6 Tips to Start Prepping Your Home for the Market

    So, you’re thinking about putting your home on the market and want to know what you can do to make it more appealing to buyers.  One of the biggest concerns for potential sellers is that their home may sit because buyers may not find it appealing.  Here are 6 relatively easy things that you can do right now to begin to get your home prepared to sell.   Number 1 is improving curb appeal.  That means paying attention to landscaping and exterior lighting, especially on the front of the house.  Power washing your house and any decks or driveways is a great start, and having your house painted, or even just the front door so it pops is even better.  Trimming trees, bushes and plants, moving the lawn, planting flowers, adding mulch, or just generally adding color are all things that you can do to enhance curb appeal.  One item to note is that from a home upgrade standpoint, adding a stone veneer to the home and replacing the garage door had the best ROI of any type of upgrade according to a Remodeling cost vs. value report.  Like everything else in life, making a good first impression is very important, and that’s what curb appeal is all about.   Number 2 is decluttering your home, especially by removing personal effects.  Buyers want to see a blank canvas with space and storage, that means open space is at a premium.  They also need to envision themselves living there, which is much harder to do when surrounded by the owner’s personal items.  A good way to do this is to think of it as spring cleaning on steroids.  Donate or toss anything you don’t want to keep, and pack everything else up into boxes.  You can store them in the garage.   The 3rd thing is to have your home deep cleaned, ideally by a professional cleaning crew.  A clean home presents well, whereas one of the easiest ways to turn off potential buyers is for the home to be dirty.  Just imagine how you feel if you walk into a hotel room and it’s clear that the room wasn’t properly cleaned.  Do you want to stay?   Number 4 is similar to number 3 – you need to make sure your home is well lit.  An easy way to do this is to replace lightbulbs with brighter LED lights.  A dingy lit space does not present well, just think of the hotel example, a bright, well-lit room is much more inviting than a dingy, dimly lit room.   The 5th thing is to make basic cosmetic updates to bring the home to the present.  These include replacing outdated light fixtures, door knobs, cabinet handles, shower fixtures and those types of things.  Modernizing those types of things are expected by buyers and are relatively easy to do.   The 6th thing is to get new appliances.  Not only will you enjoy them while you have them, but they create a more modern feel to the home.  A dated fridge, stove or washer and dryer can really turn off buyers and give a bad impression.   These 6 things will help put you on the path toward getting your home to show its best.  If you do decide that you want to sell, you’ll want to talk to your Realtor® about the next steps to take to get your home market ready.  Those things may include interior painting, replacing flooring, upgrading kitchen countertops and cabinets, bathroom vanities and hiring a stager.  One thing to make sure, though, is that any upgrades that you make in preparation to sell the home actually add value to the purchase price and create a consistent experience throughout the home for a buyer.  

To Sell or Not To Sell?

  There are many factors that go into the decision about whether to sell your home.  Perhaps you need to relocate for work, maybe your family is growing and you need more space or you just think you want a change of scenery.  Whatever the reason, the prospect of selling your home can be daunting and emotional.  In fact, a recent survey found that 36% of sellers say the process broke them down to tears.   Even if you’ve decided to move, there are options to consider besides selling your home.  Perhaps, the biggest option is renting out the old place to create a stream of income.  This option is much more viable if the mortgage on your current home is fully paid off, or if the monthly payments are low enough that you can comfortably carry two mortgages.  Renting out existing properties is a great way to build wealth and, depending on the financial circumstances, can really open some doors for the new property that you’re buying.  If the current home isn’t paid off and the mortgage payments are substantial, renting may be a non-starter because it could make it challenging to afford the new home.   Another benefit to selling is using the equity that you’ve built in your current home to help with the down payment on the new home, or if you’re downsizing, you could potentially use your equity to fund all or most of the purchase of your new home.   Many people are also considering selling to take advantage of the appreciation of the market, and to sell at the top of the market.  If you’re staying in the same area, one thing to be cautious about is that other homes have likely appreciated at similar rates to your own, so scouting the market as to what you can afford is important to make sure you’re getting the upgrade that you want.   Lastly, financing the purchase of your new home should be a consideration.  If you need funds from the sale of your current home to buy your new home, there are several options.  These include getting a bridge loan and buying first, negotiating a short rent back with the buyers or making the sale of your home contingent upon purchasing a replacement property.  All of these options have pros and cons.  Bridge loans can be very expensive, especially if it takes a long time to sell your home and rent backs and contingencies can reduce the number of interested buyers, many of whom could be in the same situation as you.  One other option on the buy side is buying first and including a sale of property contingency, but in strong seller’s markets that contingency would severely weaken your offer.      

Will Rising Interest Rates Cause a Crash in the Housing Market?

