Your home: What factors motivate buyers to purchase one home over another?

Question: What factors motivate buyers to buy a home?

At the end of the day it all comes down to price, location and condition. I learned this lesson my first week as a Realtor and it still holds true today. In 2012, the number one factor that motivated a buyer to buy was — drum roll please — PRICE. A close second was location followed by condition.

Now if we were to break buyers into sub-categories we would get a slightly different picture. For example, first-time home buyers ranked price their absolute number one motivator. This makes sense because most first time home buyers are watching every penny and are very “payment focused.” This group also has a lot of input from their parents, other family and friends. Most family members have the buyer’s best interest at heart and are just trying to protect them from what they themselves may have seen happen to their investments during the down market. This is understandable considering the market that we just went through.

For the repeat buyer, location was the most important factor when deciding on a home. Not a surprise to me. Let me explain.

I will use myself as an example. My wife, Leah, and I lived in our first home in Prairie Village for nine years. Of course our original plan was to stay for no more than five years, but who was counting? During that time, we discovered everything that we loved about our home. And everything that we did not love. We pretty much remodeled that home from top to bottom, and then sold it in the down market. You would think that we would know better, right?

Well, we did know better. We knew that the location that we had been seeking was now available and we jumped on it. And why was it so important to us? Because we had learned that you can improve a home all you want, but you cannot change the location. And at the end of the day, being able to walk to Prairie Elementary and to the Village Shops was just what the doctor ordered. We were also looking for a neighborhood that was at the beginning of its cycle. In layman’s terms that means a neighborhood with lots of kids. We did not have that in our old neighborhood and it was becoming more important as our boys were getting older.

I guess your first home is kind of like one of your first relationships: You enjoy it for the time that you have together and it teaches you what you don’t want in the future.

So why is condition in the number three spot? I think it is because a homeowner can improve the condition of their home. They can make it how they want it and do the work when they want. I find that the easier or more realistic it is to change something about a home, the less it will impact the value. Conversely, things that cannot be changed about a home (like location) have a huge impact on a home’s value. Now, I am not saying that a major kitchen remodel will not improve a home’s resale value. I AM saying that if you did the same kitchen remodel in two different homes, and one home was in a stronger neighborhood, the home in the stronger neighborhood would receive a better return on its investment.

I will sum this column up with three timeless words: location, location, location.

Your home: The pros and cons of new construction vs. resale

Question: I can’t decide between building a new home or purchasing an old one. What are the pros and cons of new construction vs. resale?

Like most things in real estate, this is a subjective question.

As usual, I will start with the facts. In June 2013, 100 new construction homes closed in Johnson County. That is down 16 percent from the same month last year when 119 new homes closed. When we look at the year-to-date numbers, we get a better perspective of where I feel new construction is headed. Year to date new construction sales are up 18 percent. That number would be higher, but you have to take into consideration that many of the homes that were started in January are still two months out from completion, depending upon the size and finish quality of the home. So there is a slight lag before the statistics will read true. I will be interested to see the numbers in December.

The important message is that new construction sales are up and that is one of the final signs of a true housing recovery.

Now let’s look at resale. In June 2013, 1,037 resale homes closed in Johnson County. Unlike new construction, that is an increase from June 2012 of 18 percent. Again, the resale market can show correction more quickly because you are not waiting on the home to be built, just sold. Year-to-date, resale sales are up 14 percent.

As you can see, both markets are seeing significant improvement and can be a smart investment in today’s market.

As a buyer’s representative, our goal today is to give you some food for thought when considering whether to make a resale or new construction purchase. Here are a few thoughts.

New construction benefits:

  • The home is brand new! You will be the first to live in it, therefore, you don’t have to repair the home or correct someone’s personal decor or remodeling choices.
  • If you purchase the home early enough in the process, you will possibly have control over the finishes of the kitchen, baths, etc…
  • The builder will address/repair almost all imperfections before you take possession.
  • Spacious kitchen, luxurious bathrooms, walk-in closets, and main level or bedroom level laundry-just to name a few.
  • Open floor plans
  • Builder’s warranty for the first year of ownership
  • Brand new HVAC, plumbing, electrical, etc.
  • Possibly more neighborhood amenities like walking trails, pools, tennis courts, etc…
  • In a healthy market, the price is what it is. Good builders have buyer’s lined up to buy their homes. It doesn’t feel like much fun when you are buying the home, but this does add a level of protection to property values in the neighborhood.

Resale benefits:

  • Established neighborhood which can protect property values more than a newly developed neighborhood.
  • Structurally, most homes have done all of the settling that they will do in the first 10 years after it is built.
  • Most resale properties will come with all window treatments in place, unlike new construction.
  • Mature trees and landscaping.
  • Most remodeling done by the previous owner was done for their own enjoyment rather than for resale. So the quality can be higher because a home owner is willing to spend a little more rather than watching every penny.
  • Charm and character of an older home.
  • A home that was built in the 50′s that sells for 200K today is on average built better than any 200K new construction home that you can find.
  • Price can be negotiable depending on market conditions and seller motivation. This can be great when you are buying a resale home, but a desperate seller can have a negative impact on property values as well.

