Real Estate Market Update: September 2022
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The weather is cooling and so is the market
At the beginning of the year, the U.S. housing market saw historically low interest rates and high demand for houses, creating a seller’s market. New data is now suggesting that the market is beginning to cool down, just in time for fall.
According to the National Association of Realtors, home sales in July of 2022 were down almost 6% from June, making it the sixth consecutive month of decline. Even more astounding is that home sales were down 20.2% from the same time as last year.
Other factors that have caused a cool down in the market can be contributed to the average interest rate sitting at just under 6% and the median price of a home being $403,800. However, this is down $10,000 from last month. The sharp rise in home prices is up almost 11% from this time last year.
NAR Chief Economist Lawrence stated, “Home sales may soon stabilize since mortgage rates have fallen…thereby giving an additional boost of purchasing power to home buyers.”
Although home sales and home building are declining, the same cannot be said for home prices. “Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price,” stated Yun.
This is not all bad news for homebuyers. While home prices continue to rise in many markets across the country, housing inventory is marginally rising. The National Association of Realtors estimates that the total housing inventory in July was 1.31 million units, an increase of 4.8% from June.
Homes are still selling fast though, with the average property remaining on the market for 14 days.
Homebuyers are starting to become more cautious when considering purchasing a new home. With interest rates being almost double they were at the beginning of of the year, some buyers cannot qualify for loans or afford the higher rates associated with the interest rate. However, according to Freddie Mac, the 30-year fixed rate mortgage rate was 5.41% in July, down from 5.52% in June.
As the market continues to cool down, buyers might see favorable conditions again. Potential buyers searching for a home could expect less competition when making offers and more homes to choose from. Contingencies might also be accepted again, leading to a more balanced market.
The bottom line is that mortgage rates have dropped marginally, inventory has increased slightly, and buyers should continue to be cautious and patient when purchasing a new home.
Virtual property? Real estate in the Metaverse
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As a kid, we probably envisioned our futures much like The Jetsons with flying cars and houses that appear like skyscrapers out of the clouds. While we still might be a long way off from flying cars, real estate is starting to thrive in the metaverse.
In the metaverse, the engaging and fascinating virtual world universe, investors are starting to buy up virtual real estate. The metaverse provides a virtual reality where we can live, work, and play with others. If you’ve ever wanted to live next door to a celebrity like Snopp Dogg, virtual real estate is your chance.
Companies like Facebook (known now as Meta) are helping to spark interest in owning property in the virtual world. Virtual real estate is growing so rapidly, Technavio Research says the virtual real estate market is expected to grow by $5.37 billion through 2026.
Why Invest in Virtual Real Estate?
Technology and our digital world will continue to grow and because of this, investors are hoping virtual real estate will be a good investment. The property, or parcel, you own in the digital world can be used for a myriad of purposes.
Depending on the type of virtual real estate you purchase, you can design and build structures, host interactive experiences like concerts and games, or even turn it into a marketplace to sell any assets.
Reader’s Digest states, “Owning digital real estate effectively gives you a place in the metaverse that you can call home.” The metaverse allows you to meet and interact with other players, which could leverage itself into buying, selling, or trading digital real estate just like you do in the real world.
How Do I Buy Metaverse Real Estate?
In order to purchase virtual real estate, you will need to do the following:
- Create a digital wallet to hold your cryptocurrency. Make sure to keep your wallet’s secret keys and passwords in a safe place and never share them with anyone else. Also be mindful of the type of cryptocurrency your platform (where you purchase your virtual real estate) accepts.
- Research virtual real estate by looking at several different platforms and viewing the market prices available in those platforms. Some platforms are The Sandbox, Decentraland, and Voxels. While most of these platforms are suitable for gamers, you do not have to play games in order to invest in virtual real estate.
- Once you’ve found a parcel of virtual land you want to invest in, purchase enough cryptocurrency to keep in your wallet. After you’ve purchased your virtual real estate, you will receive an NFT of your metaverse property.
