Smart Moves

A nurse and her architect husband, both in their late 30s, took several stabs at a home purchase during the pandemic. But their bids in the frenzied market all failed, leaving them dispirited.

“We’d come home from our real estate agent’s office so bummed out that we turned to comfort food. Never before have we consumed so much mint chocolate ice cream,” the nurse says.

But when the couple contemplate the 2023 housing market, they see signs of hope. What’s more, housing economists say their optimism could be justified, at least to a modest degree.

Granted, the statistics cranked out by economists recently don’t seem encouraging on their face. After all, home sales fell for their 10th consecutive month in November, and the median sales price rose 3.5% from one year prior.

“In essence, the residential real estate market was frozen in November,” says Lawrence Yun, chief economist for the National Association of Realtors (nar.realtor).

Still, Yun documents trends that could prove favorable for buyers in 2023.

“The market may be thawing, since mortgage rates have fallen for five straight weeks,” he says. Also, the number of available properties is expected to pick up slightly in the first quarter of the new year.

Jeff Tucker, a senior economist for national realty firm Zillow, foresees improving market conditions for buyers.

“The two big questions are whether mortgage rates will continue to decline and whether that will be enough to bring buyers back in time for the spring selling season. In the meantime, those on the prowl for a house will benefit from motivated sellers, unusual bargains and a welcome lack of competition,” Tucker says.

Tom Early, an independent real estate broker, says buyers now on the sidelines are acutely aware of the risk of overpaying.

“Everybody knows somebody who knows somebody who overshot the market on price to compete with rival bidders during the pandemic,” says Early, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

When faced with rivals, some buyers are still petrified they’ll get outbid and lose a dream home. But Early says it’s a mistake for buyers to let their emotions push them into overpaying.

He says it’s critically important that purchasers inform themselves about local property values before they craft an offer.

“To track values correctly,” Early say, “you need to go neighborhood-by-neighborhood and look at closing prices in the precise area where you’re planning to buy.”

Indeed, houses can be worth substantially more in one part of a neighborhood than another -- due to differences in, say, housing styles.

“There might be a premium for a Victorian on one side of the community versus a rancher just a few streets away,” Early says.

Sid Davis, author of “A Survival Guide for Buying a Home,” says a working knowledge of property values in their target market allows buyers to better develop an offer pegged to the right price point.

“The best thing to do is ask your agent to check on closing prices for comparable homes -- ideally for deals done in the immediate vicinity during the last 90 days,” Davis says.

Here are a few other pointers for buyers:

-- Look online for general guidance on values.

Several websites provide free information on property values and can prove a valuable resource, Early says. Two examples are Zillow and Redfin, which allow you to search data at either the property or neighborhood level.

“At the minimum, such websites get you into the right ballpark. But don’t rely on them totally because they only give you a general idea of values and nothing more,” says Early, who’s worked in the real estate field since 1984.

-- Take into account local economic trends.

Property values are always subject to change. That’s why Davis says you need to look beyond closed deals to see where values are heading.

“Unlike stocks on Wall Street, it’s rare for home values to rise or fall sharply in a few days or weeks. But local economic factors can have a big impact over time,” he says.

In a town that’s heavily reliant on a single employer, a wave of layoffs could seriously hinder values in the surrounding area. On the other hand, values could be on the upswing in a neighborhood that’s expected to benefit from a school boundary change.

-- Negotiate for concessions if you’re in a strong bargaining position.

Though a shortage of available homes is keeping prices strong in some regions, there are always exceptions to the rule. For example, a plethora of properties might be available in an area with an above-average level of new home construction.

Davis tells the true story of how he helped one client get a good deal on her first home. The data Davis gathered for this client showed that her desired condo was fairly priced. But his search also indicated a high level of new condo inventory coming onto the local market, demonstrating the woman’s strong bargaining position.

Davis ultimately advised the graphic artist to offer full list price for the place. But at the same time, he suggested she seek substantial seller assistance with her closing costs. The sellers readily accepted her request for more than $3,000 in help.

Often, sellers are much more willing to yield on valuable “concessions” than to give way on price. This helps protect their pride.

