Getting real: N.D. Realtors assess the N.D. real estate market
Editor’s note: The following is a Q&A with Ben Schroeder, the 2018 president of the North Dakota Association of Realtors, and Amy Hullet, the association’s 2018 president-elect.
Schroeder is a Realtor with Park Co. Realtors in Fargo, N.D. He was licensed in 2009 and served as president of the Fargo-Moorhead Realtors Association in 2016.
Hullet is a Realtor with Century 21 Morrison Realty in Bismarck, N.D. She was licensed in 2003 and served as the 2016 president of the Bismarck-Mandan Realtors Association.
The interview has been edited for clarity and length.
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What’s your sense of the 2018 housing market in North Dakota compared with 2017, and does that assessment vary by region?
Ben: A lot of people in real estate saw a slower market last year. I don't say that negatively, because I think that after the three or four crazy years, the market finally balanced out.
In my view, that's a good thing, because it gives buyers more time to do things such as come back to take a second look at a house, to sleep on their decision and maybe even bring Mom and Dad over to take a look.
Last year, people were in a wait-and-see mode, I think. They were asking, what is the economy going to do? What is President Trump going to do?
Now, buyer confidence is coming back. We have a balanced market, so I think this year is going to be a great year. A lot of the dust has settled, and it's going to be good for both buyers and sellers.
Amy: I agree, and the only thing I’d add is that the confidence level and the comfort level of buyers are a lot stronger this year. So I, too, think we're very strong going into 2018.
But I also think that the worry about interest rates is making buyers aware that the rates could affect the level of housing they can purchase. So, when they’re deciding whether to buy a four-bedroom or a five-bedroom home, the interest rate will affect their decision.
As for whether the market varies by region, we do notice different things in different parts of the state. For example, sometimes we in Bismarck have inventory while Fargo doesn't, and the same is true for other communities.
Around the country, analysts talk about home prices rising because housing inventory is in short supply. What’s the situation in North Dakota?
Amy: It’s interesting because in the Bismarck area right now, we actually don’t have a shortage of housing inventory. Because of the uncertainty or lack of confidence in 2017, we came into 2018 with quite a large amount of inventory.
We have a lot of houses for buyers to choose from, and in every price range.
I do know that when you talk about building permits, they are down a little bit. But again, that’s because buyers already have a lot of options, so there’s less demand for new construction at the moment.
Speaking of building permits, what’s been the story with new construction?
Ben: A key trend in new construction has been the cost. When you’re talking about a single-family home these days, you'd be hard-pressed to find any builder who would build anything under $200,000. And with that, depending on the development, you also can tack on an additional $40,000 to $60,000 in special assessments.
That’s really a second-home price point; it’s too much for the average person or couple who are buying their first home. So those first-time buyers usually have to find an existing home that’s available for a lower price, and that becomes the challenge.
What’s the difficulty?
Ben: Here’s the thing. First-time buyers, they’re often looking for a house in the $150,000 to $160,000 range, and that typically is an older existing home. Also, those first-time buyers often have to take advantage of FHA, VA or similar financing, because they can use those programs to get in with a lower down payment, a lower interest rate and sometimes a lower credit score.
The trouble is, there are a lot more requirements on those homes that the appraiser has to satisfy in order for that federally backed loan to be secured.
And these are older homes, remember. So, they may not have the best roof or the best windows, or they may have a foundation wall that’s bulging a little bit.
That leaves the buyers in a situation where they’re looking at a $150,000 home, but the appraiser comes through and says that in order to sign off, the house needs many thousands of dollars worth of work.
The result is that for a first-time buyer, it’s very difficult to buy even an existing older home.
Amy: That’s why you’ll see very good homes out there where it says right in the listing, “Conventional financing or cash offers only.” Because the sellers know that while there may be some issues with the property, these are good homes. They just may need a little work – but as the listing agent knows, that fact means the home is not going to meet Federal Housing Administration, VA or U.S. Department of Agriculture loan requirements.
We’ve run into a FHA requirement right now in which the the house in question needs paint. But our winter hasn't quit, so no one can paint. And we’re supposed to close on the house in two weeks.
In these situations, we do have the first-time buyers, in other words. And we do have affordable homes.
But we don't have the means to make the needed improvements in a timely way.
Ben: In Fargo and some other cities, if a sewer line break happens, the city rolls the cost of the the repair into your specials – your special assessments.
So, one idea is that if something like a new roof is needed for a home sale to go through, the city could pay, but the bill would be attached to the property, almost like another special assessment.
That way, the buyer would pay over time; and if he or she decided to sell a few years later, the balance would be treated just like special assessments are. It would either be assumed by the new buyer, or paid off by the seller.
Is that a perfect solution? I don’t know. But it would be an incentive for homebuyers, because they’d know that if they sold the home within a certain time, they might have to pay only a pro-rated part of the loan.
That’s one way of filling the gap between the first-time home buyer’s price range and the type of financing that those buyers use. Because right now, that gap is what’s keeping a lot of people from buying their first home.
Amy: If there was such a program, it would be a great help. Again, we have a lot of houses that first-time home buyers like and can afford. We just don't have the means to get them to the meet the FHA and other requirements.
What are some other issues that Realtors themselves are talking about statewide?
Ben: There’s also a concern about flood insurance. With the flooding in Minot, Bismarck and Fargo, it's a big factor when it comes to home values. Is the home considered to be in the flood zone, and if it is, how much is that flood insurance going to be?
Amy: It definitely affects the price. And the other thing that I think is becoming a factor is how they decide what actually is in a flood plain. There are some units that have never flooded, even when other properties around them did; but because the authorities changed the maps, the properties now are in a flood zone.
Ben: And there are different interpretations, too. For example, if the lot touches the floodplain, what does that mean? It turns out, it means the homeowner may have to pay thousands of dollars in flood insurance.
I just had a client who had a house with a deck, the corner of which was in the flood plain. And because the deck was attached to the house, the house was considered to be in the flood plain, too, which meant it needed $4,000-a-year in flood insurance.
if the deck had been free-standing and not attached to the house, the house would not have been in the flood plain.
Then there’s the fact that if Fargo doesn’t make good progress on its diversion project, FEMA has said it’s likely to remap the area. That potentially could put 20,000 to 22,000 homes in the flood plain that aren't currently in it.
Why did you choose real estate over other fields?
Ben: The one thing about real estate is that you have to enjoy a fast-paced environment. There is just so much information out there for our buyers, and not all of it is accurate, so you really have to be more than just a person who sells houses.
You have to answer people’s questions, you have to know what's going on with interest rates, legislation and all of the assistance programs that are out there.
If you like that challenge, and you like the fast-paced environment of having to deal with that information, then real estate is a great career.
But if you want that 8 to 5 steady paycheck, it isn't.
Amy: What I love about real estate is that it’s ever-changing. Spring is never the same as fall, summer markets are not the same as winter, and I do love that challenge.
Furthermore, I'm not a 9-to-5 kind of gal. In fact, the joke that we say in real estate right now is, “I work a hundred hours so I don't have to work 40.” (laughs)
And Ben nailed it: We do have to stay on top of current events in the marketplace. We do have to have the knowledge that the Internet provides the consumer. To survive in this business, that's the challenge. You have to be better than the Internet.