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The Most Dangerous Commercial in the World

April 24, 2018 By Rick Jarvis

Has anyone seen the Rocket Mortgage ad that debuted during the Super Bowl (sorry, we’re making you think way back today)? The one where Keegan-Michael Key (of Key and Peele) translates for people? I have to admit, it had me chuckling, especially when he was translating the bios on the dating site.

But did you catch the part with the couple talking to the Realtor? The couple is in the home and the Realtor is talking about mutliple offers and discussing the type of financing (which a Realtor would NEVER do) and the couple looks confused. Then, the narrator (Michael Key) pops up to “translate”, hands them a phone, and says, ‘Press this button.’

Yeah, that is pretty upsetting to those of us in the real estate community.

Push a Button and You Don’t Have to Think

The messaging is subtle, but undeniable. Rocket is saying, ‘Don’t listen to them, listen to us. We have taken all of the thinking out of the process, just push here and everything will be ok.’

In effect, they are telling the public that an experienced loan officer, who is trying educate them about one of the most complex financial instruments they will ever employ, is completely unnecessary.

Furthermore, they are saying that pushing a button on the internet is somehow a better option than having someone explain how things work.

And lastly, they are saying that shopping for the best rate, as well as the best terms, is not needed since they handle everything for you.

It is absurd.

If Knowledge is Power, What is Lack of Knowledge?

In 2007, the market crashed largely because the consumer knew nothing about the complex financial instruments that they were using to purchase homes. Unsuspecting buyers willingly accepted intentionally deceptive lending products to acquire overpriced housing that they could barely afford on Day 1, much less once the rates began to adjust upwards and prices began to fall.

Rocket, with its massive advertising budget and slick technology, is now taking the practice to an industrial scale.

By sending the message that pushing a button is the best way to get a loan, Rocket is basically telling the market that understanding your options is unnecessary. Don’t waste your time learning, just push here.

Pushing a button to order milk, movie tickets, or even a new iPhone is perfectly ok. But pushing a button to order a financial instrument that can cost you hundreds of thousands of dollars over time is unacceptable.

Don’t mistake pushing a button for thinking.

Rates are Rising – Here’s What it Means

March 28, 2018 By Rick Jarvis

Jarvis Grandchildren: ‘Grandpa, please tell us a story about the way real estate used to be!’

Grandpa Jarvis: ‘Let me tell you a story about 3.5% 30 year fixed mortgage rates …’

Jarvis Grandchildren: ‘Ooooooooo, 3.5% 30 year fixed mortgage rates?!?’

Grandpa Jarvis: ‘Yep. 3.5%. Some people even got 2.9%.’

Rates are Headed Up – For Good

As I write this in the spring of 2018, the recent job report states that the economy not only added 200,000 jobs, but wages rose at their fastest rate in 8 years.

And just so you realize:

Low unemployment tends to lead to wage increases
Wage increases tend to lead to more disposable income
More disposable income tends to lead to more money to spend
More money to spend tends to lead to inflation
Inflation tends to lead to higher long term mortgage rates

Take a look at the correlation:

As you can see, even as the unemployment rate (the blue line) began to fall in the years following the collapse, wages (red line) didn’t really begin to trend upwards until the latter part of 2015, and even then, only negligibly. The most recent jobs report indicates that wages are starting to rise, a trend that is predicted to continue for some time.

So What Does it Mean for Housing?

Not much … yet. And as a matter of a fact, I am not unhappy to see the rise happening.

Why? Because it means the economy is healthy and people see positive things on the horizon. Trust me, I would rather be in a world with healthy economies and 6 to 7% long term rates than one teetering on the brink of collapse with 3.5% rates.

As we discussed in our 2018 Predictions only a few months back, we predicted a rate rise in 2018 and went into some detail about the implications. Effectively, if we are all making more money, then a slight rise in the cost of borrowing is not something that will cause the market to collapse. And furthermore, as long as credit standards remain reasonable (and consistent) then the risk of a ‘2008, The Sequel’ is quite low.

