction. We need to create better technology with less of a footprint on the environment which is ultimately why we all want solar in the first place.

 

Then, we need to figure out a way for the construction of the panels not to cause further waste by needing to replace perfectly good roofs just to install. 

 

At this point in time, it is a decision homeowners should intensely research before they allow a solar panel representative to come in with their very appealing pitch on “electric savings” for your household. 

 

This article may not be a fan favorite, especially for those that are already committed to a solar system on their home, but we think it’s incredibly important to educate homeowners on all the areas this decision can affect: resale, liens, debt, insurance, title conveyance and safety.

What you can do

Contact your Governor and State Legislatures to make changes to protect homeowners while still trying to promote sustainable and affordable solar power. 

In Florida, you can visit the Governor’s office here.

 

 

For more questions on the real estate market in Central Florida or to SELL or BUY in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

Follow us on Instagram:
@RealtorJenelle
@WaypointeGroup

How to Overcome the Inventory Crisis

How to Overcome the Inventory Crisis?

Inventory has not increased and prices are on the rise. What does this year look like and what can agents do to stay in the game?

Before we jump into how to overcome where we are in real estate as agents, we need to understand some basic economic principles and how that affects us today.

 

Four Real Estate Cycles

 

Let’s start with the four real estate cycles and what they are.

The first is recovery. This is a tricky phase to identify as this phase takes place after a recession and most people are so burnt out on the effects of the recession to even see recovery on the horizon. This is the best time to buy real estate on the onset. We saw this around 2011-2013.

 

The second phase is expansion. This is where the general economy is improving, job growth is strong and there is an increased demand for space and housing. The expansion phase is when the general public will start regaining their confidence in the economy. This market is where renters and homebuyers will start generating demand again. While the market is on an upswing, it’s advantageous to invest your efforts into developing or redeveloping properties that cater to the current market’s taste and sell for more than market value.

 

Then we move into hyper supply as the third phase. This is where developers and investors get into a frenzy during the expansion phase to ensure that supply meets a growing demand. Eventually it hits a tipping point where supply begins to exceed demand, either from too much inventory on the market or because of a sudden shift in the economy or worldwide that causes fear and stops the demand. This is a great time to us the buy and hold strategy so that you have properties in stock when it’s an ideal time to sell again.

 

The fourth phase is recession. This is one that we’re all too familiar with whether or not you were in real estate during this time. The market crashing in the 2000’s was a combination of the perfect storm, which left the entire nation struggling for many years following. In the case of the 2000’s, subprime loans, an oversupply of inventory, inflated prices and lots of fraud and greed. If you want to understand it in more detail, check out the movie The Big Short. Typically during this phase, supply exceeds demand by a large margin and property owners see high vacancy rates in their rentals. This is a great opportunity to purchase distressed properties and wait until the market recovers to sell.

 

These four cycles typically represent a 7 year period where the market corrects itself.

 

However, since the recession in 2008, we have not seen this.

 

We saw the recession from 2008-2010 where there was a significant number of foreclosures, short sales and vacancies. Then from 2011-2013 we saw recovery and prices steadily increase. We saw expansion start around 2014 and continue through 2019 which is quite a long period for this phase but then we saw hyper supply hit in 2020 during the pandemic. It’s been going for almost two years straight with the largest equity and price increase seen from 2021 until now.

 

Homeowners have averaged a $67K gain in equity just during the pandemic ($300K in San Francisco, but that’s not our market so we don’t need to talk about that ridiculousness). People have seen higher ROI’s in buying and selling during the pandemic than in any other possible investment.

We haven’t seen a correction.

 

So people naturally think, there’s going to be another bubble popping. I agree that something has to give but let’s look at facts and…

 

 

Why this isn’t a bubble like 2008:

 

1. Low inventory
2. Cash – higher downpayments and paying appraisal gaps or removing appraisal contingencies
3. Tight restrictions on lending

Just when I think we may have experienced a slow down, 2020 happened and working remotely changed everything. Feeling “mishoused” became a real thing. This is when people had the right house until the pandemic happened and then everything felt too close for comfort so they no longer “fit” in their homes. Working environments at home and schooling from home made homes feel very tight and people wanted more space. We saw so many “move-up’ buyers that were looking for more space. Pool sales and installs and outdoor activities and remodels skyrocketed. People had to figure out what to do with their space while they were stuck at home and make it comfortable. If they couldn’t afford to move, then they were remodeling.

