Why purchases and prices are up and inventory is down
— and what it means to buyers and sellers
By Erik J. Martin
CTW Features
The real estate market is in full comeback mode, per the latest data — thanks to strong sales, continued low interest rates and more motivated buyers and sellers. Both parties will need to adopt careful strategies to improve their success in a market that decidedly favors sellers.
The latest market indicators are hard to ignore. Consider that pending home sales — purchases that have yet to close — rose 4.6 percent in April versus a year earlier, representing the most homes under contract since February 2006, according to the National Association of Realtors, which expects approximately 5.41 million homes to be sold in 2016. New residential sales data from the Census Bureau and Department of Housing and Urban Development reveals that April new home sales increased to 619,000, nearly 24 percent higher than a year earlier and the highest level in more than eight years; the average new home sale price in April was $379,800. Total housing inventory spiked 9.2 percent to 2.14 million existing residences for sale at the end of April, representing only a 4.7-month supply of unsold inventory, its lowest mark in more than a year (a six-month supply is considered healthy). And May existing home sales (yet to be released) are anticipated to reach as high as 5.65 million, a 6.2 percent jump from one year prior, according to online real estate marketplace Ten-X.
These numbers don’t surprise Kathy Smith Epping, Realtor with Restaino & Associates Realtors in Madison, Wisconsin.
“Anyone who has been following the market knew that 2016 would be an extension of the tight housing market of 2015,” Epping says. “Many of the buyers who were looking last year and were unsuccessful are continuing to search for a new home in 2016. Add to that a litany of new buyers and continued low inventory, and it has made for an even tighter market.”
Allen Shayanfekr, cofounder/principle of Sharestates, real estate investment firm, Great Neck, New York, says it’s a good sign for the housing market that demand is overcoming supply.
“Overall, the economy is ripe for a recovery due to low interest rates, employment gains and rising home prices,” Shayanfekr says. “Also, a generational shift is taking place, with Baby Boomers retiring and Millennials entering into the homebuying phase of their lives. All of these factors could motivate consumers to purchase sooner because they don’t want to lose out on a deal and they might be afraid that interest rates will begin to rise.”
The moral of the story?
“Buyers can continue to expect increased competition and decreased leverage, while sellers will wield a stronger negotiating position,” says Michael Kelczewski, Realtor with Brandywine Fine Properties Sotheby’s International Realty in Wilmington, Delaware.
To improve buyers’ chances of winning a bid without overpaying, experts recommend careful planning.
“Get pre-approved for a loan before you start looking, which will speed up the buying process when you find a house that you want if you are bidding against another buyer who is not pre-approved,” Shayanfekr says.
Additionally, don’t expect to purchase the first home on which you make an offer.
“It might take bidding on several homes before you find the right home,” says Vanessa Berman, designated broker with Caliber, The Wealth Development Company, a real estate investment company in Scottsdale, Arizona. “Also, don’t go after homes with all the upgrades if you are looking to pay under market value.”
Be prepared to cater to the seller, too.
“Agree to be flexible on the closing date to accommodate the seller, and make the offer as clean as possible with as few contingencies as possible,” Epping says.
Sellers, on the other hand, may be able to realize a higher sales price and a quicker sale if they do their homework.
“Do everything you can to make your home competitive by trimming the hedges, mowing the lawn, painting your front door and window frames and paying attention to the kitchen and bathroom,” Shayanfekr says. “List your home on every major web portal for real estate, as well, and price your home right to get more views, which will likely lead to more offers.”
© CTW Features