Homebuilders are poised for a strong next few months if recent history is any guide, based on data published last week by the U.S. Census Bureau and the Department of Housing and Urban Development.
Fall months in recent years have yielded higher home prices and less time on market for new homes than the rest of the year, with last September and October setting records in both categories.
As September approaches, 2023 is already showing tighter housing inventory for new homes and boasting more new home sales than 2022, which could bode well for homebuilders.
New homes typically lasted on the market for just a month and a half in September and October last year, based on the median values. That brief duration was the lowest median time on market since the measure was first recorded in 1975.
So far this year, the median time on market for new homes has been lower every month than the respective period in 2022, including July’s median of 2.3 months on market.
The median sales price for new homes has trended higher in each of the last two fall seasons and is trending upward already in 2023.
Last October, the median price reached $496,800, the highest in recorded history going back to 1963. However, this year’s prices have come in below their respective 2022 months since April.
More new home sales
Unlike the median sales price and median months on market, new home sales tend to dip in the fall, at least in recent years. But 2023 sales have significantly outpaced 2022 levels in recent months.
July tallied 59,000 new home sales, 34.1% more than in the same month in 2022. That total imputed a seasonally adjusted annual rate of new home sales of 714,000, up 31.5% year over year.
July was the first month so far this year in which the count of single-family new home starts was higher than the 2022 count. New homes on the market, meanwhile, have been below 2022 levels since April.
Months of supply — the number of months existing new home inventories would last without new supply — has likewise been below 2022 levels since April.
More sales for work started or completed
Homebuilders have worked frenetically since the early months of the pandemic.
The number of new single-family homes for sale fell more than 15% from March to October 2020, but then underwent an almost unbroken two-year streak of increases. This number reached 466,000 homes in October 2022, a 65.8% increase from two years prior.
That pace has moderated but has still remained above 425,000 new single-family homes for sale since then.
Buyers seem to be rewarding the effort, with the percentage of home sales accounted for by homes that have not started construction shrinking from 32% to 13% since January 2021, although that could simply be a function of the increase in new homes that are under construction or completed.
Beyond the trends
Of course, the past is never a perfect predictor of the future, and some homebuilders are skeptical that recent trends will continue. Homebuilder confidence declined for the first time this year in August.
In an effort to keep sales coming, some homebuilders are building smaller, more affordable homes, although some are skeptical that will overcome the headwinds of high mortgage rates.
However, new home sales are helped by even tighter inventories of existing homes, as recent mortgage application data show, and by a sticky housing shortage.
Affordable starter homes for first-time buyers are in great demand this year, leading to shrinking inventories and a competitive market. That means that buyers’ options are limited. This leads to increased competition for those homes that are available, spurring bidding wars and pricing out entry-level buyers.
A recent analysis by Zillow found that there were 8.6 percent fewer homes on the market in January 2016 than a year ago. Sellers have more negotiating power in competitive cities, mostly in the West, where job markets are hot, and demand for housing is heavy.
Buyers competing in a tight market must be prepared. They should get pre-approved for a mortgage and know their maximum price before house shopping so they can make a competitive offer. They should also take another look at their must-have list and decide where they’re willing to compromise, if necessary.
Here are five surefire signs that you are facing a competitive market for buyers.
1. Short time on market.
The fastest and easiest way to tell if sales are hot in your local market is to measure how quickly properties in your price range are selling. You can get a sense of the demand by simply tracking listings on real estate web sites.
A more accurate method is to review “median days on market” data from your local multiple listing service. You may not be able to access this data yourself, but your real estate agent should be able to get it for you. Look at the monthly and the year to year trends for the Zip codes where you are looking. If houses are selling in three months, that is clearly a seller’s market; in two months or less, you are probably looking at a hot, competitive market.
Another measure of demand is called “months’ supply.” It represents the number of months for the current inventory available for sale at the current rate of demand. A months’ supply of six months is considered balanced; the smaller the months’ supply, the hotter the market.
2. Jumps in sales.
An easy way to take your market’s temperature is to compare the current monthly sales rate to one or two years previous. Sales vary seasonally, but not over 5 percent when compared to the same month a year earlier.
If you see sales jump 10 percent or more, your market is taking off, and inventories may not be keeping up with demand, which is going to make it competitive for buyers. Follow local data on Zip codes or neighborhoods available on real estate listing sites, or ask your agent for information on sales trends.
