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Real Estate Trends

Airbnb, Mountain Towns and Cape Cod

    We think this article by Tom Vanderbilt at Outsideonline is particularly poignant.  While it characterizes a mountain town in Colorado the parallels to Cape Cod are astounding.  Vanderbilt describes how the growing trend in short term rentals through companies like Airbnb is slowly eliminating potential housing for residents.  The problem is one of economics: if you can own a home in a desirable area, why would you rent it on a long term basis - yearly for example - when you can rent it on a short-term basis, through a company like Airbnb, and generate more income?  Vanderbilt follows a local father struggling to make ends meet, working multiple jobs, and worrying about where he will live when the tourist season starts...sound familiar?  What makes the Cape such a great place to live also makes it a great place to vacation and it is difficult to dissuade a homeowner from the extra income potential.

    On Cape Cod we are finding that more and more homes are being rented just for the summer, making them unavailable for long term lease seekers.  In fact, in response to the decreasing supply of affordable housing on Cape Cod, CCYP is holding a design competition for architects (see the brochure here).  The contest encourages a repeatable homes design balancing 'affordability, utility, adaptability, durability and suitability for the target demographic (young professionals, working families, year round residents).'  Other initiatives on Cape Cod seek to remove restrictions on building and renting accessory dwelling units (more commonly known as in-law apartments) to increase the amount of available housing.  This link comes from the local MLS on Cape Cod and describes the problem well.

    While the economy plays a large roll in housing trends on Cape Cod we are curious to see where the future will lead.  On one side of the coin locals will be increasingly priced out of the market and the Cape will be a resort where service personnel commute from less expensive housing elsewhere.  On the other side of the coin the development of Cape Cod will find a balance between the tourist economy that sustains the region and more permanent solutions.

If you are interested in learning more about housing on Cape Cod and buying or selling property please contact us today with your questions.

 

Zestimates as appraisals

We have been tracking an interesting development with the 'Zestimate' function of Zillow.  You can find an article here by Kenneth Harney in the Washington Post and another here by Rachel Koning Beals of Market Watch.  To briefly summarize Zillow.com uses a feature involving a proprietary algorithm that pulls sales data and other factors (again we aren't sure what these factors are exactly) and produces an estimate on the price of the property.  From Zillow's own definition found on their website "The Zestimate® home value is Zillow's estimated market value for an individual home and is calculated for about 100 million homes nationwide. It is a starting point in determining a home's value and is not an official appraisal. The Zestimate is automatically computed daily based on millions of public and user-submitted data points."

Currently a class action lawsuit has been filed in Cook County, Illinois that claims the Zestimates® look too much like official appraisals and are misleading consumers.  In addition the suit points out that no consent is given by the homeowner for an estimate to be posted online.    

Our take?  In the absolute simplest terms real estate is a market like any other and the market determines the price (not Zillow, not your neighbor and not even your real estate agent).  Take this example, a house lists at $400,000, five buyers appear on the first day and each offer full price for the house.  The seller allows for the 5 buyers to present their final and best offer which turns out to be $420,000.  In this case the high demand allowed for a higher sale price.  If the house appraised at $400K it likely would still have sold for $420K because the MARKET demand was so high.  The alternative: a house lists for $400,000 and is appraised for the same.  However, in this hypothetical market there are lots of houses just like this one for sale.  The house is eventually sold after a very long time for $375,000 because the high supply of similar homes and low demand from buyers influenced the price for the home - the MARKET dictated the sale price.  

Do we think we know about writing a sophisticated algorithm that analyses millions of data points and synthesizes the result into an estimate of value?  Absolutely not.  Do we know if the new town zoning law restricting improvements to land adjacent to a salt marsh affects the price of your undeveloped land?  You bet.

Why don't you give us a call and see if three decades of experience and two generations of tradition can help you in the real estate market here on Cape Cod. For a professional home valuation done by local agents click here.

 

 

Trends in home ownership

    One question that comes up frequently in conversations these days is "why is inventory so low right now?"  This is a great question to ask and informs much larger discussion about the economy, local real estate markets, and larger social trends.  But let's start at the beginning.

