REALTOR MAGAZINE 5 PREDICTIONS FOR 2015

OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®
November 18, 2014

5 Real Estate Predictions for 2015

Daily Real Estate News | Tuesday, November 18, 2014

Expect the home-purchase market to strengthen along with the economy in 2015, according to Freddie Mac’s U.S. Economic and Housing Market Outlook for November.

What’s Coming in the New Year

“The good news for 2015 is that the U.S. economy appears well-poised to sustain about a 3 percent growth rate in 2015 — only the second year in the past decade with growth at that pace or better,” says Frank Nothaft, Freddie Mac’s chief economist. “Governmental fiscal drag has turned into fiscal stimulus; lower energy costs support consumer spending and business investment; further easing of credit conditions for business and real estate lending support commerce and development; and consumers are more upbeat and businesses are more confident, all of which portend faster economic growth in 2015. And with that, the economy will produce more and better-paying jobs, providing the financial wherewithal to support household formations and housing activity.”

Freddie Mac economists have made the following projections in housing for the new year:

  1. Mortgage rates: Interest rates will likely be on the rise next year. In recent weeks, the 30-year fixed-rate mortgage has dipped below 4 percent. But by next year, Freddie projects mortgage rates to average 4.6 percent and inch up to 5 percent by the end of the year.
  2. Home prices: By the time 2014 wraps up, home appreciation will likely have slowed to 4.5 percent this year from 9.3 percent last year. Appreciation is expected to drop further to an average 3 percent in 2015. “Continued house-price appreciation and rising mortgage rates will dampen affordability for home buyers,” according to Freddie economists. “Historically speaking, that’s moving from ‘very high’ levels of affordability to ‘high’ levels of affordability.”
  3. Housing starts: Homebuilding is expected to ramp up in the new year, projected to rise by 20 percent from this year. That will likely help total home sales to climb by about 5 percent, reaching the best sales pace in eight years.
  4. Single-family originations: Mortgage originations of single-family homes will likely slip by an additional 8 percent, which can be attributed to a steep drop in refinancing volume. Refinancings are expected to make up only 23 percent of originations in 2015; they had been making up more than half in recent years.
  5. Multi-family mortgage originations: Mortgage originations for the multi-family sector have surged about 60 percent between 2011 and 2014. Increases are expected to continue in 2015, projected to rise about 14 percent.

Why 2014 is a Good Year to buy a Home

If you didn’t buy a home in 2013, you may be kicking yourself now. Home prices climbed nationally an average of 13.6 percent in the past 12 months, according to Tuesday’s release of the Standard & Poor’s/Case-Shiller 20-city home price index.
Don’t make the same mistake in 2014, suggests Benjamin Weinstock, real estate attorney and partner at the firm Ruskin Moscou Faltischek in Uniondale, N.Y.
Market forecasters predict that 2014 will be another year of gains for the real estate market, even though the rapid pace of sales in 2013 cooled off a bit at the end of the year. On Dec. 30, The National Association of Realtors said its pending home sales index, based on contracts signed last month, rose 0.2 percent in November, below the 1 percent rise forecast.
Home prices are expected to rise about 5 percent next year, says Weinstock. Higher mortgage rates will dampen the pace of both sales and price gains, but not bring them to a halt. The average rate on a 30-year fixed mortgage is expected to rise from 4.5 percent to 5 percent in the next year.
Even aside from expected price gains, buying a home is almost always a good investment in the long run, says Weinstock. Tax benefits are not to be overlooked.
“When one rents, at the end of the year he or she has a pile of 12 cancelled rent checks,” Weinstock says. “However, the homeowner has a pile of 12 cancelled mortgage checks that are nearly fully tax deductible in most cases.”

Want to Sell Your Home? The Spring Selling Season May Be Coming Early This Year

The spring selling season has historically been the hottest time for home sales in the U.S. That trend remains intact for 2014.