3. List-to-price ratio.
When homes start selling at prices higher than their listing prices, it is a sure bet you are in a competitive market. If the list-to-price ratio is above 100%, the home sold for more than the list price. If it is less than 100%, the home sold for less than the list price.
MLSs make this statistic available to their members on a monthly basis, so you can get the data from your agent. Some also release it publicly. Some real estate web sites report local list-to-price ratios.
4. Deadlines on offers.
When sellers start placing deadlines for offers on their listings, obviously they are expecting more than one bid and they see no reason to extend the selling period. When you see a listing with deadlines, prepare for battle if you want the house.
5. Cash offers.
Cash offers, as opposed to offers financed by mortgages, are very attractive to sellers because they do not have to take the chance that a buyer’s financing will fall through or that an appraisal will come in low, and the seller might be asked to lower the price to save the deal.
In lower tier price ranges, many cash offers come from investors who are planning to flip the house or convert it into a rental. An increase in cash offers are a sign that competition is stiff. MLSs compile data on cash sales in local communities and Zip codes and you can get the information from your agent.
Soaring sales, prices above list, days on the market below two months, months’ supply below four months, cut-off dates—these are signs that buyers will likely face multi-bid situations. Be ready to move fast with the best offer you can make and be patient if the right deal takes months to appear. Even so, never bid on a house you do not like—you might end up living in it for many years to come.
Real estate is local. We hear that constantly, despite being force-fed national housing statistics all the time. But both serve a unique purpose to give us clues about the direction of the overall economy, or just our local housing market.
A new analysis from Trulia broke down time on market by low-price tier, mid-price tier, and high-price tier.
Nationally, they found that homes in the low-price cohort are moving faster than both the mid-price and high-price tiers, which is pretty standard. It’s typically harder to sell an expensive home (fewer eligible buyers).
Overall, 55% of homes listed for sale in mid-February were still on the market, generally a bad sign for the home seller who likely faces a price reduction. Still, that’s down from 56% a year ago.
In the low-price tier, only 49% of homes listed for sale two months ago were still on the market, down from 52% a year earlier.
That compares to 62% in the high-price tier, down just one percent from 63% a year ago.
Put another way, the sale of lower priced homes is accelerating while higher-priced home sales are slowing.
Where Homes Are Selling the Fastest
1. Oakland 2. San Jose 3. San Francisco 4. Denver 5. San Diego 6. Seattle 7. Los Angeles 8. Orange County 9. Sacramento 10. Middlesex County
These are your hot markets at the moment. For the record, none of them are cheap, which kind of bucks the national trend of cheaper homes selling faster, though there are probably fewer listings.
Oakland has been the hottest metro, with just 29% of homes still for sale after being listed for at least two months. That number is down from 31% a year ago.
The biggest year-over-year winner has been Denver, where only 38% of homes were still on the market after at least two months, compared to 47% a year ago.
Interestingly, Denver is hitting new all-time highs in the home price department, which makes you wonder if it’s getting bubbly at high altitude.
Despite Orange County, California making the top 10 list, home sales are actually slowing there, with 45% still on the market after at least two months, compared to 38% a year ago. The same trend is visible in Los Angeles.
Home prices aren’t cheap, which might explain some of the slowdown. They may have also overcorrected.
Where Homes Are Selling the Slowest
1. Richmond, VA 2. Hartford, CT 3. Albany, NY 4. New Haven, CT 5. Long Island, NY 6. Knoxville, TN 7. Springfield MA 8. Columbia, SC 9. Birmingham, AL 10. Greenville, SC
The slowest housing market in mid-April was Richmond, Virginia, where a whopping 72% of homes listed at least two months earlier still hadn’t sold.
That’s up 11% from the 61% share a year earlier. It was followed by Hartford with a 71% share, and Albany, New Haven, and Long Island all at 70%. Perhaps the weather could be to blame…
Interestingly, faster moving markets have had bigger price increases, which seems somewhat counterintuitive.
But the rationale is that these hot markets are able to increase asking prices steadily because demand is so strong. And that demand means fewer homes stay on the market, further allowing for price increases.
Of course, there are limits, and those have been tested in fringy spots like Phoenix and the Inland Empire of California.
Almost everyone has said it or heard it: Existing Home Sales are in the toilet because there’s no inventory and there’s no inventory because no one wants to give up their 3% mortgage when rates are 7%.