    When real estate agents talk about 'inventory' they are really speaking of the number of homes, lots, commercial properties etc... that are currently for sale.  Generally the unit in which inventory is expressed is time - in other words 'there are 8 months of inventory'.  The inventory is the supply (homes) available in the market and so has an effect on both the sale price as well as the amount of time that homes stay on the market.  In other words, potential buyers in a market with high inventory may not be motivated to make strong offers because they know that there are a lot of comparable homes they can buy.  Additionally buyers may spend more time shopping around because there are so many homes to see that match their criteria.  If you were a buyer in the early '80s or '90s you may have experienced a market like this (although regionally markets vary quite significantly). A more recent example of a high inventory market was a result of the great recession when the housing bubble burst.  In this instance the unprecedented level of foreclosures flooded the market with homes, when taken simultaneously with the concurrent financial instability, some homes spent years on the market.  The graph from the St. Louis Fed gives a nice snapshot of housing inventory from 1963-2017.

    The alternative to a high inventory market is, obviously, a low inventory market.  These are generally characterized by fewer days on the market and higher sale prices.  Potential buyers outnumber the available homes so bidding wars and offers over asking price are more common.  A great example of this is the market in San Francisco currently - the city is so desirable for a variety of reasons that home supply is inadequate to meet the demands of the market - the result, outrageous prices.  

    With this background let's return to our original question, 'why is inventory so low?'.  There is no short answer but we have a few theories and found this article by Connor Dougherty from the New York Times to be incredibly insightful.  In brief his theory is that people are not selling their homes but instead are choosing to stay in smaller, traditionally starter homes, or choosing to upgrade their existing homes rather than move for more space or amenities.  The economic impact of the great recession allowed many homeowners to refinance into incredibly low interest rates, as a result they are deciding to stay in their current homes rather than incur the expenses of a move with a higher interest rate.  Additionally the demographic of baby-boomers are largely at an age where many are still in the workforce (partially due to the great recession) and are are not quite ready to downsize. Because of the disproportionate affect of the boomers on the economy the availability of homes is low.

    Will this last forever? probably not, but here are some things to consider.  First, as the boomers age, they will begin to downsize with more frequency thereby increasing inventory.  Second, many millennials were young professionals early in their careers and family lives when the great recession hit.  They saw the result and suffered the consequences at a time in their lives when they were least equipped to deal with it.  Many lost jobs, moved back home or chose to continue renting rather than stick their necks out with a mortgage.  Additionally and for whatever reason, millennials are delaying starting families.  Given the size of this demographic this is surely impacting the market, we'll see how millennials will affect the real estate market as more and more of them graduate into adulthood.

If you are interested in learning how your home will compete in the market or your position as a buyer, contact us today.

 

When is the right time to sell your home?

Have you been tossing and turning at night wrestling with the decision to sell your home?  When is the right time to sell?  Am I going to regret not selling my home now?  Will the housing market slip back towards favoring buyers?  Deciding to sell your home can be a serious decision but don't be discouraged; keep these points in mind and you will be on the right track to making a good decision about whether to sell your home.

 

Equity

    Put simply, equity is how much of your home you actually own.  It is a funny thing to think about but mortgages, liens, home equity loans etc... all mean that something other than you (usually a bank) have an ownership interest in your home.  If you sell, all of these mortgages and liens need to be paid before you.  Getting a comparative market analysis from a real estate agent gives you an idea of the value of your home in the current market. Then you can calculate how much equity remains in your house for you to take away. 

 

Equity is not Net

    Unfortunately, your net profit from the sale of your home is not, simply put, net = sale price - mortgage.  Just to list a few of the often overlooked expenses for which sellers are responsible: Attorney's fees, broker's fees, title V septic inspections, and sales tax stamps all subtract from the overall proceeds of the sale.

 

 

 

Trends in the Market

    Everyone loves to predict the future so why should prospective sellers be any different?  Familiarizing yourself with the local market data as well as talking to a real estate agent about comparing your home to others in the area (comparative market analysis) will help you decide if now is a good time for you to sell.

