Giving thanks, post-turkey

At this point I hope all of you are coming back to real life after enjoying a serene long weekend, full of good food, good company, and the counting of blessings. 
 
I know I did. On Thursday, I joined a group – a combination of family members and long-time friends – for the big dinner. Everyone contributed to the meal and, of course, I did the cocktails. We’ve been doing this yearly for more than a decade. I love this group. 
 
This was followed on Friday with a family visit to Cheekwood and lunch at Wendell Smith’s (always beyond merely delicious) and on Saturday with a family birthday dinner – for my 71st. Wow!
 
On top of all this, I’m about to become a grandfather for the first time, and I still have the best job in the whole world.
 
Simple stuff, all of it. Yet sometimes I can’t quite believe that after 71 years on this planet, I have so much to celebrate and look forward to!
 
So, how do we tie this to real estate? Let’s celebrate the simple things …

Less frenzy
Now that things have slowed down, life’s a bit kinder and gentler. As I wrote last month, buyers likely won’t have to make a life-changing purchase decision based on a 15-minute showing and a frantic call to their lender. For sellers, the market is still strong. If a house is priced right it will sell, and unless it was bought it in the past 15 minutes, it’s highly unlikely a seller will lose money on the deal. Plus, we realtors get a chance to actually pause and catch our breath. Everybody wins. Isn’t that a good thing!

Lower mortgage rates
It’s not a big one yet, but a drop from over 7% to the mid-6% range increases buyers’ purchasing power.  The rule of thumb is that every 1% change – up or down – in the rate means a change of 10% in what a buyer can afford. So, this week buyers can afford 7-10% more than they could a couple of weeks ago. Isn’t that a good thing!
 
Balance
It’s really not in anyone’s best interest to have a seriously out-of-balance market like ours has been recently. Frantic bidding wars, split-second decision making, and eye-popping, greed-inducing price increases lead to market distortions that don’t serve anyone in the long term. Yet, while things have slowed down, Nashville is still growing and demand remains strong. Sellers still sell, buyers still buy, and we can all calm down. Isn’t that a good thing!

Surfing the Wave

Wow! Change and uncertainty continue to continue in the residential real estate world these days.

Interest rates higher than we’ve seen in decades! Houses “lingering” on the market – going unsold for days! Even weeks! Zero traffic at Sunday open houses! Sellers holding back, waiting for higher prices. Buyers holding back, waiting for lower rates. Prices going up? Going down? Going where … ?

How do we surf this wave without a big wipeout?

Well, I have a few thoughts.

Are prices going down? In absolute terms, no. Or at least not yet. If you bought your house at least 12 months ago, it would likely sell for more than you paid for it. Yes, we see a lot of price reductions on active listings these days. Most of these were likely priced aggressively, expecting the multiple-offer stampede of six months ago. And that’s no longer happening.

Will they go down? Maybe. Time will tell, but it’s unlikely – at least in our market. Supply and demand remain out of balance and that won’t change any time soon. And people keep moving to Nashville. This is still a seller’s market.

What about these interest rates? Yes, they have sorta doubled in the past couple of months, and that’s been a big shock – especially to folks who’ve never experienced anything but the ultra-low rates we’ve seen in recent years. But, over the long haul, rates in the 7% range are only medium. I got my first mortgage in 1978 at 8.9% – and that was considered a great deal. Within a year, rates had gone into double digits and didn’t go back to single digits for nearly a decade. So, are these rates too high? Meh. I’ve seen worse.

Is this a good time to sell? Of course it is. It’s not good a time to pull a price out of the air and expect to get 10 buyers scrambling to offer more than that. But, if you want or need to sell a house, price it realistically and it will sell. There is still more demand than there is supply.

Or to buy? Do you need a place to live? If so, there’s no time like the present. Yes, interest rates have changed the game, but 7% is not usury. And these days buyers have a little breathing room. You probably won’t have to make a life-changing purchase decision based on a 15-minute showing and a frantic call to your lender. So, just do it! lt’s always smarter to pay on your own mortgage than to pay rent and thereby pay someone else’s. And remember this: buy the house, date the rate. If rates drop you can refinance.

Define “normal” ...

Wow! Big changes in the real estate world over this summer! The sudden sharp rise in interest rates has caused all sorts of shifts in lender, buyer, and seller behaviors. What one hears most often among realtors lately is that we are returning to a “normal” market. 
 
But how do we define “normal”?
 
Well, the stats from August do tell a tale. As you can see below, in Davidson, Williamson, and Sumner Counties, inventory is up and sales numbers are down. The ratio of sale price to asking price has gone from a point or two over asking in early summer to a point or two below asking last month. The situation is identical all across Middle Tennessee.

What we’ve seen in the past four years is certainly unusual. Mortgage interest below 3%, bidding wars on virtually every listing, houses selling within two or three days, offers going well above appraisal value and the resulting need for appraisal gap guarantees. Delighted sellers sifting through a stack of offers. Depressed, bedraggled buyers, finally getting a house on the third or fifth or seventh offer – long after the thrill has worn off. Taking the long view, these conditions are certainly not typical.

