3 Tricks for Finding the Perfect Asking Price

Tricks for Finding the Perfect Asking Price. Image courtesy of fotographic1980 / FreeDigitalPhotos.net

Determining the perfect asking price involves psychological reasons as much as practical reasons, The Wall Street Journal reports.

“When you set a list price, you’re sending a signal to the market,” says Michael Seiler, professor of real estate and finance at The College of William & Mary in Williamsburg, Va.

But pricing a home can be a “delicate balance,” says Mike McCann, a real estate professional with Berkshire Hathaway HomeServices, Fox & Roach in Philadelphia. You have to balance the comparables with sellers’ unrealistic expectations about what their home is really worth. Sellers often want to price a home higher than what the market can bare. On the other hand, some sellers or agents may be tempted to set the asking price low in the hopes of generating a buyer frenzy and quick sale.

What strategy works? Research offers a few insights into setting the right asking price.

1. Getting too precise means you won’t budge. Pricing research suggests that setting an exact asking price — such as $795,475 — sends the message to buyers that the price is less negotiable than, say, a round number like $800,000. “Those using precise pricing show confidence in the price,” Seiler says.
2. The number nine can be a big influence. Pricing a property at $499,900 rather than $500,000 can subconsciously influence a home buyer. The home “seems way cheaper,” Seiler says. Even if the home winds up selling above the asking price, the buyer will feel like they got a great deal with the initial lower asking price, Seiler says. “The goal is to make it stick in their head that you’re getting a bargain,” Seiler says. “It’s the way our brain looks at numbers.”
3. Going low doesn’t always mean a higher selling price. While setting a lower asking price may generate a frenzy of offers, it won’t necessarily translate into a higher sales price. “It creates a havoc that doesn’t serve anyone well,” Rebecca Walter, a real estate professional with Redfin in Portland, Ore., told The Wall Street Journal. The lower price won’t necessarily increase what a buyer will offer, since some buyers may compete in other ways, like paying in all cash or waiving the inspection to produce a quicker sale, Walter says.

Source: “Strategies for Setting a Price for Your Home,” The Wall Street Journal (Aug. 21, 2014)

Friendly Neighborhoods Reduce Risk of Heart Attack

Friendly Neighborhoods Reduce Risk of Heart Attack. Image courtesy of digitalart / FreeDigitalPhotos.net

Knowing your neighbors may be good for your heart — and not just emotionally — according to a new study by psychologists at the University of Michigan. The more social connections you have in your neighborhood, the less likely you are to die from a heart attack, according to the study, which was published in the Journal of Epidemiology and Community Health.

The study is based on assessments of social connectedness for more than 5,000 adults in urban, suburban, and rural areas over a four-year period. By the end of the four years, 148 of the more than 5,000 adults had heart attacks.

“Each unit of increase in neighborhood social cohesion was associated with a 17 percent reduced risk of heart attacks,” says lead author Eric Kim, a psychologist and doctoral student at University of Michigan. “If you compare the people who had the most versus the least neighborhood social cohesion, they had a 67 percent reduced risk of heart attack.”

The researchers controlled for factors like optimism, age, race, income, marital status, education, mental health, and known risk factors for heart attacks such as diabetes, obesity, and high blood pressure.

Kim says that maintaining friendly neighbor relations could be good for your health because neighbors may be more likely to check in on one another and notice any potential health problems, share any health-related information, lend money, or share resources. “I also really believe in how helpful emotional support can be in buffering against toxic effects of stress,” Kim says.

While Kim’s team focused on the positive elements of a neighborhood that “might perhaps be protective or even enhancing of health,” past studies have mostly focused on how negative factors in a neighborhood — such as density of nearby fast food outlets, violence, noise, and poor air quality — can impact health. For example, a 2003 study in the American Journal of Public Health found that “boarded-up housing” often correlated to higher rates of gonorrhea in a neighborhood and premature death due to cancer or complications of diabetes. A study from University of Pennsylvania researchers found that abandoned buildings in an area could lead to isolation and hamper social relationships and feelings of mutual trust in an area, which also could lead to poor physical health of residents who live nearby.

Source: “Always Talk to Strangers,” The Atlantic (Aug. 19, 2014)

Reasons Mortgage Demand Is Dropping

Reasons Mortgage Demand Is Dropping. Image courtesy of marcolm / FreeDigitalPhotos.net

Fixed-rate mortgages sank to the lowest average of the year last week, yet mortgage origination activity remains lackluster. Why aren’t more home buyers taking advantage of the lower borrowing costs?