At the end of the day, it really comes down to a buyer’s lifestyle and what is most important to them. We have some clients who cannot imagine living south of I-435 because they prefer the older neighborhoods and prefer to be 15 minutes from the Plaza and downtown. Conversely, we have clients who have lived in an older home and are over it. Proximity to downtown and the Plaza does not take priority over the desire for “new-ness”. Both buyers will be happy with the end result as long as they are true to themselves and can clearly identify their priorities.

Isn’t it great to have options?

Your home: How the interest rate jump is affecting the NEJC housing market

Question: How is the jump in interest rates affecting the market?

This may sound a little crazy to some of you, but I am glad to see rates moving upwards. For too long we have seen interest rates holding at historic lows. Now, don’t mistake me: I am all for affordability. I am thrilled to see our clients taking advantage of low interest rates. That said, I am not thrilled to see complacency in the market. Complacency is a dangerous thing. As I mentioned in my previous column, you won’t know you have missed out on a great opportunity until the opportunity is gone. And that is exactly what has happened to a lot of buyers out there in the open market. While they have been waiting for a “deal” or a “steal” to come on the market, or perhaps the “perfect home,” rates have jumped up almost 2 percent from the beginning of the year. That will make a huge impact on a mortgage payment.

Not to sound like a broken record, but due to extremely low inventory, a seller with a fairly priced home is not in a position to concede much on price (if any at all). In today’s market, the deal may be a 30 year mortgage at 4.5 percent. Which, compared to interest rates of the past, is still virtually free money.

So, what am I seeing today? I just ran the June stats and this is what I see: In the northern part of Prairie Village (north of 75th Street) and including Fairway, Roeland Park, Mission, and Mission Hills, the average days on market has dropped from 63 days in May to 47 days in June. Conversely, inventory has crept up a bit from 2.6 months of inventory to 3.3 months. This increase is not atypical this time of year. Seasonally, we usually see a stall in the market around the 4th of July holiday. To confirm my earlier point about low inventory, the most exciting news for sellers is that homes are selling for an average of 95 percent of original list price. Wow! That is awesome!

Now to southern Prairie Village and nearby areas including Overland Park, Leawood, and parts of Lenexa. The average days on market in this area has crept up slightly from 46 days to 49 days. At the same time, the inventory has dropped from 2.4 months of inventory to 2.1 months. I cannot remember the last time inventory was down to 2.1 months. Incredible! In this area, homes are selling for an unbelievable 97 percent of original list price. And we thought that 95 percent was great (which it is)! It is all about supply and demand. Supply goes down, demand goes up.

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My final thought is for the buyers out there. In the past, we have seen times when jumping rates can cause the buyer market to paralyze. Please do not let this happen to you. A mortgage at 4.5 percent is still awesome. Don’t hesitate. It is not worth the risk. And keep things in perspective. I have included a graph of the interest rates dating back to 1972. Only 3 times have the annual interest rates been below 4.5 percent. Three times in thirty years. There’s some perspective for you.

Picture credit: Keller Williams International

Your home: A housing market to be thankful for

Happy belated Fourth of July!

American flag

Although this column is running July 5, I felt compelled to offer a few points of thanksgiving this Independence Day week.

Since the first week of 2013, I have been writing positive news about our housing market. And the good news continues today.
Our abundance of inventory in Kansas City has gone from over a year of inventory at its peak to the current level of a little over four months of inventory. Although several areas of the city (including Prairie Village) are in a strong seller’s market, the entire MLS is headed in that same direction as well. That is certainly something to be thankful for.

Unlike several other parts of our country, it makes more financial sense to buy a home in Kansas City than it does to rent. Although values are rebounding, the NEJC real estate market still offers great housing at a great value. We are already seeing an increase in out-of-state investors who are buying up investment properties due to our great values.

Nationally, first-time delinquent home loans have fallen to less than 1 percent of the more than 50 million mortgages nationwide. That is the first time that this number has been below 1 percent since 2007. The continued decrease in first-time delinquencies is not only a strong indicator of our housing recovery, it is also a relief. As a Realtor, it strikes you to the core to see a homeowner who is unable to afford his or her mortgage. I may love this statistic the most!

As I drove down Mission Road yesterday and saw the American Flags lining the street, I could not help but feel thankful for our great country and the strength that I have seen in my fellow Kansas Citians. The housing crash was brutal for a lot of people and their families. I certainly had my fill of conveying bad news to homeowners concerning the value of their home. I am glad that those days are behind us.

Finally, our team is extremely grateful to have the opportunity to work with a diverse group of clients. We have worked with first time home buyers, empty nesters, single parents, newlyweds — and the list goes on. All of these clients have had the same opportunity to buy and/or sell a home. Even in 2013, there are countries where some citizens — frequently women — are not allowed to own a home. I am extremely grateful for this great land of opportunity that we live in, a land that offers opportunity for all.

I hope you all had a happy Fourth of July, and thank you to those who have helped to protect and defend our great country!

Photo by: Serfs UP on Flickr