Markets react. Markets fill holes. Markets never stand still. Markets change. Markets go up and down. Knowing all of this, it makes you wonder what sellers are waiting for! Where are all the sellers? All we hear about in most real estate markets is the lack of inventory. We hear that sellers are still stung by the real estate correction and are waiting “a bit longer” for values to recover before selling. I would advise people that are thinking of selling to repeat the above statements about the market a few dozens times, and then call a realtor and list their property for sale.
A perfect example of how markets react, change and fill holes is found in articles I have been reading recently about the resurgence of new home construction, as well as by investors who are buying, renovating and flipping properties. In other words, builders and investor/flippers are stepping in where the average seller will not! That is a signal to sellers that the market will find housing without them, and they better consider putting their house on the market now, while inventory is limited, which you can argue is the best time to sell anything!
One reason why inventory levels of existing homes are so low is that investors have picked many markets clean of the best-quality distressed homes. To add pain to the low inventory story, many homeowners think prices have not yet improved sufficiently, so they stay hesitant to list their homes for sale. This month, the National Association of Realtors reported that the number of homes for sale fell to its lowest level since December 1999. That is a nationwide figure, but in the DC metro area, the available homes for sale are at their lowest point EVER since they started keeping those records.
Sales of new homes in the US are surging, I believe because builders see the small inventory of previously owned homes. Builders are business people, they identify opportunities, they are forward looking. New-home sales jumped 28.9% in January compared to a year earlier, to the highest annual sales pace in four years, according to data released Tuesday by the Commerce Department. Sales of previously owned homes rose only 9.1%. A 9.1% growth rate is strong, don’t get me wrong, but it is not 28.9%! What is even more striking is that this difference in sales exists even though a typical new home costs 37% more than one already built. Builders are responding to buyers’ needs! Where are the sellers of existing homes?
Nearly one in four homeowners and renters say now is a good time to sell a home, according to a survey released recently by Fannie Mae. That number should be 3 of 4! Maybe even 4 of 4! What are you waiting for, sellers? The economy almost collapsed 4-5 years ago. Real estate got severely damaged. We have seen a lot of recovery and strength. Do you think prices will resume their annual double digit gains of the boom market?
As far as timing, I’d sell NOW. Don’t wait for “when you have time to repaint the bedrooms,” or for spring or summer when the flowers are in full bloom. Inventory is low NOW, buyers are frenzied for inventory NOW. While trends certainly vary by region, according to a Trulia study, buyer search activity generally peaks in March and April, while seller listings peak in July. Most sellers would be better off if they pushed the process to NOW. Sellers could face problems if mortgage rates jump (and they have been rising lately) or the economy worsens. And let’s face it, at some point the supply of homes for sale will increase.
Sellers would be wise to be forward thinking and realize that markets are reacting, people will buy a new home with or without them, other sellers may beat them to the punch, and most importantly that real estate prices, which have been strong and rising, do not stay strong and do not rise forever. I don’t think I need to remind anyone of that fact after the most recent debacle in real estate that almost took down the entire economy. So my advice to sellers is, “Inventory is low. Prices are going up. Sell now while things are strong.”
Otherwise, you’ll end up like the star athlete that never knew when to retire and always thought he had one good year left, and ended up retiring too late, in disgrace, instead of at the top of his game.