Get new listings emailed daily! SIGN UP LOGIN

Date Archives: June 15th, 2022

Blog Home

Subscribe and receive email notifications of new blog posts.




rss logo RSS Feed
Augusta, ME | 5 Posts
Bangor, ME | 3 Posts
Brunswick, ME | 1 Posts
Buying a House | 33 Posts
Careers | 1 Posts
Covid 19 | 1 Posts
Cuisine | 1 Posts
Curb Appeal | 5 Posts
Entertaining | 4 Posts
holiday | 2 Posts
Home Improvement | 30 Posts
Home Maintenance | 11 Posts
Interior Design | 6 Posts
Kennebec River | 2 Posts
Masiello Cares | 7 Posts
Mortgage Rates | 1 Posts
Moving | 15 Posts
Nashua, NH | 3 Posts
Office Events | 1 Posts
Portsmouth, NH | 1 Posts
Quechee, VT | 4 Posts
Rockland, ME | 4 Posts
Tips for Buyers | 11 Posts
Uncategorized | 2 Posts
York, ME | 1 Posts
Zillow | 1 Posts
Zoom Towns | 9 Posts
Home buying tips | For Buyers | Tips for Home Buyers | Home maintenace | Home repairs | Rockland ME | Rockland | Restaurants | Local businesses | Local attractions | Things to Do | Historic Landmarks | Historic Homes | Augusta, ME | York | Southern Maine Coast | Holidays | Family Events | BHG The Massiello Group | Covered Bridges | Local landmarks | City spotlight | Family fun | Quechee | Moving | Buying a house | Move with pets | For Sellers | Home selling tips | Home renovations | Kitchen Remodel | Masiello Careers | Declutter | Mortgage | Sell Your House | Real Estate Agent | REALTOR | Sell Your Home | Zoom Towns | Auburn ME | Bangor ME | Belfast ME | Brunswick ME | Dover Foxcroft ME | Ellsworth ME | Gorham ME | Machias ME | Naples ME | Portland ME | Sanford ME | Unity ME | Wells ME | Windham ME | Atkinson NH | Bedford NH | Concord NH | Dover NH | Durham NH | Exeter NH | Hampton NH | Hanover NH | Hollis NH | Keene NH | Londonderry NH | Manchester NH | Nashua NH | New London NH | Peterborough NH | Portsmouth NH | Rochester NH | Tilton NH | Windham NH | Brattleboro VT | Lake Living | home safety | pets | pet care | diy | storage | interior design | smart home | home security | fall | decorating | decor | bar harbor | albany | stowe | camden | franconia | woodstock | maine | Moving to Maine | cryptocurrency | blockchains | digital currency | bitcoin | smart lights | smart bulbs | smart technology | smart fridge | smart thermostat | residential | residential real estate | residential homes | residential property | covid | covid-19 | health | home inspection | building inspection | ibuyer program | zillow
June
15

The real estate market has been on fire for the past few years. Like other industries, a hot real estate market and rapidly evolving technology created the opportunity for new disruptive business models. iBuying (the "i" stands for instant) first started in 2014 with Open door pioneering the concept.

With iBuying, homeowners can sell their home directly to the buying agency without needing a real estate broker or agent. This can save money and avoid the challenges and costs incurred in traditional real estate transactions. Online companies give sellers instant cash offers on their homes, sight unseen. The buyer is offered a price based on a computer algorithm they are not looking to do major renovations. Typically, they want to sell quickly.

In 2018, Zillow jumped into the fray with their Zillow iBuyer Program. But it was not a national program. They originally started in a few carefully selected markets with plans to eventually roll it out more extensively.

Zillow was aggressive in their purchases, relying on the automated price generated by their algorithm. Unlike many other programs, they purchased homes expecting to remodel and flip them for a healthy profit. Zillow invested heavily in this business model and in the first half of 2021 alone, Zillow Offers (their iBuyer program) raked in 1.47 billion in revenue but has yet to turn a profit.

Some buyers were thrilled with their offers, and many received more than expected. In fact, when you look behind the curtain, it appears that Zillow overpaid for many of the homes. They now have a huge inventory they must sell, most likely at a significant loss.

Analysts recently found that of the nearly 1000 homes Zillow recently listed for sale in its five primary markets, 64% were being marketed for less than the company paid. As a result, Zillow could be heading for massive losses in the millions from its iBuying operations.