 

 

Personal Needs

    One factor that should never be overlooked is simple reality.  When you (you have time) to sit down and rationally evaluate your current life situation, often the decision to sell or stay becomes more clear.  Are you expecting triplets and the one bedroom condominium suddenly seems like a closet?  Selling and upgrading is probably the right decision regardless of how much of the mortgage is paid off.  Are you tired of that old drab kitchen?  Perhaps new cabinets and fresh paint is all you need.

As always please contact us with any questions and put three decades of experience and two generations of tradition in your corner.

 

CAPE COD SECOND HOME OWNERSHIP

Seasonal/Recreational/Occasional Use Homes also known as Second Homes

Have you ever wondered as you are driving around the Cape, how many homes are not primary residences?  It is a surprise to find out how different the percent of second homes is in the various towns.  Below are the percentages noted in the 2010 US Census Demographic Profile Data.      

  • Sandwich            13          
  • Bourne                20.6
  • Falmouth             32.3
  • Mashpee             34.5
  • Barnstable           22
  • Yarmouth             31
  • Dennis                 50.9
  • Brewster              39.6
  • Harwich               40.5
  • Chatham              52.9
  • Orleans                38
  • Eastham              55.8
  • Wellfleet               64
  • Truro                    64.6
  • Provincetown        52.8

TIME TO MOVE--MORTGAGE RATES ARE GOING UP

If you have been waiting for the market to improve before buying a Cape Cod property, it's time to get the job done.  The Fed has indicated that mortgage rates are on their way up, and in anticipation the markets have already started raising rate.  Last week alone we saw the rate for a 30 year conventional fixed mortgage at one local bank jump from 3.5% to 4%.  This added nearly $30/$100,000 to your monthly payment.  If rates go up to 5%, your payment would go up nearly $90 per month per $100,000!!!!   So it's time to get moving.  Check out 21 Chase Avenue that has room for your entire gang and all our other listings.  Give us a whistle to make your move headache-free and fun.     

Home ownership rates down, but don't be discouraged

According to the US Census bureau's third quarter housing report released this week, home ownership rates in America are down to their lowest point in 19 years.  Sounds like bad news for buyers and sellers alike, right?  Not so fast...a closer look reveals that buyer behavior has more to do with it than strict market conditions. 

Mortgage rates have been stable over the last 18 months, and are still at near-historic lows -- yesterday's advertised rate for a 30-year fixed mortgage at one local bank was 4% - exactly what it was in June of last year.  In addition, lending standards have loosened considerably over the last year.  We are seeing bridge loans, asset-based underwriting, and first-time homebuyer products hitting the market for the first time since 2008.  In fact, USDA, FHA and MA Housing all now offer low-to-no down payment products with little or no PMI.  The bar for first time homeownership has not been lower in many, many years.

So why are ownership rates so low?  According to industry analysts, it is the changing life choices of millenials that are driving market conditions.  Young people are getting married later, having children later, and consequently waiting longer and longer to buy a home.  Sam Zell of Equity Residential was quoted in Bloomberg as saying that "the deferral of marriage has...a staggering impact on real estate."

There hasn't been a better time to buy a home in recent memory - near-historically low interest rates, continually loosening lending and underwriting standards, and a balanced local inventory ensure that you can find a home at a good price, finance it at a great rate, and put very little money down.

As always, if you are thinking of buying, give us a call - we would be delighted to answer your questions, and help you take advantage of this excellent market.  We look forward to hearing from you!

 

 

Appraisal Basics

Planning financing?

If you are planning on securing funding from a bank or other lending institution for the purchase of your home, that institution will require an appraisal by a third-party. This appraisal will be used to establish an independent opinion of the value of the home, which assures the bank that their loan is adequately secured.

 

Four levels of certification

Appraisers in Massachusetts arecertified at four levels by the Massachusetts Board of Registration of Real Estate Appraisers.

1. The first level is as a trainee. These appraisers operate under the supervision of a Certified Appraiser and cannot inspect a property without him or her present.

