Home Equity is Up

Home Equity is Up

Many sellers think they still don’t have equity in their homes and are surprised to find out they can sell their home and walk away from closing with a substantial check. Foreclosures are down, but there are home owners that get behind in their mortgage payments, receive a foreclosure threat, and give up. If you know anyone in this situation, they should talk with an experienced real estate agent as soon as possible. There are more options available earlier in the foreclosure process than later, and it is sad to see a homeowner lose their equity because of a job loss or change in life.

Many septic systems need to be updated to sell, and this has been holding some sellers back. There are options available where the seller doesn’t need to come up with the cash before closing, as some sellers don’t have $10,000-$20,000 to pay out of pocket.

The Chisago Lakes Area has a lot of seniors looking to move off the lakes and into one level living with less maintenance and less stairs, but they are not ready for a nursing home. Many of these homeowners are in their late 80’s and 90’s and their homes may have laundry and mechanicals in the basement, the bedrooms maybe upstairs or the bathroom isn’t near the bedroom. Now that they have the equity to sell and purchase or rent a one level home, they are finding there isn’t enough inventory available for them to move to.

With home prices up, it is a great time to sell your home, but it may sell quickly and you may be hard-pressed to find a place to move. It is a good idea to explore your options before you put your home on the market. Find a community where you would like to live and determine if it is possible to purchase or reserve a home before you sell.

An experienced real estate agent can estimate your selling proceeds and give you options on where to move and how to best accomplish your goals.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Now is the Best Time to Buy a Home

   Even though inventory is down there are over 200 homes for sale in Chisago County. About half of those have recent price reductions. The median list price is currently $242,500 and the median marketing time is 86 days. The median selling price for December, reported so far, is $200,000.

  This week I received a call from a seller who had her home listed with another broker. She asked me to tell her why her home wasn’t selling. After reviewing the listing, I saw that she had unnecessarily done 5 price reductions over the past several weeks. In addition to this being a slower time of year in real estate, the photos showed the worst of the property and the remarks made the property sound like it had been destroyed by renters. The house has some great features, and the needed repairs had been made but the listing hadn’t been updated. This is a 4 bedroom 2 bath home for less than $145,000, which is a good deal!

  Buyers have been conditioned to look for new listings and avoid “stale” listings. They depend heavily on photos and remarks. My advice is to look at the aged inventory as there are amazing values there, especially in January before the market heats up. There have been many times when I have showed a “stale” listing and found an additional bedroom or bathroom that wasn’t listed on the MLS, or there was a den that could be converted to a bedroom for less than $3,000. I have also found the mechanicals had been updated along with a new roof, and none of that was mentioned on the MLS. Sellers are also much more likely to negotiate a lower price right now, as they are anxious to move on.

  Now that interest rates have started to rise, waiting to buy will cost you money. For example, if you want your monthly principle and interest payment to be about $1,000, you can afford to buy a home for $209,400 at 4.1% interest. If the interest rates go to 5.1% your purchase price will be reduced to $186,200. Rising rates, can greatly impact the buying power of first time home buyers and new construction.

  For my clients that don’t have to sell, I recommend removing the listings from the market in December rather than doing price reductions and increasing the market time, when less people are looking. There are currently 20 homes in Chisago County that are temporarily not available for showings. Most of these will be coming back on the market soon.

  An experienced real estate agent can help you find hidden values and can recommend a lender to provide actual monthly payments based on your finances.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Equity is Part of Financial Plan

Last week I received a call from a homeowner “Tom”, after he met with his financial planner. The financial planner asked Tom about his home equity. Tom didn’t understand what his house had to do with financial planning; after all he had a 401k, and a savings account.

The financial planner explained that the difference between what Tom owed on the house and what he could sell it for, minus selling expenses, is the equity; which is like money in the bank, and for most homeowners it is a substantial part of their retirement plan. 

Tom got excited about the prospect of finding “hidden money” in his home and thought he would like to borrow against it. He bought the house in 2007 for $330,000 and made wonderful improvements. He contacted his bank, and hired an appraiser to find out the current value. He was shocked to see the house appraised for $330,000 which was the same price he paid for it 9 years earlier. 

Tom was referred to me, by a mutual friend and wanted my advice. He showed me the new swimming pool, landscaping, fence ($50,000) the new kitchen ($45,000) the new wood floors, paint and new ceilings ($20,000). The improvements were beautiful and they loved their pool.

This was the oldest house on the block with a 1 car garage, gravel driveway, old siding, windows, and mechanicals, near a busy road. 

I reviewed the appraisal with them and explained that the appraiser selected 6 comparable properties within a one mile radius that sold recently, and he added and subtracted values from the sales prices for individual features; i.e. one home sold for $350,000 but he deducted $20,000 for its lake view. Another one sold for $340,000 and he deducted $10,000 for a 2nd stall garage. There was added value of $10,000 for Tom’s kitchen remodel and $10,000 for the pool. After all the adjustments, the appraiser determined Tom’s current value at $330,000.

Tom said, he watches home improvement and flipping TV shows, and he had the impression he would make money if he improved the house. I explained the cost vs. value of the different types of improvement projects, and the importance of getting a market analysis before improving a home. In this case Tom spent $115,000 and was given $20,000 in value for those improvements. Tom purchased the home 1 year before the market crash of 2008, and he bought the most expensive house on the block.