“There are simply not enough homes for sale,” according to NAR Chief Economist Lawrence Yun. “The market can easily absorb a doubling of inventory.”
To be sure, more inventory would be a good thing in almost every regard. A doubling of inventory would likely keep prices in check or push them slightly lower, but it might not conjure up as much buying demand as you might assume. Two separate stats in today’s Existing Home Sales data illustrate the point. The first is for inventory in terms of UNITS.
This chart makes it seem as if inventory is in line with all time lows and not building as quickly as it normally does at this time of year. But the takeaway changes a bit when we look at inventory in terms of “months of supply.”
Since it’s not incredibly easy to quickly glean the takeaway from the two charts above, here you go: in terms of units, inventory is nowhere near mid-2020 levels while “months of supply” is well above. Let’s zoom in:
All that to say: inventory alone is only part of the problem. There’s also definitely a demand problem in the housing market, likely due to rates, program availability, and other lesser factors. After all, sales aren’t doing great since attempting to bounce at the beginning of the year.
This is about as low as Existing Sales have been since the mid 90s, with a brief exception for the housing/mortgage meltdown.
With the news this month that the housing market hit a milestone by showing the first year-over-year price decline in recent memory, homeowners who’d considered finally selling their home this year are finding themselves discouraged yet again.
What happened, they might wonder, to the not-so-distant glory days of frantic bidding wars and over-ask offers? Plenty of frustrated owners seem worried that the window for a fast and lucrative home sale might be shutting fast.
But here’s the reality: The U.S. housing market is no monolith. Although it’s true that many of the hottest markets of the past few years have seen prices fall in the wake of higher mortgage interest rates that broadly dampened home shoppers’ buying power, there are still cities where buyers continue to snatch up homes quickly and where sellers are getting their full asking price—or more.
This is why the Realtor.com® data team dug in to find the U.S. real estate markets that most favor sellers. (Sorry, buyers!)
The best places for sellers generally have persistently low housing inventory, strong demand from buyers, and often—but not always—lower prices that have room to swell. These are generally affordable metropolitan areas in the Northeast with a few in the Midwest.
Three of the metros on our list—Hartford, CT, Worcester, MA, and Providence, RI—are so close, you could tour homes in all of them in a single day. Our ranking also has one spot in the South and a somewhat bizarre outlier in California—more on that later.
To figure out if an area is a buyer’s or seller’s market, Pamela Ermen likes to track the change in the number of closed sales per month, compared with the change in the number of new listings per month.
“When sales are going up and inventory is going down, that’s a real seller’s market,” says Ermen, a Virginia Beach–based Realtor® at Re/Max and a speaker and coach at Real Estate Guidance.
Still, sellers who focus solely on low inventory can wrongly conclude that they can list their home at a higher price than an agent might advise. That can lead to their property languishing on the market not receiving strong offers. Meanwhile, buyers who focus only on the number of sales going down might wrongly think there’s less competition. That might result in heartache when they find out the hard way that many homes are still getting multiple offers.
To find true seller-friendly places, the Realtor.com data team looked at the May 2023 listing data for the 100 largest metropolitan areas. Then we ranked each based on the number of days that the median listing is on the market, combined with the portion of listings that have had the price reduced. These metrics tell us where homes are selling faster than average and with fewer sellers having to reduce their price to make the sale.
We selected just one metro area per state to ensure geographical diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
Here’s where sellers can expect the market to be most tilted in their favor this summer.
Median list price: $265,000 Median days on the market: 13 Listings with a price reduction: 1 in 17
Rochester, on the western edge of New York along the southern shore of Lake Ontario, not only is at the top of our seller’s saviors list—it’s also in a class of its own. Rochester had both the lowest number of days on the market and the lowest portion of listings with a price reduction. But this is nothing new for the so-called Flower City.
The metro area has become a mainstay of the Realtor.com hottest real estate markets list. It’s also where sellers are usually still getting their asking price, and where buyers can find one of the largest selections of homes for less than $200,000. Plus, home prices are well below the national median list price of $441,500 in May.
These affordable homes have made the area appealing to locals, out-of-towners, and investors.
“If you’re priced right in our market, you can expect to still sell in about one week,” says Jenna May, a local real estate agent at Keller Williams Realty.
When the market was at its pandemic peak in 2022, and even before anyone had heard of COVID-19, Rochester was still leading the nation in the low number of days on the market. Demand here for homes is high and seems destined to stay that way.
