It is now November and we have less than 2 months left to 2014! Another year is near its end. Hope you have had a good year with more ups than downs and more joy than sorrow. As we approach Thanksgiving at the end of this month, we hope you have plenty to be thankful for with your family and loved ones.
Let’s recap the Orlando real estate market thus far in 2014.
First a refresher: as I have discussed in the past, since late 2010, the Orlando housing market has been in the recovery/rebound mode with very robust activity. The Orlando real estate prices were considered “below fair market value” by investment standards. So outside money poured in from many sources, the most notable were large Wall Street institutional investment funds. The demand outpaced supply, resulting in price appreciation. This solidified the Orlando housing market, local economy, and secured the tax revenue base for local governments. This has been a very positive thing for Orlando.
By mid 2013, the Orlando real estate prices were considered to have reached “fair market value”. This was when the large institutional investors stopped purchasing. The market then shifted from large-investor driven, to home-owner and small-investor driven. With a big chunk of the demand gone, the market normalized and stabilized with supply more in line with demand.
There are different market perimeters worth considering. For simplicity, we will focus just on the inventory level. That is the number of homes for sale on the market.
Figure 1 above shows the steady increase of inventory since April of 2013. By now we have had about 17 consecutive months of inventory increase. The latest number from September 2014 shows a dip in inventory level from 13,084 to 12,316. This is the first time we had a month-to-month decrease in a year and half! However, my current unpublished data indicate the inventory level is back above 13,000 again. Perhaps we will see a “saw-tooth” pattern of fluctuation as we enter 2015. If that happens, it can be considered a good thing, because the inevitable result of unrelenting inventory buildup can only be pricing decline. The leveling off of inventory level will help Orlando housing market remain healthy and balanced. This is still a great place to own real estate.
With approximately 4.5 homes for every buyer right now, buyers have the opportunity to shop around and try to find a home with the best fit. But keep in mind this is not a buyer’s market. It will take a ratio of about 6 homes for every buyer to reach that threshold. It is also not a seller’s market. Sellers have to be more realistic about price and cannot expect a premium over supporting market comps. With both sides evenly leveraged, the art of negotiation is important once again. The side with better representation can expect better outcome. This has always been our practice in order to consistently achieve the most favorable outcome for our clients.
Okay! We will stop right here. Have a safe and fun November! As always, if you have any real estate related questions, give us a call! We are happy to discuss real estate even when it’s not business. And, we love referrals!
Happy October! We are pleased to introduce two seasoned real estate agents, Gabriela Molina and Mary Callaway, as new additions to our team. With over 40 years of combined real estate experience, the Yao Team aims to provide exceptional personal service to our clients. We have diverse ranges and extensive connections in the business. Whatever your real estate need is, give us a call. Expertise does not cost, it pays!
It’s finally September! Kids are back in school. Many are looking forward to some relief from the months of heat. The peak real estate summer season is now officially over. Let’s take a look at some Orlando housing statistics. The latest compiled data we have below is tabulated after July (The final August data will be computed about mid-September).
For the purpose of this discussion, the two important columns to note are the Total Inventory and the Sales Closed. Total Inventory denotes the Supply. Sales Closed denotes the Demand. If you look back at the 18 months in the chart above, the continuous increase of Total Inventory is most remarkable. A graphical representation of the inventory level is below. As you can see, since April of 2013 the number of homes for sale in Orlando has been increasing steadily.
We have seen this before. When supply outpaces demand, the inventory level builds up. To be clear, we are still in a healthy real estate market, but it is a mature market, far from either extremes. In this type of market, a seasoned real estate professional is extremely valuable in helping you achieve your real estate goals. To sell a home in a mature market, the preparation, staging, pricing, marketing, and negotiation are more important than ever. To buy a home in a mature market, you need a seasoned agent to help you sort through the confusing & overwhelming inventory and pick a winner while negotiating a good price.
Give us a call for a free consultation to discuss your personal and unique situation and needs. We will customize a strategy for you!
Happy August! Some of you have asked me various real estate related questions that can be answered by explaining how the MLS system works. So here it is…
MLS stands for Multiple Listing Service. It is an electronic posting system on which real estate agents post their listings of homes for sale. It is the backbone of the residential real estate industry. At the core of its complex structure, there is simple elegance in how this unique system works for everyone’s benefit.
First, let’s consider markets without the benefit of a multiple listing service.
I have colleagues in several European and Asian countries. When buyers want to buy a home there, they have to painstakingly visit every brokerage and ask to see its in-house inventory of listings. It’s hard to scour the market and find every home that’s a potential match. There is no comprehensive system. Buyers have to go and shop at brokerages that work for the seller.