Source: Images of Money

If you’re considering selling your home in 2014, now is the time to get ready. Not next month, not next week, not tomorrow. Right now.

Why? Because buyers are already on the hunt.

The Internet is the new curb appeal
Last month will likely be remembered for polar vortexes, widespread snow, and historic traffic jams. Lost in the shuffle is that while American’s were sitting inside trying to stay warm, they were looking at houses for sale on the Internet.

Experian Marketing Services released its monthly most visited real estate website rankings earlier this week for web traffic in January. The results are eye popping.

Web traffic to real estate websites was up 25% from December to 364 million visits. Zillow (NASDAQ: Z) led the way with over 57 million visits and Trulia (NYSE: TRLA) limped into second at over 30 million visits.

If you’re considering selling and your home is not yet online, then every day you’re missing out on thousands (or even millions) of potential buyers viewing your home.

Even more incentive for buyers
Spring is coming, and that is certainly driving a lot of the interest in homes currently listed for sale. But there are other factors at play.

Mortgage rates have declined over the past month and are currently trending back toward 4% for traditionally structured, well qualified loans. This is a significant development for buyers, as interest rates are a huge driver of home affordability.

For example, a traditional 30 year, $150,000 mortgage at 4.5% would have a monthly payment of $760. If rates declined to 4.25%, the payment would change to $738.

For borrowers on the edge of qualifying for a mortgage, that $22 per month savings could make the difference between getting a loan approval or not. Over the life of the loan, that 0.25% difference saves the borrower $7,963!

For buyers, the time is now!
Buy low and sell high, right? For buyers, the time to buy low is quickly ending, creating a sense of urgency to buy now before prices rise too high or interest rates return to more historically normal levels.

According to CoreLogic and reported by Realtor.org, home prices in 2013 saw the largest percentage increase across the board since 2005, north of 11% as of December. The appreciation was most pronounced in the states that were hit hardest in the real estate collapse: Nevada rose 23.9%, California 19.7%, and Michigan 14% rounding out the top three.

Buyers are ready. Are you?
The spring selling season will be in full swing sooner than you think. Rates are low, there is urgency to buy now, and buyers are already coming out of their winter slumber. If you’re planning to sell you home in 2014, you need to be ready now. Don’t miss out on the perfect, well qualified buyer because you waited a moment too long.

Buying Your Own Home? Read This First

 Published: Sunday, 9 Feb 2014 | 9:00 AM ET
By: Cathy Curtis, Special to CNBC.com
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It seems nothing can stop Americans from wanting to buy their own homes. It’s almost as if the credit crisis didn’t happen, even though not too long ago we were bombarded daily with stories about crashing prices, underwater mortgages and home foreclosures. It was an American nightmare, not the American Dream.

Image source: Dagmar Heymans | E+ | Getty Images

But if you think about the emotional and economic reasons people want to buy instead of rent, it’s not so hard to understand. As a financial advisor, I meet many potential first-time homebuyers who cite these reasons for wanting to buy:

—”Why should I pay a landlord when I can put the money toward building equity in something myself?”
—”Paying rent is like throwing money away.”
—”I don’t trust the stock market. I’d rather put money in real estate.”
—”Renting feels like a temporary situation. I want to put down roots and nest.”
—”I want to be able to remodel my home in any way I want, with no restrictions from landlords.”

What I usually do at this point in the conversation is a back-of-the-envelope analysis of what it would look like for my client to buy a home. The key components of the analysis involve money saved and money earned.

(Read more: Roth IRA a better way to pay for college?)

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Comprehend your costs
How much is saved for the down payment, closing costs and cash reserves? The best scenario involves putting 20 percent down. With 20 percent down, the borrower can receive gifts of up to 100 percent of the down payment with no private mortgage insurance (PMI). PMI can add several hundred dollars to the monthly payment.

However, many first-time homebuyers are cash-constrained. Some may qualify for a Federal Housing Administration (FHA) loan, which requires only 3.5 percent down. Many end up putting 10 percent down, which requires PMI and only 5 percent of the down payment can be a gift.

