Real Estate News

Currently the real estate market is being held hostage by low inventory. Stock photo

By Michael Ardolino

Michael Ardolino

The concept of pent-up demand is not restricted to buyers. Many local homeowners are ready to move up to a more desirable home or neighborhood, but when they crunch the numbers, they come up short. Often, this is because they are overlooking hidden wealth, and buying power, in the form of home equity. There is more to a home purchase than the traditional nest egg.

The basics: Let’s say a couple purchased a home with a 20 percent down payment, meaning they have a 20 percent equity stake. As they make mortgage payments, their principal decreases, and their equity — the portion of the home that they own — increases. With home price appreciation added, equity can add up much more quickly than expected.

Home price appreciation: Home prices locally have been steadily increasing at a modest rate for about five years, and the cumulative effect is now showing up in the form of increased home equity. For owners who have been in their homes for 15 to 20 years, the numbers can be surprising. According to Frank Nothaft, chief economist at Core Logic, “Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.”

The law of supply and demand: With low supply and high demand, prices will generally increase. For several years, both nationwide and locally, home inventory has been exceedingly low, while pent-up buyer demand has been very high. The resulting higher prices are boosting home equity.

Currently, our market is in effect being held hostage by low inventory. Multiple listing service stats show that in December 2017, inventory on Long Island was down by 7.1 percent over December 2016. Home equity is a solution. As more and more owners tap their equity and put their homes on the market, the constraints being placed on the market by low inventory will be lessened. As more homes are freed up for sale, more first-time buyers will enter the market, more existing owners will move up, more people will buy vacation homes and a healthy market cycle will be nourished.

Mortgage lending standards: According to research by Fannie Mae, “… if homeowners believe that large down payments are now required to purchase a home, then widespread, large underestimates of their home equity could be deterring them from applying for mortgages, selling their homes and buying different homes.”

The stringent lending standards of six to eight years ago have become much more consumer friendly. Loans with lower down payments are readily available to qualified buyers, and requirements regarding income, assets and employment are being relaxed.

If you are a potential seller who is sitting on significant home equity, it may be time to put it to work. If you are unsure as to the size of your equity position, consult a qualified real estate professional. Your equity is a valuable asset that can help you take advantage of our seller’s market while enjoying upward mobility.

Michael Ardolino is a founder and broker-owner of Realty Connect USA in Setauket.

Staging your home can result in up to a 10 percent increase in dollar value offers from buyers. Stock photo
Michael Ardolino

By Michael Ardolino

There’s an old saying that you can’t time the stock market. Well, in some ways, you can time the real estate market. Here are some strategies to consider.

Take advantage of the prevailing winds: Homeowners, this is the strongest seller’s market I have seen in about 15 years. To maximize your profit, your best course is to list as soon as possible. If you wait until spring, you will have much more competition. Often, time is money.  If you miss this market, you may have to wait another 15 years.

Consider the opportunity cost of waiting to list: While discussing the fact that low inventory has pushed up home prices, Bill Banfield, vice president of Capital Markets at Quicken Loans, wisely noted the other side of the coin, stating, “While sellers are obviously thrilled as their investment continues to grow in value, this trend could make home buyers set their sights on smaller homes in less pricey neighborhoods. I would encourage homeowners who are considering listing their home to take advantage of the opportunity they have in this seller’s market.”

Understand real estate’s renaissance:  Some owners who have not sold a home in many years don’t fully understand the dynamics of selling in today’s new market. Technology has speeded up the pace of transactions. Zillow, virtual tours, real estate apps, online mortgage applications, electronic signatures, texting, video chats and other advances have changed the pace of the industry.

Fully 95 percent of buyers use the internet in their home search. Buyers now come armed with full mortgage preapproval letters, further hastening transactions. Sellers must be ready to go to contract and close the sale promptly or risk losing qualified buyers. Time is of the essence. The Moving Checklist for sellers at will help you plan accordingly.

Take the time to prepare: The competition is fierce, and buyers are sometimes literally lined up to pounce on new listings. The best homes, priced properly, go very quickly. Those that are less desirable or overpriced languish on the market, and price decreases become necessary. 

Make sure your home is in the former category.  Do your homework. Get advice from your listing agent as to repairs and maintenance needed. Are there large projects, such as new windows, painting, or driveway paving? If so, allow the necessary time up front.

Hire a professional cleaner and consider a professional stager. According to research by the National Association of Realtors, 50 percent of staged homes saw a 1 to 10 percent increase in dollar value offers from buyers. Staging makes it easier for buyers to visualize themselves in the home, according to 77 percent of buyers’ agents.

Keep on top of the news: Interest rates remain low, historically speaking, but have been edging up. Reports indicate that inflation concerns could cause the Fed to raise rates more quickly than expected. Sellers, time your sale so that you can also time your purchase, in other words, before significant rate increases.

Michael Ardolino is a founder and broker-owner of Realty Connect USA in Setauket.