In contrast, home buyers here have access to ALL listed homes. A buyer can work with an agent to scour the MLS for all listed homes that match the buyer’s criteria. A buyer gets to compare and make the purchase decision based on the best fit, value, and terms. There is the best chance to find the right home compared to any other method. An agent can show homes listed by all other brokerages. As a result, a buyer’s agent has inventory of every listed home on the market. And a listing agent has access to all the buyers in the market place.
For a system to be so time-tested and work so well, there are 3 fundamental attributes it must have: (1) The listings inventory must be comprehensive. (2) The information must be reliable. (3) There must be incentive for all to use it.
The benefit for a home buyer has been illustrated above. For a home seller, the benefit is maximum exposure to all potential buyers. When you want to sell a product, you want every potential customer to know about it. Through MLS and its myriad syndication’s, a home listed on the MLS even has global reach. I routinely
receive international inquires on homes I list locally! Maximum exposure creates maximum demand which results in highest achievable price.
Now you know the importance of the MLS, make sure your agent understands the inner workings of this system and how best to maximize its utility as a tool. A tool is only as good as the individual using it.
Happy July! Hope you and your family have enjoyed the first half of the summer so far.
The Orlando real estate market is extremely fast paced right now. If you are not participating in this market but plan to sell a home later this year, I will offer a few tips on how to get your home prepared before your right time comes. If you are looking to buy a home, these same tips can also prepare you for what to expect.
Repairs – One of the questions sellers frequently ask me is “should I repair or replace this before listing my home? I can offer the buyer a credit.” The answer depends on the item. But the general principle is, a potential buyer will estimate the cost of repair at 2-3 times the cost a seller sees, and offer a lower price for the home accordingly. Some items are much better repaired or replaced ahead, instead of offering a credit to buyer.
Roof – Florida sales contract requires the roof to be watertight and functional, but excludes limited remaining life as an issue. However, the insurance industry requirements have changed. Currently, if a roof is 20 years old, the home virtually cannot be insured in the traditional market. Many transactions hit a snag when buyers try to obtain homeowner insurance on homes with older roofs that are perfectly functional. Anticipate this potential pitfall and make plans accordingly.
Plumbing – Again, insurance industry decisions are causing issues with contractual definitions. Recently it has become virtually impossible to insure a home with polybutylene plumbing without limited coverage or a high premium. Anticipate this potential pitfall and make plans accordingly.
Air Conditioning – Everyone is feeling the heat this summer. Air conditioning system is particularly important in Florida. Be sure your AC is serviced and cooling properly.
Wood Rot – Contract jargon is “WDO” (Wood Destroying Organisms) damage. This is common in wood trims around the outside of the house. For example, any door that opens to the outside (front, garage, side, back). Certain types of financing require that the home does not have WDO damage. Sellers are often advised to look for and repair WDO damages before listing.
Permits – Many improvements to a home require a permit from the city/county. The Florida sales contract included a provision for permit examination a few years ago but generally people did not know what to do with this provision. The permit history of a home can be messy. The current contract (FR/BAR-2) includes a provision for municipal lien search. So now permit history search is run for most transactions and cans of worms are often opened. It’s a good idea for you to take a look at your own home’s permit history by going to the public appraiser’s website for your county and search for your address.
I will stop here. I hope the above information is helpful to you. For more details or a full evaluation of your home, you can always call or email me.
Hope this message finds you well. We are now in the month of June, nearly the half way point of the year already!
Here is the Orlando residential real estate outlook for the rest of the year. Please note, these are very general descriptions and my own observation and opinion.
Currently there are 10,647 active listings in the Orlando regional MLS. New inventory continues to come on the market daily, as we are in the peak summer season of real estate sales. The peak months are May, June, and July. August is technically still part of the summer season, but past experience shows that in August, most buyers are closing the transactions and moving. Some late comers in the market include buyers that had to wait for the closing of the sale of their previous home, or those back in the market after a deal fell-through. By September and October, the slowdown will be palpable. November and December are seasonably slow as well, as we do not get a snow-bird influx in Orlando. This year we do not have the benefit of a high number of investors, who shop all year round. So the bottom half of the year will be markedly slower. Again, this is a relative comparison, our market is definitely still hot.
