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There’s no doubt that 2020 will be seen as the odd year out due to Covid-19. So many things happened last year. The massive buyer demand appeared in March and cautious homeowners that would normally be preparing to put their homes on the market pulled back.
Those that did decide to jump into the frenzied buyer pool were met with the stress of having to make on the spot purchase decisions. Many gave up the safety net of home inspections (or at least asking home sellers to bring properties up to previously expected conditions).
Others armed with greater buying power due to continued record low mortgage interest rates found themselves frequently in bidding wars and using escalation clauses or even guaranteeing to make up the difference if the home didn’t appraise. This buying fever even spilled into the first half of 2021.
Everything That Goes Up Must Come Down (and Vice-Versa)
The second half of 2021 is looking quite different from the first half of this year. Make no mistake, our real estate market is still very active with homebuyers, especially in the under $300,000 resale market, but a funny thing happened in June on the way to July and beyond.
The Number of Homes For Sale Began To Rise
After a year and a half of Home For Sale inventory falling, (at the peak of the 3rd Quarter in 2019 there were just over 4,000 homes for sale), the number of homes for sale in 2021 finally began rising after bottoming out in the 1st Quarter at 1,693 properties on the market. At first this increase looked to be slow, but in the 3rd Quarter of 2021 the Quarterly Median For Sale Count is pushing above 2,400 and it looks like we will have a chance of coming close to 3,000 homes for sale at years end for the first time since before Covid-19 arrived in late winter of 2020.
Sale Pendings Slowing Down Quickly
One of the best leading indicators of market activity is following the count of homes in Sale Pending (under contract and in the inspection/financing/closing process). There are so many hurdles that must be overcome during this timeframe.
At the beginning of this article, I mentioned some of the challenges of keeping a sale together. Getting through home inspection periods and appraisals are by far the two biggest obstacles in the sale of a home.
But other factors have been at play this year as well. With on-the-spot purchase decisions and multiple offer bidding wars, many would-be homebuyers have experienced buyer’s remorse. Others have had financing issues, even after presenting a loan pre-approval letter from their mortgage lender.
A typical year would show Sale Pending activity building steadily during the first two Quarters of the year, the 3rd and 4th Quarters would show a downturn, but would be more gradual until the months of November and December. These last two months are historically the slowest months for sales activity as homebuyers and sellers alike prepare for the upcoming holiday season and for winter to set in. 2021 has been more like a rocket launch during the first two Quarters of the year with the 3rd Quarter on a downward trajectory that we haven’t felt for a very long time.
It’s Not Just All About Homes For Sale or Sale Pendings
In 2021 we have experienced one of the fastest increases in home pricing ever seen. In the five-year period prior to 2021, the Median List Price of homes for sale hovered around $275,000 with seasonal fluctuations.
So far in 2021 the year-to-date Median List Price of homes for sale has been $305,000. This $35,000 jump in home pricing has been largely due to the number of new construction properties that have taken over our market during Covid-19.
With fewer resale properties on the market, home builders have been able to fill much of the housing gap from normally pre-existing home sales. Even with the rise in the cost of lumber, record low mortgage interest rates allowed many more buyers the opportunity to buy new during the pandemic.
Side effects of this type of market are the Days on Market and Months of Inventory. Median Days on Market has been in single digits all year long with Q1 at 8 days, Q2 at 3 days and Q3 so far rising slightly but still only at 5 days on market. Likewise, Months of Inventory has been below 2 months which is not unexpected with the records pace of sales.
Bring Out The Crystal Ball
Next month, I will dig out my crystal ball and make my year end predictions along with what I foresee happening in 2022. One thing is certain in the world of residential real estate—there’s never a dull moment!
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It’s that time of year again, where, if you work for a medium-to-large employer, you’ve got some decisions to make because it’s open enrollment time. Of course, depending on your situation, you may have been working remotely for a while, but, even so, you will likely have the opportunity to review your benefits package and make changes. And you’ll want to make the right moves, because your choices can have a big financial impact on your life.
So, take a close look at these key areas of your benefits program:
- Health insurance—Think about your health care needs over the coming year—will you or someone in your family be coping with a chronic illness or facing a surgery? Will you need to at least consider testing and possible treatment for COVID-19? In any case, make sure you’re choosing the right plan for your needs. And pay close attention to any changes in your health insurance, such as whether the plan’s provider networks have changed – you may want to make sure your own doctor is still in-network. Also, check to see if you can reduce your health care premiums by taking part in a wellness program or health-risk assessment.