2. Licensed Appraisers can independently appraise any residential property up to $1,000,000, but cannot appraise homes of greater value without the supervision of a Certified Residential Appraisers.

3. Certified Residentialappraisers can appraise any residential property.

4. The final and highest level of certification is Certified General Appraiser. Since these appraisers are in high demand to appraise commercial property, they are rarely used to appraise residential property.

 

Appraisal vs. Comparative Market Analysis

Appraisers use a process very similar to a Realtors Comparative Market Analysis to arrive at a value for your home. They ideally look for three identical homes sold on the same day to use for their comparison -- this is clearly impossible, so they generally use comparable sales within similar areas, within the past year.

 

How we handle appraisals

If you list your property with us, we make sure to attend any bank appraisal of your home. While it is not necessary for the listing agent to attend the appraisal, we feel strongly that professional representation of the seller at the appraisal is a valuable means of advocating for our clients. We work as closely as possible with the appraiser to ensure that they are well-appraised of any significant factors which affect the value of the home, but which may not appear in the appraisers database of recent sales. For example, major town improvements to the neighborhood, recent improvements made to the home or property, or pending sales in the area are all significant factors which affect the value of your home, but which may not be readily available to the appraiser. We make sure that they are aware of these factors to ensure that the home is valued as accurately as possible. Furthermore, we only recommend lenders who we know use local and experienced appraisers. The choice of lender is yours to make, and the appraiser is hired by the lending institution, but we are always available to make recommendations or answer questions you may have.

 

Real Estate Short Sales

Pertinent short sale update

Due to the shoddy title work that was done in the previous few years, many title issues are surfacing that are taking an inordinate amount of time to resolve and may, in fact, not be resolvable. There has been much talk about new rules and regulations that are supposed to make short sale purchases more "user friendly". These rules are in place, but, they are not necessarily being adhered to by the Lenders involved. Therefore, it is still taking a lot of time to move deals along. Additionally, FHA rules are tightening up for Buyers and properties. It is harder to get a Buyer qualified and distressed properties are not as easy to finance as they were in the past.

In sum, while short sales are often priced attractively, they are not for the faint of heart. They should be approached only by Buyers who have financing in place, have a strong stomach and are patient. Good luck!

Real Estate Market Update

Real estate prognostications continue to be like hocus pocus. Depending on the whether the economic forecaster is an optimist or a pessimist; real estate prices are expected to go either up 1 % or down 2 % in the near future. However, what most everyone will agree to is the fact that the market is showing strong signs of having stabilized.

In fact, the spring market on Cape Cod was stronger than in the past few years. This can be attributed to the fact that Buyers are aware that prices are on the cusp of turning in an upward direction. The time for investing on the Cape is now. Savvy Buyers are aware of this fact and are making their moves.

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Client Testimonials

 Ed and Agnes Chatelain are extraordinary. They were honest, clear, patient and extremely helpful. We purchased a house with them recently in Dennis Port. They were very helpful in listening to our preferences and helping us find the home that was right for us.Patience: Ed and Agnes gladly showed us the same house many, many times and never ever showed us any pressure. In the end, we decided to not buy that house or even in that year, but we immediately went back to Ed and Agnes when it was time to buy.Process: Ed and Agnes were extremely helpful with all details of the buying process. We were very comfortable with their advice, guidance and ideas.Repeat: If we decide to move on the Cape, we will almost certainly ask Ed and Agnes if they are willing to help us both sell our current home and find a new one. They are a pleasure to work with.Details: There was never a detail that Ed and Agnes didn’t cover. They were persistent in making sure everything was done, correctly, completely and in our own best interests.Fun: Ed and Agnes are both fun to be around. They make what some people find to be a stressful experience – buying a house – quite a pleasure.Recommendation: I searched for and met many Real Estate agents on Cape Cod. My search ended with Ed and Agnes. I would recommend them to anyone.Comfort and Trust: Ed and Agnes are wonderful and kind people. I trust them both completely.Smarts: Ed and Agnes know Real Estate. Ed and Agnes know Cape Cod. They are experts in the field. I recommend them to anyone. 

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