Florida saw a massive increase in relocations from other states, especially New York (which is typical for retirees but now we were seeing younger and younger families moving from NY earlier than normal) and California. In droves they were moving to Florida. I’ve heard it said and have experienced this in Orlando, but Florida is the new California – I hate that reference but we have the beaches, great weather, low taxes, incentives for small business, and freedoms that many other states do not and did not see during the pandemic that caused a huge exodus from states into ours.

This didn’t help our already low inventory crisis. I remember complaining about low inventory in 2011 and it has only continued decreasing monthly.

 

 

What a healthy market can sustain:

 

 

Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.

A healthy real estate market is a 6 month supply.

Where are we right now: According to the Florida Realtors monthly stats, we are at a 1.0-months’ supply while condo-townhouse inventory was at a 1.2-months’ supply.

Why has it not corrected itself? For the same reason this isn’t a bubble. We don’t have sufficient inventory for all those looking to relocate, stop renting or selling to buy a home.

According to Fortune:
Why is the inventory situation getting worse? It starts with demand, which isn’t letting up. We’re still amid the five-year window (between 2019 and 2023) when every millennial born in the generation’s five largest birth years (between 1989 and 1993) will hit the all-important first-time homebuying age of 30. Homebuilders, who cut back on building after the 2008 financial crisis, simply weren’t ready for this demographic wave that was looming even before the pandemic struck. To make matters worse, homebuilders are now struggling to even fulfill contracts on time as the overwhelmed global supply chain continues to create delays and shortages for everything from garage doors and windows to framing lumber.

There’s another reason inventory is shrinking again: Spiking mortgage rates. Back in December, the average 30-year fixed mortgage rate was at 3.11%. As of Friday, that rate has spiked to 3.85%. In theory, higher rates should cool the market over time. However, this sudden move up in mortgage rates, Bachman says, has corresponded in a short-term uptick in “buyer urgency.” Home shoppers, she says, are rushing to buy now before rates go even higher. Of course, that’s only taking more inventory off the market.

 

 

When can we anticipate a correction?

 

When it will correct – 3-5 catching up with housing and construction. Then we’ll see the inventory finally level to where the expansion phase is and will catch up with the housing shortage. Shortly after that is when I think we should see a balanced market.

Additionally, keep an eye out for interest rates rising and how that affects your buyers from purchasing a home. It will only become more costly over time.

 

Now what?

So what do you need to do now to make sure you still have a real estate career by the end of this year during this inventory shortage never seen before?

 

 

I have 4 simple but career changing ways:

1. This market is aggressive. We need to know what opportunities are available for our buyers. We have rent-to-own programs that we utilize as well as cash offers to help get our buyers the homes they want and compete against cash as cash because we all know FHA and VA don’t stand a chance but conventional

2. Work for your buyers (we know those are in abundance compared to sellers) by finding sellers. Be creative. We’ve contacted Expireds, FSBO’s and sent letters to homeowners of homes that match what our buyers are looking for. Door knocking. For sellers, eXp offers several programs that help set us apart from the rest in terms of listing presentations (Curbio, Express Offers, America’s Home Warranty)

3. Be the real estate expert in your market. Miami/Orlando is huge. You have to make sure you’re not trying to compete with everyone, you want to create a niche and expertise that people will find you. Mayor of your town.

4. Partner with a team or network that will train you on how to submit competitive offers and WIN! (discuss our weekly huddles) Getting ideas and discussing best practices – what has worked, what hasn’t. Feed off the energy and gain training to propel you through the next week
Joining eXp has given us access to tools and trainings we would otherwise have to pay thousands for. Here, it’s part of the culture. It’s what we do for one another since it’s an agent owned brokerage.
– Luxury caravan
– Team Building Mastery training
– Weekly accountability
– Referral system
– Support

For more questions on the real estate market in Central Florida or to SELL or BUY in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

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7 Things Buyers Need To Know in This Market

It's a difficult market for home buyers, but...

