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By Kenan Jue | Real Estate Pro in San Francisco, CA
  • Where Can the Middle Class Afford to Buy a Home?

    Posted Under: Market Conditions in Reno, Home Buying in Reno, Financing in Reno  |  October 10, 2013 7:57 AM  |  310 views  |  No comments

    For the middle class today, homeownership is well within reach in some parts of the country, but in others, it’s more of a pipe dream than the American Dream. Even after taking income differences into account, homeownership affordability varies hugely across the country. Nationally, home prices still look a bit below their long-term average, and mortgage rates are far below their historical norms – which means that buying a home is still cheaper today than during the housing bubble. But this national average hides enormous differences in what the middle class can afford in each local market.

    To assess middle-class affordability, we looked at all of the homes for sale across the U.S. through the eyes of the typical household in each metro area. For every for-sale home, we determined affordability based on whether the total monthly payment for that home was less than 31% of the metro’s median household income. (See note below.)

    For instance, for a middle-class family in the Chicago metro area, where median household income is $58,911, homes under $254,000 are within reach based on the 31% guideline. Of homes listed for sale in Chicago, 73% are priced below that – which means that nearly three quarters of Chicago homes are “within reach” of the middle class. Remember: we’re defining the “middle class” separately for each metro based on the local median household income.

    Trulia_Middle Class_Infographic

    Looking for Affordability? Go Midwest, Young Man
    In the most affordable housing markets, more than 80% of homes for sale today are within reach of the middle class. Even though incomes in the Midwest and in the South are lower than on the coasts, housing costs are lower there even relative to income, making homeownership more affordable. In Akron, OH – the most affordable of the 100 largest metros – 86% of the homes for sale are within reach of the typical household. Including Akron, the six most affordable metros are in Ohio (Dayton, Toledo, Cincinnati) and Indiana (Gary, Indianapolis).

    Most Affordable Housing Markets for the Middle Class

    #U.S. Metro

    % of for-sale homes affordable for middle class, October 2013

    Average size of affordablefor-sale homes, October 2013 (square feet)

    % of for-sale homes affordable for middle class, October 2012

    1Akron, OH

    86%

    1,336

    86%

    2Dayton, OH

    85%

    1,360

    89%

    3Toledo, OH

    85%

    1,332

    88%

    4Gary, IN

    84%

    1,512

    88%

    5Indianapolis, IN

    83%

    1,656

    88%

    6Cincinnati, OH-KY-IN

    83%

    1,444

    87%

    7Detroit, MI

    83%

    1,075

    89%

    8Columbia, SC

    83%

    1,661

    86%

    9Columbus, OH

    82%

    1,400

    86%

    10Birmingham, AL

    82%

    1,396

    86%

    Find out how affordable each of the 100 largest metros are for the Middle Class: Excel and PDF

    The least affordable housing market in the U.S. is San Francisco. Even though the median household income is 60% higher in San Francisco than in Akron – which means San Franciscans can afford more expensive homes – the median price per square foot in San Francisco is close to seven times higher than in Akron. As a result, just 14% of the homes for sale in San Francisco are within reach of its relatively well-paid middle class.

    Least Affordable Housing Markets for the Middle Class

    #U.S. Metro

    % of for-sale homes affordable for middle class, October 2013

    Average size of affordablefor-sale homes, October 2013 (square feet)

    % of for-sale homes affordable for middle class, October 2012

    1San Francisco, CA

    14%

    1,000

    24%

    2Orange County, CA

    23%

    1,057

    44%

    3Los Angeles, CA

    24%

    1,170

    39%

    4New York, NY-NJ

    25%

    978

    30%

    5San Diego, CA

    28%

    1,056

    46%

    6San Jose, CA

    31%

    1,133

    46%

    7Ventura County, CA

    32%

    1,222

    56%

    8Fairfield County, CT

    36%

    1,317

    41%

    9Honolulu, HI

    40%

    778

    4 Steps for Coaching Buyers to Hot Market Success

    Posted Under: Market Conditions in Reno, Home Buying in Reno, Home Selling in Reno  |  October 9, 2013 10:10 AM  |  170 views  |  No comments

    The skill set of a successful agent in 2013 is wide-ranging. Last year, there was a viral video that parodied the Super Bowl “God Made a Farmer” commercial, which somewhat accurately documented the roles we all play, variously, as our clients’ financial advisors, detectives, psychologists and even, if duty calls, gardeners and bed makers.