Just like with buying and selling real estate in the real world, metaverse real estate can also have risks. Because the metaverse is still in the early stages, there is room for growth which could lead to potential gains in the future. However, digital properties and cryptocurrency values are constantly changing. Make sure to do plenty of research if you are looking to take the leap into virtual real estate.
Taking Control of Your Yard Before Putting Your House on the Market
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We’ve all heard the saying “First impressions matter” when meeting someone new, but did you know the same applies to your house? The landscaping of your home can influence potential buyers’ opinions since it is the first view they have when looking at your property.
If you’re about to list your home, enhancing your curb appeal will not only make your home more attractive to potential buyers, but it could also add value to your home.
Before putting your home on the market, consider some of these tips.
- Add or Replenish Any Mulch in Your Landscape Beds
Landscape beds offer a great chance to increase your home’s curb appeal by drawing attention to potential buyers. Enhancing the appearance of your landscape beds can make a huge difference, especially if you add or replace the mulch.
Mulch comes in a variety of types that can fit the aesthetic of your yard: straw, wood chips, shredded bark, and more. The color and type of mulch you use can contrast any surrounding plants and flowers and make everything stand out more. Mulch also has several positive aspects as it’s relatively cheap, easy to apply, and offers health benefits to your plants.
- Incorporate Colorful Flowers in Your Landscape Beds
Adding colorful flowers to your landscape beds can also make your yard stand out against others. Consider planting seasonal flowers in your landscape beds before listing your property. Some seasonal flowers that are perfect for fall are mums, sunflowers, and black-eyed Susans.
- Trim Trees and Bushes
Make sure potential buyers can actually see your home by trimming any trees and bushes. This will also allow more light into your home. Trimming any dead branches and shaping up bushes will show your yard is well-maintained.
If you have any small plants in your landscape beds, consider trimming them as well. Doing so will eliminate overgrowth and help keep them in their intended shape. Keeping your landscape beds edged will also give off a clean appearance.
- Clean Water Features
Decorative water features can certainly draw attention to potential buyers. Make sure to keep the water clean and scrub off any visible algae, remove any dead leaves or debris, and replace the filter if available.
- Fix Irrigation Issues
Fixing any existing issues with your irrigation system will help potential buyers. While it can be costly, knowing there aren’t any problems will put potential buyers at ease. Make sure to provide them with any instructions on the system.
- Powerwash Dirty Areas
If the exterior of your home has any paved walkways, fences, vinyl, or brick it might be worth your time and money to power wash this areas to make them look brand new.
- Maintain Your Lawn
One of the best ways to take control of your yard is to maintain your lawn. Keep the yard mowed and weeds pulled to maintain an attractive appearance and desirability of your home.
Remember that first impressions are everything and curb appeal is what potential buyers notice first when looking at homes.
Five Incredible Southeast Cities for Millennial Homebuyers
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Millennial homebuyers looking for southern charm and hospitality can easily find them in cities like Raleigh, Asheville, Franklin, Savannah, and Richmond. Each is unique and has a distinct appeal. The biggest challenge will be choosing which one to explore!
- Raleigh, NC
With its diverse neighborhoods, history, great schools (Duke, UNC, and NC State), and job growth North Carolina’s capital city offers something for all millennial homebuyers.
If you love visiting museums, Raleigh boasts three free, state funded options – the NC Museum of Art, the NC Museum of History, and the NC Museum of Natural Sciences. Raleigh is also home to several live music venues for small or large audiences, bringing in various types of entertainment for all crowds.
Sporting events also play a major role in the lifestyle of Raleigh residents. There are plenty of games to choose from with the surrounding universities, not to mention Raleigh is home to NHL’s Carolina Hurricanes.
There are also plenty of dining, shopping, and outdoor activities throughout the City of Oaks, making this capital city an ideal place for millennials.