We are definitely in a stable housing market. Current average mortgage rate is stable, hovering between 4.25% – 4.5%. No external factors are unduly skewing the market. Buyers and Sellers tend to be on even footing. With the housing inventory near a 3-year high (10,647 listings), Buyers have more choices than in recent years, and tend to be pickier and take longer to decide on a purchase. Sellers are learning that to achieve a sale, their home must be in top condition, strategically presented, and priced competitively. Any potential issue with the home may cause a buyer to pass on it. On the other hand, good homes are still achieving high prices. This is actually all very normal, very traditional. Our crazy Orlando roller coaster history gives people short term memory of the extremes, both when it’s extremely easy to sell a home for top dollar in a short time, as well as when it’s extremely easy to buy a home cheaply and negotiate for all concessions. Again, we are now in a normal, stable, balanced market.
In this type of market, a seasoned real estate professional is extremely valuable in helping you achieve your real estate goals. Above are general and generic descriptions. Give us a call for a free consultation to discuss your personal and unique situation and needs. We will customize a strategy for you.
Happy month of May! The Orlando real estate market is entering its peak season (May-July). It’s a competitive market, for both buyers and sellers. For buyers, quality homes that are priced well can still draw multiple offers and sometimes even go over asking price. For sellers, please see the inventory analysis below.
To understand the housing inventory level (number of houses for sale), here is a quick Orlando market recap. After the market peak in 2006 and subsequent decline in 2007, 2008, and 2009, the market finally reached bottom in 2010. It then spent 2011, 2012, and first half of 2013 in recovery mode. The chart below shows the housing inventory level (supply) during that time. As the supply dipped and demand surged, the prices went up. You can see the consistent inventory decline in 2011 and 2012. But starting in May/June of 2013, due to the price maturation, the market shifted again. The demand dropped and the inventory began to build.
As you can see in the graph above, the housing inventory has been building for the last 11 straight months now. The inventory in March this year (10,343 homes for sale) is 49% higher than March of last year. In fact, we are currently at the inventory level of July, 2011 (trace March 2014 data point across towards left). Wow, we are at almost a 3 year high! This is significant if you are trying to sell your home. Please give us a call to discuss the significance of this in your particular situation. It’s important to realize that different areas, neighborhoods, and types of home behave differently. Generally speaking, the more desirable the area and nicer the home, the more the seller can still be in control, over both the price and terms. Whereas more common homes in neighborhoods with a lot of active listings, the buyers tend to call the shots. What often happens is that sellers are pricing homes above comps, expecting the market to continue climbing. Over time, when the prices are reduced, it feels as though the market is going down, yet it’s really staying consistent with the comps. This is a sign of a stable market.
Hope this information is helpful!
We also wanted to take a moment and thank you for all your support in 2013! Our business largely depends on referrals and word-of-mouth. Our Team was just awarded the 2013 Number One Team Award for Keller Williams Advantage II Realty! We couldn’t have done it without you!
Happy April! The Orlando real estate market is approaching full swing. Lots of buyers and sellers are active in the market place now. I will first provide you the latest market update. Then, I will continue Part II on the topic of valuation from last month, and describe how to properly price a home.
To start, here is a quick Orlando market summary. After the market peak in 2006 and subsequent decline in 2007, 2008, and 2009, the market found bottom in 2010, and spent 2011, 2012, and first half of 2013 in recovery mode. The chart below shows the housing inventory level (supply) during that time. As the supply dips and demand surged, the prices went up. You can see the consistent inventory decline in 2011 and 2012. But starting in may/June of 213, due to the price maturation, the market shifted again. The demand dropped and the inventory began to build. As you can see in the graph below, the housing inventory has been building in the last 10 months. This means the number of houses for sale currently exceeds demand.
We are not seeing price decline at this point. What we are seeing is price stabilization. Homes are not selling at incrementally higher and higher prices, but have bounced off the ceiling and staying within a narrow range.
Now, the discussion of how to properly price a home:
There are generally 3 approaches to value theory in real estate: (1) comparable sales (2) reproduction cost (3) income potential. In residential resale, comparable sales approach is the method of choice. It uses closed sales to determine the market value of a property. Assuming the market is efficient and the buyers and sellers act in their own best interest, we can derive value based on how sellers are selling and buyers are buying. Like stock prices, the supply and demand ultimately drive the fluctuation in price: when demand exceeds supply, the price goes up. When supply exceeds demand, the price goes down. A property does not have a fixed value. Its value changes with time.
