Smart Moves

Countless young American families are facing severe housing challenges. One obvious factor is affordability. Another is that many older homeowners are hanging onto property they’ve refinanced to a low-rate mortgage during the pandemic, leading to property shortages.

But despite the so-called lock-in effect, life circumstances are gradually forcing more owners to let go of their home.

“Homeowners hate to give up their 2% to 3% mortgage rate, but life happens, and people have to move,” says David Palmer, a Redfin real estate agent in Seattle. He says many people are moving because a major life event like a job change or divorce has given them no other choice.

But it’s not enough for homeowners to simply decide to sell. In most cases, they must also prepare their property for public showings. And one key barrier to that process can involve the often agonizing chore of decluttering.

Sellers who prune their accumulations fare better than those who fail to remove superfluous items prior to selling, says Vicki Norris, who heads her own professional organizing firm.

“People want to picture themselves living in your place, and they can’t do that if it’s crowded with all your stuff,” says Norris, author of “Restoring Order to Your Home.”

Would-be sellers are not only advised to streamline their possessions; they should also reduce the inflow into their homes until they receive a solid contract for sale. And that means less shopping.

Many people use shopping as a form of entertainment or as a mood lifter when they’re feeling down, says Barbara Hemphill, author of “Less Clutter More Life” and other related books.

“People often shop to ignore or cover up emotional pain, though this is only a momentary fix,” Hemphill says.

For prospective home sellers, particularly those who must liquidate for financial reasons, spending time hunting through stores for the perfect addition to an already large collection of designer shoes, for example, is self-defeating behavior.

Ironically, many people begin an anti-clutter campaign with a shopping spree involving the purchase of numerous storage containers. But all those big plastic bins prove more of a hindrance than a help, states Hemphill, who began her career in professional organizing in 1978.

“What’s inevitable is that those containers will just get in your way,” she says.

Judith Rough, an expert in helping seniors downsize, strongly recommends that sellers halt all but the most essential shopping until they’ve concluded their move.

“Before you start acquiring new items, you need to measure your new space and see what will fit,” she says.

Here are a few pointers for sellers:

-- Seek outside help for major projects.

Rough estimates that to fully declutter an average-sized house usually takes at least four weeks of concentrated effort and often outside help.

“Going through everything you’ve acquired for decades is extremely emotional -- particularly if you’ve raised your family in that house,” Rough says.

To gain forward movement, sellers often turn to relatives. But Rough says you’re better off with an objective third party -- ideally a professional organizer. One source for referrals is the real estate agent who will list your property. Another is the National Association of Productivity & Organizing Professionals (napo.net).

Regrettably, many sellers can’t afford the cost of a professional organizer for numerous hours of assistance. If this is true for you, Rough suggests you limit the organizer’s help to just a few hours of planning time. Then also pay the person for a few one-hour “check-ins” on a weekly basis, during which you’ll receive a “homework” assignment for the following week.

-- Ask loved ones what items they wish to keep.

Are you the parent of grown children? If so, Rough says you may be tempted to hang onto nostalgic possessions you believe your offspring may someday want to claim. But as Rough says, “Your kids will want far less of your stuff than you expect.” So she suggests you ask them directly what they want.

-- Take photos of items you can’t keep.

Before seeking to declutter, Hemphill often recommends that sellers take photographs of entire rooms to create compact memories of these spaces. She also advises taking pictures of valued items, such as a grand piano, that are too large to bring to the next property.

“Converting prized belongings to art is a great way to hasten the clearing process and make your house more saleable,” she says.

In addition to taking photos, Hemphill recommends you keep a small box of special items

Those who convert precious items into art or photographs often find the transition to their new environment to be emotionally easier, Hemphill says.

-- Safeguard valuable documents and keepsakes.

To safeguard such non-disposable items as passports, birth certificates and diplomas, Rough suggests you encase them in clear plastic sheet protectors and place them in a three-ring binder. Alternatively, you may wish to buy a storage item designed for vital records.

-- Locate a new home for your discards.

In sifting through your accumulations, you’re bound to find many things you no longer want.

Whenever possible, Rough encourages you to donate serviceable items to a reputable charity. Through the years, for example, she’s donated many of her own discards through church groups.