    Then this year happened. And the market began to recover, with home prices ascending at breakneck speed for months on end. In times like this, when the market is ticking up faster than buyers’ expectations can keep pace, agents often find ourselves in the role of cheerleader. Agents find themselves called upon to constantly provide encouragement about how and why buyers should not get discouraged or give up in light of their repeated losses in bidding wars or the emotional upset that comes from the dawning realization that their money won’t go as far or buy as much house as they’d hoped for.

    I submit that there’s a more powerful way to deliver this encouragement in a way that sustains your buyer clients’ hope while also positioning yourself as an authority who will use your know-how to lead the way to a successful home buying experience. Developing the skills and using the tools of a coach can move you from cheering your buyers from the sidelines to leading the way to a home buying win. Here’s what coaches do and use that agents should, too—especially in seller’s markets:

    1. Playbooks:

     Every great coach has a great playbook, and every great agent does, too. Every home you have ever sold has undoubtedly left you with learnings and insights that you use when advising your buyer clients. You know what a client’s experience of a transaction will look like from start to finish, from pre-approval to housewarming party—including all the points at which they will freak out.

    And you have:

    • strategies for collecting the information you need about competition levels and seller priorities from the listing agent

    • strategies for understanding the comps and a buyers personal finances to formulate your recommendation regarding offer price;

    • strategies for knowing when to recommend a client change course and save more, spend more, offer more aggressively or house hunt in a new neighborhood.

    Normally, when you sit down with a buyer for the first time, they are ready to get in the car and start house hunting—they might even start out by sending you listings they already think are “the one.” But you know better—you know that you’ll need to first interface with their mortgage broker, help them understand list price-to-sale price ratios and possibly house hunt in a lower price range, and whatever other strategic steps their success in your market will require.

    You know what a realistic timeline looks like, what action items they need to do at the beginning of their transaction to set it up for a successful end, and when to kick in a Plan B, C and D—as well as how to create the Plan B, C and D in the first place!

    So tell them, from the beginning, that you have playbooks for every stage of the transaction. Coach your buyers to success—even in a heated market climate—by sitting down with them from the beginning and helping them understand, play by play, how a normal house hunt in your area today unfolds, all the decision points that they’ll face, ways they can rethink anything that causes them panic and fear and even insider insights like how many homes the average buyer loses before they are successful. This positions you as a credible authority and causes buyers to relax into the feeling that they are being well advised and represented, when they do in fact experience things the way in line with the expectations your coaching has created.

    2. Practice:

    regular meetings that move preparation forward. Every good coach holds practice. In sports coaching, practice involves all sorts of drills and conditioning work to get the athletes prepared, and also scrimmages—trial runs. Both of these sorts of practice come into play in coaching your buyers in a hot market. Preparation work and trial runs in the form of offers that don’t get accepted can both serve as practice—so long as your buyer is more ready to be successful after the experience than they were before.

    Buyers’ potential to panic and feel out-of-control of the events of their house hunt can be quelled, in part, by setting up a recurring, weekly home tour appointment at the same time every week—just like a sports team practices—rather than one-off, scattershot meetings whenever you can make your busy schedules line up. To turn occasional meetings into a coach-driven “practice, implement practices like having a set format for home tours, possibly:

    • setting up the list of homes via email in advance;

    • having a system for collecting their feedback during and after the tour; and

    • setting up next steps (and confirming the next practice time) at the end of every meeting.

