Karl Case, an economist who won the Nobel Prize in economics last year, was recently highlighted in a a CNNMoney post which claimed that the U.S. housing market is a "crapshoot". They used a quote from Case which explained that the belief that housing prices could 'never' depreciate was, indeed a falsity - a recent home he bought during that time lost around half of its value.

However, KCM founder Steve Harney recently stepped in to add another dimension to this article, indicating another aspect that prospective homeowners may find interesting.

The odds ARE ever in your favor

While Case did lose about half of the value of one of his properties, it is important to mention that this house was only one of three houses - and the other two houses did incredibly well:

  • The second property was purchased at $54,000, and later sold at over 4x that amount at $240,000
  • The third property was purchased at $375,000 and later sold for over $1,000,000

Essentially, Case laid some bets on 3 properties. One lost 50% of value; one gained over 400% of value; one gained near 300% of value. Great odds? We think so too.

A "crapshoot" worth shooting

More and more American residents are choosing to rent, according to a recent report from Real Estate Economy Watch. The national apartment occupancy reached 95% this May - the first time in at least six years. Rent prices have climbed alongside it, with rent growth driving to 3.7% (year to date, ending in May), which is the highest growth since the recession.

Original Image from Real Estate Economy Watch

Axiometrics' recently released the May 2014 Market Trends Report, indicating a 20 basis-point (bps) increase in occupancy. Based on their identified supply, about 180,000 new units have surfaced across the U.S. during the past year. However, these properties are marked by high absorption, and the impact on effective rent growth and occupancy has been positive.

Director of Research at Axiometric, Stephanie McCleskey, speculates the reason occupancy is rising is due availability of Class B units as well:

“One reason occupancy is rising is that not only are people moving into these new units, but they’re also moving into Class B units at a lower price point. Most of the new units are priced competitively with Class A product, so about 80% of existing stock has lower rents than the newcomers, making them attractive to those who can’t afford the highest rents.”

If you're thinking about buying a home and are already feeling apprehensive about the process, hiring a good real estate agent will be the biggest help you can get.  

A good agent will walk you through stranger's houses while explaining what it is that you're really looking at, tackle all negotiations and paperwork, and help explain the process to you along the way.

This will only happen, however, if you are able to carefully choose between an average agent and a superior one.  

Make these 4 demands of your agent up front to ensure you're working with a true professional.

1. Demand an agreement on your price point

There have been far too many stories of agents that simply courier the client's offer to the table, regardless of the message or attachment to reality, and then try to dig out of a hole in negotiations farther down the line.  

Simply throwing an offer "over the fence to see what sticks" is not a path to success - at times it even kills an offer before the offer sees the light of day. A professional agent would never approach the situation this way.

Demand that your agent show you their plan to get the seller - and then, even more importantly, the bank - to accept the price that your offering.  With the appraisal process getting more and more difficult, contract price becomes a big sticking point in many transactions today.  Not only that, but a good negotiation strategy will put more money in your pocket - obviously.

You want to know up front from your agent how they will handle this situation before you get anywhere near it.  If you aren't hearing your agent talk about this, this will be your first big red flag.

2. Reach accord on the timetable

In April 2014, home prices were shown to climb at a slower-than-expected rate, according to the latest Case-Shiller report.  That said, the report goes on to show far higher price gains than other reports project.

The Case-Shiller report appears slower to reflect the slower pace of home price growth.  Here is the chart from Ian Shepherdson at Pantheon Macroeconomics which indicates Case-Shiller home prices are running much higher than the NAR median home price figures.

What has been skewing the average home prices higher?

Real Group Real Estate

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