In a recent blog post, Freddie Mac analysts point to three main factors behind the decrease in mortgage originations:

1. The refinancing boom has ended. From 2013 to 2014, mortgage applications for refinancings have fallen about 60 percent. Freddie Mac projects refinance applications will drop by another 50 percent from 2014 to 2015. When mortgage rates rise—as they are expected to soon—borrowers will have less incentive to refinance. Applications for home purchases are not expected to be able to fill the void from the refi boom.
2. Home sales are down. Sales of existing and new homes have fallen about 5 percent during the first six months of 2014 compared to the first half of 2013, according to Freddie Mac. “A period of higher mortgage rates, a harsh winter, and slower economic growth compared to a year earlier contributed to the slowdown,” researchers explain.
3. More buyers are paying cash. The number of borrowers who took out a mortgage to purchase a home is down compared to last year, but that could be due to more buyers using cash. In the first six months of this year, all-cash home sales were up slightly from 31 percent to 33 percent, according to National Association of REALTORS® data. Yet, “with rising home values and fewer distressed homes coming the market, expect the available inventory for all-cash buyers to trend down in the coming year,” researchers note.

Freddie Mac researchers say the key to an increase in mortgage origination activity will be “sustained economic growth and jobs.”

“Overall, recent economic and employment improvements should help bolster household formation and contribute to gains in construction, home sales—and also mortgage originations,” Freddie Mac researchers note. “However, even with these improvements, expect new and refinance mortgage origination volume for this year to be the lowest since 2000 at about $1.15 trillion.”

Source: Freddie Mac

Mortgage Rates Sink to New Low for 2014

Mortgage Rates Sink to New Low for 2014. Image courtesy of cooldesign / FreeDigitalPhotos.net

Despite predictions that mortgage rates were to inch up in the second half of this year, fixed-rate mortgages continue to tumble.

Borrowing costs moved lower this week, as the 30-year fixed-rate mortgage dipped to a 4.10 percent average, Freddie Mac reports in its weekly mortgage market survey. The 30-year fixed-rate mortgages previous low average for the year was 4.12 percent.

Freddie Mac reports the following mortgage rate national averages for the week ending Aug. 21:

• 30-year fixed-rate mortgages: averaged 4.10 percent, with an average 0.5 point, dropping from last week’s 4.12 percent. Last year at this time, 30-year rates averaged 4.58 percent.
• 15-year fixed-rate mortgages: averaged 3.23 percent, with an average 0.6 point, dropping from last week’s 3.24 percent average. A year ago, 15-year rates averaged 3.60 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.95 percent, with an average 0.5 point, dropping from last week’s 2.97 percent average. Last year at this time, 5-year ARMs averaged 3.21 percent.
• 1-year ARMs: averaged 2.38 percent, with an average 0.5 point, rising from last week’s 2.36 percent average. A year ago, 1-year ARMs averaged 2.67 percent.

Source: Freddie Mac

Families Extend Aging Parents a Suite Deal

Families Extend Aging Parents a Suite Deal. Image courtesy of photostock / FreeDigitalPhotos.net

More homeowners are remodeling their dwellings to create in-law suites for aging parents, with features to make them accessible and safe while providing plenty of space and privacy.

AARP senior policy adviser Rodney Harrell says demand for in-law suites is on the rise as baby boomers age, and with the cost of care-giving facilities and services soaring, it may be more affordable for parents to move in with their children.

These suites often are located on the first floor to eliminate stairs and feature flush thresholds; large bedroom and living areas; showers with ramp entries, built-in benches, and grab bars; and wide doorways — giving parents their own space but keeping them close enough to interact with their children and grandchildren.

Moss Building and Design’s Jason Hampel says home owners should plan for the long term when designing in-law suites, ensuring they can accommodate other uses and will add resale value. In-law suites generally are integrated into the home and are intended for older or disabled relatives, meaning they are not considered separate or “accessory dwelling units” that require special permits and are difficult to build under strict zoning rules.

In some jurisdictions, in-law suites can have a bedroom, sitting area, bathroom, and a couple of appliances, but adding a stove or full kitchen could require special permits.

The trend builds on a report that builders are increasing home sizes to include additional generations and Coldwell Banker Real Estate’s finding that younger parents are more accommodating of adult children staying at home for extended periods.

Source: “For an Aging Parent, An ‘In-Law Suite’ Can Provide a Home Within a Home,” Washington Post (08/16/14) & realtor.org