    As the coach, you understand that every “practice” might not result in a sale, or even an offer. Make sure you let your buyer clients know that your definition of a successful weekly tour is that they are somehow closer to a successful home purchase at the end than they were before, whether that means they are more qualified to buy, more clear on what homes will and won’t work for them, more informed about what can be had in which neighborhood for the money, or closer to compromising with their co-buyer.

    3. Practice:

    trial runs with takeaways. Buyers today are constantly frustrated and upset when they lose homes. But every home on which your buyer clients make an unsuccessful offer can become turned into a learning experience if you, their coach, position it that way by having a follow-up conversation about lessons and takeaways. Every offer that gets declined should lead to a conversation between you and your buyer that ends with the answer to the question:  what will we do differently next time?

    4. Time-outs:

     On an athletic team, the coach is the boss of when a time-out needs to take place. In the course of your clients’ house hunts, your role as the coach is to call a time-out when it makes sense to stop a string of ill-conceived offers, target properties that are wildly unrealistic or other frenzied, panicked or paralyzed buyer freak-out moments. You can use your time-outs as you see fit, whether to give a pep talk, issue a reality check, or try to get a buyer who is undergoing excessive “price creep” a big-time reality-check.

    But you take the initiative to call it.  And try, when possible, to make it an in-person sit-down: in this digital age, just the fact that you are asking the buyer to come have coffee and talk about what tweaks need to happen to their action plan can grab their attention and help them understand the import of the advice you’re about to give.

    Tara-Nicholle NelsonWRITTEN BYTara-Nicholle NelsonMore about Tara-Nicholle Nelson
  • 4 Untapped Sources of Year-End Buyers

    Posted Under: Market Conditions in Reno, Home Buying in Reno, Home Selling in Reno  |  October 8, 2013 10:22 AM  |  184 views  |  No comments

    There are two ways to approach marketing to buyers: you can reach out to people who are not urgently motivated and inspire them to get motivated (push), or you can attract (pull) in the buyers and sellers who are already motivated. Most profitable, sustainable agent businesses do some form of both. Pull marketing leads to higher close rates, but those motivated buyers are the ones everyone is after.

    Except for those urgently motivated buyers that almost no one pursues at all. Except for them.

    In a market like today’s, there are loads of self-motivated buyers who are calling agents, but might have budget or other reasons that make it so it will take them awhile to actually buy. If you’re looking for buyers on a mission to close by year’s end, consider unlocking these caches of often-overlooked buyers.

    1. Investors.

     Investors come in all flavors, but if you’re looking to close some deals this quarter, you should probably target those mid-level investors who:

    • are willing to work with agents they haven’t worked with before;

    • have ready access to mortgage and closing cost money; and

    • have enough experience that they don’t get emotionally attached to any single property.

    These are often people who are looking to buy properties in the 2-4 unit range (which are easier to finance, as well). But there are many investor buyers who are also always on the lookout for small commercial and/or mixed-use buildings, and these folks seem to be a sector that is overlooked by agents in their marketing.

    How to find them: Work with your title agent to pull farms of people who own multiple duplexes, three-plexes and four-plexes; target owners of individual properties in your area that meet this description and send letters of introduction with a list of small investment properties in your area with compelling cap rates and strong pricing. Also, consider teaming up with a local 1031 exchange intermediary or agent that works on larger commercial transactions to partner on marketing, seminars and referrals. They often have a constant stream of their own clients who need to close transactions within a short time frame, driven by 1031 exchange rules.

    2. Financial planners and CPAs.

    Fact: You will never have the power to motivate a buyer like the IRS can. This is the time of year when many entrepreneurs and newly minted professionals (e.g., lawyers who just passed the Bar exam, doctors finishing their residencies, etc.) meet with a financial planner and discover that really bad things are in store for next year’s tax bill.

    Now, it’s a high class problem, of course. A high tax bill means you had a great year, income-wise. But the hard work that generates a good year of income makes it even more excruciating to think about parting with tens of thousands of dollars in taxes, with nothing in return, and drives otherwise uninterested people to be highly, urgently motivated to buy.