- Life insurance—Your employer may offer a group life insurance policy for free, or for a small amount. It’s probably worth your while to take this coverage, but it may not be enough for your needs. If you only had this group policy, but your family situation has recently changed through marriage or the addition of a new child, you may well need to add some private insurance.
- Disability insurance—In addition to offering group life insurance, your employer may provide short-term disability insurance as an employee benefit. Like group insurance, this disability coverage may not cost you anything, but it may not be adequate—typically, short-term disability only replaces part of your income for three to six months. And while you may never need to miss work for an extended period of time, you never can tell—after all, more than one in four 20-year-olds will become disabled before they retire, according to the U.S. Social Security Administration. You may want to consider purchasing your own long-term disability policy on top of the coverage offered by your employer.
- Retirement plan—You can probably make changes to your 401(k) or similar employer-sponsored retirement plan at any time, but why not look at it now, when you’re reviewing all your benefits? If you can afford to increase your contributions, you probably should, because a 401(k), with its tax advantages and ease of contribution through paycheck deductions, is a great way to save for retirement. At a minimum, put in enough to earn your employer’s match. You’ll also want to review your 401(k)’s investment mix. Is it still providing you with significant growth potential within the context of your individual risk tolerance? Over time, you may need to make some adjustments, either because an investment is underperforming or because you’re getting close to retirement and you need to reduce your risk exposure. In any case, it’s a good idea to check up on your 401(k)’s investments at least once a year.
Your employee benefits are an important part of your overall financial picture—so do what you can to get the most from them.
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The internet has grown into one of the largest marketplaces in the world. It’s a hub for tons of unique businesses that grow with their own strategies, and it requires commitment, patience and perseverance to keep them going—but passion makes all the difference.
When I started my first website , I had no clue what was the best direction to take or how to get visitors. I made a lot of mistakes, and as frustrating as it was at the time, I learned from them. It allowed me to become who I am today, and you can use these lessons to jump-start your own online business.
- Build a better and faster website
Your website will be the first thing people see when they visit, and it’s how prospects and customers will know who you are. If your website is poorly designed or not optimized for mobile devices, then you’re missing out on a lot of traffic. You can also lose interested visitors because of navigation difficulties and disorganized pages.
A slow-loading site is frustrating for web surfers, which is why you should invest in designing a fast-loading site that gives users an easy browsing experience. A clean layout makes it easier for clients to get around and look at other products while keeping content organized helps retain visitor interest. Google’s page experience update(which is the update that rewards fast-loading sites) has prompted many business owners to modernize their websites, so you are losing out on traffic if you have not already.
- Use SEO to get more results
Search engines like Google look for keywords that people search for when they want specific products, so the more those keywords are implemented into your site and its content— such as blogs and product descriptions—the easier it is for users to discover you. Optimizing your layout and having fresh content and images related to specific keywords can make a huge difference in how many visitors find you.
However, SEO does not always pay off instantaneously. It takes time to get your site ranked higher in search results, and if you’re just starting out, then you’ll need to put in a lot of elbow grease before you see positive results. Your SEO strategy should include, besides keyword optimization, off-site SEO factors, such as link building to get more backlinks and social-media shares.
- Use an aged domain name
Aged domains automatically generate a sense of trustworthiness for search engines, making it hard to compete with them. This is because they have been around longer than new sites and are more familiar in general. They also come up higher on the first pages of Google searches, giving you an edge over your competition that can’t be matched when starting out fresh with a newly formed domain name.
Aged domains cost more money, and it can take a lot of time to bring up rankings for your new domain name. However, this is a great investment in the future if you plan to stick around for a while because it will take less time and effort in the long run.
- Have a dominant social-media presence
A massive part of any business’s success today is the presence it has online. Social-media platforms like Facebook, Instagram and Pinterest have been invaluable tools to businesses big and small for years now, and this trend will only continue as time goes on. By learning how to use social media effectively, you can increase your following, get tons of new visitors each week and even influence their purchases with ease.
By using a combination of humor, helpful information about your products or services and anything else that works well for your brand, you’ll be able to grow a lively community around your business in no time at all.
