Spring is upon us! Prospects of selling and buying a home - by Jeffrey Klein

Jeffrey Klein, Allied Appraisal Associates

Spring is upon us and everyone is excited with the prospects of selling and buying a new home. This time of year is always met with a lot of anticipation and in New England the buzz seems to be stronger, as we have made it through another long winter. Thankfully this winter did not bring as much snow and cold as last year. This year the market is poised to take off based on some indicators that may lead to how consumers are feeling. We all benefited from the lower gas prices in the past months, despite some recent increases. Also, with less damage occurring to homes this winter many owners are able to get their homes in shape and ready for selling in less time and for less money. Interest rates continue at a very low rate and indications are that they will remain at this low level for a while.

When it comes to selling homes, traditionally the second and third quarters are the most active with transactions and many sellers see values trending to their highest points for the year. For the appraiser, this has always been a big challenge, how do we anticipate where values are going based on old data? We are able to go back in time and see what similar quarters for past years have done and apply similar market factors and put together a reasonable theory as to where trends are headed. This can be tricky as not all factors match up year to year. The patterns from the past can try to help shape what the future may look like. The appraiser needs to filter some of the noise that may influence where the market is headed and focus on what the data is saying.

Being overly optimistic can lead to a misread of the market and lead to values that can’t be supported, especially in a situation where the agreed upon price is too high. It is understood that the process by which two parties come together, without undue pressure, and agree on a purchase price should be respected. However, it by no means is the overriding factor for valuing a home at that price. After all the analysis is completed, it may be proven that the buyer is overpaying. Many sellers anticipate getting top dollar for their home and whether it’s driven by ego or the prevailing thoughts of many that “my home is worth so much more than my neighbor’s home,” expectations need to be tempered. There are communities and neighborhoods that enjoy a strong desire for people who want to buy in those areas and in those cases bidding wars occur for those precious properties. We are still in a market, in many communities, where buyers want to see all that is available and are willing to tour numerous homes before making the life altering decision. The consequence of losing a potential home they once desired is minimal in their minds.

There are additional outside factors that could play a role in the overall trends for residential sales in the coming months. These factors include, in no particular order, an increase in lending rates, continued increase of oil prices and other consumer goods, the upcoming presidential election, and continued turmoil throughout the world. The first two items would certainly have the most direct impact on the market and may even cause the market to fluctuate more than anybody has forecasted.

There also seems to have been a shift in the way people market and try to sell their homes. The momentum for listing and selling a home without a realtor seems to be picking up. Personally every situation is different and I am not endorsing one idea over another but it is a factor in the market and how the price of a home may be affected. Realtors will often have their clients contact an appraiser so that an independent opinion can help guide the seller in a direction that will eventually land a buyer.

In the end the market participants will determine how 2016 shapes up and what impact there may be for 2017 and beyond. All we can do in the industry is watch what occurs, analyze, react to the results, and then make predictions for the following year, of course.

Jeffrey Klein is principal of Allied Appraisal Associates, Worcester, Mass.