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August 2022 Real Estate Market Update – Connect Homebuyers

August 2022 Real Estate Market Update - Connect Homebuyers

Table of Contents

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What is normal in the real estate market?

Everywhere in the news we’re seeing that things are “getting back to normal” across the country. Rental prices and home prices are at least slowing down in their meteoric rise, even if they haven’t totally evened out just yet. The pandemic seems to be winding down, or at the very least we have the tools to deal with it effectively enough that life can keep chugging away.

Normal is of course relative, and the normal that things are getting back to in the real estate market is not necessarily going to be the normal that existed prior to the pandemic. If anything, we’re going to shift to a “new normal” that will be similar to what we had before but not quite the same. There’s a potential new wave pandemic on the horizon with monkeypox and omicron, but neither of those is threatening another shutdown right now.

The past two and a half years have been undoubtedly life-changing for everyone. There’s an old curse that people sometimes say to those that they wish ill upon – may you live in interesting times. We have certainly lived in interesting times, and we continue to live in them. 

The catch is that all times are interesting. Anyone who is investing in real estate right now should be old enough to remember the real estate bubble bursting in 2008, causing the huge flood of the Great Recession. Those were interesting times to live in, and they were just fourteen years ago. Overnight, the real estate market that used to seem so stable and immovable suddenly evaporated. Who could have imagined home prices going down? 

We cannot know what’s coming in the fall for the real estate market, not for certain anyway. It will most certainly be interesting though, and at least more stable, even if it’s not normal.  

China’s Summer Real Estate Catastrophe

Huangpu Qu, Shanghai Shi, China housing crisis

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There’s a housing crisis running through China that is threatening to upend one of the world’s largest economies, and it looks like it’s just getting started. 

The major issue is with debt in China right now, thanks to developers who over-leveraged their ability to deliver on huge construction projects and are now falling further behind with finishing homes. Homebuyers across China are increasingly angry, and with good reason. 

What’s unique about the housing crisis in China is the way that homeowners have come together to address the massive issues they’re facing. Recently, a group of mortgage holders in China came together and have vowed to stop paying their mortgage loans if construction doesn’t resume on three hundred partially finished homes. Construction giant Evergrande is increasingly a lightning rod for the frustration, with its massive debt laid that has caused a number of construction halts and raised the ire of homebuyers. 

Much like the massive bailouts we saw in the United States back in 2008, the Chinese government is exploring whether they need to step in to save homeowners and builders alike. The current bailout proposal would provide almost $150 billion worth of funds for developers to finish construction on the homes that are in progress. Whether that would solve the root problem is a whole different story, but it would at least mollify angry homeowners.

The crux of the situation is that home buyers in China are saddled with paying construction companies on homes that they can’t live in. These mortgages tie up major parts of the disposable funds that middle class Chinese families have, preventing them from using that money for other housing. Where these families are working hard to build a better life for themselves, they are saddled with debt for homes they may never step foot in.

Not only is it a problem that homeowners might not see the homes they’ve paid for, but even if they were able to get into the homes, the property would likely be worth less than the mortgage they owe. Falling real estate values in China are pushing home values lower at an alarming rate. 

The problem isn’t just affecting the ability of individuals to buy homes, it’s also bleeding into the other parts of life in China. Individuals are changing their marriage plans, halting their development of new businesses, and putting off having children due to the lack of stability in the housing market. How far the problems go and how long they continue to push middle class families to change their lifestyle has everything to do with how long this crisis goes on.  

The pledges by collectives of homeowners to defy large corporations like Aoyuan and stop paying their mortgage payments could potentially destabilize the Chinese economy if conditions don’t change. The issue affects more than ninety cities across China, and the scope of the problem is massive. The societal impact of hundreds of thousands of buyers simply opting to stop paying mortgages on these unfinished homes is unknown as the situation is so unprecedented. 

Why Professional Cleaning is Essential for Home Sellers

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Moving into a new house can be incredibly stressful, especially when you’re trying to sell the home that you’re moving out of. Getting the home clean and ready not only for the new owner to move in, but more importantly for the sales process, can feel daunting. 

Hiring a cleaning company might feel like a waste of money because it’s the kind of thing you could do yourself in theory, but in reality there are lots of benefits to having a professional cleaner take care of this aspect of the home selling process. 

  • Buyers want a clean start

Home buyers want to come into a space that looks new, even if it’s not. Though you’ve lived in the home for a long time and might not notice the dust on the baseboards or the grime around the back of the toilets, a professional cleaning service will spot those things in a deep clean and create a fresh slate for the new buyer. They’ll detail your house in ways that you might not think necessary. These professionals understand the depth of cleaning that’s required for a buyer to see your home the way you want it to be seen.

