It’s best to know the possible circumstances before entering the housing market
Presentation by Lance Dunn
There are many things you have to consider when you are a buyer or a seller of a property. You have to know the factors that might affect your buying or selling decisions and also know the possible challenges you might encounter in the market or in the homebuying process. Knowing these things ahead of time will not only help you avoid conflicts but also help you be prepared for anything that's likely to happen.
This may be a lot to take in but here is a way to make it less stressful for you.
Consulting with Lance Dunn who is a real estate agent will make things easier for you because he can give you an idea of what to expect and also help you make an informed decision.
Lance is a real estate agent at Keller Williams located in Clinton, New Jersey. He specializes in residential sales specifically in the areas of Central New Jersey such as Somerset, Hunterdon, Middlesex, Mercer, Warren, and Morris County. So if you are someone who wants to make a move, sell their house, buy their first home, or relocate to a new location, you can reach out to him as he can make things easier and possible for you.
The impact of increased interest rates
In this feature, Lance voiced his opinion about the recent situation of the housing market. He noticed that the prices are not going down and the interest rates are continuously increasing, resulting in an adverse effect because of how it pushes down the buyer's ability to purchase.
He even mentioned a metric which is a rule of thumb for every point of increase in interest rates. So if there is about a 9% downward pressure on purchasing power, it means the buyer who found a house that costs $500,000 last year will only be able to purchase that house for up to $450,000 with the same money or at least keep the same monthly mortgage payment. This situation made his buyers feel frustrated while the sellers felt pressured because it became more difficult to sell and get the first offer accepted; unless their offer was a very good deal.
The housing market has been really tough recently which is why he came up with a strategy to help his clients have a natural flow in the buying process. First, he does a heart-to-heart conversation with them explaining the challenges that they might face so that they won’t be discouraged. Second, he figures out how much they want to spend and then backs off about 10% of that number before finding their home.
The pronounced effect on the housing market
Lance also shared his work experience in real estate, specifically along Route 80 Corridor and 78 Corridor. He noticed in both situations that there was an obvious westerly trajectory of people even in a balanced or buyer's market. He explained that this happens because most people decide to get out of the urban areas to come to the suburban areas to settle down, establish some roots, and raise families. Then once they've done that, an outward flow happens to Pennsylvania down to Florida or the Carolinas.
The reason why people choose to do this is because a lot of properties in urban areas have higher prices than the ones in rural areas. For example, in suburban areas, you can get a house for only $500,000 with a 1995 center hall colonial with four bedrooms and a full basement. But in urban areas, you can get that kind of house for $650,000.
Tips on renting a home in New Jersey counties
Lance also gave tips to his clients on where they can find affordable rental housing in their area. Usually, single-family home rentals in Hunterdon County are very difficult to find and he remembered reading a statistic once that it is one of the most expensive counties for renting because the typical house there is about 2, 3, 5, or 10 acres with $18,000 in property taxes. That only means if they choose to look for a house to rent there, they would have to prepare a huge amount of money to cover that.
He said that most investors that he works with purchase in areas where prices and taxes are very low. He then suggested getting one in places like Trenton and Phillipsburg because they are the areas that can sustain those types of rents and cover the monthly debt and taxes. There are also some areas with affordable rent in Somerset county because there are some investors who are holding properties for years, getting ready to start to liquidate.
Taking advantage of the downfall of inventories
Lance shared that there is still a lot of hesitancy among sellers with regards to whether or not they should put their house on the market. They know that if they put their house on the market and if they need to make a purchase on the other side, they are going to be in the same boat as the buyers who were trying to purchase their home.
But what he wanted the sellers to realize is that the inventory has already become very low, thus, there are more chances for their house to sell even with the prices up.
“I just took a look at some of the numbers from the New Jersey association of realtors in February of 2019 and all of New Jersey that was 49,115 houses for sale for the whole month of February. So again, 49,000 in 2019, and now 18,679 houses for sale in February of 2022. That's a big drop in available inventory. I want sellers to be aware of the fact that now is a magnificent time to take advantage of the market because while I don't see prices dropping out at the bottom, I still see them continuing to rise.”
Even in a competitive marketplace, with the help of the right agent by your side, you can get the house that you want. Knowledge is the key and using an agent that's knowledgeable, somebody that has the relationships with the other agents. Somebody that reaches out and knows what the seller is looking for, all of those things play such a key part in getting an offer accepted.
So if you are a seller with a house that has the potential to be in this recent market, while there are still a lot of buyers, this is the perfect time for you to put it out. Because according to Lance, at some point in the future, you are not going to have the same situation where 10 to 30 people are all around your house where they get the pick of the “litter”. There would be a time when the housing market isn’t hot and there are only a few people looking at your home. Yes, it is certain you can still capture them to accept similar prices and offers but it is possible that you will have to deal with things that you don’t want to.
“So that roof that's 30 years old, that probably needs to be replaced next year. Buyers are not going to be sent there. The furnace that is 25 years old and is on its last legs, buyers are going to be sensitive to those types of things.”
He said if sellers want to be able to capture the momentum of the market and the tangential things that go along with the real estate transaction that sometimes they don't think about until they're underway, now is the time to do it because they're not going to be able to get that in a year from now when there are two or three buyers all around their house instead of 20 or 30.
From the increased interest rates to the decreasing house inventories, both buyers and sellers have their own gains and losses in today’s housing market. But what Lance wanted both of them to realize is that the market is still very hot, thus, it is still an excellent time for them to take risks and take advantage of the situation. If not, they might come across something in the future that they did not expect to happen because there are big chances that maybe tomorrow the interest rates may increase even more, which will force some buyers out of the market. There is also the possibility that there will be a lot of competition in the market which will make things more challenging for all sellers.
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