“There are people who are offering $80,000 over listing price and not getting the home,” says May. “It’s that competitive.”
Median list price: $424,925 Median days on the market: 19 Listings with a price reduction: 1 in 14
The capital city of Connecticut is also no stranger to the Realtor.com list of the nation’s hottest real estate markets. Hartford is the largest population hub in the state, with 1.2 million residents.
It also boasts home prices that are about 5% below the national median.
“The Northeast has been well undervalued compared with other markets—and not just for years, but for decades,” says Lisa Barrall-Matt, a senior broker at Berkshire Hathaway in West Hartford.
Homes in the Hartford area have been priced $100,000 less than comparable homes in other markets, Barrall-Matt says, for so long that she began to take it for granted.
Now, she’s feeling vindicated: “I used to say, ‘Why aren’t prices higher?’ Now I’m saying, ‘Where’s the ceiling?’”
Median list price: $622,500 Median days on the market: 24 Listings with a price reduction: 1 in 13
Portland became a popular pandemic destination for Northeasterners looking for a scenic, coastal city with some great restaurants, entertainment, and a brewery scene. The area has a rich history, having a Native American presence dating more than 10,000 years before becoming an early Colonial settlement.
The above-average prices in this artsy city on Casco Bay aren’t keeping sellers from enjoying quick sales. In fact, few listings are getting marked down. The demand for housing here is just so strong. Portland has been featured on our list of the best places to retire in 2022, and it has one of the last year’s hottest neighborhoods: Windham, just on the northwestern edge of Portland proper.
Prices in Portland have grown significantly faster during the pandemic—from May 2019 to now—than they did in most of the country. Where prices rose about 40% nationally, prices in Portland have grown by about 62%. Just since this time last year, prices rose 17%.
A newer four-bedroom home in South Portland that’s within walking distance of Fore River is listed for $650,000, close to the area average.
Median list price: $517,450 Median days on the market: 19 Listings with a price reduction: 1 in 10
Worcester, about 40 miles west of Boston, was nicknamed the “Heart of the Commonwealth” because of its central location in Massachusetts.
This medium-sized metro has a name that’s fun to say, like “rooster” but with a W. But it simply doesn’t have enough homes to match the high interest from potential buyers, according to Nick McNeil, a local Realtor with the Lux Group.
“The amount of demand and the absolute lack of inventory is nuts,” he says. “And there’s not much room for new construction in this area, with tight regulations on what can be built.”
Until there’s some kind of change in the supply and demand dynamic in the area, McNeil says, it’s going to be hard for buyers, and relatively easy for sellers—as long as they’re not also trying to buy.
“The best situation you can be in is if you can sell now,” he says.
Median list price: $384,250 Median days on the market: 25 Listings with a price reduction: 1 in 10
Amid the rolling hills of Eastern Pennsylvania’s Lehigh Valley, about 60 miles northwest of Philadelphia, Allentown has a few things going for sellers right now. The portion of homes with a price reduction is about half the national average, and homes are selling about 40% faster.
Like some other places on this list, the homes in this historic steel town are priced below the national average. But local incomes are a bit higher than average, offering buyers more affordability. That’s helping the real estate market to remain competitive as buyers seek out deals.
Allentown offers a mix of urban, suburban, and rural lifestyles, making it broadly attractive for buyers.
What’s especially notable about the area is the price growth over the past several years. Allentown metro prices have risen by 78% since before the pandemic, ahead of all the other places on this list.
For about the local median price in Allentown, buyers can find a five-bedroom bungalow in the Hamilton Park neighborhood west of downtown Allentown.
Median list price: $374,950 Median days on the market: 29 Listings with a price reduction: 1 in 11
Perched on the western shore of Lake Michigan in southeastern Wisconsin, Milwaukee is known for its breweries, including Miller and Pabst. It’s also where Harley-Davidson was founded. And it’s been a staple of housing affordability for some time.
However, prices have been rising in Milwaukee’s metro area: They rose by around 11% compared with this time last year.
The median number of days on the market is below the average now, just like it was before the pandemic. The same goes for the portion of listings with a price reduction. This is all very good news for home sellers hoping for a quick, profitable sale.
For $375,000, a buyer can get a large, four-bedroom home just 5 minutes from hiking trails, a golf course, and a dog park, all along the shoreline.