  • Cleaning takes up valuable time

The biggest reason to hire a professional cleaning service when you’re selling a home is that cleaning a home takes a lot of time. Rather than eating up those hours scrubbing the floors or wiping off fan blades, let an expert take care of it. This extends to especially tough areas like kitchens and bathrooms, as well as to carpets. A professional cleaning service will be able to do the job faster and more thoroughly than you can. 

  • Return on investment

There are lots of costs associated with selling a home, and some of them have a better return on investment than others. Professional cleaning is one that will almost always give a positive return because it makes such an impact on potential buyers. A dirty house can indicate to buyers that there are other problems because the home has not been well maintained, leading them to offer lower bids and for you to get a lower return overall.

  • Professionals will do a better job

When someone is performing a job that they are experienced at, they learn to see things that others just can’t. A professional cleaning company will have the experience to see things in your home that you might not, like how much nicer the room looks when the light switches and doorknobs have been scrubbed. These minutiae make a big difference in the overall impression that buyer gets when they look at the home.

When you’re selling a home, whether it’s on your own through a FSBO listing, with a realtor in a traditional sale, or with a cash buyer. A professional cleaning crew will be able to look at your home with fresh eyes and see things that you can’t. Once they see those things, they can come in with professional grade tools and techniques to clean in the house faster and better than you have time or headspace to do. 

New Construction is Booming in Raleigh-Durham

North Carolina flag over a new construction home

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The Raleigh-Durham home sales market has been one of the top real estate markets in the country for decades thanks to a robust economy, relatively cheap home prices, and a high standard of living. RDU provides the amenities that many bigger cities offer, and the temperate climate offers a more relaxed and balanced pace of life compared to other metropolitan areas.

In a recent report from the Inspection Support Network, the Raleigh-Cary region was found to be among the top three metro areas for new home construction. RDU ranked behind Nashville, Tennessee and Austin, Texas. This is an important statistic because it means that, though home construction continues to be hampered by supply chain issues, this area is increasing its real estate inventory. 

The region measured by the report includes Franklin County, Johnston County, and Wake County. The study measured the 53 biggest metro statistical areas in the United States. Per the findings, for every one thousand existing homes in the RDU metropolitan statistical area, 39.5 new housing units were built in 2021. 

The total number of new home construction properties in the RDU area was 21,649 for the entire year, which is a substantial increase over the last year that data is available, 2019. In that year, there were just 13,320 new home projects approved. It’s notable that there is no data for 2020, as the pandemic derailed almost all new construction during that year. The increase is significant – 62.5%. The growth in RDU in new home construction approval is behind only the Philadelphia metro area. 

The takeaway from this report is that RDU is going to be a leader in metropolitan real estate markets in the next several years. As work has pivoted from in person to remote, there was some question about where things like new construction would fall and whether there would be some shift away from traditionally hot markets like RDU.

These new numbers show that new home construction is still centered in the same areas that it was before the pandemic, at least in the case of the Raleigh-Durham-Cary market. Without a significant move towards lesser growing areas, investors and homeowners can safely assume that RDU is going to remain in the highest echelon of home sales and construction across the United States. 

Wild Homes: Rounding Out in Sarasota

Image by David Bruce Kawchak

Anyone interested in hanging a”round” for some fun? A recently listed property at 3201 Peachtree Street in Sarasota, FL has made a circuit around the internet recently not only for its incredible shape, but also for its throwback interior. 

Sitting on a half acre lot in the midst of a grove of trees, the house has been masterfully flipped from a run down oddity to a sparkling example of throwback styling. It’s an incredible home for anyone of any age. 

Image by David Bruce Kawchak

Built in the round, the home has a three bedroom, one bathroom layout that’s all packed into just under thirteen hundred square feet. Though it was modeled on the Hilton Leech Art Studio down the street in Sarasota, Florida, this is a private residence that would be suitable for a family. 

What makes this home so unique isn’t just the round design, it’s that it’s in almost pristine retro condition. The colors, finishes, and furnishings all offer a 1960’s vintage feel that is like walking back in time. 

Awash in blue, white, and brown tones, the home is a sanctuary from the hustle and bustle of the outside world. The soft curves of the walls contrast sharply with the bursts of light fixtures and the long lines of the furniture. 