Here are 7 things you should know when buying in this market to help you set the stage for what is going on right now:

  1. You may have to submit 6-10 offers in this market before you get one accepted because of the demand and low inventory. Be patient with your agents!
  2. You may find out it’s pending on Zillow or Realtor.com before your agent tells you. It’s not their fault, they just haven’t received a response from the listing agent because the listing agent was slammed with offers. It doesn’t excuse it on the listing agents part, but understand if they’ve received more than 10 offers, they’re weeding through a lot of information and didn’t get back to your agent before trying to stop showing requests so they just switched it to pending.
  3. You’re competing against cash offers and big hedge fund investment companies. You’ll need to submit a true highest and best, not full price. Unfortunately, that doesn’t fly in this market for highly desirable homes. I’m truly sorry buyers.
  4. Offerpad and OpenDoor have a large percentage of the inventory in Central Florida and they are consistently overpriced by tens of thousands. Most of the time they don’t want to budge on pricing which is why they’ve been on the market so long. They also don’t disclose anything about the property that would be of value to a buyer. Buyer’s just do your due diligence if you pursue one of these as you would any other home.
  5. This is not the time to look for a dream home. This is time to find a realistic purchase that you can redesign later. Just get into a home before rates go up because pricing will not crash.
  6. Be realistic with your expectations. In other words, don’t have as many or you won’t be able to find a house.
  7. Don’t give up, but you will need tough skin. Don’t get married to any one property just in case it doesn’t end up working out.

Unlike any market

This is a market I’ve never seen before ever. As a real estate professional, I’ve seen prices soaring, inventory high, market crash, foreclosures and short sales in abundance, a balanced buyer and sellers market, a buyers market, and then a sellers market with rapidly shrinking inventory…but this by far is the lowest inventory I’ve ever experienced.

 

In 5 counties in Central Florida, we have under 1500 homes for sale. That’s insane. But even so, we continue to get our buyers under contract and into homes.

It’s possible, but please make sure to pay attention to the 7 things a buyer needs to know in this market to succeed.

For more questions on the real estate market in Central Florida or to SELL or BUY in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

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What is driving up real estate prices

What is happening in real estate

 

Back in July I spoke of something really serious that has only worsened the real estate market since then and has gone completely understated…hedge funds are buying out homes in droves. They are outbidding actual home owners left and right with cash offers above asking.

Who is buying up all the inventory?

 

BlackRock is the world’s largest asset managers. Already owning more than $34 billion in real estate, their goal is to become one of the largest landlords and they are well on their way.

 

According to a NY Times article, BlackRock is buying every single-family house they can find, paying 20-50% above asking price and outbidding normal home buyers. Wall Street’s latest real estate acquisitions have ballooned to roughly $60 billion, representing hundreds of thousands of properties. It’s no wonder home buyers in this market are up against as many as 70 offers on a property and don’t stand a chance against cash offers almost $100K above asking as we’ve seen in homes in the Orlando area.

 

More than 1/2 of the countries properties are owned by institutional investors.

 

In the great recession, we saw over 6 million homeowners lose their home. While many have since purchased a property, large hedge funds like BlackRock took advantage of the opportunity and started sweeping up real estate. Almost two decades later, we have a new generation trying to make their splash in real estate with homeownership only to be pushed out during another type of crisis: inventory.

 

There are so many factors that are affecting low inventory, but the largest is the shortage of laborers and supplies which has in turn affected construction and new inventory which is a necessity in growing markets.

The Effect of Low Inventory

 

The effect of low inventory has created a wild west of sorts for sellers and buyers where sellers are definitely capitalizing on their earnings to an extent that has created buyer fatigue, frustration and really not even being able to keep up with the increase in prices.

 

FEDs have announced an interest rate hike (or two or four), but that doesn’t help solve any problem. In fact, it just worsens the situation for buyers because it will just continue to drive up the expense of purchasing a home.

What We Do

One incredibly helpful thing we do on the listing side and I’ve seen it done for me on the buyers side, is real estate professionals working together to help actual home buyers get into homes instead of companies. 


How? Leverage the offers we receive and give the home buyers a chance at competing to see if they can win. It still gives the seller the earnings they want while allowing the home buyers the ability to compete with large cash offers.


Not every agent does this, but those that want to give home ownership a fighting chance, try.

For more questions on the real estate market in Central Florida or to SELL or BUY in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

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@WaypointeGroup

2022 Real Estate Forecast

The 2021 Recap

The last 22 months have been some of the wildest in real estate history, as the COVID-19 pandemic accelerated the speed and intensity of recent trends in Florida and all around the country.