Median list price: $386,973 Median days on the market: 29 Listings with a price reduction: 1 in 9
The Virginia Beach metro area, a popular vacation spot for beach, maritime history, and seafood lovers, is another place where incomes are higher than average and home prices are lower.
Last year, sellers could count on getting multiple offers, usually leading to potential buyers bidding up the price, says Virginia Beach–based Realtor Ermen. Now, it’s not as easy to figure out that pricing sweet spot. If the home is listed too high, that’s when there’s eventually pressure to reduce the price.
In the month of May, even with a low number of price reductions, Erman says, “90% of price reductions were made before the listing hit the average time on market.”
That indicates sellers are getting antsy, and probably would have been better off pricing the home lower to begin with. But homes that are priced to sell are still moving briskly.
Median list price: $1,530,000 Median days on the market: 25 Listings with a price reduction: 1 in 9
San Jose is the oddball on this list.
Nestled in the heart of Silicon Valley, it is one of the most expensive real estate markets in the nation. Homes in this San Francisco Bay Area hot spot cost more than triple the national average, which means real estate attracts a very specific buyer.
Because San Jose is a global technology hub, its population is very diverse, and not just racially or ethnically. Roughly 40% of residents were born outside of the U.S., according to the U.S. Census Bureau. Most significantly, many residents have tons of money to spend, whether they’re high-salaried tech employees or they have had an entrepreneurial startup windfall.
Local real estate agents will tell you that San Jose is simply insulated from many of the market dynamics because the clientele is so wealthy. If they’re making an all-cash purchase, they don’t have to worry about higher mortgage rates. And that’s a big boon for sellers.
Median list price: $539,950 Median days on the market: 31 Listings with a price reduction: 1 in 10
Providence, home to Brown University and the Rhode Island School of Design, is a bustling town filled with older homes. About 50 miles southwest of Boston, it’s one of the medium-sized, Northeastern metros on our list that are enjoying especially strong housing markets right now.
Providence prices are significantly above the national average, but compared with nearby Boston, where the median list price is north of $850,000, Providence is a downright bargain.
Plus, it’s got a lot going for it. It boasts beautiful scenery along the Seekonk River, a thriving arts scene, and good jobs. The headquarters for CVS is located in nearby Woonsocket.
In Providence, for $550,000, a little above the local average, buyers can find a midcentury two-bedroom home with classic brick construction about 15 minutes from downtown.
Median list price: $229,950 Median days on the market: 31 Listings with a price reduction: 1 in 9
Home prices in this Rust Belt city, which has struggled in more recent years, are still dramatically lower than the national average—about 45% less expensive. And with the focus of buyers on affordability, it’s no wonder that Toledo has taken off.
In the past year, median list prices in Toledo have risen by 25% (10% per square foot), which is quite a bit higher than before the pandemic.
For less than the median list price in Toledo, buyers can get a massive, six-bedroom home in Toledo’s Old West End neighborhood, just northwest of downtown.
Mortgage rates edged further toward 7%, rising for the fifth consecutive week, as the Federal Reserve suggests rate increases will continue amid stubborn inflation.
The 30-year fixed-rate mortgage averaged 6.73%in the week ending March 9, up from 6.65% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 3.85%.
After hitting a 2022 high of 7.08% in November, rates had been trending down. However, they started climbing again in February, rising half a percentage point over the past month. Robust economic data continues to suggest the Federal Reserve is not done in its battle to cool the US economy and will likely continue hiking its benchmark lending rate.
“Mortgage rates continue their upward trajectory as the Federal Reserve signals a more aggressive stance on monetary policy,” said Sam Khater, Freddie Mac’s chief economist. “Overall, consumers are spending in sectors that are not interest rate-sensitive, such as travel and dining out. However, rate-sensitive sectors, such as housing, continue to be adversely affected. As a result, would-be homebuyers continue to face the compounding challenges of affordability and low inventory.”
The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.
Fed signals it will continue with rate hikes
Coming into 2023, inflation seemed to be cooling. But strong employment numbers and a rising Consumer Price Index revealed inflation remains stubbornly high.
In testimony to Congress on Tuesday, Federal Reserve Chairman Jerome Powell said the central bank will likely raise interest rates higher than previously forecast to fight inflation.
“While last month Fed officials said that a smaller increase in the federal funds rate would help create a soft landing for the economy, Powell’s testimony on Tuesday made it clear that the central bank is prepared to return to a faster pace of rate increases if the incoming February economic indicators remain strong,” said Jiayi Xu, an economist at Realtor.com.