- Asheville, NC
Nestled in North Carolina’s Blue Ridge Mountains, Asheville is a city that gives off a small town vibe with all the amenities one would need. Asheville’s downtown is known for its restaurants, art galleries, and shops with many events happening throughout the year.
If you’re a self-proclaimed beer enthusiast, Asheville is indeed the place for you with more breweries per capita than anywhere in the U.S. Outdoor adventurists can also revel in the many hiking and biking trails in the area with Pisgah National Forest nearby. You can also enjoy a scenic drive on the Blue Ridge Parkway or tour America’s largest home, the Biltmore.
If you’re looking for a city that’s animal friendly and full of culture, Asheville is the place for you!
- Franklin, TN
Located 20 miles from Nashville, Franklin, TN is an idyllic city bustling with a vibrant downtown and economic growth. Home to many health-care businesses and corporate headquarters such as Mitsubushi Motors and Nissan, Franklin continues to see a job market increase which is good news for millennial homebuyers.
Residents in Franklin enjoy exploring The Factory, a former stove factory, that houses local shops, eateries, and entertainment. There are also plenty of historical and cultural sites to explore ranging from historic homes to farms to beautiful architecture in the downtown area.
- Savannah, GA
Savannah is a charismatic southern city with tons of history and activities. It’s also an incredibly walkable city, making errands a breeze. If you value one-of-a-kind homes, Savannah has plenty of historic properties with stunning Greek or Gothic details.
Living in Savannah also has the benefit of being near the coast. For those who enjoy watersports or recreational activities near the beach, look no further! The art scene is also impressive with nearby Savannah College of Art and Design.
- Richmond, VA
Another capital city on the list is Richmond,VA. With its cobblestone streets and history at every corner, Richmond is full of amazing restaurants, museums, and its proximity to D.C. makes for fun weekend trips.
Richmond is a dynamic city with amazing views of the James River. It’s also home to several universities like VCU and The University of Richmond, providing the city with diverse neighborhoods full of cool shops and entertainment venues.
Wild Homes: The Shire on the Lake
Image via Berkshire Hathaway Home Services
If you’ve ever thought about living like a hobbit but won’t be able to jet out to New Zealand anytime soon, The Thatch House in Charlevoix, Michigan might be the spot for you. Unlike a typical hobbit hole, though, this “mushroom house” marries cozy comfort with modern luxury.
The charming villa boasts six bedrooms and five bathrooms and includes some unique amenities, including a sitting area with a view of Lake Michigan, right across the street. With a home theater, several fireplaces, and a large dining room table, The Thatch House is a great space for entertaining – whether it’s invited friends or a horde of hungry dwarves brought upon by a wizard with a quest.
Image via Berkshire Hathaway Home Services
The original builder is nearly as fascinating as the home itself. Earl Young didn’t use blueprints; instead, he took inspiration from the surroundings, both for the shape of the home and for the building materials. He inspired a series of “mushroom houses”, although The Thatch House was his first home and didn’t fully encompass this whimsical, fantasy style until its redesign by Michael Seitz.
Image via Berkshire Hathaway Home Services
If the main house isn’t reminiscent enough like a Hobbiton for your tastes, there’s an accompanying chalet with one master bedroom and a loft with twin beds that mirrors the style of The Thatch House: lots of exposed stone with rustic wood furnishings.
The Thatch House is within easy walking distance of several other mushroom houses, so those with an interest in quirky architecture may enjoy one of the several walking tours available. It’s also within a few steps of the sandy beach shores of Lake Michigan and a scant five minutes from downtown shopping, as well as the local marina.
Image via Berkshire Hathaway Home Services
If you ever find yourself in Charlevoix, a few hours northwest of Detroit, The Thatch House may be worth a visit. If you’re lucky, you might even be invited in for a second breakfast.
The Slowing Real Estate Market’s Effect on Small Businesses
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Although it might be obvious that large construction companies would be in less demand with new home construction declining, some consumers may not be aware of the significant impact the downturn in the real estate industry has had on their local small businesses.
