Connecticut Real Estate Reality Check - Five Trends Driving Today’s Real Estate Market

August 5th, 2009 categories: Real Estate Market

One of my favorite movies is Moonstruck. I especially like the scene where Cher slaps Nicholas Cage, yelling “Snap out of it!”

This post is one big collective slap to myself, home buyers, home sellers, fellow Realtors and just about everyone else. Snap out of it. What you know of the real estate market or think you know has changed.

I count five trends that are shaping the real estate market in Hartford County Connecticut today.

Longer Waits for FHA/CHFA Mortgage Commitments

In 2005, FHA (and VA) insured mortgages were only 6.8% of the total number of mortgage applications. In 2009, that percentage is nearly 36%, according to the Mortgage Bankers Association. It only makes sense that with such an increase in demand, home buyers and sellers should expect a longer waiting time to obtain mortgage commitment. On average and according to the mortgage lenders I work with, expect a 4-week waiting period from the time of mortgage application to get mortgage commitment. Add an extra week to that wait if the buyer is using CHFA.

That’s longer than it used to take - you used to be able to close within 30 days of writing a real estate purchase contract. Expect 45 days to close. Plan accordingly.

Expect Appraisals to Be a Barrier to Home Buying and Selling

Only in effect since May 1, 2009, the new HVCC rules affecting Fannie Mae and Freddie Mac mortgages (not FHA/VA) are causing problems. Delays. Higher fees. Botched appraisals. All of this can lead to contracts falling apart. Expect it and try to mitigate any issues. The Chicago Tribune has a great article which recommends, for example, that home sellers be present during an appraisal, offer the appraiser a list of improvements, and discuss with the appraiser what constitutes a comparable home.

A Pre-qualification Letter is Not Good Enough

I’ve never thought a pre-qualification letter was good enough for my home buyers or for my home sellers. But especially today, it amazes me how many agents still present offers with just a pre-qualification.

What’s the difference? Specifics - a good pre-approval letter will note most or all of the following: the borrower’s credit or credit worthiness, property address, mortgage amount, rate, down payment, type of mortgage, and what the lender has reviewed prior to issuing the letter (pay stubs, w-2s, etc). Without this information, a buyer cannot know for sure what they can afford and a seller cannot be as certain as possible that the buyer will qualify for their mortgage.

Buyers Are Nervous About Overpaying

When home buyers are nervous about overpaying for a home, they do several things: they write offers for far less than the list price (and sometimes less than comparable sales), they ask for a lot of repairs and they write multiple offers looking for a seller who’s willing to make a deal. They’re also quick to withdraw an offer at the slightest sign of negotiation. Who can blame them?

Your House May Just Be The “House of the Moment”

The strangest thing I’ve noticed is that some houses receive multiple offers and others don’t. There seems to be no rhyme or reason. One agent I spoke with called it “the house of the moment” syndrome. A home can be on the market for months and all of a sudden, buyers descend upon it all at once. Why? Other homes in comparable neighborhoods, condition and price just sit while one house gets three or four offers.

If I could use only one word to describe today’s real estate market, it would be “complicated.”