“Sellers love to brag to neighbors about how much they ‘got’ for their house. But when they brag, they rarely admit to the concessions they had to accept to get their place sold,” Davis says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

Savannah, Georgia, is loaded with historic gems built in the 1800s. Such multilevel houses, which range in style from Georgian to Gothic, have architectural flourishes galore. What they don’t have, however, are first-floor master suites.

Andi DeFelice, a real estate broker in Savannah, says its stately old manses are widely admired by many homebuyers. But the inconvenience of living in a multilevel property dissuades most from giving such vertical homes serious consideration.

“More and more, buyers want the comfort and convenience of single-level living, without stairs to climb,” says DeFelice, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

What’s behind the intensified interest in one-story living? Obviously, most seniors planning to age in place are reluctant to buy a home that requires them to scale stairs to reach their bedrooms. But DeFelice says she’s surprised by how many young families also now prefer one-story living in a so-called rancher.

“The parents of very young children especially appreciate the easy flow of one-level living. Also, families with toddlers don’t need to worry about the kids falling downstairs, and they’re spared those troublesome baby gates,” DeFelice says.

Many with multi-generational households --a growing cohort of the U.S. population -- are also fans of single-floor living. As an example, DeFelice cites a retired couple in their 70s for whom she’s now seeking a sprawling ranch-style home in an outlying Savannah suburb. They are searching for a compound with at least two first-floor suites to accommodate their middle-aged son and his family.

“This extended family wants a large enough one-level house for father and son to easily start a woodworking business together,” DeFelice says.

All this is not to say that there aren’t some buyers with a strong preference for vertical living, including those who welcome the exercise of climbing stairs. Also, the parents of teens often prefer a multilevel house. Another factor is that most new construction in high-cost areas involves multistory houses.

Sandy Jurich, a realty firm owner in Michigan, notes that land costs remain high in many popular residential communities. And because a two-story house requires a smaller “footprint,” most builders favor vertical properties over horizontal ones.

“For the same price, you can get 25% to 40% more square footage of living space in a two-story house,” Jurich says.

Mark Nash, a longtime real estate broker and author of “1001 Tips for Buying and Selling a Home,” says buyers who are ambivalent about housing styles should be sure to visit at least two vertical properties as well as two horizontal ones.

Here are a few pointers for buyers:

-- Project your lifestyle plans into the future.

Whether you’re age 28 or age 58, it can be hard to picture your future housing needs. Yet no matter your age, projecting into the near future is important.

Nash advises buyers to look at least three to five years ahead.

“Planning for the future is especially important if you’re approaching your late 50s and anticipate retiring in the next few years. In this age range, health or mobility problems can start to develop at any time,” Nash says.

But people of all ages can benefit from one-story living.

For example, Nash says couples with very young children should also think about how their kids’ needs will evolve. Those for whom affordability is a major issue may wish to opt for a two-story house with extra bedroom space for their growing offspring.

-- Recognize that a one-level house could prove a good investment.

Due to the aging of the population, Nash says demand is mounting for single-floor living among pre-retirees and retirees. As a result, ownership of a one-level house should prove a good investment over time, so long as it’s located in a popular neighborhood.

“The market for ranch houses will intensify. Owning a single-level house in an area where they’re in short supply could be an especially good deal,” Nash says.

-- Realize the advantages of a second-floor “hideaway.”

Do you already telecommute from a home office or expect to begin doing so in the next few years? Or do you expect to start a home-based business?

If so, Nash recommends you consider the advantages of an out-of-the-way second-story office where you can concentrate with few interruptions. Likewise, many homeowners enjoy an upstairs bedroom where they can pursue a hobby.

“Sometimes it’s nice to have a getaway place in your home, where you can leave a project all spread out and go back into your ‘cave’ when you want to,” Nash says.

Another nonobvious benefit of an upper-level retreat: you’re farther from the temptations posed by food in your kitchen.

-- Try to avoid a property that would require an addition.

“Sometimes real estate agents encourage their older clients to buy a house that needs an addition. But getting an addition done is expensive and can take six months or longer. And remember, it’s not your agent’s time or money at stake,” Nash says.

Of course, one-level houses aren’t to be found in every community. However, if you’re sure a one-story house is your best choice, Nash suggests you look at neighborhoods comparable to the one you’ve targeted.