The US housing market finally began to slow down in May after two years of unprecedented rapid growth. By June, the typical US family could only afford about 43% of the new homes being built. In July, new home sales had decreased to 2016 levels. Even existing homes are down almost 6%, at the lowest level in two years, while the prices have continued to increase.
The Federal Reserve, voicing concerns about inflation, began to increase interest rates in the hopes of avoiding a recession, upping the rate by .75% in June. This increased cost in borrowing money likely tamped down potential homebuyers’ desires for bigger and better real estate. The days of buyers going under contract sight unseen are waning, and this creates a ripple across the home-building and renovation industries.
As the housing market cools, homeowners have less incentive to renovate and improve their homes. Coupled with this, inflation is causing the costs and availability of materials to increase dramatically. Over the past year, construction businesses have seen some materials costs jump as much as 200%, and the average year-over-year increase may be as much as a 20% increase. These twin factors have caused a perfect storm for hesitancy among homeowners looking to renovate, buy, or build.
This cooling off of interest in construction has recently been dubbed a “housing recession”. Builders, landscapers, and other small businesses related to improving homes for sale have had to lower prices in order to keep customers on their books, and their confidence in the market is taking a hit. Builder confidence has fallen every month in 2022, and is now below the 50-point mark into negative territory. The last time this measure wasn’t positive was June of 2014.
So, what are small construction businesses doing while facing down the possibility of a market that may continue to decline into 2023? One option is changing the type of work that is the focus of their activity. Bill Albritton of Albritton Custom Carpentry in Charlotte, North Carolina is now doing more “kitchen facelifts”, a service that costs significantly less than installing custom cabinets from scratch.
Another choice small construction companies might make to remain competitive with large firms that offer comprehensive building and remodeling services is to join up with complementary businesses to offer consumers more value. A landscaping company could join forces with a woodworker to design and create a new deck and custom patio with the shade trees and soft grass the client desires. Innovative connections like these may be the best way for small businesses to thrive during a housing market in decline.
For those businesses watching housing prices and the costs of building materials closely, the recent downturn might be concerning. Those creative business owners who find new ways to generate a steady income stream are likely to be the ones best able to weather the storm.
What Investors need to know about Opportunity Zones
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Back in 2017, the Tax Cuts and Jobs Act was designed to create jobs and develop communities. One element of the act was identifying areas that needed more attention for economic growth; these are dubbed “opportunity zones”. In order to incentivize investment in these areas, the Department of the Treasury has created some tax benefits for these qualified opportunity zones, or QOZs.
To invest in a QOZ, investors can participate in a qualified opportunity fund, or QOF. Most people could invest in an opportunity zone, but only those making over $200,000 per year or with a net worth over $1 million are eligible to invest in a qualified opportunity fund. Before diving in, investors should know about these kinds of investments.
The benefits of the QOZ are clear, as the QOF invests in the real estate and businesses in the zone, but what is the benefit to the taxpayer with their money in the QOF? For one thing, investors can defer tax on their capital gains by setting it up in a QOF, waiting up to five years to pay it. For taxpayers who hold their investment in a QOF for ten years, any of their investment gains will be totally tax free at the end of that period.
Any real estate investment carries risks, but a knowledgeable investor who carefully reads the information detailing the expectations of a particular fund should be well-equipped to determine if it’s worth the risk. Another reason a taxpayer may not want to take advantage of the tax benefits of a QOF is that some states don’t participate. So, an investor could still benefit from the federal tax deferral, but they’d be required to pay state tax.
Eligible taxpayers should check with their tax and investment advisor to determine whether investing in a qualified opportunity zone would be beneficial to their portfolio. If deferring capital gains tax is of use, investing in an area struggling economically could be a way to do some good while reaping benefits for yourself.
Why Tampa Bay is in the Top Ten Cities for Investors
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For three months in 2021, a quarter of home purchases were made by investors, not individual homeowners. Investor sales have gone up and back down since then, but investors are still almost 25% of the market as of the first quarter of 2022. So what makes the city so attractive?
