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Welcoming the Return of the Seller’s Market

Seller's Markets Can Be Quite Subjective!

Seller’s Markets Can Be Quite Subjective!

Orange County, CA – The National Association of Retailers said last Thursday (the 9th of May) that after five years of decidedly buyer-centric home sales, many areas of the country are experiencing a seller’s market for the first time. “Inventory conditions are expected to remain fairly constrained this year, so overall price increases should be well above the historic gain of one-to-two percentage points above the rate of inflation.  If home builders can continue to ramp up production, then home price growth is expected to moderate in 2014,” said Lawrence Yun, Chief Economist for the NAR.

Orange County, San Diego and Los Angeles are definitely in the seller’s market category. The housing supply in some hot cities has dropped below 1 month.

The NAR revealed that distressed sales and lower-priced homes are making up an increasingly shrinking part of the market (23% of sales compared to 32% this time last year), and higher price ranges are forming a correspondingly larger chunk of all sales.

Despite the change, however, buyers still remain generally able to afford the homes offered, with the median home price after 20% down payment requiring an income of only $30,700/year. The median income in the country being more than double that ($62,200), it’s clear that there are a lot of potential buyers out there.

At the same time, the supply of houses is dwindling: there were 1.93 million homes for sale at the end of Q1 2013, compared to 2.32 million at the end of Q1 2012. “The supply/demand balance is clearly tilted toward sellers in a good portion of the country,” Yun says. 

How Sellers Inadvertently Reduce Their Homes Potential

To be frank, even in a sellers market, there are those homes that simply don’t move. In San Jose, for example, the median time-to-sell is a mere 20 days right now — but there are still about 10% of houses that have been on the market for 161 days or more, even if they have curb appeal. Why does that happen?  There are a lot of reasons.

  1. Pricing problems can result from unreasonably high prices that don’t match the neighborhood, unreasonably low prices that scare potential buyers away, or a refusal of the owner to negotiate on a low but qualified offer. Setting the price based on surrounding similar sales is crucial. Whereas multiple offers are driving prices up in many areas, that’s still dependent ont he quality of the home. When the home is not priced right or needs some TLC, you should expect the buyer to come with an offer that’s less than your initial proposal. It’s part and parcel of making a sale.
  2. Showing restrictions can make it very hard on a buyer to see your property — and one problem with a seller’s market is that you’re competing with the other sellers. If you can only show your home between 6pm and 8pm on Tuesday nights, you’re not going to get anyone looking, and that means no one buying.  Similarly, a 24-hour advance notice before a showing puts a complete halt on the many buyers who ask their agents after one showing, ‘so what else do you have in the area?’
  3. Helicopter sellers who insist on presenting the home themselves, pointing out everything they like about their home, can make a buyer quite uncomfortable. Best just to leave them to decide what they like about your home — it will probably be quite different.

There are many other factors, of course, but it’s important if you want to take advantage of the sellers’ market that you don’t shoot yourself in the foot. Let your agent do their job and guide you around the pitfalls.

In order to compete, buyers are crafting competitive offers. In many cases, offering more than the asking proce is just the first step. Others are waiving their appraisal contingency and reducing contractual turn times. By waiving the appraisal contingency, the buyer is saying that they will cover the difference in the price, in the event the home does not appraise at the contract price.

If you’re in the market to buy now, we would be happy to help you navigate the financial side of the transaction. Contact us today for more information.

Scott Storace

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