Home prices surged to record-breaking highs. Interest rates dropped to historic lows. On top of that, we saw serious labor shortages and everything from inflation to supply chain issues further affecting the 2021 housing market. This became the perfect storm for sellers and a daunting prospective for homebuyers making it increasingly difficult for younger buyers to purchase their first home.

The 2022 Forecast

We all know that no one can predict what the next year will bring, but here’s what industry experts are saying. Home prices are expected to continue to rise, though at a slower rate than last year. As a result, the 2022 housing market will continue to present challenges for new buyers looking to make their real estate purchase.

For those looking to sell, existing homeowners will likely have another year to capitalize on equity. Or, if not interested in selling, take advantage of rising property values and refinance — if they haven’t already. I would recommend refinancing sooner rather than later as interest rates are said to increase in 2022.

Experts also predict two major 2021 trends: low housing inventory and supply chain issues, both of which will continue to be the major obstacle and challenge for construction and renovations.

What to expect in 2022

Two major topics we’ve been talking about that is said to hit the scene in 2022 is inflation and rising interest rates. Chief economist the National Association of Home Builders, Robert Dietz, said, “For a homebuyer, 2022 is going to require patience and strategy,”

One thing we heard a lot of in 2020 and 2021 were buyers waiting for the market to crash or slow down.
In a recent CNET article, Karan Kaul, senior research associate at the Urban Institute, cautioned buyers saying, “If you think you’re going to wait on the sidelines for the market to cool off, that usually doesn’t work. “Timing” the market is a tricky enterprise, and prices seem unlikely to decrease meaningfully any time soon.”

Quick recap:

Combined with historically low interest rates, a record-breaking number of homeowners were able to tap into their home equity in 2020. As property values surged during the first year of the pandemic, cash-out refinancing levels were at their highest since the 2007 financial crisis.

We’ve seen how this increase in equity for homeowners has become a difficult situation for homebuyers even with the low interest rates, but unfortunately the pricing doesn’t look like it’ll change much in 2022, but interest rates will, making it even costlier for buyers in 2022.

Construction delays and soaring prices

As stated in CNET, “Supply chain disruptions caused by the COVID-19 pandemic continue to delay shipments which impedes new construction. That is only making the market that much more competitive along with the rising price of existing homes across the US. And the number of people looking to buy is also increasing, thanks in large part to millennials entering the housing market in growing numbers.”

Buyers are hitting in the market in droves and even with those willing to wait, there are still plenty out there, including cash investors, that are still flooding the market and surpassing the supply of inventory available.

Additional challenges for new construction, which typically alleviates inventory issues in the real estate market, include a lack of building materials, higher cost of building materials like lumber, appliances, windows and doors, and even garage doors. Further complicating the picture is a sustained labor shortage, particularly for skilled construction workers.
It’s clear that demand will continue to outweigh supply for some time to come. We continue to hear we are 3-5 years behind in construction.

Something to watch for

The Federal Reserve announced that it will wind down bond purchasing and look to raise interest rates next year. Higher interest rates will only make things more difficult for those looking to buy, as they raise both the average monthly payment and the total lifetime cost of a mortgage.

For more questions on the real estate market in Central Florida or to SELL or BUY in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

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Renovating Your Home FAQ

Renovating Your Home? Check Our FAQ’s!

 

1. How do I pick a contractor?

Ideally, you want to build the same kind of relationship with your contractor as you do with your real estate agent: one built on trust that makes you want to go back to that person for any future needs. Your contractor should be a very good listener and communicator. You want them to “get” your vision for your home, and to keep you in the loop every step of the way. Do your due diligence by checking out contractors’ reputations, talking with other clients, and looking at work they have done previously before you make your selection.

2. How much will my project cost?

Of course, the answer depends upon the scope of your project, but in order to get the best estimate from your contractor, take time to write down each detail of your plan so that the contractor can include everything in their estimate. Renovations are famous for taking longer and costing more than originally planned, but this is often because the homeowner makes additions or changes along the way, or they don’t realize that, for example, if you move a wall in your home, you may have to then reroute electricity and outlets. One item often leads to another, so you have to look at everything piece by piece.

3. How long will renovations take to complete?

As we said above, this depends on the amount of work being done– and how many changes are made along the way. The more pre-planning you do, the better estimate your contractor can give you.

4. How do I prioritize projects?

If you are living in your home during renovations, you may want to plan out the project in phases, so you can live out of some rooms while others are being worked in. You may also need to phase projects based on cost and availability of funds.