  Interest rates are going through the roof just in time for the Spring housing season, does that mean the market here in the Bay Area is finally shifting?    The short answer to whether a market shift or collapse is coming to the Bay Area housing market is no.  Especially not anytime soon.  While many casual observers are seeing a housing bubble In the Bay Area much like prior to the subprime crisis in 2008, the reality is that the fundamentals now are completely different now than they were in 2008.   Let’s start with supply and demand.  In order for the market to reverse there will need to be some combination of a substantial increase of supply and a significant reduction in demand.    To put into perspective where things are right now, let’s look at the absorption rate which is the best measure of supply and demand in real estate.  The absorption rate measures the number of sales against the number of available properties in a given period, with any rate in excess of 33% generally defined as a seller’s market.  In March, the absorption rate in San Mateo and Santa Clara counties for pended sales closed the first quarter at 128.3%, soaring to 175.2% in March.   The last time the quarterly absorption rate fell below 33% in those combined counties was in 2011.  As the absorption rate shows, a substantial amount of upheaval in the current market will need to take place to change the dynamics of the market.   Given that, let’s take a look at interest rates.  As of April 11th the average 30 year fixed mortgage rate sits at 5.25% according to Mortgage News Daily.  That’s up over full point in just a month and marks only the second time the rate has exceeded 5 percent since 2011.    The jump in interest rates has been swift and was triggered by a quarter point increase of the federal funds rate by the Federal Reserve in March.  Buckle your seatbelts because the Federal Open Market Committee now expects to raise the rate at each of its six remaining meetings this year.    So, are the rising interest rates enough to cause an upheaval in the market?  There will certainly be an impact on the demand side, but let’s look first at the supply side where inventory is currently extremely low and has been trending downward. Year over year monthly inventory throughout the Bay Area has fallen 27 months in a row.   Let’s compare with what happened in 2008.  In 2008, there was an influx of supply that hit the market due to foreclosures and short sales and demand simultaneously dried up as subprime lenders collapsed and access to credit became harder.  Mortgage rates throughout the 2000s were between 5 and 7 percent, much higher than they have been for the last decade, particularly recently where we have seen record lows within the last 2 years.  In the 2000s risky adjustable rate mortgages with balloon payments were prevalent, they are not right now.   In stark contrast to the last bubble, homeowners now are predominantly locked into fixed rate mortgages at record low rates as many have taken advantage of refinancing opportunities.  Due to appreciation and enhanced lending standards, most homeowners now hold a substantial amount of equity in their homes.    In 2008 many homeowners were underwater and facing balloon payments that they couldn’t afford.  In contrast, today, homeowners have substantial home equity and are locked into mortgage payments that are well below the current market rate.  In essence, many are locked into a standard of living that they wouldn’t be able to afford on the open market.    With no external pressure to sell, the question becomes, where is the additional supply going to come from?  Sellers who need to finance a new property will likely face paying rates 3 plus points higher than their current payment, plus the possibility of a large capital gains tax bill.  In that aspect, the interest rates could potentially depress supply.  Sellers moving out of the Bay Area to cheaper markets are the strongest candidates to sell, but that’s already the case.  Same with sellers looking to downsize and use their equity to pay cash on their new property.  Perhaps others could sell to gain access to liquidity given the high rates and investors could take advantage of 1031 exchange sales.  Even so, a large increase in inventory doesn’t appear to be forthcoming.   On the demand side, the people who are most impacted by the rate increases are buyers who need financing to enter the market or move to a more expensive house.  These are precisely the people who are disproportionately losing out currently in bidding wars, and the rates may push these people out of the market, and perhaps out of the area completely.    Some buyers looking to purchase second or third homes by taking advantage of low interest rates which was a feature, particularly during the pandemic will likely leave the market as well, those a good number of these buyers could choose to pay cash for these homes.   While the exodus of these buyers from the market will soften it somewhat, given that supply is likely to remain extremely low, how much of an impact will it truly have?  Investors who have been very active recently figure to continue to be active because real estate is considered a good hedge on inflation.   On a broad scale, while I expect absorption rates to fall as interest rates increase and the pace of home appreciation to slow, I don’t expect there to be a major correction in the housing market.  There’s simply too little supply and too much intrinsic demand here in the Bay Area.  I do expect the market to soften, and potentially decline in some areas as a result of the interest rate increases.  Areas of the Bay Area with lower general demand, particularly those where demand is high for second and third homes could soften.  The condo market, which is already comparatively weak, is likely to soften significantly.  Some areas in the East Bay which are the tip of the spear for entry level home buyers may also suffer from reduced demand.   For buyers who are looking to get in the market, I strongly encourage you not to wait hoping for the market to crash.  If you can afford to buy now, you should do so and get in the market before the increasing rates price you out completely.  Interest rates are trending upward and will continue to do so for the foreseeable future.  While today’s 5 percent rate doesn’t look good compared to the rates in the 2 percent range last summer, it is likely to look pretty good by the end of this year where rates could be in the 7 percent range.   Sellers remain in the driver’s seat.  Due to changing market conditions I wouldn’t expect the same rate of appreciation over the last few years, particularly on entry-level homes.  If you have an entry-level home, now may be a time to consider selling as you’re close to the top of the market, but it depends on your cash position and your goals.  If you’re thinking about leaving the area, now is the ideal time to sell in my opinion.  At this point, if you sell, you will get a premium for your home.