The news that existing home sales slowed in November sent chills down the spines of some real estate industry observers who worry about what that news means for the housing industry.
The fact is that home sales have been at record levels for the past few years and most housing economists believe that by the time 2006 is finished, sales will still be strong — although perhaps not as strong as 2005. David Lereah, Chief Economist of the National Association of Realtors expects existing home sales to fall about 5 percent this year from 2005 levels.
But the slowdown in one neighborhood might feel very different from a neighborhood across a metro area. Certainly, some communities might be harder hit than others.
How can you survive a real estate slowdown? Here are some suggestions for maximizing your single largest asset.
- Don’t over improve your property.
This year, homeowners are expected to spend over $300 billion in home improvement projects. That’s a lot of cash. Before you start demolition (always the most fun part of a home improvement project until the day your project is complete) you may want to assess what kind of return your home improvement dollar will bring.
Upgrading your kitchen or bathrooms may be a better investment than adding a fireplace. If everyone in the neighborhood has a patio and your house doesn’t, then adding one might only bring you up to the neighborhood standard. But if you add a $50,000 patio and hot tub in a neighborhood of $200,000 homes, you may have done too much of a good thing.
- Make your landscaping and exterior shine.
Even if you don’t have a green thumb, do what you can to give your home as much curb appeal as possible. Since almost all home buyers start their search for a home on the Internet, a gorgeous exterior is your ticket to generating additional interest in your property — and that will translate into showings and, eventually, an offer.
Start by walking around the exterior of your home. Does it need to be painted? Tuckpointed? Powerwashed? Is there debris and garbage that’s been sitting around your yard that could be thrown away. Next, look at the landscaping. Consider hiring a pro to trim back bushes and trees, manicure the lawn, turn over the planting beads and ready them for spring flowers.
Finally, take a look at your driveway, front walkway and patio or deck. If these pieces of hardscape don’t shine, consider doing them just before you put your house on the market. A fresh new front walkway or even a new sealcoat on your driveway could give your entire exterior a lift, and bring it to life for a buyer shopping online.
- Keep a close eye on how quickly homes are selling in your neighborhood.
A home buyer recently wrote in to say he noticed home prices over the past month were falling quickly. While that could be an aberration, it could also be the start of something big for his area.
Since real estate is all about what happens locally, it’s important to stay on top of local trends. Are homes being improved and upgraded in your area or are their owners failing to keep them properly maintained? Are lawns mowed and hedges manicured or are the front walkways unkempt and full of litter? Are lots of homes coming on the market for sale?
Neighborhood housing markets can change on a dime. You can stay on top of it by going to the occasional open house, flipping through the real estate section of your local paper, and spending time online looking at homes for sale. When homes sell, think about how long the property had been on the market. You can even call the listing agent and ask much the seller got for his or her property.
Keeping tabs on the neighborhood news is an important part of protecting your single biggest asset.
Clarification: In my annual list of personal finance resolutions, I wrote that individuals can borrow up to $10,000 from an IRA account for the purchase of a first home. I should have written that an IRA account holder can redeem up to $10,000 from an IRA to purchase his or her first home. You’ll avoid the 10 percent withdrawal fee, but you will have to pay taxes on the redemption.