Now things are cooling off. Interest rates are in the high 5% to low 6% range. Houses are staying on the market longer and buyers have the chance to weigh options. The bidding wars have largely ceased and sale prices are no longer averaging above asking prices. Increased interest rates have decreased buyers' purchasing power and the upward pressure on prices has declined. More typical of how things have been over the past 50 years or so.

So, was the former situation abnormal? And is the current situation normal? My answer is this: they are both normal.

Residential real estate is about as pure an example of supply and demand economics as you can find. Low supply and high demand drive prices upward. And visa versa. Things are worth exactly what people will pay for them – not a penny more, nor a penny less. So, everything described above is perfectly normal. Things are functioning as they should. Unusual doesn’t mean abnormal.

So what do we do with this? I say: take a deep breath and proceed as if nothing is wrong. Because nothing is wrong. Like all areas of life, the real estate market is subject to all sorts of external pressures, and nothing is constant but change.

And always remember that a house is first and foremost a place to live your life. Over the long haul you will likely make money on your investment – but you may not. And that’s where the “place to live” factor kicks in. Life is about so much more than dollars and cents.

It Takes a Village

I went to a memorial service last week. It was tough at times – as these events usually are – but at the same time, it was enlightening and, in a certain way, gratifying.

Jenn Garrett, a realtor and broker who had been with Village for decades, died after a year-long battle with a rare cancer. The turnout for the memorial service was huge. Jenn was well-liked in the community at large, and many of her friends from all sorts of connections were there. But there was an even larger contingent – Village realtors and others with Village connections.

Funerals are, of course, for the living. Among Jenn’s survivors are her brother, Teddy, a busy and successful Village realtor, and her mother Bobbie, for many years principal broker at Village and the guiding light for hundreds, if not thousands, of successful realtors both at Village and beyond. To Bobbie and her guidance, I owe at least 90% of my success.

After the service, the line waiting to share a word and a hug with Bobbie and Teddy was, at times, more than 30 people long – all waiting patiently. Both tears and laughs were shared. It was an honor to be a part of this crowd.

What does this say about real estate in general and Village in particular? I have a few thoughts. 

 It’s about life – in all its dimensions
The practice of real estate touches every facet of life. Birth, death, marriage, divorce, business success, business failure, departures, arrivals – any and all these things can come up in a real estate deal. It’s essential to remember that this is about so much more than dollars and cents. A home is where life unfolds – in all its ups and downs. And realtors are here to deal with it all.

Realtors take care of people
Despite what some say about realtors taking up too much space and not adding any value, we earn our keep by taking care of people – helping them get what they need, when and where they need it. It’s hard work, but so rewarding! You won’t find a successful realtor anywhere who doesn’t enjoy people and care about helping others.

At Village we look after our own
The huge crowd who came out to honor Jenn’s life and support her family makes it plain – Village is not just a business. It’s a big bunch of fundamentally kind and decent people, who are busy, but not too busy to step up and offer a hand to others.

In my rookie weeks as a realtor, I was in Bobbie’s basic training course at Village, and she said that real estate is a caring profession – like nursing. At the time, I thought she was nuts. But I have never forgotten that statement, and over the years, I have learned how very true it is.

Living in the Moment

I’m a big fan of Eckhart Tolle and his book The Power of Now. I’ve read it three times. And I’ll doubtless read it again. Were I to boil this book – and all Tolle’s other writings, and the wirings of others who think like him – down into one sentence, it would be this: Live in the moment – the right now – because the past is gone and the future isn’t here yet.

Expanding on that a bit, the right now is all we ever have. Too many of us, myself included at times, spend way too much time and energy dreaming of or regretting the past, and anticipating or worrying about the future. So much so that we often miss the magic in the current moment.

How does this apply to a real estate market in the throws of rapid change? As usual, I have a few thoughts …

The only constant is change
Nothing stays the same for long. At this moment, with mortgage interest having nearly doubled in recent months, we are shifting from an extreme sellers’ market to a more balanced market. A lot of buyers have been deterred – if not scared away – and prices are softening. But demand is still high and inventory is still low. And people who claim expertise are predicting interest rates will settle down in the low 4% range. So, what do these mixed signals mean? Since a real estate license doesn’t come with psychic powers, I say it means we deal with what’s happening in the right now.

Know what you want and what you need
I’m not sure there is ever a time for a casual, tire-kicking approach to residential real estate, but whatever the case, this probably isn’t it. As things shift and change, the one thing that you can hold constant is your objective. Buy, sell, both? Timeline? Financial limits and imperatives? Get all this decided for your current situation and hold on tight. And if your current situation changes, adjust.

Surf the wave
Once you have your wants and needs decided, go out there (with your relator, of course) and work it – as the moment requires. Don’t like the interest rates? Remember that you’re marrying the house, but only dating the rate. If rates go down, you can re-finance. If they go up, you can rejoice that you locked in where you did. See a house you really want? Grab it! Go all out and get it now. If you hesitate you may not ever get the chance again. And don’t look back. Woulda, shoulda, coulda thinking will make you unhappy – and might cause brain damage.

And always know that a good realtor is also living in the moment, ready to roll whenever you are.