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How to be a Successful Buyer in a Seller’s Market
Years ago when I started my Real Estate Career we were still in the thick of a depressed market. Bank owned listings were prevalent and real estate investors were having a hay day! With foreclosures flooding the market buyers had a lot of options to choose from and sellers had to drop prices to compete. Buyers were happy! But things have shifted and buying a house now is a different experience all together.
Market forecasters say that we could see foreclosures only making up 1 to 3% of home sales this year. That means the housing market is essentially “back to normal”. Little to no foreclosures on the market means that there’s less to choose from and that the consumer home seller holds the monopoly. It’s a seller’s Market Ya’ll. So what can you do as a buyer to ensure a good home buying experience?
Set your expectations: Basic rules of supply and demand say that when supply is low, prices are up. What you WANT to pay for a home doesn’t determine its market value. If you are home shopping under the impression that you can effectively place a low ball offer, you’re going to get nowhere fast. Chances are if you find a home you like, there’s someone else who likes it too. Expect to be competing with other buyers. If you’re unsure if the asking price is fair ask your agent to show you what comparable properties are selling for.
Be prepared: Since you’re likely to be competing with other buyers you want to make sure you’re ready to pull the trigger when you do find a home you like. You’ll need to have your pre approval ready when you start looking. You and your agent will need this to determine which type of financing you’ll be using, your price range, and the amount of closing cost you should be asking for from the seller. If you find a home you love and then have to get your financing together someone who was ready could already have your house pending.
Work with the right agent for you: Because the market is competitive for buyers right now, it’s more important than ever to have the right agent on your side. Not only do you want your agent to be knowledgeable but you also want to make sure that your schedule and communication preferences fit well together. What I mean by this is if you work until 6 during the week, you want an agent who has availability to work evenings. If you find a house on Monday you love but can’t see it until Saturday afternoon, it might be gone. Also, if you are an avid text message user who despises phone conversations you may want to rethink the Realtor who has a flip phone and wants to fax you documents. Everyone has their own methods that work best for them. While none of them are wrong, working with an agent who works the way you do can add a level of fluidity to your transaction.
The Perfect (Sales) Storm
The weather here in the tristate area has been anything but normal recently. We’ve went from a mild winter, to spring like warmth and tornados, to actual winter like temps and snow - all within about a week’s time! Although, the weather here in Cincinnati has always been quite finicky. How’s the saying go? “If you don’t like the weather just stick around, it will change.” Well, so goes the real estate market.
There’s a storm brewing in the market. A few conditions are coming together to make it a perfect storm for sellers. Here’s what the forecast models are showing:
High demand, low supply – In the Cincinnati MLS we generally run an average of 10,000 units for sale. Give or take. When the market was flooded we had over 20,000 units which was more supply than the market needed therefore demand dropped and it was overwhelmingly a buyer’s market. But right now we are at around 5,000 units for sale in the Cincinnati MLS. That’s half the normal supply! This creates a higher demand and means buyers are competing, not sellers.
Rising Values – What does high demand do? It makes values go up! Here’s an excerpt from the Cincinnati Area Board of Realtors Press Release. These values reflect January 2017 sales information, “The average home price climbed to $180,681 compared to $166,130 a year earlier, a +8.76 % increase. At the same time, the inventory of homes for sale, as of January 31, continued its year-over-year declining trend to 4,867 from 6,647 a year ago, down – 26.78 %.’ I’m not making this stuff up!!!
Low Interest Rates – Interest rates are still hovering the in the low 4’s. This is up just slightly from last year but is still extremely low! Great, right? But how does it affect you as a seller? Glad you asked! Low rates mean that a buyer has more buying power. Here’s an example; let’s say that a buyer wants to keep their monthly payments right around a grand. If the interest rate is 4.5% they could purchase a home at $200,000 and have a monthly mortgage and interest payment of $1,013.37. Let’s change that by just 1%. At 5.5% a buyer would have to purchase a home for $180,000 to have a monthly payment of $1,022.02. A 1% increase in interest decreased the buying power by $20,000!!
All of these conditions coming together at the same time are really creating a perfect storm in the market. We’re gearing up for another strong year. But we need more listings to support the buyers out there looking! If you’ve considered selling but weren’t sure if it was the right time, now could be the perfect time for you. Contact an agent at Ring Real Estate today to find out!
