Todd West with Bean Realty Group
Real estate agents have an urgent message for homeowners: Now is the time to sell. A lot of people are missing the best market now by waiting.Home sellers wield formidable negotiating mojo because demand outweighs supply. Buyers outnumber sellers, as relatively few owners are putting their homes on the market. The supply of homes for sale settled at an unprecedented 1.9 months in January, much lower than the six-month supply that marks equilibrium between sellers and buyers.Sellers call the shots, and the proof is in the pricing. The median home price rose to 303,900 in January 2021, a 14.1% increase compared with 12 months before, according to the National Association of Realtors.Does that make it sound like sellers have it easy? Most dont, because theyre looking to buy, too. Here are some factors sustaining this sellers market, and the decisions that owners will face when listing their homes for sale.
Housing market gone haywire
Its tempting to blame the coronavirus for the supply shortage — to say that homeowners want to bar strangers from their homes until the pandemic wanes. But the meager supply of existing homes has an additional cause.Most people sell their home to upgrade, downsize or move to a better location. But with few dwellings on the market, would-be sellers cant find another house to move to. Its a self-reinforcing market failure: Would-be sellers worry that they wont find their next house, so they stay put, exacerbating a shortage that deters other owners from putting their homes on the market.Rapidly rising prices worsen the problem. Would-be sellers think, Im going to end up paying more than I would expect on a comparable home. So they keep their homes off the market.
Buy first or sell first?
Sellers have two escapes from the not-enough-homes-to-buy trap:
- Buy first, then put up their home for sale.
- Accept an offer from a buyer whos willing to wait while they find a place to buy.
I would say buy first, because this way they can take their time. They’re not feeling rushed, and they’re not just going to jump into any house, just because they need to hurry up and move out. Presuming that the seller can secure preapproval for a mortgage to buy the next home while paying the mortgage on the current one. Many people dont earn enough to qualify for two mortgages at once, even briefly. In that instance, then, unfortunately, its going to be a situation where we just start looking as soon as they put the property on the market. Second, in which the buyer agrees that the sale is subject to the seller finding suitable housing. Buyers shun this contingency in a normal market, but todays market has moved away from normal. Sellers dictate terms. Sellers can even negotiate a rent-back agreement, in which the buyer closes on the property, then lets the seller stay in the home for a few days or weeks at a daily rental rate.
Multiple offers are routine
The scant supply of homes benefits sellers in ways besides high prices: Homes sell fast, and sellers need not fix them up. In a balanced housing market, ask how much notice they need before they skedaddle for a showing (a visit by prospective buyers). Nowadays, dispensing showings and instead holds open houses. At this point, Im telling my sellers, Pick a Saturday. Give me four or six hours, and Ill sell your house. He says 30 people showed up for a four-hour open house recently. Expect a flurry of offers within days, and to sort through them and choose the best one in a week, tops. If they price the property reasonably, then most likely they’ll have multiple offer situations. A house needs to be in good, not great, condition. Clients ask what it would take to get top dollar without, say, renovating the kitchen. My reply is that they simply need to declutter, clean the carpets and maybe repaint the walls. Even when sellers do nothing to fix up the house, the winning bidders feel relief instead of buyers remorse. Theres a heavy emotion of the fear of missing out right now.
Buyers prefer versatility
In the era of COVID-19, buyers prefer certain amenities. This year, homes replaced gyms, restaurants and offices. The classroom inhabits a nook or a cranny. Families feel sardine-canned. Consequently, the cacophonous open floor plan has lost appeal because occupants need doors to provide quiet and privacy. Open floor plans aren’t the most popular right now because the more sectioned-off a home is, the more they can do in their home. On the other hand, buyers in 2022 will settle for the imperfect. You might have people that say, I need extra space for an office, but I’ll take a large bedroom and Ill put my desk in there.
If you are interested in selling or buying in the Houston, Conroe and The Woodlands contact me at (903)530-1912
Todd West with Bean Realty Group