Zillow entered the iBuyer fray as a way to grow the company. Zillow's original business model was focused on offering consumers a marketplace to sell buy or rent properties. It also marketed properties listed by agents where buyers could reach out to a local agent for information or to schedule a showing. The person reached was not always the listing agent but a Premier Agent who pays Zillow a fee to obtain leads.

Their original model produced mostly buyer leads. Zillow's iBuyer program attempted to generate more seller interest for their Premier Agents. The program was designed to grow their base of Premier Agents and the company's revenue stream.

Using Technology to Remove the Human Touch

Online buyers have existed for several years. While some have success using a computer-generated price and buying homes sight unseen, Zillow's model made a few mistakes.

Their Zestimate data and pricing algorithm was flawed, and this caused the company to overpay for many homes because it failed to take certain factors into account. For example, technology can't determine a property's condition which is a major factor when agents price a home.

While technology was a factor in Zillow's downfall, it wasn't the only one. Global supply chain issues and labor shortages also had a significant impact on the company's business model. When time is of the essence, these factors can be costly when the home needs improvements.

The final nail was Zillow analysis which determined that the iBuyer scale needed to be very large to be as profitable as they had hoped and, in the end, the company decided that this was something they did not want to pursue.

The Impact of the Failure of the Zillow iBuyer program on the Industry

Before Zillow shut down Offers, they tried to offload 7000 homes to an unnamed buyer (or buyer's) for $2.8 billion according to a Bloomberg report. While Zillow Offers was in limited markets, releasing this inventory to investors can exacerbate supply problems in those markets.

Many financial and real estate industry experts have theorized that the shuttering of Zillow Offers may be interpreted as a top to the recent frothy market. As it winds down, we may begin to see supply and demand stabilize. Zillow's business model proposing a national program was too ambitious. While Zillow is out of the game, the pool of local and regional iBuyers is still robust.

Zillow's suspension of iBuyer presented us with some interesting insights. While technology in real estate has helped immensely to educate buyers and improve the search process, the removal of human interaction has proven to be less effective.

Technology has improved our lives in many ways. However, an algorithm cannot replace human knowledge in the real estate process. Brokers and agents have a deep understanding of their local markets that an algorithm simply cannot match. Sometimes, a home that looks great in pictures can have issues that you need to see firsthand to understand. For example, the house might have an unpleasant pet-related smell or be located next to a home with a cluttered yard. These are factors that automated technology cannot factor in.

The bottom line is that Zillow is an excellent place to start your home search, but it should be the first step, not the entire process. The best solution is to reach out to a local real estate professional. They will know details about the local market, including homes not yet listed. They will also understand the nuances of their market or a particular home. It's still the best way to meet your needs as a home buyer or investor!

June
15

The Rental Market is on Fire. Is It Time To Buy?

The housing market has certainly been interesting in the past few years. The past year has seen limited supply and growing demand for the rental market and home sales. In fact, despite historically low-interest rates, the industry had an extraordinary booming year. 2021 showed the most significant annual gains in single-family house values and rental prices, low foreclosure rates, and the highest number of home sales in 15 years.

Rental prices kept pace with housing. Rental prices for single-family homes increased 7.8% in 2021, an all-time high according to CoreLogic. The rental market exploded as remote workers and young families fleeing the cities spurred double-digit increases in rental costs and squeezed supply.

With rental prices, home prices at all-time highs, and a tight housing supply, is it time to think about buying a home in 2022 instead of renting?

Some Housing Statistics to Think About

While the market in recent weeks has begun to cool a bit, it's still competitive. Since a home is likely one of the biggest purchases you'll make, it's essential to take some time and make an informed decision.

According to Redfin, as of June 30, 2021, the median sales price of a home in the U.S. was $386,888, a 24.8% year-over-year increase. The massive spike in demand in many markets has allowed for higher sale prices. This can often make it hard to decide whether to continue renting or purchase a home because you don't want to overpay.

Rental prices have also increased by double digits in most markets. According to Redfin, rents jumped more than 14% in December 2021, the most considerable rise in more than two years. However, in many major metropolitan markets, rents have skyrocketed. In Austin, Texas, New York City, Boston, several areas in Florida, and other cities throughout the country, rents have jumped by 35 to 40% year over year.

Add to this the fact that there is less housing available for sale or rent than in the past 30 years. With supply shortages worsening and growing inflation contributing to rising rental costs, it becomes difficult deciding whether to rent or buy.

