The Real Estate Times, they are A’Changing
Does the real estate market’s positive shift this Fall signal more great times ahead? Or is this a temporary positive blip? I believe that the recovery will continue into next year, and that the bust is over.
In fact, the third quarter of 2013 gave us lots of positive momentum that has and should continue. While December is typically a slow month we are still seeing the best properties sell quickly with multiple offers.
The best strategy for sellers now and for the year to come is to choose an initial listing price that is aggressive enough to compare very favorably with competing listings. A home needs to be the best option in the price range in order to sell quickly. Strategizing in this way brings into play the “scarcity fear” – meaning buyers will see the home as a scarce commodity in the price range and will move quickly and be willing to pay more. Buyers, in other words, will be afraid that someone else will snatch up the home first. This is exactly what a seller should want. A seller who overprices in the beginning loses that buyer urgency. The longer a home sits on the market, the less a buyer thinks it is worth. Therefore, paradoxically, a seller who prices less from the beginning will net more than the seller who starts out high and has to price reduce thereafter.
The good market for sellers that we are seeing now is due to the fact that the downward price pressure from distressed properties has alleviated. For several years, the number of foreclosures and short sales have brought all prices down. Now, however, we are seeing much fewer distressed properties on the market and overall lower inventory, so this is the best time to sell that we have seen in years. While the market may be even better in the Spring, sellers who list NOW have the added advantage of the low inventory of homes available over the holidays. If a seller waits until the Spring, they will be competing with many more homes. A buyer looking right now has little to choose from, and this can mean a higher price for a seller who acts strategically. The following chart shows the severe decline in listing inventory.
Even though there are fewer properties in general, and significantly fewer distressed properties on the market currently, they still have an impact on a sellers’ ability to get top dollar. When setting an initial list price, take into account how many distress properties you will be competing with. This can vary greatly from area to area, so it is hard to provide generalized advice about the impact on pricing. The following chart shows the decline in the number of distressed properties for sale; but note that there ARE still a number of distressed properties out there.
For Buyers, it is important to understand that the supply/demand relationship has shifted to the seller’s advantage. Now, fast action and realistic offers will be necessary for buyers to capitalize on still-low prices for many available properties. Low-ball offers on properties that are already well priced will result in missing out on a great opportunity. In other words, our low inventory of homes for sale and the fact that prices are still low in a historic sense reduces the buyer’s advantage in contract negotiations. Making realistic offers is a must for desirable houses.
Overall, the good news is that prices are still historically low and interest rates are too, but inventory is ALSO low and prices and interest rates are rising. This Spring will see an uptick in activity, with rising inventory, prices, and probably also interest rates.