This suggests that investors were not fully prepared and are anxious about the Fed’s upcoming actions, she said.
The Fed’s next rate-setting meeting is scheduled for March 21-22, where a half-point rate hike is now back on the table.
“Uncertainty about how high rates will go and how long they will remain elevated makes it challenging for investors to make well-informed decisions,” Xu said. “Therefore, it’s crucial to keep a close eye on the latest developments from the Federal Reserve.”
The Fed does not set the interest rates that borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.
Housing market chilled
Rising mortgage rates have put a damper on the spring selling season.
While applications for a mortgage rose slightly last week after three weeks of declines, according to the Mortgage Bankers Association, activity is muted.
“Even with this jump in activity, both purchase and refinance applications remain well below year-ago levels when rates were much lower,” said Bob Broeksmit, MBA president and CEO. “The recent increase in mortgage rates, right at the start of the busy spring buying season, could cause prospective buyers to delay decisions until rates moderate.”
Home buyer sentiment returned to record lows in February, according to a survey from Fannie Mae. After three consecutive months of improvement, sentiment dropped, returning the index closer to its all-time survey low set last October. The most notable drops in sentiment were in those associated with job security and home-selling conditions.
“While the current housing market may not look promising for sellers due to factors such as an increasing number of unsold homes, longer time on market, and decelerating price growth driven by high mortgage rates, there are still opportunities to be found,” said Xu.
For example, Xu said, recent sales data show that the share of first-time homebuyers is up compared to one year ago.
“As a result, sellers with starter homes may see robust demand and retain some bargaining power,” she said.
In addition, she said, the lasting presence of hybrid working models offer home buyers more flexibility in where they choose to live. Rather than competing for a home in denser, more central areas, some buyers will move further away from work if they aren’t commuting every day.
“This trend could make homes with easy access to public transportation systems more attractive to home buyers which, in turn, enhances bargaining power for the sellers,” Xu said.
For sellers who are also buyers, she said, “it is important to note that they can still leverage their record-high equity, even if they have to adjust their expectations to lower asking prices.”
You could risk it, but why? Starting October 12th, when you list with Homie, you get six months of seller home warranty protection for free. Even the first $65 service charge is waived.
What is a Seller Home Warranty?
A seller’s warranty covers the seller in the event that something like an appliance breaks or the water heater goes out while a home is on the market. It gives both seller and buyer peace of mind while progressing through the real estate transaction.
Raychel Johnson, from America’s Choice Home Warranty, explains that homes covered by a seller’s warranty increases the perceived value of a home in three ways.
Sellers with a home warranty are more apt to fix problems ASAP, so prospective buyers may not notice a malfunctioning dishwasher when they look at the house.
If the buyer or home inspector finds a new problem, it’s fixed quickly with a deductible payment rather than through renegotiations.
A buyer who knows that a seller’s warranty is covering the home during the listing period feels their future investment is protected from harm. Not only has the home been well maintained in the past, but if something goes wrong between offer and closing, it will be fixed by the warranty.
To sign up for a free seller policy, call 888.495.2249 and tell them you’re with Homie.
How you use your Homie seller’s home warranty
Financially speaking, a seller’s home warranty coverage is a smart move. From the first day you start showing your home, plus the entire time you’re under contract, all the way until possession of the home transfers to a new owner, you’re responsible for keeping everything in prime operating condition—including plumbing, electrical, and appliances.
With the America’s Choice Home Warranty (free to all Homie sellers), all you pay is a $65 service call fee to have covered items repaired—far cheaper than replacing appliances or lowering the sale price. With America’s Choice Home Warranty, you can choose your own professional repair person, which beats telling prospective buyers to ignore the mess in the bathroom while you finish snaking the toilet. And you can even use it to do a tuneup of the heating and/or air conditioning unit. It’s all covered.
One more thing: don’t confuse a home warranty with homeowner’s insurance. While homeowner’s insurance covers major problems such as fires, hail, property crimes and certain types of water damage that could affect the property, a home warranty covers specific components within the home. Your homeowner’s insurance policy will never pay to repair a broken dishwasher.
Adding a buyer’s home warranty
A buyer’s home warranty lets buyers know that if something goes wrong after they move in, they don’t need to come up with the cash to fix it.