Home Prices Will Still Rise

Expect housing values to continue to rise, especially urban and affordable, due to a complete, thorough, absolute, and total lack of inventory. As the millennial generation begins to exit their downtown rentals and enter the buying market, affordable urban markets will continue to be starved for inventory.

Expect some of the upper end suburban markets to see slowing price gains due to the fact that homebuilding is finally cranked up again, mitigating some of this inventory shortage.

Think ‘Strategic Finance’

Remember, it is the long term rates that are the ones that have more room to rise. The 3, 5, and 7 year adjustable rate mortgages will still give buyers options a point or two below the long term rates, offsetting any rate increases.

But that said, it is time to get a little more strategic about how you finance your home. Gone are the days of just taking a 30 year mortgage at 3.5% simply because it is a no-brainer to do so. Thinking long and hard about how long you expect to stay in the home will become a key ingredient to making the correct mortgage decision.

But it does feel like we have come to the end of an economic era – the end of the 4% 30 year mortgage. And while I will be a little sad to see it go, it indicates much better times are on the horizon.

4 Reasons to Call Us… Even if You Don’t Want to Buy or Sell

February 28, 2018 By Rick Jarvis

Studies show that people tend to move every 5 to 7 years on the average and own roughly 3 to 4 houses over the course of their lives. So during the time when you are not considering a move, you don’t need a Realtor, do you?

Well, maybe you do… just not for the reasons that you think.

Real Estate is a Constant in Our Lives

You interact with your home every day.

You come home to it every night and leave it in the morning. You pay taxes on it each year, you pay the bank to own it, and you pay contractors to fix it. You put down mulch in the spring, mow the lawn in the summer, rake the leaves in the fall, and shovel the walkway in the winter.

And that’s where we come in, even when you don’t plan on selling. We know housing and can help offer guidance along the way.

1. Contractor Referrals

So much of what we do every day involves interacting with the people who provide services to homes, both directly and indirectly. We know who does what, their reputations, and their customer service.

Is your roof metal? Or is it modified bitumen? We have people that know how to fix both.

Are you walls plaster? Or sheetrock? Or do you want to put up shiplap? We have people that do that.

Or are you considering solar? Yep, we know all about that, too.

The bottom line is we have a list of Richmond’s best service providers and we would love to share it with you.

2. Tax Assessments

Have you ever been shocked by the county raising your assessment? Yeah, we have, too. And we can show you how to combat it.

The goal for any county (or city) is to maximize their revenues to pay for schools, fire, police, etc. and yes, as citizens, we need to pay our share. But a poor assessment can result in you paying more than you need to.

We have helped more than a few clients understand how to combat an overzealous assessors office.

3. Adding Value

So what happens if you spend $20,000 improving your home? Do you improve your value by $20,000? More? Less? It depends.

One of the most difficult things to understand is what drives value in housing. Even more confusing is the fact that what adds value in one home or one neighborhood might not work in another.

At the end of the day, we can help you understand the best way to spend your hard earned dollars so that when the time comes to sell, you get all of it back, and more!

4. To Get the Inside Scoop

Why is there a ‘zoning case’ sign across the street from us?
What are those bulldozers doing over there?
Who just bought that office building and why are they tearing it down?

We pay attention to what is getting built, where it is being built, and who is doing the building. We also pay attention to zoning, development, population trends, and a host of other factors to help us know what is going on.

So while we don’t proclaim to know everything, we do know a lot. And when we don’t, we know who to ask to find out.

We are a resource

Even if you aren’t buying or selling right now, we still consider you a client. If you have a question, ask.

No agent who is worth their salt ever wants to see someone make a poor decision, especially when a 5 minute call could have made the difference.

And, no, you are not bothering us — it’s what we do.

Buy a House, Pay for College

February 4, 2018 By Rick Jarvis

Several years ago, we wrote a blog about buying a small house or condo for your child attending VCU. That article has always been popular and carried significant traffic on the web.

And Now… We Have a VCU Student!

