End of a trend

When we started this newsletter, we knew we were in one of the most unusual times in the history of our industry, and even our world. The pandemic had totally upended this business in so many different ways.

Now that the world has returned to normal, or semi-normal, we are seeing certain statistics come back to Earth.

Our second story is a perfect example. The second-home, or vacation home, market looks nothing like it did several years ago. We encourage you to read the full report. It really gives us a good sense of how that sector of the industry has changed in such a short period of time.

Now, on with today’s Blueprint!

– James and David

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Inflation sees slight drop

CPI inflation rose 3.4% between April 2023 and April 2024, according to the BLS. That was down slightly from the 3.5% year-over-year increase noted in last month’s report. Here are the other key takeaways from the April update:

• Inflation rose 0.3% month-over-month

• Core CPI inflation declined to 3.6% year-over-year, the lowest level since April 2021

• Rent and gas are the big inflation drivers now, accounting for more than 70% of April inflation.

• The shelter index, which is made up mostly of rent, was up 5.5% over last year

• Monthly rent price growth has slowed to the lowest level since mid-2022

• Housing prices contributed 0.175% to monthly core CPI inflation in April. While that’s up from the 2018-19 average of 0.11%, it's the lowest monthly contribution since Dec. 2021.

Our take

We needed this report. It broke the streak of hotter-than-expected CPI reports we’ve seen all year. While housing inflation is going down, it’s dropping at an annoyingly slow pace. Still, there is positive news here. This data translates into lower mortgage rates. The 30-year fixed is now at 6.99%. While these numbers won’t be enough to cause the Fed to cut rates anytime soon, they show we’re heading in the right direction. We just want to move a little faster, please!

Vacation home demand is down big

Last year, U.S. homebuyers took out 90,772 mortgages for second homes, down 40% from 2022 and down 65% from the height of the pandemic housing boom in 2021. That’s according to a new update from Redfin on vacation home demand (note that “second home” and “vacation home” are used interchangeably in this report). Here’s other key data from their 2023 numbers:

• Mortgages for primary homes declined at half that 40% rate, falling 20% compared to 2022 and 35% compared to 2021. 

• The typical vacation home costs $475,000, compared to $375,000 for the typical primary home.

• 29.5% of all second-home mortgages went to people aged 55-to-64 and 28.6% went to people aged 45-to-54.

• These metros saw the biggest year-over-year declines in second-home mortgages:

  • Austin, TX (-62.5%)

  • San Francisco, CA (-57.6%)

  • New York, NY (-53.9%)

  • Seattle, WA (-53%)

  • Nashville, TN (-51.3%)

Our take

This report is so full of good info we couldn’t cover all of it. The main takeaway: the trend of buying second homes has declined massively since the pandemic. Now that many employees are getting back to the office, people just don’t see the same need for a vacation home. Also, the rental market has cooled, so short-term rental owners can’t make the same profit, and companies like Airbnb have seen a drop in revenue.

Markets with the highest and lowest price appreciation

Zillow reports that U.S. home prices rose by 1.15% between March and April 2024. That is 0.20% higher than the 0.95% increase home prices have averaged since 2000. Although home price appreciation has been roughly typical nationwide, it has varied enormously across the 250 metros Zillow tracks in its index. 

Here are the markets where prices have grown the most and least between March and April of this spring season.

Our take

No surprise here. Midwest and Northeast markets saw the highest price growth since active inventory for sale is far below pre-pandemic levels in these areas. It’s a different story in Florida, where the large spike in inventory over the last year had led to the least price appreciation. Unfortunately, the state is also still recovering from Hurricane Ian, which caused a rise in home insurance premiums and slowed migration into the area. Southwest Florida markets are likely to see even more price declines through the year.

Schematics

The news that just missed the cut

• This waterfront home beat a local Miami sales record 

• Down payments have doubled in the past 4 years

• Big-name funds are INCREASING their stake in real estate as banks retreat

• Why this reform of Freddie Mac is a massive game changer to the mortgage market

• What happens when agents damage a listing

Foundation Plans

Advice from James and David to win the day

In our business, we not only need to acquire new listings, we need to keep current listings from going stale. Today, we’d like to give you some of our best tips on how to make your listings sell as quickly as possible.

Prepare your clients first – Your seller clients will likely still be living in the home, and that could cause some issues. You want the home to look like a model home, so you need them on the same page as you. Make sure they understand that they simply can’t have all the same lived-in touches (and messes) as a normal home. Your job is to put the home in its best light, and they should support you in that goal.

Get the home pre-inspected – This is an important step to fix any items that could wreck the deal. HVAC, plumbing, electric and safety items are the most important. Change all furnace filters, knock the dust off the hot water tank and check for mold in the basement and crawl spaces. Offer a copy of the inspection along with receipts of any recent repairs when you start showing the home. Mention it in the agent-to-agent comments in the MLS.

Make sure the first sights are all right – Buyers make their decision on a home in two places: from the street and in the home’s entrance. Make sure both places shine. Upgrade landscaping, enhance the front door's appeal with a wreath or paint, and create a welcoming entry with a doormat and plants. In the foyer, aim for a bright, spacious feel—no clutter, coat trees, or excessive furniture. It should welcome all new buyers. This can net your seller thousands of extra dollars, or even tens of thousands, when you do this right! 

Preview the competition –  The day before you launch your new listing, check out your competition one more time. Make sure your pricing is still accurate, and what the potential buyer is considering. Your price has to make sense. In some cases, you may want to take your seller client along for these showings so you’re on the same page regarding pricing. Are other listings (especially new construction homes) offering seller incentives? You may need to meet or beat them depending on what you’re up against.

There is a lot more we want to say, but just to get a taste of how we market our listings, check out our Instagram pages and see how we do it.

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

That’s a wrap on this edition of The Blueprint! Whether it’s a question or comment, don’t hesitate to reach out. We love hearing from you.

As we head into the weekend, remember: each day is a gift and a new opportunity to lead the life you want and to become the person you want to be. The mistakes and missteps you’ve made in the past don’t define you. Live as intentionally as you can and be ruthlessly focused on the goals you’ve set out to achieve. You can do it!

Thanks for reading, and we’ll see you back here on Tuesday!

– James and David