“The buyer’s home warranty protects the buyer after they complete the purchase,” said Johnson. “Many sellers make this investment for the buyer. The low price—between $300 and $500—makes the situation much less stressful for both buyers and sellers.”
The addition of a buyer’s home warranty typically equates to:
An increase in the final selling price
Shorter time on market
A boost in traffic to an older home
That said, Johnson indicates the age of a home shouldn’t determine whether it has a buyer’s home warranty or not. “Even if the appliances are covered under a manufacturer’s warranty, buyers still have a possibility of a pipe leak or something happening to the sump pump or electrical system in a newer home. Or you might just want an AC tune-up,” she said.
Most buyer’s home warranties cover the first 12 months after purchase, although America’s Choice Home Warranty gives Homie buyers (and sellers purchasing for buyers) an optional second year for 25% off, if you purchase the warranty through Homie’s Provider Marketplace.
Protect your home and your sanity. Call 888.495.2249 for your free seller warranty and ask about your options for a buyer’s warranty today.
I was on Zillow the other day looking at real estate when it occurred to me that I never really touched upon the so-called “Zestimates” offered up by the famous real estate portal.
Most consumers have heard of the Zillow Zestimate, which made its debut back in 2006.
But they’ve been largely written off by industry folk (real estate agents) as “unreliable” and various other expletives, assuming the value estimation is lower than it should be.
First things first, let’s define a Zestimate. By Zillow’s own account, a Zestimate is the “estimated market value” of a property.
By estimated, they mean a home value assigned using proprietary computer algorithms developed by statisticians.
They also refer to Zestimates as a “starting point in determining a home’s value,” which is important to note when browsing around Zillow.
A Zestimate is computed based on data, not human touch, vision, interaction, etc. And we all know how computers can fall short…this explains why there are error rates.
Speaking of, the median error rate for the entire nation is currently 4.6%, which means half of Zestimates nationwide were within 4.6% of their sales price, and the other half were off by more than 4.6%.
Where to Find a Zestimate?
Simply visit the home details page of any property
And you’ll see the Zestimate near the top of the page in the center
Below the most recent sold price
There is also a section below dedicated to the Zestimate
If you look up any property on Zillow, whether it’s for sale or not, you should see a Zestimate at the very top of the page, directly under the last sales price (or current listing price).
And if you scroll down a bit more, you’ll see an entire section dedicated to the property’s Zestimate, including a 1-year, 5-year, and 10-year graph.
On the graph, you’ll be able to track the history of the Zestimate alongside home prices for both the city and zip code to get a better feel for the property in question.
It also displays the movement of the Zestimate over the past 30 days to give you more information about recent price movements, as seen below.
Recently, the company launched a Zestimate forecast, which as the name implies is an estimate of the home’s value over time, in this case the next 12 months (both dollar amount and percentage wise).
Finally, you’ll see a so-called “Rent Zestimate,” which is simply the estimated monthly rental price of the property.
Is Zillow Accurate?
It depends on the number of recent sales comps in the immediate area
How unique or not unique the property is
If any major home improvements have been made since the last sale
Or if the neighborhood dynamics have shifted considerably
A Zestimates accuracy is clearly of utmost important, especially if it’s being relied upon by millions of prospective home buyers. But Zillow says themselves that Zestimates track the market, as opposed to drive it. So it’s not a forward-looking valuation tool.
So are these Zillow estimates accurate? This is a tough question to answer because like any other statistical model they could get the value right on the nose or be $100,000 or more off.
It’s a bit of a crapshoot really. But it certainly depends on the property. And the day because they’re apparently updated daily.
For example, a 3-bedroom, 2-bathroom single-family residence built in 1982 in Your Town, USA may be assigned a Zestimate of $250,000, based on public data culled by Zillow.
You’ll also see a value range, which displays the high and low estimated value of the property.
A large range indicates less data/higher volatility, whereas a small range means Zillow has plenty of information to make an informed decision, and hopefully a lower median error rate.
In other words, if there are lots of sales in a given area where homes are pretty uniform (same style/size/layout/number of beds and baths), the Zestimate will probably be pretty accurate.
Conversely, if the property is unique and in a sparsely populated area where homes only sell a few times a year, the Zestimate may be a far cry from its true value. And this can be too low OR too high.
So if a multi-million dollar home sells next to yours, and it’s the only recorded sale over the past six months, your Zestimate will probably be inflated if it’s not truly a multi-million dollar home.