Since the first article is now a bit outdated and we’re currently in the works of purchasing a home for our own child headed to VCU, we think now is the perfect time to take a deeper look at the concept.

First, let’s look at some pricing statistics for the past several years.

Year	Median Sales Price	Median Price/SF
2015	$187,000	$147
2016	$210,000	$159
2017	$227,000	$179
2018	$238,000	$182
2019	$255,000	$191
+/- %	+36%	+29%

For the area that surrounds VCU’s Monroe Park Campus, you can see that pricing has been rising –– by about 30% over the last 5 years.

That could pay for a lot of college tuition.

Here’s Some Context:

The cost of a VCU dorm in 2020 is $11,506 (up from $7,800 in 2018)

Per our rental managers, the average cost of rent is anywhere from $600-700 per bedroom in a standard house.
To rent a 1 bedroom studio apartment, the number rises closer to $1,100 to 1,200 per month
To rent a 2 bedroom/2 bath apartment, you are likely to pay anywhere from $1,600 to $2,000 per month

The Numbers

So imagine the following scenario ––

Purchase the home for $350,000 and sell it 4 years later for:

$409,000 given only a 4% annual appreciation rate
$425,000, given a 5% annual appreciation rate
$441,000, given a 6% annual appreciation rate
Instead of paying $11,000 in rooming costs to VCU, you received $1,300 in rent per month from two roommates
And you paid down your mortgage balance by roughly $20,000 to $40,000 depending on loan type, interest rate, etc.
(As a small disclaimer: The past does not guarantee what the future will look like and the type of loan you choose and interest rate you receive will impact how quickly you pay down the mortgage balance.)

Loan Possibilities

Though there are some navigable hurdles, you can co-sign for your child and use a Maximum FHA loan that requires a very low down payment. There are also loan programs for non-owner occupied co-borrowers for less than 20% down. And finally, there are investor loans that allow you to purchase without requiring 20% down.

So all that said, you have options and not all of them require substantial amounts of cash.

So depending on what loan type you choose, we can help you find an originator who knows the market for investor and co-borrower loans.

But Aren’t Prices Going to Stop Rising?

Maybe if we solve the inventory problem or everyone decides to leave the city.

To solve the inventory issue, all we have to do is figure out how to build another, say, 3,000 or so houses per year around VCU (which if you aren’t detecting my sarcasm, is near impossible).

So while past performance is no guarantee of future returns, but, of all of the segments that offer value protection, it is housing that surrounds a 30,000 student university –– especially an urban one where the ability to add additional housing is essentially nil.

Furthermore, the fact that VCU’s housing need is largely supplied by the private sector means that the dorm life element of VCU is far less important than it is at other comparable institutions.

To back this statistic up, as we entered into the 2020 market, there was less than 2 months of inventory –– and that is as low as it has ever been.

Summary

So is purchasing for you? Not necessarily, but for many it makes a lot of sense.

The inventory issue is not really solvable and owning property next to perhaps the most important economic engine in the region has proven to be a great hedge against market downturns.

We can help.

Do You Want to Know What to Bid? Read this…

February 1, 2018 By Rick Jarvis

Please stand if this describes you — you have not bought a house in the last year. The rest of you who have bought in the last year can sit down and just nod your head as you read this. Why? Because you know what its like.

The Market is Bizarre

I am not sure if I can explain how truly bizarre this market is right now.

Buying a home is more like an auction than anything

I have NEVER EVER EVER EVER seen conditions this extreme in my 25 years of being involved in real estate. I must admit, I thought 2015 was nuts … until I lived through 2016. And then I thought that 2016 was totally nuts … until I lived through 2017. And then 2017 was the year to end all years, until I saw what 2018 is turning into.

A Word to the Wise

So a word to the home buyers of 2018 — do not listen to anyone who bought prior to 2017 because they are giving you bad advice. And I don’t care whether or not it is a parent, sibling, grandparent, financial planner, economics professor, fortune teller, Swami, the Dali Lama, a Realtor buddy in another market or any other trusted advisor. They do not know what it is like.

So I am going to stop overselling and start explaining.