5. Where do I begin?

You begin by conducting a lot of research. Start a look book for your home, either in a notebook or online, collecting pictures of the look and finishes you want. Talk to different contractors, and visit kitchen, bathroom, appliance, and flooring showrooms to get ideas on selections and pricing.

6. Do I need permits?

Your contractor will know what projects require permitting. Make sure that you do abide by permitting regulations, as failure to secure proper permits can come back to bite you if further work is needed down the road.

7. How much will renovations increase my home value?

Every homeowner hopes that making improvements will increase their home’s value, and this is usually the case, but sometimes what homeowners view as improvement can turn out to be liabilities to future buyers. For example, don’t put so much money into the house that it becomes more expensive than the rest of the neighborhood. And be careful not to add personal style preferences that can’t be easily changed, like ornamental fixtures, radical architecture, or unusual landscape features. 

8. How should I pay for renovations?

If you have the cash to pay for your renovations, that’s certainly a good way to go. Otherwise, you might consider a home equity loan with a manageable monthly payment or a revolving line of credit that you can use for renovations as well as emergencies that may arise later.

For more questions on renovations or real estate in Central Florida or for real estate market information in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

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December Market Report – Oviedo

What is happening in Orlando’s real estate market. Here is the rundown and even though the holidays are typically a slower time in real estate that’s not what we’re seeing.

If you have any questions about the market or how we can help you buy and sell in this market, contact us!

For more questions on historical homes in Central Florida or for real estate market information in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

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Why the Zestimate failed Zillow

The “Zestimate”

Zillow’s Zestimate unfortunately became the go-to reference for US homeowners in terms of the value of their home. This was always something that has frustrated real estate professionals like myself, because we knew it wasn’t accurate. But when Zillow tried to use its algorithm to buy and sell homes, it misread the market in a severe way.

The company’s instant buyer program, which is better known as the iBuyer, launched in 2018 in Phoenix and is where Zillow and their subsidiaries started using algorithms to quickly value, buy, and sell homes. It joined a rapidly growing market in the Arizona city where Opendoor, Redfin, and Offerpad had been buying and flipping homes since around 2014.

The iBuyer

The principle behind iBuying is simple: These companies leverage the power of big data and they estimate the price they think they can sell a property and then offer a really low offer, lower than a traditional buyer, but make it attractive by guaranteeing it’s a cash offer and fast closing, leaving tens of thousands on the table for sellers for the sake of convenience.

Once an iBuyer owns a home, they work quickly to renovate the property and relist it—in theory for a profit. An analysis of millions of home sales across the US between 2013 and 2018 by academics at Stanford, Northwestern, and Columbia Business School found that iBuyers made around 5 percent profit by flipping homes.

Zillow’s Secret

Zillow believed it had the secret to the iBuying world: the Zestimate. They launched this algorithm in 2006, which has created home valuations for millions of homes across the US before it was put to work estimating the possible price of property Zillow itself bought.

John Wake, a real estate analyst around Phoenix since 2003 said: “I don’t know anybody in the spring of 2020 who predicted the market would do what it did. No one foresaw it would take off and become so strong.”

In March 2020, pretty much all activity in most housing markets stopped as the world shut down and economic uncertainty reigned. By November 2020, we saw sales increase as inventory continued to decrease and 2021 saw even more exponential growth, including iBuyers.

What happened?

In early October 2021, Zillow recorded its most active week buying homes in Phoenix, part of its goal to buy 5,000 a month by 2024. We saw the same in Orlando, one of the other markets Zillow targeted consistently. Then suddenly Zillow stopped buying all around the country.

It became clear a month later.

The shift in Zillow

When announcing the company’s third-quarter results earlier this month, Zillow cofounder and CEO Rich Barton said, We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers, the company’s home buying program, would result in too much earnings and balance-sheet volatility.”

Zillow completely halted their iBuyer program and said it would cut 25 percent of its workforce.

Barton told analysts that the premise of Zillow’s iBuying business was being able to forecast the price of homes accurately three to six months in advance. That reflected the time to fix and sell homes Zillow had bought.

But the forecasts proved inaccurate in 2021’s shifting housing market. In the second quarter, Barton said, Zillow actually was able to sell homes for 5.8 percent more than it expected. In the third quarter, though, Zillow sold homes for 5 to 7 percent less than it forecast.

Zillow’s competitors also slowed down buying in October.