Closing costs are approximately 2 percent of the purchase price and include title insurance, escrow fees and appraisal fees. There may be a local transfer tax due on the purchase—and that can be substantial.

(Read more: Clueless investors just pay the fees)

Lenders require two to 12 months’ worth of cash reserves, which will cover mortgage, property tax, insurance and other debt payments. The cash reserves can be in retirement accounts, but lenders only count 65 percent of retirement accounts, unless you’re over age 59½.

For example, Mary wants to buy a home in the $400,000 range. She makes $90,000 a year. She will put 10 percent down. Her lender requires a five-month cash reserve. Closing costs will be 2 percent of the price. There will be a $15-per-thousand city transfer tax due that Mary will split with the seller. She has $500 a month in other debt payments. (The chart below breaks down all these expenses.)

Mary’s new home—counting the costs

Home price: $400,000
Down payment: $40,000
Loan: $360,000
Closing costs (2% of mortgage): $7,200
Transfer tax ($15 per $1,000 divided by 2): $3,000
PITI (Principal, Interest, Taxes, Insurance):
Payment @ 5% interest: $1,932.56/month
Private mortgage insurance: $150/month
Property tax (1.25% of purchase price):* $416.67/month
Homeowners insurance (0.35% on loan amount): $105/month
Other debt payments (credit card, auto): $500/month
Required cash reserves (5 months’ PITI and debt): $15,521.15
*Lender qualifying rate
Source: Cathy Curtis, Curtis Financial Planning

Mary would need $65,721 saved to buy this home. Plus, she might need to pay various moving costs. I usually add $5,000 to the analysis so that these costs are accounted for.

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Get prequalified
Does the client earn enough money to qualify to buy the home? Rule of thumb: Lenders require that housing costs (PITI) plus all other monthly debt payments be no more than 43 percent of gross income. In Mary’s case, she would need to earn $86,630 a year to qualify for the $360,000 loan at 5 percent.

If this analysis looks positive, I will recommend that my client visit a lender and get prequalified for a loan. This will involve running a credit report. With a credit score of 700 or above, there should be no issues. Below that, a good mortgage professional will advise clients on how to improve their scores.

(Read more: Give the baby a bottle and a bank account)

Lastly, a good real estate agent and a good dose of patience will make the experience a lot easier. That dream home may be right around the corner, after all.

—By Cathy Curtis, Special to CNBC.com. Cathy Curtis is an independent certified financial planner and founder and owner of fee-only investment advisory firm Curtis Financial Planning, based in Oakland, Calif.

Top 10 Home Improvement Projects

 

If you’re thinking of selling your home in 2014 or just want to ramp up your home value, it’s important to educate yourself on which improvement projects will bring you the most return on your investment.

A great resource for your research is the 2013 Cost vs. Value Report, an annual collaboration between Remodeling magazine and REALTOR® Magazine, which breaks out the estimated cost of various projects and the estimated return on investment for those projects by region and by city, as well as by midrange and upscale projects. In general, this year’s report shows that exterior replacement projects are the most cost-effective. If you plan to sell your home later this year, remember that the first impression your home makes on buyers is their first glimpse of the outside.

Here are 10 home improvement projects you should consider:

1. Replace Your Front Door

You may not even notice your front door anymore, especially if you regularly use another entrance, but a new door makes a great impression on buyers and yields an 86 percent return on your investment. If your front door doesn’t need replacing or you’d rather spend less money, you can paint it and replace the hardware for a similar impact. Replacing your garage door recoups 75 percent of your investment.

2. Add a Deck or Patio

No matter where you live, buyers are looking for outdoor living space. You can recoup 77 percent of your investment on a new wood deck. If you already have outdoor space, consider enhancing it with a water feature, an outdoor fireplace or new landscaping.

