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By Tara-Nicholle Nelson | Broker in San Francisco, CA

3 Hyperlocal Hijinks: Signs Your Local Market is Defying the National Headlines

I received a reader email the other day that went something like this: “Who decides whether the market is good or bad?  Who sets the prices on homes?” People like you do, my answer goes. Buyers and sellers, by virtue of their buying and selling activity, decide the mood of the market.  And the price any given home ultimately sells for is dictated by what the market bears, meaning what a qualified buyer pays for it at the moment in time of the sale.

But there’s a caveat to these general rules. A big caveat, actually.  Local buyers and local sellers determine whether any given neighborhood, town, state or region is a buyer’s market, a seller’s market, or something in between.  What a buyer will pay for a particular home in Cheboygan is dramatically different than what a buyer local to Malibu would pay for that same number of beds, baths and square feet.  This is another way of stating the phrase so frequently uttered by media economists during the recent recession: “real estate is hyperlocal.”

During the down market, hyperlocal meant that some areas’ home values were harder hit than others.  But in today’s recovering market, it can be a little more complicated. What do you do if it feels like what you read in the newspaper real estate headlines doesn’t reflect what you’re seeing in your local market?  Know that you’re not alone, and make sure you have a top-notch local real estate professional who can give you personalized advice if you find yourself in any of the following situations:

National News:
Bidding wars cause most listings to sell for way over-asking.
Your Town:  Everyone you know is paying 10% less than asking, and buyers seem to have their pick of inventory.

From the New York Times to the Los Angeles Times, many national media outlets are devoting a lot of square footage on the real estate pages to documenting the market’s stunning reversal of fortunes.  In cities where listings lagged amongst a flood of competition just two years ago, inventory is scarce and listings fly off the market and receive multiple cash offers over the asking price today.

But, not to beat a dead horse, hyperlocality is still a reality. Just because your cousin two towns over can’t buy a house to save her life doesn’t mean you are bound to be outbid time and time again. It’s really a matter of local market dynamics and supply versus demand. Some towns simply have more inventory vis-a-vis qualified buyers than others do. In places where the market wasn’t hit quite so hard, the foreclosure rate might have been lower than in other markets over the past few years. Instead of walking away or short selling, would-be sellers in many of these areas were just biding their time, quietly waiting to be right-side-up so they could sell. And now they are all listing their homes at the same time, too.

Check in with your agent. Ask them to brief you on how long listings tend to stay on your local market before they go into contract, how many listings that generally fit your criteria and price range are currently available, how many offers most listings receive and to show you the recent sales data that shows how far above (or below) asking price the average home sells for.  And wherever you are, whatever you do, decide how much to offer and how high to go for a home based on the one-two punch of what you can afford, and what comparable homes are selling for, right now.

Don’t let the national media headlines scare you into thinking you can’t successfully buy a home on today’s market unless and until you know whether those headlines even apply to you.

National News:
Skyrocketing home prices abound.
Your Town:  Not so much.

After lagging for what seemed like an interminable run, home prices are up nationwide. The May Case-Shiller Home Price Index reports a double digit increase in home prices across the country of 12.2 percent, on average. In fact, in some places, home prices are WAY up – more than a few major metros across the country have had 20 percent growth in home values in the last twelve months. For example, San Francisco, Las Vegas and Phoenix all had year-over-year home price increases of 20 percent or more, according to this report.

But, as always, there are some cities that are simply not en trend.  And they aren’t necessarily places that have weak markets.  In the May Case-Shiller report, two of the slowest appreciating markets were New York City, with a year-over-year appreciation rate of only 3.3 percent, and Washington D.C., which had only 6.4 percent annual appreciation. Compare this to the May 2011 edition of the report, where all but one major metro depreciated, and the lowest end of the appreciation totem pole in May of 2011 was represented by Minneapolis, with negative 11.7 percent appreciation in the preceding 12 months. 

Times are good, relative to those days, almost everywhere.

There are several takeaways for the buyer whose market is not behaving. The fact that home prices are steady(ier) in your market than elsewhere might create more opportunity for you to buy without the stress of overspending – especially when compared with your compatriots in other areas.  However, you might also wonder why your market hasn’t kept pace with the overall national trend – it might even give you some pause before you buy, or create some worry about whether your new purchase will hold its value over time. 

This is where it behooves you to get a more nuanced understanding of the dynamics of your local market that truly impact you.  Cleveland, for example, has one of the lowest appreciation rates of all the cities on the latest Case-Shiller report: 3.4% year-over-year. But Cleveland agents point to a stratified market, where low-priced fixers and lagging luxury homes are dragging down the numbers, but entry-level and mid-priced family homes fly off the market. 

Wherever you are, it pays to have an experienced local agent on your team who can help you understand the nuances of your area’s market as you proceed to pick your neighborhood and make decisions about when to time your house hunt.

