Financial Friday

February 23, 2018

Housing Starts jumped 9.7% to a seasonally adjusted annual rate of 1.326 million units in January, the highest level since October 2016. Economists had forecast 1.234 million units. Nation-wide, single-family homebuilding increased 3.7% – rising in the South and Northeast, but falling in the Midwest and West. Starts for the multi-family housing segment surged 23.7%.

Building Permits surged 7.4% to a rate of 1.396 million units in January, the highest level since June 2007. Single-family home permits fell 1.7% but multi-family home permits soared 26.5%.

The 3.2% drop in Existing Home Sales in January has been attributed to a shortage of affordable homes for sale. Sales of homes priced below $100,000 fell 13% in January year-over-year. Sales of homes priced between $100,000 and $250,000 fell just over 2%. The share of first-time buyers also fell to 29%, compared to 33% a year ago. The biggest sales gains were in homes priced between $500,000 and $750,000, up nearly 12% annually.

Home Buyers Are Increasingly Turning To Escalation Clauses

In competitive real estate markets where homes are fetching multiple bids, Realtors are finding escalation clauses a useful tool to eliminate the back and forth of offers and counteroffers. It also helps buyers avoid getting caught in a frenzy where they may end up paying more than what they intended.

The concern of escalation clauses is that buyers are indicating the maximum amount they are willing to pay for the house and revealing to the seller how much higher they are willing to go. However, an escalation clause is not always advantageous to a seller either. For example, a house is listed for $1 million and receives three bids: Buyer A offers $950,000. Buyer B offers $975,000 with an escalation clause that could go up to $1 million in $5,000 increments. Buyer C offers $980,000. In this scenario, the seller would get $985,000 from Buyer B after the initial offer escalates over Buyer C’s offer. But, had the seller not relied on the escalation clause and instead asked the bidders for their best and final offer, he/she might have sold the house for $1 million.

Before using an escalation clause, buyers should speak to their lender to see if it could affect the type of mortgage available to them in the event the appraisal does not match the escalated price. Buyers should also be specific about the type of documentation the seller must provide before the escalation clause kicks in.

Questions To Ask Buyers & Sellers Who Don’t Think They Need A Realtor

In competitive housing markets, sellers might believe they can sell their home themselves and save the agent’s commission. Arm yourself with these questions to sellers (and buyers) who feel they can represent themselves.

  • Do you know how to file the paperwork? Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A Realtor can guide the seller through the paperwork.
  • What do you do after you’ve found a home? There are over 180 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before and knows what these actions are, to make sure that you successfully buy/sell your home?
  • Are you a good negotiator? From the buyers (who want the best deals possible) to the home inspection companies, all the way to the appraisers, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.
  • What is the home you’re buying/selling really worth? Sellers need to price their home correctly from the start to attract the right buyers and shorten the amount of time that it’s on the market. Studies indicate that FSBOs achieve prices significantly lower than those from similar properties sold by real estate agents.
  • Do you know what’s really going on in the market in your area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?

Tools To Save Time, Control Costs and Go Green On Construction Sites

These trends, some already in use and others newer to the jobsite, are making a big impact on the construction industry.

  • Prefabricating building elements in a factory before on-site assembly keeps more of the job out of the elements that could potentially delay construction and requires few workers to build and assembly.
  • Building Information Modeling (BIM) software allows designers to produce 3D mockups of a planned structure that also incorporate cost and time information. Variables such as construction methods or different materials can be manipulated in the software to compare the costs over time of different techniques or materials used.
  • Virtual/Augmented Reality Technology to enhance worker safety training. Workers can visualize what they are learning, reinforcing how serious construction site hazards can be, instead of just reading it in a booklet. Firms also use apps that tie VR/AR technology to their BIM software allowing contractors and owners to do virtual walkthroughs of a structure long before it is complete. Owners can make more informed design decisions earlier in the construction process, saving time and cutting costs.
  • Permeable or Porous Concrete uses larger stones, less sand and is just as strong as traditional concrete but contains between 15% and 20% empty space. The concrete allows rainwater to seep down into the ground as it normally would instead of pooling or running off. This takes the burden off of municipal sewer systems, extending their life, saving repair costs, and eliminating the need for costly upgrades.
  • Fly Ash Bricks are made from the waste ash from coal-fired power plants. Fly ash bricks are lighter, stronger and cheaper to make than traditional bricks or cinder blocks.

How To Generate Buzz, Momentum, And Sales Activity When Launching New Communities

Use this tried and tested Presale Without Fail process to generate early sales in your next housing community.

  • Land secured: When you have a signed land contract, install signage with basic information – product type, municipality, and school district – to drive people to your website so they join a VIP list to stay informed ahead of the general public.
  • Pull marketing: Keep information broad – no site maps or floor plans yet – to protect you from delays and keep prospects paying attention as you slowly release this information at strategic times.
  • List building: Your goal is to get three times the number of qualified VIP list members as home sites being initially released.
  • Push marketing: As you approach 60 to 90 days from launch, promote the community using digital advertising, including AdWords, Facebook, Instagram, email marketing, and Zillow.
  • Online sales counselor will broadcast to VIPs on your list that base pricing is now on the website, and that one-on-one sales appointments are now available.
  • “House In the Sky” appointments with the on-site sales team allow the sales prospect to get an expert’s help choosing a floor plan and understanding pricing so they can determine if the community is a good fit. This ensures a big turnout at your preview, where people will want to see details.
  • Preview events offer a complete picture of every aspect of the community. Site details and premiums are unveiled. The sales team can work one-on-one with prospects to match their perfect home with the perfect site.
  • Walk home sites: Prospects walk the site they selected at the preview and finalize paperwork for the contract. Everything except for the signature and hand money are prepped to make the grand release go as smoothly as possible.
  • Grand release: Allow your prospects to turn in their signed contracts with hand money on a first-come, first-served basis on the day of your grand release. Use the early momentum to get others off the fence and into the sales office.



Information Courtesy of Jason Browning 

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