Market Writing Trip Certain Predictions | January 2023 Monthly Note

This month: How affordable housing can keep Charlottesville – Albemarle a great place to live, market predictions with certainty are worthless, local lenders, writing and thinking, and a trip ahead.

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A great place to live

Standing in the backyard of one of my new listings last year, we were talking.

They semi-retired here after long careers. Their kids live around the country one in particular lives in the Bay Area, and has been trying to buy a home for some time out there.

Their kids qualify for what in our market would be a luxury home (whatever is the top 10% of the market) and they’ve been unable for a couple of years to buy one.

The problem with soaring prices around the country is that the people on whom we depend to run our society — teachers, police, firefighters, restaurant workers, and people starting out in their careers — won’t be able to live in those places anymore. A very recent example is how a small amount of ice recently affected Charlottesville City Schools: “On Mon, 1/9, Cville Schools will operate on a 2-hour delay due to last night’s wintry mix. While Cville streets appear in good shape, we are delaying to assure safe arrival of our staff, most of whom live outside the City. Thanks for patience.

Look at the responses to this Reddit thread titled, “Live here with $60K salary?” It sounds like $60K is reasonable, with some sacrifices, in Charlottesville.

 

The Market – Certain Predictions Are Worthless

There. I said it. Anyone who says, “The market will do X” this year, and says it with confidence is lying or selling something.

When either discussing with clients, or talking with colleagues or friends, I start the “What’s the market going to do?” conversation with, “I don’t know, but . . .”

I was listening to the most recent The Problem with Jon Stewart podcast, “A Nuanced Conversation About COVID Vaccines (Yes, Really!),” and one of the things that they discussed was the lack of good nuanced conversations about the vaccines and the pandemic and the fact that there was so much certainty put forth by experts.

Certainty is good, but to say that “Vaccines are great with no downsides,” or “The market is going to do this, you should do X,” minimizes the feeling that questions are reasonable.

In my world, I’d like to think I empower and educate my clients sufficiently so that they can make good decisions — through questions, supported and cited answers, and making them feel like they can and should ask questions.

I want and need my clients to trust me (see below about lenders) but that trust should start with questioning skepticism.

 

What do I think the Charlottesville – Albemarle market is going to do in 2023?

I think the market is going to be fine. Just fine. Some houses will go for over asking, but not that many. Some will sell in a few days or weeks, more will sell in several weeks to months.

Buyers will remain patient, wondering if they are paying too much, if the market has peaked, and be cautious about further price reductions.

Sellers’ expectations will continue to moderate as we’re thankfully no longer seeing dozens of offers on houses and exponential increases in prices.

Agents will thankfully have to work smarter and harder, and experience will matter more than ever.

For specific nationwide predictions, I like Logan Mohtashami’s 2023 housing market forecast because he’s specific and shows his models.

Locally, I’ll reserve my specific thoughts for the micro-market analyses I’ll do for my clients, in large part because each property is (usually) so very different. And I will continue to advise my clients to buy for the long term, rather than short-term horizons. (but to any of my clients who have been in the same place for 15 years – don’t you want to move? 🙂 )

Open Rates.

In many ways, wondering “How many people opened my email?” is navel-gazing.

I try to not look at the percentage of you who open the note; better to focus on what I write rather than “Will they open it?”

I try to write to just one person, and not some arbitrary percentage of subscribers. I think the rate is high, but what do I know? I write about what I find interesting and hope that you do too.

And how accurate are these numbers, particularly in light of the blocking changes Apple made last year, and how services like Hey and Protonmail block tracking by default?

That said, I am human and remain curious.

Lenders

I heard recently that in November in Charlottesville – Albemarle 80% of the loans were ARMs, and 28% had mortgage insurance. Holy cow — this is a massive shift upwards in both adjustable rate mortgages, as well as PMI, an indication that buyers are stretching to buy homes. I asked a great local lender to verify the above:

So, its anecdotal…we don’t have those stats to dig down to.

First, yes, ARMs are a bigger part now than ever.   We have a 7/1 ARM that is .25-.375% lower in rate than 30 year.   It’s attractive because we’ll have a refinance window…I know it, I’ve seen it before many times in my career.   Refinancing will happen in the next 6-36 months, I believe.

So, no real harm in a 7 year fixed, amortized over 30 years.   Mortgage insurance is subjective.

I recently had clients who closed at 95% because they wanted to leverage their current house as a future rental and didn’t want to put a HELOC on it immediately, nor obviously sell it for proceeds.   They qualified with both house payments, so they are nowhere near being in risk of default.   The strategy will work for them because they have clear goals.   But, the vast majority of my clients are 20%+ down.

 

And use a local lender. I’ll gladly share more when we talk in person, but I’ll highlight what one of my buyers wrote to me, unasked, to share with you:

Just so you know, in the midst of my frustration with (a big national lender I don’t advise using), I reached out to (the local lenders I’d recommended at the beginning). Both responded promptly and helpfully. I really appreciated that and understand why you recommended them. At this point, I think our best course of action is to work everything out with (big lender) and stick with them. Next time I buy a house, I will just do everything you tell me to do.

I have better conversations when …

… My clients listen to and/or read Sean Tubbs’ Charlottesville Community Engagement. Sean covers Charlottesville – Albemarle growth and development more comprehensively than anyone else in the Charlottesville area.

When I sit down with my clients for the first time, and we start talking about the area, market, developments, etc., I find that we have more of a second or third level conversation rather than first if they’ve started the reading and the research.

My goal is to help my clients see beyond the horizon. I do that in part with Sean’s help, and I gladly pay to subscribe and encourage you to do so as well.

 

Improving Writing

Every day, I’m working on becoming a better writer.

The book, Everybody Writes, is helping.

Hopefully, everyone has a teacher who they remember for what they taught them. Dr. Erb who was one of my high school English teachers shared this recently on LinkedIn:

My new goal is to teach each student to answer three questions:
1. How does this system work?
2. What can I do alone?
3. What can we do together?

And along the way, what’s beautiful here?

I still remember making a bet with him about whether a certain word in French was masculine or feminine. Cost me a letter grade, and the lesson was learned.

Trip with W

I got Covid on our 20th wedding anniversary and had to cancel our plans. Then we both got Covid when we went away for my wife’s birthday.

We’re heading out of the country for a few days, to live and explore without kids. I highly recommend this. More next month.

We will wear masks and be cautious, but we’re also prepared for the possibility that we’ll get Covid again anyway.

I wrote last year that my wife and I were entering a new phase of life as empty nesters. I’ve related to and shared my experiences throughout my career with clients when we’ve had kids — tiny and bigger — one kid, no kids, and now grandkids. Onward!

I’m looking forward to more explorations with my wife. 🙂

 

What I’m Reading

What I’m Listening To

 

(Any suggestions on great podcasts?)

 

Thank you for reading and sharing.

Jim

434-242-7140

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