National News:  Foreclosures?  What foreclosures?
Your Town:  Every other property you see is a short sale or REO.

You’d think that markets that were harder hit by the foreclosure crisis would have more inventory and lower appreciation rates right now, but that’s not always the case.  Mortgage servicers and banks grew pretty strategic near the end of the real estate recession. Many made the decision to hold onto foreclosed homes and trickle them onto the ‘for sale’ market slowly, versus inundating the market with a firestorm of listings. 

We should continue to see this “shadow market” of foreclosures and other distressed homes come onto the market, slowly, for years to come. Yes, years. So don’t be surprised, dismayed or alarmed if you should happen to come across a property listing marked REO (real estate owned by the bank), even in 2014 or 2015.  By the same token, don’t be overly excited at the prospect of a bargain if you see such a listing: banks expect to get the full market value for these properties, and they are just as likely to receive multiple offers as any other, similar property in town.

Long story short – your market may not move in parallel with every other neighborhood, city or even state. So you can’t count on the news to drive your decision-making or your timing.  Stay informed, but make your decisions about whether and when to buy a home based on what works for your budget, your family, your career and your life. Then, take hyperlocal data and insights from your agent into account when it comes to the specifics like how much to offer, what price range to hunt in, and the like. 

All:
Does your market differ from what you read in the national news? If so, how?
 
P.S.
- You should follow Trulia and Tara on Facebook! 

Comments

By Lny Dri,  Thu Aug 8 2013, 12:37
National News: Skyrocketing square feet abound.
In my town: Not so much.
By ramonals,  Thu Aug 8 2013, 12:59
Many news sources report that international and local investment companies and banks are buying up foreclosed properties. The investment companies are remodeling and reselling the homes and banks are liquidating large quantities of home properties to these investors. This makes the housing market appear to be rebounding. The same housing bubble is building again due to the same business model that helped get us into this mess in the first place by over-inflating the prices of homes again.
By safepethaven,  Thu Aug 8 2013, 13:48
I have a problem w/your statement above, "and make sure you have a top-notch local real estate professional who can give you personalized advice if you find yourself in any of the following situations". Yes of course - nobody prefers a deadbeat, uninformed, lazy do-nothing of a representative when making the biggest purchase of their life. Unfortunately, that is what happened to me -- twice, when trying to by a home in my childhood home town which is 1,500 miles from the house I'm in today. They were the most unprofessional slugs ever and the causes of my not getting the house of my dreams; everything on this end was in place. It s a very small town so everyone knows everybody else and there are not many "players" there to chose from as far as r.e. agents go. Going to an outlying area to get a rep is also unfavorable because they really don't know that area as well as the 'locals'. So what's a person to do who is long distance but cannot commute for the purpose of r.e. buying/selling just because lazy, smug agents are so unprofessional as to return phone calls, emails, or let you know they're taking a week's personal vacation -- the week the house just happened to sell to a local? Yeah right.
By Amanda,  Thu Aug 8 2013, 13:50
Ramonals' theory above makes sense to me. I'm currently looking to buy, and at least 80% of the homes I've looked at recently have been obvious flips. Of those, I'd say about three fourths of them weren't even done well. Investment companies are buying them cheap, putting band-aids over cosmetic issues, then turning around and selling them for more, while still keeping it low enough to be enticing to buyers who don't know any better.
By bergencountydeals,  Thu Aug 8 2013, 13:54
I just had a bidding war on my listing but I don't think it had to do with my particular market.

I think the key is to make sure the home shows well and get the listing as much exposure as quickly as possible before it becomes stale.

I plastered the listing all over the place facebook, twitter, google+, tumblr and about another 20 places nobody has heard of.

I'm always on the lookout for the newest startups from silicon valley that can help me. The newest I am trying is sellhomeasap.com which gives you free backlinks to your website to help your rankings on google & bing.

Plus I'm noticing more younger buyers are coming to see my listings. And these younger buyers are always glued to their smartphones. So remember to get your listing out there quickly.
By rcg32,  Thu Aug 8 2013, 15:21
Amanda, that is true, same in my area.
By Moehatfield,  Thu Aug 8 2013, 15:40
Amanda and Ramonal, I agree and wish I didn't have to. I am in a home where the same model and lot size have been listed and sold with multiple bids at a minimum of 50K over asking. I am very nervous as I have gone from negative equity, skyrocketing payments, modification with forgiven debt, to positive equity and am terrified of a slide when I need to sell. I am in N. CA and want to sell in a maximum of 5 years (retiring from education in 4 years). I am making myself crazy in whether to sell now or wait. The agent I plan on signing with for the sale has stated many times in a newspaper article and to me personally that he does not believe there is a bubble forming, that prices may adjust and stablize in the future, but I am not sure I have time to waste, or chances to take. My home needs repairs that I am not in a position to make right now, but am wondering if I should get out now while I can or ride it out. Never thought these type of issues I would be facing while readying for the next chapter, very scary and uncertain.
By Tonylynwhite,  Thu Aug 8 2013, 16:35
In Spokane WA, houses (beautifully decorated and great curb appeal) that are priced lower than they should be are not selling, yet at the same time houses that are crammed full of crap, dirty and little to no curb appeal and waay over priced are selling.
We can not figure out why this is, but makes us nervous as we plan to sell our large home next year to downsize.
Should we start scummying up our home to make it sell better?
And where are they finding the appraisers to say that mobile home with no foundation on bare land is worth 250k?
Don't get it at all. The market seems very strange now at days!
By josecheng72,  Thu Aug 8 2013, 17:20
The true situation in FL Miami here. you need CASH and Bank approval Letter to go meet "Lazy Agent", they will open door and ready the seat for you. Otherwise...no way have phone call tracing, email feedback..etc...((don't brother asking some profession questions as article,, NO WAY. they wouldn't ANSWER at ALL))