While rental prices in the U.S. initially dropped when COVID-19 hit, prices rebounded strongly in 2021 and quickly outpaced pre-pandemic trends. As a result, rental prices have far outpaced wage increases.

The Housing Market in 2022 and Beyond

Housing market predictions are about as reliable as the five-day weather forecast. The truth is that no one can predict what will happen with 100% accuracy.

However, many industry experts predict continued strong price appreciation, scarce inventory, and high demand. Overall, the housing market is doing well and will most likely not crash in 2022. The trends and forecasts for the next 12-24 months show that the market will most likely stay strong, with many of the factors that drove prices to new highs in 2021 remaining firmly in place. Last year, homeowners saw a market where properties sold quickly and often above asking, as numerous buyers fought for limited inventory.

Last year prices increased by an unsustainable 18.8%. The market is even tighter than it was before the spring 2021 frenzy. Experts like Zillow increased their bullishness in January, predicting growth of up to 16.4% in 2022. They recently adjusted anticipated price growth to reach 22% by mid-year. However, price growth is expected to slow through February of 2023.

Fannie Mae is predicting that by mid-2023, price appreciation will return to the pre-pandemic rate of 5% annually. They also expect that mortgage rates will rise modestly, providing some relief to buyers as prices climb. Slowing price appreciation and potentially increased inventory could help avoid a crash in 2023. The main downside risk continues to be increasing inflation. As mortgage rates increase, refinancing activity will soften as rates gradually rise and the Fed works to tame inflation.

So Should Your Continue To Rent or Consider Buying a Home?

There is no single answer to this question, as there are both pros and cons to both options. However, there are a couple of factors to consider in your decision-making process. First are your finances. In a typical market renting is often the more affordable option. That being said, this is not a typical housing market. Rents have increased to the point where even as mortgage interest rates rise, buying a home might be a better option.

Ultimately, your choice depends on several considerations. One major factor is your personal finances.

In terms of lifestyle considerations, consider what is important to you. Are you seeking the flexibility to move if your career requires it, or are you looking for stability to put down roots in a place you can call your own? Here are five considerations to explore before you make a final decision on whether to rent or buy.

How Long Do You Plan to Live in the Same Place?

Are you planning on putting down roots in the community? If you're planning or have a family, are you happy with the schools? If you're sure you'll stay in the same place for at least five years, buying can make sense. It can be a good fit both personally and financially.

However, if you don't have kids or get that big promotion but it's halfway across the country, the smarter choice might be to rent. While you can buy a home and sell it in a few years if your situation changes, the costs like moving, closing costs, and repairs may not be worth it.

Look at the Cost of Renting VS Buying a Home

In the past, renting was almost always cheaper than buying a home because of the upfront costs involved, like the down payment, closing costs, moving expenses, and renovations. In today's market, rental prices have risen to the point where it may cost you more each month to rent than a mortgage payment. However, there are other ownership costs to consider, like property taxes, homeowners insurance, and HOA fees in some instances.

However, even in a traditional market, buying a home is almost always cheaper over the long term. According to the National Association of Realtors, a homeowner's mortgage payment is lower than that of a renter after six years. This assumes that the rent increases at 5% annually and the homeowner is paying a fixed monthly mortgage.

Mobility or Putting Down Roots

Things change. It can be hard to predict where life's road will take you. If you intend to stay in one place, close to family, or planning on raising a family, and you have the means, buying a home makes the most sense. Examine your current situation and whether it could change in the next few years. For example, if you're moving up in your career and an opportunity for a promotion comes up, but it is on the other side of the country, renting is probably the best choice. Think about your current lifestyle and where it will be before buying a home.

Finally, Assess Your Current Financial Situation

You need to be realistic about your financial situation when deciding between renting and buying. Once you analyze the costs involved, be honest about whether you can afford to own a home's upfront and ongoing expenses. The worst situation to be in is where you have a home but are cash poor and unable to enjoy life!

The Bottom Line On Buying A Home In Today's Market

Consider all the factors when deciding on buying a home or continuing to rent. Renting and buying both offer pros and cons. In reality, your lifestyle, future plans, and financial situation will be the primary factors to consider when making a decision. Speak with a Realtor® or your financial advisor if you need additional information or are unsure which choice is right for you.

Login to My Homefinder

Login to My Homefinder