Another option is to post your giveaways through your Facebook account, which could result in finding a friend, relative or acquaintance who would appreciate receiving them.

“Maybe there’s a young family you know who could use your extra furniture because they’re setting up a new household. It’s hugely satisfying to know that things you paid good money for will find the right home,” Rough says. (To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

A young Maryland couple -- an eye doctor and her accountant husband --have been renting a bungalow near her private practice for two years. As parents of a newborn girl, they’re paying $1,900 a month for childcare, which constrains their budget for housing. Even so, they’re spending more than that on rent.

Lately the pair have determined they’d be better off as homeowners than as renters. And they see no advantage in waiting to buy.

“In the suburb where we live, prices are on an endless escalator,” the doctor says. Also, our landlord is planning to sell his property. That means, even if we stay as renters, we’ll be forced to move. So, we feel an urgent need to buy a place soon.”

Of course, there are parts of the country where home prices are now slipping somewhat, including in some formerly overheated markets in Florida and Texas. But elsewhere, prices continue to rise due to relatively limited availability and general inflation.

A report by the National Association of Realtors (nar.realtor) says that about 90% of metro-area residential properties rose in value in the fourth quarter of last year. For buyers, such price gains represent a disappointing trend. But that’s not true for owners.

“Record high home prices and the accompanying housing wealth gains are definitely good news for property owners. However, renters who are looking to transition into homeownership face significant hurdles,” says Lawrence Yun, chief economist for the National Association of Realtors.

As Yun notes, the national median single-family existing home price climbed 4.8% in the fourth quarter to $410,000. Moreover, 32 markets, including the one where the doctor lives, are recording double-digit annual price appreciation.

Although motivated to soon make a purchase, the Maryland couple is nervous that they could overpay for a property in their chosen suburb, where prices soared during the pandemic. Due to the bidding wars common in the COVID-19 period, they note that several friends and relatives overpaid at the height of the market and now have buyer’s remorse.

“Overpaying is what we dread most,” the doctor says.

Here are a few pointers for purchasers:

--Seek out the internet for guidance -- but only as a starting point.

Several websites now provide free information on property values and can prove a valuable resource. One example is Zillow, which allows you to search data at either the property or neighborhood level. Another example is Redfin.

“These websites rely on publicly available data on housing transactions that have closed. The data (is) imperfect, but they take you to the right ballpark,” says Eric Tyson, a personal finance expert and co-author of “Home Buying for Dummies.”

-- Choose an established real estate agent familiar with your area.

The classic method used by real estate professionals to reach an estimation of value for a property is known as a “Comparative Market Analysis.” This technique is grounded in data on recent sales of similar homes to the one being judged.

“For people intending to buy in an area with lots of look-alike houses, this process is pretty simple. It’s much tougher if every home there is custom-built,” says Tom Early, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

In any case, your real estate agent should find at least three transactions that are roughly comparable. Then the agent should add and subtract value based on differences – such as size, number of bathrooms, etc. -- between the home you like and the others.

-- Factor local economic trends into your analysis.

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

“It’s highly unusual for home values to rise or drop in a matter of hours or days, the way stocks can do on Wall Street. Yet over time, local economic trends can make all the difference,” Tyson says.

In a community that’s heavily reliant on just one employer, a wave of layoffs at a local company could seriously hinder values in the surrounding area. On the other hand, values might rise in an area that’s expected to benefit from a school boundary change.

“Access to a top-rated high school, like one with a strong record for admissions to prestigous colleges, is a huge asset for many homebuyers with school-age kids,” Early says.

-- Seek out seller concessions if you’re in a strong bargaining position.

Though a shortage of available homes in some popular neighborhoods is pushing up home prices, there are always exceptions to the rule. For example, a plethora of properties might be available in a community with an above-average level of new-home construction.

“Suppose you live in an area with a number of big new subdivisions. With so many new units, sellers of older homes can’t be too arrogant about their chances to grab an inflated price for an older place, especially one that has upkeep issues,” Tyson says.