3. Add Space

Depending on your budget and your goals for your home, an addition of extra bedrooms and bathrooms, a finished attic or an expanded casual living space can rapidly increase the value of your home. You can recoup 73 percent of your investment in an attic bedroom.

4. Remodel Your Kitchen

Buyers look most carefully at kitchens and bathrooms, so you should, too. You can recoup 75 percent of a minor kitchen remodel and 60-68 percent of a major kitchen remodel. If you’re selling soon, be careful not to overspend on your kitchen. You may be able to do one or two things, such as replacing the appliances and painting the cabinets, or just replacing the counters with granite to garner a good offer.

5. Replace Your Windows

Buyers are interested in how your windows look and their energy efficiency. Whether you’re replacing vinyl- or wood-frame windows, you can get a 72 percent return on your investment. When you’re ready to market your home, be sure to highlight the new windows as a selling point.

6. Work on Your Lighting

Today’s buyers like bright, light rooms, so look around your home and see if you need to upgrade your lighting fixtures or add more. You can hire a professional to add a few recessed lights to your kitchen and living areas and replace outdated overhead lighting fixtures to match contemporary tastes.

7. Replace Your Window Treatments

Make sure you’re letting as much natural light as possible into your home and that your window treatments don’t hide any oversized windows.

8. Update Your Bathroom

While a full, upscale bathroom remodeling project can cost as much as $50,000 and add only about $29,000 to your home’s resale value, you can make cost-effective minor upgrades. Replace your fixtures and your mirror, repaint the space and jazz it up with some crown molding (depending on your home’s style) and you’ll have a space that looks new. While you’re there, redo the caulk around your tub and shower and replace the grout on your tile flooring. If your tub is in bad shape, you may be able to have it resurfaced rather than replace it.

9. Replace Your Siding

If your home’s exterior needs a major makeover, you can typically recoup 72 percent of your investment by replacing the siding.

10. Organize Your Closets

High on the list of priorities for today’s buyers is adequate storage. If your home lacks big closets or has too few storage spaces, you can increase their efficiency with closet organizers.

No matter which project you choose, be careful not to over-improve your home for the neighborhood. A REALTOR® can offer advice about how to spend your money so that your home sells faster and for the best possible price.

Existing-Home Sales Highest Since 2009

June 20, 2013, 11:52 a.m. EDT

Existing-home sales highest since 2009

 

By Ruth Mantell, MarketWatch

Existing-home sales in May were up 12.9% from the same period in the prior year — the largest growth since October 2011. Meanwhile, year-over-year median prices rose 15.4% in May, the largest growth since 2005.

WASHINGTON (MarketWatch) — Existing-home sales rose in May to the highest pace since November 2009, when buyers were rushing to make a tax-credit deadline, pointing to a continuing recovery, the National Association of Realtors reported Thursday.

Existing-home sales rose 4.2% in May to a seasonally adjusted annual rate of 5.18 million. These sales were 12.9% higher than during the same period in the prior year. Economists polled by MarketWatch had expected the pace of existing-home sales to hit a rate of 5 million in May, compared with an April rate of 4.97 million.

“This report provides further evidence that the housing market is on a firmly improving trend,” wrote analysts at RDQ Economics in a research note.

Meanwhile, the median existing-home price hit $208,000 in May, the highest since 2008, with low inventory supporting prices. The median price is up 15.4% from the same period in the prior year, the largest growth since 2005.

Inventories rose 3.3% in May to 2.22 million existing homes for sale. The supply of existing homes declined to 5.1 months at May’s sales pace from 5.2 months at April’s sales pace. The share of the sales accounted for by distressed properties and first-time buyers remained low in May.

Analysts say the housing market’s gains over the past year could have been even larger if inventories were greater. Still, economists expect housing demand to continue to grow along with the U.S. economy.

As home prices continue to rise, more buyers are likely to be able and willing to put their homes on the market. Rising prices also induce buyers to bid before prices get too high. However, NAR said prices are rising too quickly and more construction is needed.