Some Really Mind Blowing Statistics

Want to know what a good agent can tell you? 52% of the homes that sold in the City of Richmond in the last 6 months sold for above asking price and in less than 10 days.

Here you go:

For houses in the following four zip codes in Richmond (23220, 23221, 23222, 23223) if the house was on the market for 5 days or less, there is an 83% chance is sold for full price or greater. Oh, and the average sale was for 101.5% of the asking price.
- For houses on the market 6 to 10 days, you are highly likely to still pay full price, too (100.7%, to be exact)
In Chesterfield north of Route 60 (zones 62 and 64 in Realtor speak), there is a 74% chance you will pay at or over asking price for a home on the market for 5 days of less.
- For houses on the market 6 to 10 days, you get a small break at only 99.5% of the asking price
In Henrico’s Deep Run, Glen Allen, and Godwin Districts, 73% of the time a home is sold in 5 days or less, it goes for full price or greater (100.3%, to be exact)
- For houses on the market 6 to 10 days, sellers receive 99.1% of their asking prices.
In 2015, 39% of the homes marketed in Richmond City sold in less than 10 days. In the last 6 months, that number has spiked to 52%.

Let Us Know

Want us to do a special study for your preferred area or neighborhood? E Mail us today at Kendall@richmondrelocation.net

We can not only do the research for you, but we can also do the analysis. Tell us your price and your area preference and we can do the rest. Knowing your market means understanding the best strategy to deploy when you are getting ready to pull the trigger on that perfect house.

As you can see, the old way of purchasing is no more.

Bidding has replaced bargaining.
Acting has replaced waiting.
Conceding has replaced negotiating.

Now we have written extensively about some ways to help offset the seller’s market (like here, and here, and here), but the key is understanding. Just because buying a home USED to be a certain way, it isn’t anymore.

And a Few More Interesting Tidbits

Want to know another trend? Cash.

In the City of Richmond, of the 1,500 or so most recent transactions, 294 were cash (that is 20%, if you want to know the math.) So if you are using debt (i.e. a mortgage) in your purchase, there is a pretty good chance you will be squaring off against a cash buyer.
In Chesterfield, the number drops significantly. Cash transactions made up only 8% of the most recent transactions in Chesterfield.
In the West End of Henrico, roughly 11% of the transactions were cash.

So when you bid, you need to take into account what your competition’s likely terms are going to be.

Scarcity Drives Pricing

The reasons are many for our upside down topsy turvy market, but at the end of the day, prices are set by supply and demand — and right now, it is about supply (or a lack thereof.)

When supply drops by roughly 75%, then yes, prices are going to rise.

Why?!?

Here goes:

As a nation, we are undersupplying the housing market by anywhere from 300,000 to 500,000 homes per year — and we have been doing so since 2008. When you have created somewhere between a 3M and 5M unit housing deficit, you are going to experience a market like we have now.
Richmond, as a region, is gaining popularity and new people are moving here every day. When more people seek fewer things, prices rise.
Interest rates are low, still. Like waaaaayyyy low.
The economy is doing better and people are making money.
The cost of building houses is rising extremely quickly, compressing inventory even more at the entry point of the market.
Rents are rising and thus making people want to buy.
Seven, at least within the City limits, people are staying longer and holding onto properties. Where there used to be thousands of homes in a given year to choose from, there are now only hundreds.

Fix all of these problems and prices will stop rising. Until then, bidding wars will continue and waiting costs you money.

That about sums it up.

Summary

Please, do yourself a favor, and when someone who hasn’t been in the market in the last year offers you advice on what to pay, how to act, and/or what to say, just nod and thank them — but take whatever they say with a grain of salt. The market that they experienced is as different as apples are to station wagons.

The buyer in 2018 acts quickly and powerfully. Using old data to make a new decision will not work.

Let us help guide you through what is one of the most challenging markets in the last 25 years.

The Most Dangerous Commercial in the World

Push a Button and You Don’t Have to Think

If Knowledge is Power, What is Lack of Knowledge?