Blog :: 2018

HOW TO: Buy a home in a seller's market

 

Our area is currently experiencing a seller's market - there are less homes for sale, than interested buyers. This can make it difficult for buyers to break into the housing market; difficult, but not impossible. We have some tips to help you secure a home within your budget - even during a seller's market.

How seller's markets come to exist

The main metric used when evaluating housing markets is home price appreciation.There are several factors which can influence the price of homes in any given area, including:

  • Population growth. Generally, when there's an increase in the number of people moving to a town, demand for housing begins to exceed supply. The basic law of Supply and Demand will tell you that too few homes will lead to an increased sales price. 
  • Job growth. An influx of new companies and jobs can in turn fuel population growth that turns areas into seller's markets. This is a great indicator of economic progress! Unfortunately, it can also present challenges to buyers seeking to relocate to the area. 
  • Housing starts. The term "housing starts" refers to the number of new homes on which builders have started construction in any particular month. Because new construction directly affects supply, a decrease in housing starts can result in a sellers market. 

We are currently experiencing a seller's market. Here's how to tell:

  • Average days on market (DOM). This measurement will tell us the average number of days a home stays on the market before changing hands. In our area, this number has been steadily dropping since January 2017 and as of April 11, 2018, it sits right around 100 days from the day a home goes on the market, to the day the new owners receive the keys. Considering the time it takes to process a contract is about 60-80 days, this number is quite low!
  • Asking vs. final home price. In seller's markets, bidding wars can often erupt among buyers, which means sellers may enjoy a final sales price that's equal to their asking price, or more. So, if a home is listed at $450,000 and sells for $450,000, $460,000, or higher, that's a seller's market. In a strong seller's market, the final sales price is typically at least 10% higher than the asking price.

Buying a house in a seller's market

To compete against other buyers in a seller's market, you need to be prepared. First off, you should meet with a mortgage lender to discuss your finances, and find out what you can afford. You'll need a pre-approval letter before you start looking at homes; when competition is fierce, sellers want to know that the offers they're receiving are backed by actual buying power. 

Once you have a pre-approval, you'll want to hire a Realtor. It is crucial that you are represented during your purchase, especially in a seller's market. The Realtor who has the home listed is contractually bound to represent the seller's best interests not yours. You'll want to find a Realtor that you trust to advocate for you, and get you into the areas you're interested in. Often times Realtors will have knowledge of homes that haven't even hit the market yet - take advantage of that knowledge!

You'll want to discuss with your Realtor your wants, needs, and desired location. When housing supply is low, try to keep an open mind and consider exploring areas slightly outside of your target. Once you've found a home, you and your Realtor will work quickly to submit an offer. Consider adding an Escalation Clause to your contract, which basically states "if sellers receive an offer higher than this one, I am willing to increase my offer to X." You may also want to add a personal letter to the sellers with your contract, sometimes small details like that can really set your offer apart. 

 

Buyer Demand Far Outpaces Inventory...NOW Is The Time To Sell!

Inventory in our area is still very competitive for home sellers, and buyers are entering the market to take advantage of low interest rates. It is truly a great time to enter the real estate market no matter which end of the spectrum you're on!

The price of any item is determined by the supply of that item, as well as the market demand. The National Association of Realtors (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for their Realtors Confidence Index.

Their latest edition sheds some light on the relationship between Seller Traffic (supply) and Buyer Traffic (demand).

Buyer Demand

The map on the right was created after asking the question:

“How would you rate buyer traffic in your area?”

The darker the blue, the more buyers are looking for homes in that area. Only 3 states came in with a weak demand level.

 

 

Seller Supply

The Index also asked:

“How would you rate seller traffic in your area?”

As you can see from the map on the left, a good portion of the country has weak seller traffic, meaning there are far fewer homes on the market than what is needed to satisfy the buyers who are out looking for their dream homes.

Bottom Line

Looking at the maps above, it is not hard to see why prices are appreciating in many areas of the country. Until the supply of homes for sale starts to meet the buyer demand, prices will continue to increase. This is great news for homeowners thinking of selling their home. Buyers should not be discouraged; low interest rates allow for affordable options even when inventory is low. 

 

Are you financially ready to buy your first home? Let's find out!

 

 

 

If you're wondering whether you're ready to stop renting and purchase your first home, we are here to help!

With current interest rates still being low, and the cost of rent in our area increasing year over year, now might be the ideal time for you to take the plunge into homeownership. Some might wonder if it makes sense to purchase a house before they are married and have a family, others might think they are too young, and still, others might think their current income would never enable them to qualify for a mortgage. Not to worry, we are here to help you navigate those questions, and any others that may arise. 

We want to share what the typical first-time homebuyer actually looks like based on the National Association of REALTORS most recent Profile of Home Buyers & Sellers. Here are some interesting revelations on the first-time buyer:

Bottom Line

You very well may be ready to purchase your first home, and start building equity! Every situation is unique, and we are always available to answer questions for you.

Tips To Sell Your Home Faster (And For More Money!)

When our clients ask for our assistance selling their home, their two main concerns are timeline and price. 

 

We've been in the Real Estate industry a long time, and have amassed countless tips and strategies to address both of those concerns. We decided to put together an online magazine to make our best advice available to the whole community!

Below you'll find a link to check out our magazine and learn some of our best home selling strategies. When the time comes to list your home, we'll be here to walk you through the process and make it not only quick and painless, but fun and profitable as well! Give us a call any time, we're always happy to help.