As with most questions of real estate, a lot of Tampa’s appeal comes down to location, location, location. On Florida’s Gulf Coast, Tampa is a major port city and therefore attracts overseas investors who may want to control more aspects of their import business. Even if shipping isn’t your thing, Tampa is a relatively short drive from three international airports, so foreign business and tourism is easy to accommodate there.
The infrastructure for business is robust here as well, with job growth continuing to rise, even when it’s slowing in other places. Travel and tourism is a major growth leader, of course, but Tampa has also seen expansion in tech, healthcare, and education. Plenty of jobs and housing prices expected to continue to grow for another year make this coastal city an ideal location for investment.
Many investors in Florida are paying cash for their properties, eliminating concerns about a mortgage and therefore mortgage interest. The local populace may actually appreciate some of the investment activity these days. Since the Federal Reserve has been increasing interest rates, some potential homebuyers are priced out of purchasing a home. Investors can offer rental properties at affordable rates until the market cools down enough.
Population growth is another factor investors likely consider when looking at Hillsborough County. The population is forecast to grow 3.3% each year over the next few years, and the population tends to come from a wide array of backgrounds. Many Tampa inhabitants are multilingual, with residents from over 130 nationalities.
With rivers, beaches, and virtually no days without sun, Tampa can be a very desirable location for investors looking to rent out properties to sun-seekers. Economic growth indicators are still favorable in this part of Florida, so whether investors are in it for business or pleasure – or the business of pleasure – they are likely to be able to find something that will suit their needs in Tampa.
Should I build a tiny house on my land in North Carolina?
This section includes real questions from real homesellers, plus our answers.
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I’m considering building a tiny house on a piece of land I inherited near Raleigh, NC. Right now, the piece of property is sitting empty, but I think I can do more with it. I came close to selling it last year, but ultimately sentimentality won out. These three acres were owned by my uncle, who left them to me when he passed away two years ago. There’s a little pond on the edge that I remember him taking me fishing in when I was a kid.
The Triangle is constantly growing, and this property is near Knightdale. When we used to fish there decades ago, it was out in the middle of nowhere. Now there are developments everywhere around it and the location is more or less considered to be “in town” now.
Though I don’t want to sell it because it’s an inherited property, I don’t want to do anything with it. I’m thinking I could build a tiny house on it for little money, overlooking the pond, then do short term rentals so that my extended family and I can come rent it as a way to remember him.
Is this even a good idea? I’ve done lots of research into tiny houses, but I can’t seem to find out if this would be a wise investment.
– Fishing for advice in Raleigh
First off, let me offer my condolences on your uncle’s passing. Losing a loved one is never easy, and you’re clearly trying to preserve a piece of him with this transaction. That’s worth doing. Given that you own land in North Carolina, and particularly given that it’s somewhere in demand like Raleigh, NC, a tiny home is certainly a viable option. Let’s look at the benefits and the pitfalls of building a tiny house on your land.
One of the first considerations should be about infrastructure: what do you want, and what is available? If the impetus behind building a tiny home is to save on construction costs, you may reconsider if you’ll have to pay for new sewer, water, electricity, and internet to what might be a rural area. If you build something that is “off the grid” or make use of a septic system rather than city sewer, the costs will be lower. The flipside is that the value will also be considerably lower, both in terms of rental and resale.
Although tiny homes are legal in North Carolina, some places have more restrictions than others, including whether or not the home can be on wheels. You’ll definitely want to look into what the codes are in Knightdale.
Tiny homes can be a great entry point for a more sustainable, less cluttered lifestyle. In your case, it would allow you to preserve the land and legacy of your family while still improving the property. The tiny home community is also highly connected and will offer you a good place to go for support as you work to market it as a rental. Be sure to look into the hidden costs of building and maintaining a tiny home on your property, but it’s absolutely worth investing in. Good luck!