Zestimates may also appear to be too low if there’s a ton of demand in a certain area because home buyers are technically overpaying based on the value Zillow comes up with.
The opposite is also true. That being said, the seller won’t care that they’re selling well above their Zestimate so long as someone is willing to pay.
And if you make the “Zestimate is too high” argument, you’ll probably get laughed at by the seller and the real estate agent.
Of course, if I were buying a home and had the choice, I’d want to be making an offer on a home that was listed below the Zestimate, whether accurate or not. It’s not a must, but if I had the choice…
If you want to get really deep, you have to question what accurate really means. Is what a property is worth what you should pay for it? Does it matter what it’s “worth” if someone is willing to pay an entirely different amount?
I’m sure over time we’ll see improved Zestimate accuracy, which is a good thing, but it will always leave many unanswered questions like those just posed. Then again, so will full-blown appraisals.
In fact, there have been three different versions of the algorithm released thus far (2006, 2008, 2011, and 2019) with probably more to come.
Note: Only about 100 million homes have an associated Zestimate, so you could get extremely unlucky, but chances are the property you’re researching will have one.
The 2019 Zestimate Update
In late June 2019, Zillow announced a major update to its Zestimate, calling it the “most sophisticated and accurate” version to date.
What makes it different now is that it relies upon so-called computer vision and neural networks to identify and value any improvements present in a home, along with real-time data.
For example, it can analyze a property’s photographs and determine if a countertop or fixture is high-end or low-end, merely by classifying different patterns found in the pixels.
It’s pretty wonky stuff, a product of the $1 million Zillow Prize science competition that spanned two years.
But if your house has nice stuff inside, like a new kitchen, and perhaps good curb appeal outside, it can help pump up its value.
It appears to go beyond the black and white data stuff to find the qualities that make a particular property special or unique, and most importantly, more valuable.
The use of real-time data will bolster accuracy as well, with the list price and time on market of for-sale homes also factored in.
As a result of the update, Zillow says the error rate is now less than 2%, meaning half of all Zestimates will fall within 2% of a home’s eventual selling price.
That’s down from nearly 5% in prior iterations, which should be welcome news to those who saw their value go up (and not down!).
A Zestimate Is Not an Appraisal!
Despite what you might think or hear
A Zestimate is not an appraisal, Zillow says this verbatim
It’s just an estimated market value
Also check out the market appreciation number for increased accurary
This is where things get ugly. A lot of homeowners, and I suppose some in the industry, seem to get tripped up into thinking a Zestimate is a home appraisal.
Zillow explains right on its informational page that a Zestimate is not an appraisal, and cannot be used in place of an appraisal.
Why? Because Zillow hasn’t physically inspected your home, like a real appraiser would.
And the data they receive may be dated, incomplete or inaccurate, especially if recent changes have been made to the home in question, such as major home improvement, or if a home has just sold nearby.
Of course, they do allow homeowners to edit their home facts if thing change.
But it’s still really nothing more than a home value estimator, just like the Redfin Estimate.
Zillow also shows a so-called “market appreciation” tab in the Zestimate section for certain properties that reveals the local housing market appreciation. I’ve seen it for homes in Los Angeles.
For example, if home prices rise by 10% in a given neighborhood since purchase, they’ll provide a sale-based estimate by combining the purchase price and the dollar amount of that appreciation.
So a home that sold for $250,000 with 10% appreciation would get an estimate of $275,000, which could exceed the home’s Zestimate.
Different properties have different types of estimates available, all of which you’ll be able to see on the individual property page.
Regardless, you can’t get a mortgage with a Zillow Zestimate. You’d be laughed right out of the bank.
An appraisal from a certified appraiser will be required by the mortgage lender to obtain financing in most cases unless you’re paying with cash.
So what does that tell us? Well, it means Zestimates are exactly what Zillow says they are, a starting point. An idea, a ballpark, an estimation of a home’s value using a computer. The actual sales price could be entirely different.
In other words, take them with a huge grain of salt, just like advertised mortgage rates. But still brag to your friends if and when your Zestimate rises!
So hereâs a true story. Yesterday, a good friend of mine asked the following question via text message: âWhatâs your outlook on the real estate marketâ¦we are looking to buy a place soon.â Thatâs the exact message he sent over last night; there werenât any emoticons by the way, sadly. That’s a Pretty Loaded Question… Read More »Whatâs Your Outlook on the Real Estate Market?
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