Bloomberg

Existing-home sales rose 4.25 in May and home prices climbed more than 15% year over year.

Low interest rates have been fueling demand. In recent weeks these rates have trended higher, though there was a recent decline. While rising rates will curb demand among some buyers, they could also spur others to quickly enter the market to take advantage of high affordability.

“Given the massive rise in mortgage rates in recent weeks, we expect the pace of positive momentum will likely slow in the coming months, though the initial reaction could be for some buyers to move into the market as they try to lock-in the lower mortgage rates,” wrote Millan Mulraine, director of U.S. research and strategy at TD Securities.

Despite their recent climb, rates remain relatively low, as Federal Reserve Chairman Ben Bernanke pointed out Wednesday.

“In terms of monthly payments on an average house, the change in mortgage rates we’ve seen so far is not all that dramatic,” Bernanke said at a press conference following the central bank’s decision to leave policy unchanged.

Indeed, Americans’ views on the housing market recently hit a multiyear high, with large shares saying that now is a good time to buy and sell homes. However, recent price gains don’t necessarily signal that real estate is a good long-term investment, according to Yale economist and housing expert Robert Shiller.

 

Ruth Mantell is a MarketWatch reporter based in Washington. Follow her on Twitter @RuthMantell.

Home Prices Signal Recovery May Be Here

Home prices signal recovery may be here

By Les Christie @CNNMoneyAugust 28, 2012: 11:09 AM ET

Home prices rose 6.9% in the second quarter, a signal that a housing rebound may be underway, according to S&P/Case-Shiller

NEW YORK (CNNMoney) — A sharp boost in home prices during the spring could signal a recovery in the long-suffering U.S. housing market, according to an industry report issued Tuesday.

The S&P/Case-Shiller national home price index, which covers more than 80% of the housing market in the United States, climbed 6.9% in the three months ended June 30 compared to the first three months of 2012.

“We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change,” said David Blitzer, a spokesman for S&P, in a statement. “The market may have finally turned around.”

Related: $94,000 off? Great home deals

Two other key indexes covered in the S&P/Case-Shiller report also showed gains. The 20-city index was up 6% for the quarter and the 10-city index rose 5.8%.

Why Mounting Your TV Above the Fireplace is Never a Good Idea

 

Shep McAllister

Why Mounting Your TV Above the Fireplace Is Never a Good Idea

 

When setting up your home theater, it’s tempting to mount the TV above your fireplace. This arrangement seems like a great use of space, but it’s actually one of the worst things you can do for both the TV itself, and for your own viewing experience.

It’s Bad for the TV

First and foremost, the heat and soot generated by a fireplace can raise the operating temperature of the set, and reduce its usable life span. If the damage to the internals is noticeable, the manufacturer could even refuse warranty service. This won’t really matter if you rarely use the fireplace, but it’s a non-starter if you do.

It’s a Pain in the Neck

Even if you aren’t concerned about damaging the TV, you’ll still strain your neck watching it it if it’s mounted too high. Geoff Morrison at CNET likens it to sitting in the front row of a movie theater every time you watch TV, and suggests placing the center of the screen at eye level from your standard sitting position, or even slightly below. Apartment Therapy offers similar advice, recommending that the top of the screen should only be about 15 degrees above your horizontal plane of vision. By either measure, hanging your screen above a fireplace isn’t remotely close to an optimal position. In fact, you’d be better off mounting it inside the fireplace.

It Hurts Your Image Quality

If this weren’t enough, most LCD and LED-backlit sets still suffer from poor viewing angles, so looking at them from below can spoil your experience. An exhaustive 2008 DisplayMate study found that every LCD TV they tested suffered from noticeable color shifts at less than 15 degrees, far less than the angle from your couch to the top of a fireplace-mounted screen. LCD technology has improved somewhat in recent years, but unless you have a plasma screen or an expensive IPS display, you’ll never get as vibrant a picture from a mantle-mounted TV as you would from one at eye level.