If your home is part of your financial plan, contact an experienced real estate agent for a market analysis before remodeling to estimate the current value and post remodeling valuation.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

2017 Real Estate Projections

According to the MN REALTORS® Association, in 2016 there was an increase in transaction numbers and home prices. Although affordability was high, property selection was abnormally low. In many markets, there are simply not enough homes for sale, including Chisago County.

This is a two-fold problem: many typical sellers are unsure about the real estate marketplace for their buying needs. Many would like to move to new construction, but have not been able to find a home that suits their desires.

Many of the first-time buyers from the early 2000’s either don’t have enough equity to sell, or they simply bought a home large enough to satisfy their needs for a longer period of time. 

The 2017 the marketplace for home sales is projected to be good, but not as strong as 2016. Some Baby Boomers have delayed their move because of older children returning home or a lack of desired inventory. Developers have been working hard during 2016 to get product to market. In 2017 we’ll see more new construction opportunities for move-up home buyers, which will free up inventory as they sell their existing homes.

New households are forming in the Millennial generation as they get married and have children, and then buy a home. In some instances, the new households will have condos or town homes to sell. 

 

Interest rates will rise in 2017, and they have already started in the past few weeks. The increase won’t be tremendous, but will help people recognize that now is the time to purchase. It will cut into the median home price number slightly, but not enough to see it move backward.

 

Job growth remains strong, and that confidence will lead many to establish roots. Rents in many markets have increased faster than ownership costs. This increase makes it harder for first-time buyers to accumulate the funds needed to purchase a home. 

In Chisago County January through October 2016 closed sales were up 5.2% over 2015, the median sale price was up 11.5% to $212,000, new listings were down 2.3%, and inventory was down 24.4%.

A professional real estate agent can analyze your situation and help you develop the best plan to sell or buy your next home. 

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

 

Is there still time to sell a lake home in 2016?

  Now that summer is over, sellers are asking if they should sell their home now or wait until spring. To answer this I reviewed the Multiple Listing Data for the larger lakes in Chisago County in 2015 and 2016, year to date.

  In 2015 there were 78 lake homes that sold on the larger lakes in Chisago County. The months with the highest number of sales were June (10), March (9), May (8), July (7), August (7). The months with the least amount of sales were December (2), January (4), September (4), November (4). 

  There are currently 33 active lakeshore listings on the larger Chisago Lakes. Three of them are sold with a contingency. Last year from September through December there were 16 sales, so if we use last year’s sales activity, about half of the homes on the market could sell this year. 

  Because we are moving into a slower market, it becomes a buyer’s market. There are less multiple offers and sellers start dropping their prices. Of the 33 active sales 19 have already made at least one price reduction. 

  The good news is that sale prices are up from 2015. From January to September 5, 2015 the average sale price was $277,874 compared to this year at $311,802. 

  Our most expensive sale this year, to date, was on Comfort Lake for $690,000 with 4 bedrooms, 4 baths, 4 garage stalls, and 4,268 square feet. The second highest was $535,000 on Green Lake with 3 bedrooms, 2 baths, 6 garage stalls, and 1,615 square feet. 

  There have been quite a few new homes being built on the lakes over the past couple of years, which means our average sale price should be increasing. Washington County experienced a building boom several years ago and the average sale price for Forest Lake, Clear Lake, and Big Marine Lake is $601,591. Their average price per square foot is $189 compared to ours at $180. So that tells us that their homes are much larger than ours, but priced comparably.

  The greatest demand, is for homes with a gentle slope to the lake, swimmable beach, at least one bedroom, bath and laundry on the main floor, good garage space and parking space. These are hard to come by, and they are typically newer, which means the prices are above $500,000. 

  When buying or selling a home in the Chisago Lakes Area, it is important to work with a local area expert that knows the features and benefits of each of the lakes, and how to overcome the buyer’s objections.

 Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

 

Home Prices Are Up 11.8% for June

The median sales price for closed sales in Chisago County for June was up to $222,500 which was 11.8% higher than the median sales for June 2015 at $199,000, according to the Minneapolis Area Association of Realtors. Closed sales are based on purchase agreements that were written approximately 45-60 days before closing. This is great news for sellers that have been waiting for the return of their lost equity from the market crash of 2008!

  Inventory was down 19% in June to 340 homes for sale compared to 418 in June 2015, which gives buyers fewer options and helps to keep the prices higher for the sellers.

  The number of new listings and the number of sales for 2016 was almost the same as last year with 860 new listings through June 2015 and 839 through June 2016. There were 457 sales through June 2015 and 459 through June 2016 in Chisago County.

  The median sale price for June 2016 was up 6% over May 2016. Which brings our year to date increase over last year to 10.4%. 

  With less inventory comes fewer days on the market, which is down 29% for Chisago County compared to the same time last year. Sellers have more confidence that they can sell their home and purchase the next one in a reasonable period of time.

  The Chisago County market is increasing at a faster pace than the Twin Cities. Through June 2016 the median sales price is up 5.5% in the Twin Cities compared to Chisago County’s increase at 10.4%. Some of this is attributed to new construction and lakeshore properties. 

  Based on our market data; now is an excellent time to sell your home, especially if you have waterfrontage, acreage, or a beautiful lot. Buyers are looking for more listings in Chisago County and they want to be settled before winter.

  An experienced real estate agent can provide you the current market data to help you determine if now is a good time to sell or buy your next home.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.