    One of the quickest, most powerful ways for these sorts of people to resolve the high class problem of an oversized tax bill on January 1, 2014 is to buy a home and make sure escrow is closed and closing costs paid by December 31, 2013.

    How to find them: Join a local networking group like the Chamber of Commerce, BNI or your local business district, and connect with the financial planners and CPAs who are delivering tax advice to these types on the regular. These strategies may seem passe, but they do still work.  Similarly, check Yelp! for the most popular fee-based financial planners and tax advisors in your area, and ask your own clients who they work with, then reach out directly to suggest co-marketing and build a referral-generating relationship.

    3. People who lost homes to foreclosure/short sale a few years back.

    Lots of these folks have been waiting to buy again, missing out on the tax deductions and lifestyle advantages of home ownership. And many have been spending the time since they lost their homes paying off debt, saving up and generally building a more sustainable financial life. But they might not realize that they are now eligible for home loans.

    Foreclosure and short sale seasoning guidelines have come down to as low as 12 months in situations where the borrower can document a loss of income ask having sparked their mortgage woes. I’m not suggesting that everyone who lost a home even should buy again a year later. That said, many foreclosed and distressed former homeowners who have truly financially recovered from the recession are unaware that they are qualified to buy again under current mortgage guidelines.

    How to find them: You probably already know them. These are the folks you sold to at the top of the market last time. They are also the clients that called you up for advice on a loan modification or to list their home as a short sale a few years ago. Run through your client database and flag the 5, 10 or 50 folks who fall into this category, then reach out directly with a call to discuss their ability to qualify and buy. Also, consider partnering up with a mortgage pro who is up-to-speed on handling the mortgages of people who had a short sale or foreclosure in the last few years.

    4. Buyers and sellers whose transactions you already closed this year.

    This year has been a strange one – it’s the year of the legitimate, full-fledged shift from recessionary market doldrums to a booming market full of activity, even in areas where home values haven’t yet fully recovered. So, there are two dynamics in your own client list that might have created a treasure trove of potential year-end buyers that is as yet untapped.

    First, there were scads of what I call “Catch-22” sellers at the beginning of the year: people who’d been waiting to sell for years, put their homes on the market and finally move them, but were unable to successfully compete in bidding wars to close on their ‘buy.’  Lots of these folks moved into rental housing and decided to just wait until the market cooled off. Even though it hasn’t cooled off, these people will want to take advantage of any reduction in buyer competition that might happen in your area due to holidays and weather. To boot, they might not quite appreciate, yet, the tax impact of not having a mortgage interest deduction next year. You should remind them of the coming tax implications and help reactivate them to close by year’s end.

    Second, buyers who closed escrow this year are still probably raving about your services, and sharing their own testimonials with friends and colleagues about their experience of buying in such an ascendant market. These folks see you as a linchpin of their successful home buying experience, and often have unwittingly activated home buying aspirations in their own personal networks.

    How to find them: Again, these folks are in your own client database. Do a round of calls to your buyers and sellers who have closed escrow earlier in the year to reactivate them and spark their referrals to other people they know want to buy. Ask them for email introductions, and follow up on them, stat.

    Tara-Nicholle NelsonWRITTEN BYTara-Nicholle NelsonMore about Tara-Nicholle Nelson
  • Market Trend: The List Price Slowdown

    Posted Under: Market Conditions in Reno, Home Buying in Reno, Home Selling in Reno  |  October 4, 2013 10:02 AM  |  211 views  |  No comments

    The Trulia Price Monitor and the Trulia Rent Monitor are the earliest leading indicators of how asking prices and rents are trending nationally and locally. They adjust for the changing mix of listed homes and therefore show what’s really happening to asking prices and rents. Because asking prices lead sales prices by approximately two or more months, the Monitors reveal trends before other price indexes do. With that, here’s the scoop on where prices and rents are headed.

    Asking Prices Jump Nationally in September, but Price Slowdown Continues
    Asking home prices increased 2.0% month-over-month in September. However, the quarter-over-quarter increase – which is less jumpy – was 3.0% in September, the smallest gain since February. Although monthly price changes remain volatile, the overall trend shows that price gains are slowing down, despite the fact asking prices were up 11.5% year-over-year – the largest increase since the housing crash.

