345% surge in home sale contracts as mortgage interest rates rise

(As seen in the Ledger column)

The recent increase in interest rates by the Federal Reserve Board has slowed the residential real estate market as buyers and lenders re-assess the buyers’ borrowing abilities. Coupled with a downturn in the stock market, the residential market is resting in some areas and at some prices.

Or so it would seem.

In the past two weeks, 720 single family listings went under contract in Davidson County. That’s 345% more than the 207 properties that went under contract the two weeks prior.

In the past 30 days, 1,330 single family homes closed.

This is a market selling at a higher rate than the previous month, despite all the factors working against it.

The increase in inventory is lending to the stagnant feel the market is experiencing, as is the feeling that the current formula for pricing houses has run its course. During the past two years, a house was worth about 20% more than recent comparable sales suggested, and – even with the aggressive pricing – often sold for an additional 20%.

Those days seem to be gone – at least at some price levels in some areas. The frenzy persists in some areas, but “reduced” signs have resurfaced when prices are overly aggressive.

Inflation must cool, the stock market must rebound and long-term interest rates must drop if the area is to ever return to the wildness of the past two years.

All of those events are not likely to occur anytime soon, so there is a new slogan among those in the real estate field: “Date the rate. Marry the house.” The idea is that if buyers are able to find desirable properties at tolerable prices, they should make every attempt to purchase the homes without becoming house poor.

Rates are temporary, but prices will continue to climb. Perhaps an adjustable-rate mortgage would allow a purchase with an acceptable monthly payment. The ARMs of today can be locked in for five, even seven years. That allows time to await a reduction in long-term rates and allow for a refinance when – and if – rates drop.

Another major shift in the market is sellers are not as pandered as they have been over the past two years. During those frenzied times, sellers could close and remain in the houses for often as long as two months.

Now, when buyers buy, they want possession. They also want the houses clean, very clean. Spic-and-span clean. Mister Clean. Professionally cleaned, and they are not using the Jim Thorpe guidelines for amateur versus professional status.

Once it was determined that Jim Thorpe received money to play, his amateur status was revoked. Considered by many to be the greatest athlete of all time, he was required to return his Olympic medals.

Just because a person has been paid to clean a house does not mean that person is Barbour’s a professional cleaner, at least by buyer standards. Once the sellers leave and the buyers take possession, the wailing begins. The recording artists known as the Wailin’ Jennys cannot hold a candle to the bawling animation from the new homeowners.

The house is filthy, they say, to the point that they feel the cockroaches are flea-ridden. Rats would not accept the living conditions of the houses according to the new owners.

Contracts used to call for houses to be “broom clean.” As that phrase was loosely interpreted, it was eliminated from the contracts. The new owners will not be happy regardless of the state of clean.

The best thing the sellers can do is to provide a cleaning allowance. Let the Jennys wail away and hire their own service.

Sale of the Week

East Nashville is home to this week’s featured sale with 1110 Russell Street changing hands for $2 million in an offmarket sale by Robert Drimmer with Compass Tennessee, LLC.

The 3,564-square-foot manse rests on a double lot and was described by Drimmer as a Queen Anne Victorian. He noted the property was “pre-sold” at a price of $561 per square foot for one of East Nashville’s most prestigious properties.

The last time the property transferred was in November 2007, almost 15 years ago. At that time, the house sold for $497,500 after spending months on the market at $699,000 and then reduced to $625,000.

Finding no buyers at that price, it was withdrawn and reentered at $589,000 and quickly reduced to $549,000. It was at that price that the $497,500 buyer was found.

The house has three bedrooms, two full bathrooms and one half bathroom.

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty, LLC and can be reached at?[email protected] .