Image by David Bruce Kawchak

Recently renovated, the interior footprint of the home was changed thanks to the removal of an interior wall to make a larger primary bedroom. In addition, the bathroom was updated to include mosaic tile and a luxury tub. Though the home is full of retro appliances, they’ve been restored with the recent update to provide the kind of convenience that we would expect in a home at this price point. 

In fact, a whole host of improvements went into the updates on this home. The addition of a new roof and new HVAC, as well as new Impact windows and wifi LED smart lighting throughout the home give the retro styling a modern backbone. Prior to the latest renovation, the home was in disrepair.

Originally listed at $899,000, 3201 Peachtree St. is a home that’s well worth the buzz. 

What the Huge Rise in Foreclosures Across the U.S. Means for the Housing Market

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Foreclosures are a part of the real estate economy, and there’s nothing fundamentally wrong with that. The way that the U.S. market is structured, there will always be a percentage of homes that revert back to the lender when the homeowner can’t pay back the loan. 

The question isn’t whether there are foreclosures – it’s how many foreclosures there are. In the last six months, there’s been a dramatic increase in the number of foreclosed homes in America. This metric is measured in the number of “foreclosure starts”, which is the first public notice of a foreclosure getting going. 

In the first half of 2022, foreclosure starts were up 219% according to data from ATTOM Data Solutions. This jump was seen across all markets, with 96% of metropolitan areas in the United states seeing an increase in the number of filings for foreclosure by lenders. Top states for foreclosures include New Jersey, California, Ohio, Illinois, Tennessee, and Florida.

Is this huge increase indicative of something really going wrong in the economy? That’s unlikely. During the pandemic, moratoriums on foreclosures prevented lenders from being able to foreclose on residential mortgages. The huge increase in foreclosure starts is more representative of a climb back to foreclosure rates that we experienced before COVID. According to historic data, the US. The foreclosure rate is still below what it was prior to the pandemic. 

Though the mid-year totals for 2022 seem high, they still aren’t close to the mid-year totals for 2019, the last year that we have data for that’s not affected by COVID foreclosure moratoriums. The loans that are being foreclosed on now are by and large homes that were already three months past due before the pandemic. 

The pace of foreclosures is going up certainly, but it’s nowhere near the kind of levels that economists would be concerned about. Not yet, anyway. The real question will come when the current backlog of mortgages that are already past due start to come around. Since the current round of foreclosure starts are largely made up of loans that were behind through the pandemic, they aren’t a clear indicator of where the foreclosure rate is right now, but rather they’re an indicator of where the foreclosure process was two years ago. 

The massive shift in employment rates, with job openings at an all time high, has blunted the number of real mortgage defaults. 

This rise in foreclosure rates is actually good news for buyers in the tight market that’s been an impossibility for the last couple of years. High rates of foreclosure will open up inventory that has been frozen due to these moratoriums. Once those homes are through the foreclosure process, they’ll come back onto the market and provide some relief for homebuyers who have been unable to find open houses. 

This reality makes the whole process a double edged sword. A higher number of residential properties being foreclosed on is a tragedy for those families who are losing their homes, but it’s an opportunity for other homebuyers who have been unable to find homes due to the tight housing market.

All in all, the market is balancing out, and part of that is necessarily tied to foreclosures coming back up to pre-pandemic levels. The numbers are dramatic, absolutely, but they aren’t unhealthy. The economy is slowly coming back to where it was without the artificial limits placed on it by pandemic safety nets, and overall that’s a good thing for the housing market. 

Essential Facts About Home Inspection for Sellers

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Home inspectors are a part of the real estate process that’s baked in, and for good reason. Even when someone lives in a house, they might not realize when things go wrong behind the scenes. Bringing in a home inspector means unearthing potential problems and getting a good bead on issues that might be on the horizon. 

  • Attend your home inspection

Though most home inspectors will perform their inspection while you’re away, it’s a much better idea for you to be present. This way, you can ask questions and give them context about what the issues are, as well as potentially giving you recommendations about which professionals will be able to do the work. 

  • Start with a generic list

One solid tip is that you can start off with a general home inspection list that you do yourself. With this kind of knowledge in hand, you’ll be able to ask the inspector questions and you’re less likely to be blindsided by their findings. 

  • Expect to pay for an inspection

Home inspections overall will cost around three hundred dollars. This gives you not only the time and expertise of the home inspector, but they will also provide you with a written report detailing their findings. 

  • Get a home inspection early

A home inspection will help you be able to price your home effectively and to know what opportunities you might have for repairs. Not only that, but a home inspection can help you sell your home to potential buyers, who will take solace in knowing that you’ve done the right thing.