If you spent good money on a new flat panel, you want to put it in a position to shine. So avoid the fireplace and find another wall to mount it lower, or set it on an entertainment center. Your TV, neck, and eyes will thank you for it.

Selling Your Home? The Cards are in Your Favor

Selling your home? The cards are in your favor

By Beth Braverman @MoneyApril 8, 2013: 4:33 PM ET

homesellersCatch buyers’ attention, and get multiple offers, by pricing your home in line with comparable sales.

NEW YORK (Money Magazine)

Six years after prices collapsed, housing has begun to climb out of its hole. So what are the best moves to make now? In a three-part series, we offer smart strategies for buyers , sellers, and owners in today’s market.

Selling your home? In most parts of the country, you have finally regained the upper hand.

To get your best price, though, you need to finesse your timing, list competitively and match your marketing strategy to local conditions.

Lower your sights to make more money.

Rising prices breed rising hopes: In a recent poll, brokers complained that 75% of homeowners think their agent’s recommended listing price is too low. Pricing your property above recent sales to cash in on the momentum may slow down deals, and sitting on the market too long can stigmatize a house.

Catch buyers’ attention — and get multiple offers — by pricing your home in line with comparable sales, says Rick Turley, president of Coldwell Banker San Francisco: “Then let the market take it higher.”

Trading up? Move fast. Downsizing? Go slow.

It’s tempting to postpone selling to hold out for a better price. But if you want to move to a larger place, act sooner rather than later. True, higher-end homes aren’t rising as quickly, but the gap is small. So while you’ll be able to sell your home for more if you wait, the appreciation on the trade-up home will be greater.

Related: 5 best markets to sell a home

When you’re downsizing, the math works the other way, so it pays to wait.

The case for these strategies should strengthen as gains slow for cheaper homes. “Investors are driving the lower end of the market, and there is a point when the investor opportunity becomes less attractive,” says Richard Green, director of the University of Southern California’s Lusk Center for Real Estate.

Smooth out your home’s rough patches.

Repair that leaky roof and address other obvious structural problems, or you’ll have to subtract the cost of doing so from your price. “In today’s economy, many buyers don’t have as much savings left over after their down payment for improvements,” says Teri Herrera, a broker in Bellevue, Wash.

Smaller fixes that pay off the most, according to a HomeGain poll of real estate professionals and consumers: cleaning and decluttering, brightening (adding lamps and clearing window obstructions), and solving electrical and plumbing problems.

Get ready for your home’s close-up.

Sellers who stage their homes — rearranging or replacing furniture to bolster appearance — usually do so just before an open house. The better time to glamorize: right before you post your listing online, where 90% of buyers look first. Says Realtor.com president Errol Samuelson: “Web appeal is the new curb appeal.”

Related: 5 best markets to buy a home

Use a professional photographer and get tight shots of fixtures and other details. The cost: $200 to $500 for a gallery of 30 to 40 photos. Homes between $300,000 and $400,000, shot professionally, sold for about $3,000 more than those with amateur images, Redfin found recently.

Guard against low appraisals.

While rapidly rising prices may attract more buyers, the upswing can make it harder to close a deal. One-third of realtors polled in December reported setbacks from low appraisals, including delays in closing, lowered prices, and cancellations.

Related: Guidelines for selling a house

The problem: Appraisals can come in low because they’re based on transactions as old as six months — out of date, perhaps, in today’s market.

Solution: Have your agent personally oversee the process, accompanying the appraiser to point out improvements and supplying data about the latest comparable sales.

Help investors find what they’re looking for.

Investors amounted to one-fifth of all homebuyers in January, but are a much larger share of some markets; 38% of deals in Sacramento and 45% in Orlando, for example, involved absentee buyers. Signs of an investor market: a steady stream of resales of foreclosed homes (you can find that info at zillow.com/local-info) and the conversion of many homes in your neighborhood into rentals.