Where they failed

Problems for Zillow came when they started purchasing properties above market value based on the Zestimate program only to find that the numbers didn’t hold up and they were quickly bleeding profit.

Nine in 10 homes Zillow bought were put up for sale at a lower price than the company originally bought them, according to an October 2021 analysis by Insider. If each of those homes sold for Zillow’s asking price, the company would lose $6.3 million. Barton admitted that, “Put simply, our observed error rate has been far more volatile than we ever expected possible and makes us look far more like a leveraged housing trader than the market maker we set out to be.”

Zillow says its algorithm, which updates the estimated value of more than 100 million properties by analyzing dozens of variables, including the size and location of a home, isn’t at fault. “We remain confident in the ability of our Zestimate,” a spokesperson says, citing the system’s median error rate for on-market homes of 1.9 percent, and 6.9 percent for off-market homes.

To make the iBuying program profitable, however, Zillow believed its estimates had to be more precise, within just a few thousand dollars, which it’s not. Throw in the changes brought in by the pandemic, and the iBuying program was losing money.

How they could have avoided it

Experts say if Zillow had stayed in the bounds of the algorithm’s valuations, they may not have had a problem, but there are valuations of homes outside of the cookie-cutter homes that Zillow’s algorithms just don’t understand. We’ve seen that in our market over and over. They don’t understand rural properties, custom homes, land value, lakefront vs corner lot without a lake in the same community and so on and so forth.

Many experts in the real estate industry have different thoughts on why it failed. Anywhere from trying to acquire too much at once to having the inability to predict the future home prices and others say they tried to manipulate the pricing with their algorithm in order to control the market and their sales. Either way, their purchasing power ended up hurting their bottom line in the end and now they have to go into recovery mode as they start selling off their current inventory in the next few months.

For more questions on historical homes in Central Florida or for real estate market information in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

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Don’t expect more inventory | What to expect in 2022

New Median Price

The median U.S. home price just passed $400,000 for the first time ever, according to data from the St. Louis Federal Reserve.

In the third quarter the median home price hit $404,700, jumping nearly 13% since third quarter of 2020, when the median sales price was $358,700.

Though it’s an eye-catching number, the market has been hot of late, and a lack of inventory and high demand means foretold the rise in home prices.

Expected Rise in Prices

According to a recent note from Goldman Sachs, home prices could rise another 16% by the end of next year. Goldman economist Jan Hatzius pointed out that of all the pandemic shortages, the housing shortage might last the longest and that a crash is very unlikely.

According to the latest forecast by Fannie Mae, median home prices are expected to rise another 7.9% between Q4 2021 and Q4 2022.

A recent note from Morgan Stanley showed that the country needs as many as 1.5 million homes to get back to normal and that the pace of real estate availability is three years behind.

“The housing shortage has contributed meaningfully to the record pace of home price appreciation we are currently experiencing,” Morgan Stanley strategists wrote in August. “While the magnitude of the shortage described above means it is unlikely that we will find ourselves with an excess of supply at any point in the near future, the pace at which supply is contracting has slowed.”

Don’t Expect Extra Inventory

Another bump in inventory people were expecting were foreclosures after the forbearance ended. That hasn’t been the case.

Even if default rates jump up there are too many companies sweeping them up directly from banks to make a difference.

Hedge funds with $20B in investments have been buying property in last 20 months which is a lot of the frustration with buyers trying to purchase through financing.

1400 homes are in default nationwide with Fannie and Freddie Mac. This is very very low. It’s great for the economy, but doesn’t help the inventory buyers were expecting around this time.

Most American’s have kept their mortgages current in spite of the pandemic, which is great, but it hasn’t helped inventory as many expected.

Vacancy rates are the lowest they’ve been since 1978.

Normally banks will have trainings for BPO’s and forbearance loans but instead they’re selling to hedge funds and not gearing up for excess bank owned properties which is what we normally see in the market after a bank forecloses on a home.

Hedge funds are snatching up inventory if banks are foreclosing or homes are going into default

Attention Buyers

All of that to say, do not anticipate spike in inventory. If you’re on the fence about buying, don’t be. Home prices will go up and so will interest rates making homes even more expensive than this year.

Additionally, if they do go down, interest rates will go up and still make home buying more expensive in the long run than looking for a property at this time.

For more questions on historical homes in Central Florida or for real estate market information in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.

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