- Use advertising methods wisely
Google AdWords, Bing Ads, Facebook ads—there are tons of ways for you to market your business online! With such a huge amount of options available to businesses today, advertising can be very frustrating when done the wrong way. However, it’s also a great tool that can help grow your business into something larger without even having to spend much money at all.
Each platform has its own benefits and pitfalls that may end up being too costly or not have enough visibility for you to get the results you want. Use them together with SEO if possible, but be careful about spending too much money on advertising without getting enough return on your investment.
- Track your progress top-to-bottom
Investing money into strategies that don’t work is never a good way to grow your business. Whether you’re using an advertising platform, building links to increase traffic or trying any other online marketing strategy, you’ll want to track your progress so that you can make the best decisions and get profitable results.
The simplest way of doing this involves tracking basic metrics like the number of visitors coming through each page on your site and where they come from. With this information, you can see what’s working and what isn’t for your site and improve over time.
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Have 2021 Homebuyers and sellers missed the boat? The fast answer to this question is—NO!
The Real Estate Market Doesn’t Have to Follow the Seasons of Nature
It’s true that real estate every year tends to mimic the four seasons of nature. In the spring, there is an awakening of homebuyers that occurs followed by early summer and increased buying and selling activity. As summer begins to end, there is a slowing down period through fall and a time of perceived dormancy or slow activity during the winter.
But the advantage of being a homeowner is that you aren’t tied to seasonal activity. As a home seller, you only need one ready, willing, and able buyer to purchase your home. And in any market—dormant, increasing, peaking, or declining—there is a buyer for your home. This is because a home seller can adjust to the current market through pricing or conditional improvements.
As a homebuyer, it can be challenging when there is such high buyer demand, but if you stay ready for any new listing that hits the market, especially right now when inventory is beginning to build, you should be able to find that perfect next home! Especially with continued record low mortgage rates! Many homebuyers find their perfect home during the slower time of the year when there is less competition from other homebuyers on the streets.
The Economic Cycle of Real Estate
The four stages of an economic real estate cycle typically stretch over a 10-year period.
The early stage of Recovery is the first upturn in market activity by buyers and sellers. This period is where you would likely see a market that favors buyers over sellers. Mortgage interest rates would likely be higher than at the peak of the cycle. In real time terms, the last period that the real estate economy was in recovery was after the mortgage economic crisis of 2008.
The second stage of Expansion is the period that gives homebuyers and sellers the most confidence. The height of Expansion tends to benefit sellers over homebuyers and lower mortgage interest rates can add fuel to buyer activity as we saw in 2018 and 2019.
- Over Supply (Or in 2020’s case renamed Pandemic Period)
The third stage is referred to as Over Supply and occurs after the economic Expansion cycle peaks and begins to slowdown. Our market began to see this in late 2019 and the first 3 months of 2020 just prior to Covid-19. January and February of 2020 were beginning to see a large influx of listings entering the market. Once Covid-19 arrived in early March 2020, it was like a river reversed course.
The Central Iowa real estate market experienced a tsunami-like wave of homebuyers and sellers that felt just like the expansion period that had started in 2018. Even with home inventory levels dropping to record lows and fully in a national pandemic, homes sales continued at a rate that pushed 2020 year-end unit sales to record highs.
Due to the pandemic, 2021 acted like 2019 and as a result effectively resetting its place in the cycle back to the peak. This was accentuated by record low mortgage interest rates and record high buyer demand. Sellers enjoyed multiple offers often above the listed price of their homes within hours of going live on the market.
If you were doing the math earlier, you’ll remember that I said that a typical real estate cycle occurs over the course of a 10-year period. We are 14 years into this current cycle and just now seeing indications that we are inching toward the Recession period. At the current activity level of home buyers, it could take 3 to possibly 5 years before we should expect to fully bottom out and begin the Recovery portion of the cycle again making this real estate cycle one of the longest in history.
The title of this article was “Have 2021 Homebuyers and Sellers Missed the Boat?” and it’s important to understand that each year, the real estate market follows calendar seasons. But the market is also on a larger and longer cycle that is typically 10 years in length. This current economic real estate cycle will be at least 16 years and possibly longer. Regardless of where we are on the calendar or in an economic cycle, a home that is well priced and in top condition will always have a buyer and buyers that keep focused on the housing inventory will be able to find that perfect next home!