Hornung on where the market is today

Highlights:

  • Monthly Q&A with Lane Hornung.
  • Market no longer “frenzied and frustrating.”
  • Buyers need a clear strategy.
Lane Hornung

Lane Hornung

How to describe today’s housing market?

During the Great Recession, which wasn’t that long ago in years, but was a different era as far as demand from buyer and sellers, it was clearly a strong buyer’s market.

Then, the endless supply of homes evaporated, the economy no longer looked as it would fall off a cliff and interest rates fell to never-seen-before lows.

Seemingly over night, it was a seller’s market.

It was what Lane Hornung, CEO and founder of 8z Real Estate, called the season of the two Fs — ‘frenzied and frustrating,” as bidding wars became common and consumers were forced to make buying decisions on the spot.

The monthly conversation between Lane and John Rebchook of InsideRealEstateNews.com is about where we are in the market at this point of time and what it means for buyers and sellers.

John: Lane, clearly the market is not as frenetic as it was a few months ago. Does that mean it is now the buyers who are in the catbird seat?

Lane: No, it is not a buyer’s market. The market has slowed, but not all that surprising. The market slows every Autumn as we head into Winter. The market is more active than typical at this time of year.

John: You seem pretty confident. What do you base it on?

Lane: If you aggregate the market across geographic areas, I think it is still a seller’s market. The reason I say that is because if you look at the inventory in most areas, there is still more demand for homes than there is a supply. The inventory has creeped up a little, but not that much.

John: So what does that mean?

Lane: Speaking generically, where we might have had a 1.8-month supply of homes, now we have a 2.5-month supply of homes.

When you are well under six months of inventory, that is clearly a seller’s market.

John: I suppose the same is true for interest rates.

Lane: That is right. You won’t find interest rates at 3.5 percent anymore, but at 4 or 4.5 percent they are incredibly low by any other historical period. We may never see rates as low as we did when they were at their absolute bottom.

Of course, any time rates go up, that means some people will no longer be able to buy a home, or will have to settle for a less expensive home.

John: But rising rates and more supply doesn’t mean a sea change in the market?

Lane: No. We saw a sea change in February and March of 2012, when we went from a buyer’s market to a seller’s market in about six weeks.

John: So if you are a prospective buyer in today’s market you shouldn’t be lulled into thinking that a seller will take a low-ball offer?

Lane: It’s important to understand that every listing is different, and every seller is different, so I’m not a big believer in blanket rules or buying strategies like offering 10 percent below list. What if the listing is overpriced by 25 percent? Ten percent below list isn’t all that great of a deal. That said, in this tight market, you have to have a mindset of making all of your decisions up front and be clear of what your operating parameters are. Then, you can act decisively when you get into the heat of battle and are placing offers. You have to think things through, or you are going to lose out on a home, or alternatively, pay more than you wanted to.

John: And if you are a seller?

Lane: Do not price your home too high. Home prices are rising on a year-over-year basis, but they are tapering.

Prices have been rising maybe 9 or 10 percent on a year-over-year basis in Denver and twice that in California.

Remember, if you see a year-over-year gain of 7 or 8 percent in this fall, that is on top of a 5 or 6 percent gain the prior year.

That’s a pretty healthy increase. And it’s usually even a larger gain when you look back three or four years. Remember, the market in most areas bottomed way back in the spring of 2009.

John: Thanks, Lane.

8z Real Estate is a sponsor of InsideRealEstateNews.com along with Universal Lending and Land Title Guarantee, A monthly Q&A with Lane Hornung is a feature of IREN. 

Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.

 

 

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

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Comments

  1. Thanks for the insight Kane and John.
    We are still not in a normal market. The past six weeks has been more complicated with the threat of the government shut down. the shut down and the fears related to it. We only have a short reprieve in order to bring common sense to Congress.
    It seems that every business slowed down except alcohol and ice cream.
    Call and write your elected officials today.
    ONwards and UPwards!

    • The real estate market has very little to do with govt shutdown. As the stock and bond market showed when neither one moved more than a few percentage points, no one really cared or believed anything bad would happen. You will need to come up with a different excuse.

      • Also Captain Platitude, when I make the call to my congress person, what would you like me to tell them, specifically? Use common sense? Fix the problem? Sir Robert, what do you think the problem is?

        • See the problem in DC is not that they are not getting too few phone calls. I’m sure the phone is ringing off the hook. People calling in saying the govt is spending too much money at the same time an email comes in say we are not spending enough on infrastructure to simulate aggregate demand. Some are calling saying we need major tax reform at the same time you are calling saying don’t touch the mortgage interest deduction.

        • DJ- Mr Alarmist Secret Money Guy misses one extremely important point. The US is not broke and fiat currency is not as big of a ponzi scheme as he makes it out to be. Yes, the US does have a large debt and high unfunded liabilities, but the US has an enormous asset base backing it. Do you the value of just the land the US govt owns that could be sold off? The value of proven natural resource reserves that also back the debt? What is the difference if currency is backed by gold or by priceless land off of PCH 1?

          • I agree that most of the Sheeple will take your view. Events like a dollar collapse are too unimaginable for the masses to comprehend. Understand that throughout human history, every fiat currency has failed. The 1-2% who understand what it happening early enough will become wealthy, while the vast majority will lose everything. History has proven this time and time again.

  2. Average DOM has risen to the mid 40s from the mid 30s during the summer. This is expected. Anything below 60 DOM is indicative of a strong sellers market. 70-90 DOM is average. Above 90 DOM is a buyers market, it’s that simple.

    • I don’t see how looking the most recent September reading of days on market does anything for a current buyer or seller. The makeup of these number are for homes that went under contract in July and August. Seem useless to me now for any decision on buying or selling today.

          • MLS, I can look up DOM for “under contract” up to the day, so the data is very relevant. But what’s more relevant is the trend. Once a bull market is entered, typically DOM stays under 90 for years, while prices continue to rise until it becomes a buyer’s market. I’d say we have a minimum of 3 years to go, probably more though.

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