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

“The top-line price is often what’s most important to sellers rather than the few concessions they must make. That’s because their pride is at stake when neighbors inquire about how well they did on their sale,” Tyson says. (To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

Rich Rosa, a Boston-area real estate broker, remembers well how eager homebuyers were to capture a property during the pandemic years, when mortgage rates were near historic lows.

“People were out every weekend going to every possible open house. It was a frenzy because you could afford a lot more house at 3% than 7%,” says Rosa, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

Of course, not every eager homebuyer was able to acquire a property during the pandemic. Some of those wannabe homebuyers are still seeking ownership several years later, despite substantially higher mortgage rates.

“If you’re still sitting on the sidelines, I don’t know what you’re waiting for,” says Rosa, noting that home prices are steady or rising in popular areas, and few economists are forecasting any immediate drop in mortgage rates.

Still, Rosa contends there is some good news for those out on the home-shopping trail.

“The gradual increase in inventory works to your advantage. The winter is a good time to look for a house to buy, because you’ll face less competition from other buyers than you do in spring,” he says.

Though the news on mortgage rates isn’t encouraging, there’s potentially good news for buyers on the availability of unsold properties. That’s because an increasing number of properties are sitting unsold for longer periods, making owners more open to negotiating.

Homes are selling at their slowest pace since the start of the pandemic, as prices and rates remain elevated, according to a new report from Redfin, the national reality brokerage. According to the report, the typical home is now taking nearly two months to sell.

However, Jordan Hammond, a Redfin agent in Raleigh, North Carolina, cautions would-be buyers against the belief that they can lowball those who have unsold homes.

“It’s pretty clear that sellers aren’t slashing asking prices,” Hammond says.

Another reason for would-be buyers to avoid delaying is that rents are beginning to rise in many parts of the country. This is particularly true in metro areas where large employers are insisting that more workers return to the office full-time. Rents are increasing especially rapidly for single-family houses and more slowly for apartments.

“Right now, more multifamily units are hitting the market than at any time in the past 50 years, but detached homes aren’t seeing the same surge in construction,” says Skylar Olsen, chief economist for Zillow, a national realty firm.

Here are a few pointers for first-time buyers aspiring to a successful purchase:

-- Think of mortgage preapproval as your passport.

Before the Great Recession of 2008, qualifying for a mortgage was extremely easy. Few documents were required. But that era -- and the wave of foreclosures it ushered in -- is long gone.

“Property sellers are a lot more nervous about the financial viability of their buyers. They want proof you have the resources to close a deal. That proof comes in the form of a preapproval letter from a reputable lender,” says Michael Crowley, a real estate broker in Spokane.

Obtaining mortgage preapproval also helps ensure you won’t waste precious time visiting properties that are over your price range.

-- Try to buy into the strongest neighborhood you can afford.

Most young buyers confront financial limits when purchasing property. Still, Crowley urges buyers to reach for the most desirable neighborhood in their price range.

“If there’s one certainty that remains in real estate, it’s that location still overtakes all other factors to determine the ultimate value of any given property,” says Fred Meyer, a longtime real estate appraiser and broker in Massachusetts.

Even if you can capture a bargain price, choosing a big house in a weak neighborhood is the equivalent of buying a imitation-gold wedding ring.

Though it’s taking longer now than it did during the pandemic for nearly all residential listings to find buyers, better properties are selling relatively faster.

“Before you pick a neighborhood, ask your buyer’s agent about median selling times in the area. Communities that are coveted now are more likely to retain their value in a downturn,” Meyer says.

-- Look for red flags about a neighborhood’s future.

A few positive indicators make it obvious which neighborhoods have a bright future. These include areas with well-ranked public schools and popular recreational amenities, like a community pool. Other signs of strength include easy access to quality public transportation, like a widely used light-rail system as well as quiet streets with little cut-through traffic.

“You never want to be too close to an interstate highway. And you never want to pick a house near a junkyard or a landfill,” says Ron Woodall, a Texas-based real estate broker.

He cautions against a neighborhood bordered by blighted buildings. For instance, you should avoid property near stores that have gone bankrupt or closed.

“A house surrounded by a lot of vacant land is a risk, too, unless it’s part of a nature preserve. Look into present or proposed zoning to make sure the vacant land is slated for positive developments,” Woodall says.

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