Clients often ask me the eternal question: “This is a fair deal, right? This house is worth what we’re offering?”
Yes, but….
There are relative “metrics” for valuing a house: for one, what the market says, as there may be other bidders; for another, what the comparative sales—the comps—say; as well, the price the seller originally paid for the house factors in, especially if the seller feels like he’s “losing” on the deal (because he paid much more for it than it’s currently worth.
But this is also a time to say “hang on Skippy” when applying those metrics.
Real Estate just isn’t an exact science. And in our present market, the petrie dishes are pretty cloudy. I heard an agent say yesterday, “There is so much insecurity in this market.” Perfect way to put it.
Consider this month’s highlights from the “roller-coaster real estate news.”
- Positive: Nationally, existing-home sales rose 4.2 percent in May alone, with median prices continuing to rise.
- Positive: Fixed-rate mortgages continued to drop in May. Thirty-year mortgage is 4.14 percent.
- Positive: Fed Chair Janet Yellen testified that housing is still undervalued—and based on the Case-Shiller Price-to-Income Index, she’s right. The market is still about 10 percent undervalued.
- Positive: Contracts to buy previously owned homes rose for the first time in nine months–evidence, according to the National Association of Realtors, that the market is “stabilizing.”
- Negative: Fannie Mae Chief Economist Doug Duncan says while improving labor market may help with recovery, “housing remains worrisome.” The employment picture is not improving fast enough.
- Negative: NAR Chief Economist, Lawrence Yun, indicates that while existing home sales are overwhelmingly positive, there is concern about the slow pace of new construction.
- Negative: All-cash transactions remained high at 43 percent, up 19 percent from a year ago–a sign of softness in the recovery.
Said NAR economist Yun: “Sales should generally trend upward from this point. Total year home sales, however, due to a very sluggish first quarter, will likely be lower than last year.”
A mottled picture if there ever was one.
The Wilton market picture is improving, but slowly. Continuing low interest rates have made buyers less than urgent. May sales rose against April’s, but January-through-May sales are down 12.5 percent per cent from a year ago, with total revenue down 8 percent for those first five months. Sale prices were 97.5 percent of list prices in May, up 2 percent from April, but flat against a year ago.
Westport’s picture is similar. May sales were up sharply from April, but down from May a year ago. The number of January-through-May sales are down 12.5 percent from a year ago; with revenue down 7 percent. Sale-price-to-list-price ratio was up almost two points in May to 97.6 percent, but flat from a year ago.
Weston numbers are similarly mixed. The number of sales are up sharply fromMarch and April, but down 8.3 percent from the first five months a year ago. Median price, $791,500, is up 4 percent against 2013’s median. Sale-price-to-list-price ratio remains flat at 96.5 percent.
In Darien May sales volume was nearly double that of April’s, but number of sales through the first five months was 7 percent lower than the same period in 2013, with revenue down around 14 percent.
A mixed picture. Overall, signs point to gradually increasing home values, something everyone will be happy about.
But in Fairfield County real estate, this year more than ever, there are no guarantees. There is however, possibly unquantifiable, but very important metric that tends to go by the wayside in a spreadsheet–enjoying the house you buy!
Julie Carney is GMW.com’s real estate columnist. One of Wilton’s leading realtors, she heads up the Julie Carney Group at William Raveis. Her award-winning real estate career spans twelve years and sales exceeding $130 million. Her husband Bob Carney is a member of the JC Group and an award-winning journalist for 30 years. He contributes many of the columns to GMW.com.