Unlike shares of a company’s stock, no two pieces of real estate are exactly alike. Comparable sales approach takes the available sales that meet the right criteria (sufficiently similar to the subject property, sufficiently close to the subject property, and sale date close enough to reflect the current market) and compares them to the subject property. Adjustments are then made based on established guidelines as well as subjective judgments to increase or decrease the value. For example, if a home that backs up to a road sold at a particular price, an otherwise identical home across the street that backs up to a wooded conservation would be presumed to be able to fetch a higher price (the value adjustment for conservation frontage). A common feature in Florida homes is the swimming pool. We presume a home with a pool sells for a higher price than an identical home without the pool.
Two crucial factors in doing the comparable sales method correctly are: (1) Selection of appropriate comparable. If wrong comparables are used, however diligent the subsequent adjustments may be, the results will likely be off. For example, Stoneybrook sales should be used for comparables to a Stoneybrook subject property, not Eastwood or Avalon Park. (2) Use right adjustment values. Even when the right comparables are selected, if the adjustment values are improper, the result will be off. For example, once comparables similar in size are selected, the adjustment for difference in square footage is not what general public may expect, it may only be $30-$60 per square foot based on price range of home.
Licensed appraisers are trained to do this based on their professional guidelines. These guidelines are adhered to in order for the appraisal report to be valid and accepted by the bank which uses this report to assess its risk in making the loan on the property.
Real estate agents are not licensed appraisers. Their approach should start in the same objective manner as an appraiser, but there are many additional factors to consider. Many features in a home have different values to a buyer than to an appraiser. For example, top-of-the-line appliances in a kitchen will certainly impress a potential buyer, who may be inclined to pay more for this home than a similar one without them, but an appraiser will not appraise the home higher because of the better appliances. Appliances age and break, and they can be easily removed. They are personal properties that happened to be in the real property.
So, a skilled listing agent considers all the tangible factors such as features and amenities, as well as intangible factors such as appeal. He/she estimates what a normal buyer would be willing to pay based on the current market environment. An understanding of market trend is paramount. In an up-trending market, the last home that sold in the area is the base on price. In a down-trending market, the last home that sold is the ceiling on price. In a stable market, the last home that sold is a mirror on price.
I have to stop here. I hope the above description is helpful to you. For more details or an evaluation of your home, you can always call or email me.
Happy March! Hope you are doing well in 2014.
By popular request, I will talk about how the value of a residential home is determined. This month, I will first discuss how NOT to price a home:
Okay, I will stop here. Next month, I will continue this topic by discussing how we DO price a home! Stay tuned!
January is already behind us in this new year! It’s been a very active month in the Orlando real estate market. This is seasonally expected. Everyone was busy with the holidays in November and December. In central Florida we do not get much of a snow-bird influx like our coastal cities. So it has been relatively quiet. Now the holiday season is behind us, Sellers are calling for consultations for selling their homes, and Buyers are calling to start their home shopping. In Orlando, this activity starts in January, and will continue to build momentum through the Spring and into the Summer peak season.
Now having said that, what has gradually changed over the recent years, is that people do tend to start looking earlier, and watch the market for a longer period of time. I believe this is a natural phenomenon resulting from the wide availability of information of homes for sale on the internet. People can browse real estate online in the comfort of their homes, as well as gather information long before it’s time to start making appointments to view homes in person.
The result is that we get inquiries on listings in any month, any season. Listings in December went under contract just like listings in peak summer season. We are able to fully market and create exposure for listings regardless of the season and market. My consultation focuses on the overall market trend (trending up, down, and sideways) rather than specific timing of a particular month. The listing timing is based on Seller’s personal and family situation and moving plan, rather than market timing.
For Buyers, more information is at their finger tips than ever before. The market place is flooded with information of mixed quality from dubious sources. Some are useful, others can be flat out erroneous. We frequently look up properties our clients inquire from third-party websites and find them not for sale, already sold, or have misleading valuation recommendations! We also find our own listings on websites with wrong information but we have no control over.
For the most accurate MLS search, start with our search engine on the home page. We typically take the team approach with our Buyer clients and evaluate properties together.
What can we provide for our clients as Buyer’s Agents when “everything” is on the internet?
The internet is a wonderful source of BULK information. Our expertise is in deciphering that, separating the fluff from the reality. We are your partners in knowing the local market, the trends, quality of specific products, advantageous mortgage financing, supervising the appropriate inspections, facilitating the closing, and in every other matter being the professional eyes and ears in the real estate world.
So far 2014 looks very promising with regard to local economy and health of the housing market. I will be reporting to you significant trends over the course of the year. Stay tuned!
Hope this is helpful to you, if you like to keep an eye on real estate related matters.
Okay! We will stop right here. As always, if you have any real estate related questions, give us a call! We are happy to discuss real estate even when it’s not business. And, we love referrals!
We will be contacting you shortly.