In FL- Miami. the property price is "shocking" because 70% from oversea and very rich people all bring " CASH" to purchase home. Home for them is not for living, is show off to other people, people living here without communities root, they all floating..So, waiting the sea level rise I believe here all become empty ghost Miami., let's wait and see.
By boilerdoc,  Thu Aug 8 2013, 21:22
The truth in my case is: i want to sell my home that I have lived in since 1986 but will not give it away because some estate sales and short sales are killing the market where I live. It is too hard to swallow for me that counting in just a few of the major improvements I have made,my house is worth exactly the same as 27 yrs ago. So here we stay (probably for good) instead of downsizing and moving south like we always planned.I have given up on the "market". I could have saved so much by renting. Who knew? So a house 100 feet from mine is worth double mine because it is in a different town on the other side of an old stone wall. Must be better dirt.
By Mac Akin,  Fri Aug 9 2013, 08:53
even the term 'hyperlocal' doesn't apply. if you're transacting a cookie-cutter-my-house-looks-like-your-house tract home you can still experience your own financial 'eco-sphere' by going all cash. the fact remains: cash is king. sellers don't have to sit on pins and needles as do buyers waiting up to 60 days for uber-conservative banks to approve their 70% ltv financing. in this market, you never know when it will turn. seller's are stupid not to take an all cash offer even @ a 10% discount with a 20 day close. the key here being the time frame: write your contract for a quick close/quick contingencies so you can hold all-cash buyers feet to the fire. on day 21, you're out of contract. 'nuff said.
By Brian Summers,  Mon Aug 12 2013, 13:45
This is not true for slc. Its hard to find foreclosures. Inventory dropped and finally it is coming back up. Prices went up because there were sometimes up to 30 offers on a property. I wouldn't say prices are way up but some housing types are up about 15% from the beginning of the year.
By Rick Teisan, J.D.,  Mon Aug 12 2013, 22:11
Tonylynwhite and Jose as well as Amand and Ramonals - While I have shown a lot of houses to young couples, they never win b/c they are outbid so fast by more liquid investors for the lower priced houses. We are out of lower priced houses here on the California Desert. A lot of Canadians want to move here who have cash to spend but the action is so hot that we have no inventory to accommodate them. No builders will build here yet so the market will be slow to change if ever. Truth is, buying a house turns out not to be the long term good deal it used to be. Every ten to twenty years, 'things fall apart'. Remember the S&L crimes of Mr. Keating when hundreds of thousands of people lost their homes. Seems to be the new American way. So if housing is no longer the piggy bank it used to be and the stock market is rigged for you to lose I guess we buy Treasury Bills and lease the house we raise our kids in.
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By claimsssss689,  Mon Aug 19 2013, 11:21
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By Lenny Marsidi,  Tue Aug 27 2013, 22:17
I just want to warn everybody when look at houses in the internet, I used to look at Zillow, Trulia and Redfin and another site, but never pay anything and I got a house to buy 2 years ago.
My son plan to buy a house close from where I live,so I help him to look and search for a house, 2 month ago I saw at Realty Store, you can search for houses and pay $1.00 for trial, after that you have to pay $49.99, every month w/out warning or bill, they take your money automaticly from your credit card, I don't even open the Realty Store for view months and forget about that, so this month I check my credit card bill and found out that they take my money from Credit Card for almost $100.00 in 2 months, it not their fault, because I sign up for this, but I just shock loosing money for nothing and forget that I need to call if I want to cancel that acct, so to everybody who don't know or forget full, don't do this kind of deal, it's the way they do to make money easy and rip you off, and also the listing they list is not updated, and not really good information to get for buying a house, almost all of them are old , either sold or outdated, by the way I am an elderly couple that forget on what I suppose to do, if I don't write it down on my computer table, I forget,so be aware of this kind of things friend! Actually I don't like to do this thing and give my credit card for $ 1.00 transaction on the internet, but I did! how stupid I am.
 
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