“But always remember that location should be the top priority on your selection list,” he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

Leading housing economists caution against overconfidence on the part of anyone hoping to do a real estate deal in the upcoming year.

“After being overwhelmed in the housing frenzy of the recent past, homeowners, sellers, buyers and renters may be underwhelmed in 2023,” says George Ratiu, manager of economic research at Realtor.com, the home listing service.

He foresees a further slowing in sales transactions due to the surge in mortgage rates that began this year. He also predicts that, at long last, the market will finally tip in favor of buyers.

One category of sellers who should pay special attention to the cautionary words of economists are those who hope to soon market a property in the top 5% of their local price range.

“Testing the market on price is a terrible idea for any sellers, but especially for those with an upscale property. While it’s true that buyers of high-end homes have more discretionary funds for bidding, that doesn’t mean they’re willing to overpay,” says Eric Tyson, co-author of “Selling Your House for Dummies.”

Stacy Berman, an agent who sells property in the Washington, D.C., region, says the buyers of expensive homes are typically insistent that all repairs be done by the owners before they’ll close on a purchase.

“These buyers know the value of their money, and they expect high levels of service. They are not going to accept a house with such minor issues as malfunctioning garage doors or unfilled exterior holes caused by carpenter bees,” Berman says.

She urges the sellers of luxury properties to ensure that all repairs are completed before staging their place for sale.

Here are a few other pointers for the sellers of high-end homes:

-- Choose a seasoned listing agent.

Many real estate agents have the expertise to market average properties. But relatively few have experience selling upper-echelon homes, says Joan McLellan Tayler, the author of several real estate books.

“Upscale communities are totally different marketplaces than average communities. This is no place for beginners,” she says.

When looking for an agent, seek someone with a network of friends and associates who travel in affluent social circles.

How can you create a shortlist of qualified agents?

“I recommend you count on referrals to screen candidates. Word-of-mouth recommendations should overtake all other factors,” says Tayler, who long headed a San Francisco-area realty firm.

After you’ve assembled your list through references, she says you should do in-depth interviews with all the agents on the roster before making your final selection.

“Request details on their marketing plans and how they’ll follow through to finally close a sale,” Tayler says.

-- Consider pricing your place by consensus.

The sellers of a cookie-cutter home in a tract subdivision normally have an easier time setting their list price than do those who own a luxury place, says Mark Nash, a longtime real estate broker and author of “1001 Tips for Buying and Selling a Home.”

“Most estate homes are one-of-a-kind custom properties. So it’s harder to figure out the right price tag to hang on them,” he says.

As a basis for pricing, the owners of any for-sale property should analyze the results of comparable recent sales. But, as Nash says, home sellers in the upper echelon usually need to make more adjustments.

“Don’t just rely on your one agent for a recommendation on the appropriate list price. Ask the agent to draw colleagues from the same office into the discussion and maybe their broker, as well. That way you’ll get more of a consensus on the correct price,” he says.

If in doubt on the appropriate price for your luxury home, Nash says you should move to the lower end of the suggested range.

“Given the difficulty nowadays of selling a very large luxury home, you really have to resist the temptation to price high. The buyers of these houses may have money. But in this market, they will still demand a deal,” he says.

-- Stress the quality of your local public schools.

Though it’s not universally the case, most luxury home communities are served by public schools with good reputations. Also, many are within a short drive of private schools that are widely admired.

Given that school quality is important to buyers in all income categories, make sure the marketing materials developed to sell your home highlight statistics that show the strength of the local schools.

“Also list the tuition costs for the nearby private schools to show potential buyers how much they’d save if they sent their kids to public schools. Many people appreciate a bargain in education,” Nash says.

-- Emphasize curb appeal.

Obviously, one common motivation for those planning to buy a luxury home is the opportunity to impress friends and family with the grandeur of their residence. Therefore, owners seeking to sell a high-end home should address this reality, Nash says.

A handsome front door with polished brass hardware and meticulously pruned shrubbery -- such as topiary gardens -- are status symbols that matter for many high-end buyers.

Though no home seller should expend a fortune to make a property more appealing to prospects, a sizeable investment in curb appeal could help hasten the sale of a luxury home.

“In some rare cases, even spending the money to put in a circular driveway with the fountain in the middle could be justified if it gives your house killer curb appeal,” Nash says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)