WHAT TO KNOW
Right now it is a Seller's market, which means that the seller's have the upper hand when it comes to negotiating and closing on a price. Why do the sellers have the advantage? Think of a simple supply/demand model in which the buyers are the demand and sellers are the supply. If there were the same amount of buyers and sellers then the market would be in equilibrium, but currently there is a lot more demand (buyers) than supply (sellers), therefore the sellers hold the advantage.
There are a few reasons for the higher demand, one of which is the mortgage rates. Recently the mortgage rates have been extremely low, especially when compared to the historical averages. Mortgage rates bottomed out a few months ago at just under 3.5%, currently the rate sitz around 4.5% but is expected to hit the 5% mark when we enter into the new year 2014. Another reason for the higher demand is the rising home prices. Buyers would obviously purchase a home at a lower value if they could. Home prices have been increasing consistently month over month for the past year which, in combination with the mortgage rate situation, is causing the urgency to buy a home now.
On the other side of the coin, the low supply in the market today is being caused by sellers and banks together. There are a lot of people who would like to list their home for sale right now but the biggest issue seems to be gaining back lost equity from the housing crash. Many homeowners are thinking that they will wait until they gain all their money back before they sell. Although we can all understand this thinking, it is not necessarily the best option. Why not sell your current home and gain equity in a new home? As I mentioned earlier, home prices are rising, so if you were to move into a new home now, you could look at it as an investment and watch your new home increase in value.
The other cause is the banks. During the housing market crash, many homeowners sunk underwater on their mortgages and were forced into foreclosure. Well, now that all those homes have been foreclosed upon, the banks are simply holding all of their inventory for the same reason mentioned above, waiting on the home prices to come back up. How can the banks afford to hold on to all these homes? They can because our administration decided to bail out the banks right after the crash and give them a ton of money. When this was done, the banks were given the monetary leniency to hold their inventory. Expect a change in the bank situation soon though. Banks have been holding on to these homes for a while watching the home prices rise, but it is not cheap to do so. As we all know, homes cost money to keep in working condition and the banks can only hold on for so long before they start losing money. Therefore, expect to see more bank owned properties entering the market and helping to fill up the low inventory.
WHAT TO EXPECT
Now that you have an idea of why things are the way they are with the market, you need to know what to expect when you go to purchase your next home. Due to the large amount of buyers and shortage of inventory, there will most likely be more than one person interested in the home you are interested in. I have been seeing many multiple offer situations as well as sellers receiving offers ABOVE asking price. Bidding wars are very common right now so be prepared to go up against other offers. If you are very interested in a specific home DO NOT low ball the offer or ask for the extra ordinary; you will most likely lose out on the home. When searching for a home, KNOW YOUR PRICE RANGE! Do not look at homes 10k, 20k, 30k above your price range and expect to get a deal because you will only be wasting your time. Understand that the final negotiated price will not be to far from the listing price. Also, to make sure a home's listing price is relevant to the fair market value, MAKE SURE your agent does a good job pulling comparable sales to double check what the market is indicating the home is worth. Also, do not stop looking for homes once you have decided to make an offer. In a market as tight as this one with a limited amount of inventory you do not want to lose out on any valuable time. So, what I have been instructing my clients to do is this; once we submit an offer we do not stop searching for more possibilities, we will have a list of more homes together and ready to view as soon as possible. That way, if our offer does not go through, or we lose out to another offer, we will already be set-up with appointments so we do not lose out on the other available homes.
No comments:
Post a Comment