Monthly Value Message – December 20

Year To Date Closed Residential Sales (SCASD/BASD/BEASD/PVASD) January 1 – October 8

2019……………..1341 Closed Residential Property Sales

2020……………..1278 Closed Residential Property Sales – down 4.7%

This data is based on information from the Centre County Association of REALTORS® MLS for the period indicated. Totals include all existing single family residential properties located in the following school districts: SCASD, BEASD, BASD, PVSD as of the first business day of each month.

1. The Numbers

• Our current level of Active Residential Properties for sale is 32% lower than this same period last year.
• Perhaps not unreasonable that 32% of consumers “do not have to move” and during covid, have decided not to?
• Current Available Inventory down 32%, yet Total Year to date Closed Sales down less than 5%….Interesting!
• Mortgage Rates are the lowest they have ever been, since the beginning of time. (stable income and an interest in a new home, requires action under these conditions)
• The Demand Rate last year at this time was 68%, the sky was not falling. (current Demand Rate 106%)
• Buyers need to be over prepared and over informed for the upcoming 2021 market(especially if inventory remains low).
• Sellers need to be aware, our market is not growing. The recent periods of elevated Demand are the result of fewer sellers placing their homes on the market, not an increase in demand from additional Buyer’s entering the market.
• All qualified consumers need to understand…..If you have stable income….It is opportunity time.
• Today’s borrower pays $322.50 less every month, due to no other reason than lower mortgage rates.

The Approximate Cost of 30 Year Mortgage Money.

December 2020
The monthly payment of Principal and Interest on a 30 Year Mortgage

Loan Amount $250,000 at a 2.75% Interest Rate = $1,020.00/Month

2 Years Ago,

December 2018
Loan Amount $250,000 at a 5.00% Interest Rate = $1,342.50/Month

2. What Does “Market Value” Mean?

To me, the definition of Market Value is……

What a qualified buyer is willing to pay in a reasonable amount of time.

I could teach a 40 hour course on this topic and only scratch the surface.

• That said, here are a few factors I consider when coaching clients on receiving offers(sellers) or making offers(buyers).
• Does the offer result in the attainment of your goals?
• Are you negotiating because you think you’re supposed to or because you are firm in your view of the “value”?
• Does the result of the negotiations matter?(If not, what are we doing? and Why?)
• Is a 1% or 2% difference in the final value a deal breaker?
• Can you easily and probably replace the offer(sellers) or the property(buyers) you are negotiating on?
• What is the cost of future time if the negotiation is not successful?
• Does today’s final “value” affect your future in a significant way?

I know, this exercise may seem a bit “abstract”. I assure you, it is not.

How many times in your life will you purchase a single product with a value over $300,000, $400,000, $500,000…..or more?

Yet some consumers negotiate this type of purchase as if they’re buying something at a yard sale.

I have witnessed consumers(both buyers and sellers)end negotiations within $5000 of success on properties priced at $400,000.00 or more. (FYI….at current mortgage rates ((approx 2.75% on a 30 year mortgage)) paying back $5000 dollars equates to an approx $21/month higher payment)

I am not saying that $21 more per month on your mortgage is not significant.
I am not saying that $21 more per month over 30 years is not significant
I am not saying that ending negotiations within $5000 of success is ridiculous in all cases.

What I am saying is…..”Why did you decide to buy or sell at this price point to begin with”?

“And why is $21/month the deal breaker…..

• when you have a $200/month Cable TV/Internet bill
• when you eat at the Waffle Shop once a week
• when you grab a Gatorade and Milky Way once a week
• when you drive through for fast food once a week
• when you have Penn State Football season tickets
• when you buy a cool new piece of clothing without thinking about it
• when you treat yourself to a couple of cocktails because you had a hard day

I am not talking about grossly overpaying for a property.

I am trying to convey a minimum amount of perspective.

This perspective may provide more value in a limited inventory marketplace.

(recap from a previous message, but that is what learning is….review and reminders)

3. Where’s Todd?

The third person to respond via email with the correct location of this photo wins a $10 Panera gift card.

Hint…it will always be somewhere in Centre County.

This Month’s Prize….

1 Winner will receive a $100 Gift Card to the Carnegie House.

“It was one of those March days when the sun shines hot and the wind blows cold: when it is summer in the light, and winter in the shade.”

– Charles Dickens