    How can there be a slowdown if year-over-year prices are hitting new highs? Because the year-over-year changes are averages over the previous 12 months, and the recent price slowdown hasn’t been underway for long enough to start bringing down the year-over-year changes.

    September 2013 Trulia Price Monitor Summary

    % change in asking prices

    # of 100 largest metros with asking-price increases

    % change in asking prices,excluding foreclosures

    Month-over-month,
    seasonally adjusted

    2.0%

    Not reported

    2.0%

    Quarter-over-quarter,
    seasonally adjusted

    3.0%

    89

    3.1%

    Year-over-year

    11.5%

    97

    11.5%

    *Month-over-month change is September versus August. Quarter-over-quarter and year-over-year changes are three-month averages. Data from previous months are revised each month, so data being reported now for previous months might differ from previously reported data.

    Trulia Price Monitor_Line Chart_Sept 2013

    Asking Prices Declining in Several Florida Metros, Slowing Down in California
    In September, 89 of the 100 largest metros had quarter-over-quarter price increases. That’s down from 93 in August, 96 in July, and 97 in June. The 11 metros where prices fell quarter-over-quarter include three in Florida and two in upstate New York. In most of these markets, prices had been rising before the most recent quarter, so their year-over-year change is still positive. Also, keep in mind that the trend in asking prices over the past quarter – that is, July to September – should affect sales prices from September to November, which won’t be fully reflected in the major sales-price indexes until their January 2014 releases. So you heard it here first.

    The 11 Metros Where Asking Prices Fell Quarter-over-Quarter

    #U.S. Metro

    Q-o-Q % change, September 2013

    Y-o-Y % change, September 2013

    1West Palm Beach, FL

    -4.6%

    5.2%

    2Albany, NY

    -2.2%

    -0.7%

    3Miami, FL

    -1.5%

    9.8%

    4Honolulu, HI

    -1.5%

    1.7%

    5Syracuse, NY

    -0.9%

    4.6%

    6Little Rock, AR

    -0.5%

    -0.7%

    7Lakeland-Winter Haven, FL

    -0.5%

    12.7%

    8El Paso, TX

    -0.3%

    0.6%

    9Allentown, PA-NJ

    -0.1%

    1.8%

    10Albuquerque, NM

    -0.1%

    3.4%

    11Akron, OH

    -0.02%

    2.3%

    In addition to the 11 metros where asking prices are actually declining, price slowdowns have become widespread. (Driving is a good analogy for explaining the difference between price declines and price slowdowns: price declines are like putting a car into reverse, while price slowdowns are like tapping the brakes but still moving forward.) Remember: the way we spot a price slowdown is by looking at the quarter-over-quarter change – it’s less volatile then a monthly change but less smoothed out than a yearly change.

    Among the 100 largest metros, 68 had slower quarter-over-quarter price changes than three months earlier, in June. Sacramento, Oakland, Orange County, and Los Angeles all had price slowdowns of 2% or more, even though prices in those metros are still up more than 20% year-over-year. Atlanta is the only metro where prices are up at least 20% year-over-year and the quarter-over-quarter price change is accelerating by more than 1%.

    Recent Price Changes in the 20 Hottest Markets

    #U.S. Metro

    Y-o-Y % change, September 2013

    Q-o-Q % change, September 2013

    Q-o-Q % change, June 2013

    Price slowdown = Difference in Q-o-Q % change, September minus June

    1Las Vegas, NV

    34.4%

    7.1%

    7.6%

    -0.5%

    2Sacramento, CA

    33.6%

    4.4%

    8.6%

    -4.2%

    3Oakland, CA

    29.2%

    3.2%

    11.1%

    -8.0%

    4Riverside-San Bernardino, CA

    26.9%

    6.5%

    6.9%

    -0.4%

    5Orange County, CA

    24.4%

    4.2%

    6.8%

    -2.

     
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