If your area fits the bill, choose an agent experienced in investor sales; she should create a flier that highlights how easy it is to attract tenants, the rents that nearby homes command, and other pertinent bottom-line info. Says Atlanta real estate agent Charlotte Sears: “All investors want to know is what their margins look like.”

Don’t Be Fooled By These Three Real Estate Myths

Don’t Be Fooled By These 3 Real Estate Myths

by Brendon DeSimone

Published April 01, 2013

Zillow

As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works.

Their assumptions may come from TV reality shows or watching their parents’ house-hunting experiences. Maybe they’ve learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized “real estate myths.” Here are three such myths that many less-seasoned home buyers and sellers assume are true.

Myth No. 1: Spring is the best time to sell a home

Historically, real estate seasons were tied to summer and the end of the school year. Families were the typical buyers or sellers, and they wanted to move during the summer so their kids could start anew in September. That’s how spring became the prime selling season. It’s true there are still more homes for sale in the spring, which means there’s a lot of activity and buzz. But spring isn’t necessarily the best time to sell a home anymore.

The reality: The best time to sell is during the holidays and right after

Today, more than half of buyers aren’t married, and their decisions aren’t based upon school schedules. So spring isn’t as relevant as it used to be. Instead, the best time to sell a home is in November, December and January.

It’s a supply-and-demand issue. Most sellers assume buyers aren’t seriously looking during this prolonged holiday season. And yet, many buyers are looking at properties in person and online right up until Christmas Eve. If the right home goes on the market in mid-December, a serious buyer — and there will be a lot of them — will take note.

After New Year’s Eve, most buyers jump back into their routine with a resolve to get into the real estate market, even though many sellers wouldn’t even consider listing in January. The net effect: Savvy sellers will face less competition for a still-strong pool of buyers during this period. And that makes November-January a great time to sell.

Myth No. 2: Always start with your lowest offer

There’s no generalized strategy for making an offer on a home anywhere, ever. A seller could have overpriced or underpriced the home on purpose. Some markets may be more competitive than others. But, somehow, in the back of the buyer’s head is good old Uncle Bob saying “never offer the full asking price.” That strategy might work if you’re trying to buy a used computer on eBay. And it worked in some real estate markets years ago. But times have changed.

The reality: A low offer may get you nowhere fast

A buyer in a strong, tight inventory market today would be wasting their time making low offers right from the start. It’s likely a home that’s priced right and shows well can receive multiple offers, sometimes even over the asking price. In this environment, constantly throwing in low offers because that’s what your Uncle Bob advised you to do will likely lead to disappointment. Instead, work with a good local real estate agent to understand the market. You’ll quickly learn after a few weeks on the open house circuit (and maybe a disappointment or two) that starting low may not get you anywhere.

Myth No. 3: A cash offer trumps all

There’s an assumption that a seller, considering two different offers, will always go with the cash offer because there’s less risk. As a result, many buyers who hear they’re competing with a cash offer assume they won’t get the home. They may not even make a formal offer. At the same time, many cash buyers assume that because they’re paying cash, they can make an offer below the asking price, and it will likely be accepted.

The reality: A savvy seller may be more tempted by a solid financed offer

Consider a seller with a home priced at $399,000. The seller receives two offers: One is a cash offer of $375,000. The other is an offer for the full asking price, with 25 percent down, a bank pre-approval letter and swift contingency periods.

A good buyer’s agent, upon learning their client is competing with a cash offer, will arm the seller with lots of data supporting their client’s finances, such as a credit report and verification of income or assets. The agent might even arrange a call between the seller and the buyer’s lender.

Learn your market

When you become a buyer or seller, especially for the first time, the most important thing you can do is learn your market. Talk to a savvy local agent, and don’t make assumptions based on what you think you know. Real estate is local. Every market is different, with its own customs. If you believe there are general rules for real estate strategy that apply everywhere, anytime, you’ll likely be fooled — not only in April, but every other month of the year.