For a home seller, a home inspection can be a great tool for getting the most value out of a home. Learning how and when to use a home inspection can help you to know whether and how much you should rely on it will save you time and money, and it will also give you peace of mind. 

Michigan Property Taxes are Rising – How High Will They Go?

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Inflation is hitting Americans hard all over the country, and many families are struggling to keep up with constantly rising costs. In many parts of Michigan, property taxes are now going up as well, representing a doubling down of increased costs for homeowners in those areas. 

Property taxes in Michigan are based on the assessed value of a home, not on what a homeowner is paying in their mortgage. With the huge increase in property values over the last couple of years, homes all over the country, including in Michigan, are now worth dramatically more than they were when homeowners purchased them. That value isn’t reflected in the income of these homeowners – in real terms, it’s just on paper.

Fortunately for homeowners, Michigan caps the amount of taxable value that a homeowner can withstand to just five percent in a tax year. That’s good news for homeowners, as many homes have seen much bigger jumps in value recently. Michigan has stricter limits on property tax increases than most of the rest of the country. It limits property tax increases from three angles – levy limits, assessment, and rate. This use of three different methods to limit increases is unusual, but it’s good for homeowners. 

Even with that cap, the average homeowner in Michigan is going to see a 3.3% increase in their property taxes thanks to recent recalculations. Urban areas in the state are seeing the highest tax level, but places like Detroit are already levying some of the highest rates in the state, so there’s not much room for growth. Unfortunately, homeowners who are in the lowest income brackets are likely to see the highest leaps in property taxes. 

The current jump in property taxes across Michigan is the highest increase since 2009, and those who have recently bought homes are going to experience higher increases than homeowners who have long held mortgages. 

As property taxes in Michigan are tied to inflation, homeowners should continue to expect property tax increases as long as inflation rates continue to go up. Michigan calculates its property taxes on homeowners twice a year. In six months, these rates are likely to increase again, something that homeowners should be prepared to pay for. 

Ask Connect: How do I sell an off-the-grid property?

Off-the-grid property for sale in Joshua Tree

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This section includes real questions from real homesellers, plus our answers. 

Dear Connect,

For the last decade, I’ve owned and renovated an off-the-grid property about two hours from Charlotte, North Carolina

It started out as a rustic cabin in the woods outside of Asheville, with little insulation and no foundation. Since then, I’ve dug a well and built a beautiful outhouse, plus added a camp shower and put the home up on a foundation. I’ve put a lot of work into making it a beautiful place to retreat to, putting on a tin roof and installing modern insulation to keep it warm in the winter. There’s a wood burning stove inside and a propane grill on the porch. Inside, it’s cozy and clean, with lots of light and modern amenities – except for electricity.

Even with all of those improvements, I’ve chosen not to run electricity to the property and it’s free of wifi signal, though there is reliable cell phone service. If you didn’t know it during the day, you’d look at the house and think it was a wired cabin. 

Though I’ve loved having this haven for my own use for the last few years, it’s time for me to let it go. In an ideal world, I’d sell it to someone who would keep it off the grid as it is, but I know that’s unrealistic. In the real world, I’d like to at least get my investment back out of it. 

Is it possible to sell a house that’s off the grid but is well finished for a solid price? It’s such an unusual property that I’m unsure about what to list it at, and the realtors I’ve spoken with in the area are not much help. Another issue is that it sits on 10 acres, and I know that the property itself is going to have a substantial value  

Sincerely,

Off the grid but in the market

First off, great work on putting all of that into what sounds like an incredible property. 

I cannot see that you’ll have any trouble selling this house or the piece of property if it’s in the kind of condition you say it’s in. Though these properties are unusual, you’ll want to keep in mind that they’re also highly desirable. You’re not selling a fixer-upper. This is a property that has lots going for it, and the acreage is no small thing in that area of North Carolina

All that being said, you want to keep in mind that the most likely outcome is that your property will end up in the hands of a developer if it’s near Asheville and it’s that big. Your little cabin that’s off the grid is likely to be laid low in deference to a string of glowing houses with neat yards. I’m sure that’s not what you want, but it’s unavoidable if you sell. You could potentially spin off the property and sell the cabin separately, but that’s no guarantee that the cabin will stay intact. 

The most likely thing that you’ll see is a huge interest in your property. My advice is to list it and see what happens, then let yourself be surprised by the interest. If you need to sell it faster for whatever reason, there are plenty of investors who would offer you cash for the property to get it off your hands quickly. You’ve got all the choices here! 

Autumn Karen

Autumn Karen

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