With homes now being purchased at a bustling pace, there are many signs that point to a seller’s market across most of the USA.
In recent years, housing supply has lagged the number of interested buyers. That has especially been the case the last few months, Adam DeSanctis, economic issues media manager at the National Association of Realtors told Black Enterprise. Homes for sale thus far this year have been typically going under contract 10 days faster than a year ago.
He noted a six-month supply of homes is typically considered a “balanced market,” where conditions are equally favorable for buyers and sellers. Yet, according to NAR’s most recent data, the supply in March was 3.8 months, down from 4.4 months in March 2016. Without newly added inventory, that means it would take 3.8 months for all homes for sale to come off the market.
“Anything less than 6 months of inventory tilts more in the favor of sellers,” DeSanctis says. “More buyers and fewer homes for sale, which in turn pushes up prices as buyers bid against each other.”
Plus, the median days on the market in March was 34 days, down from 47 days in March 2016.
About 40% of the nation’s home sales during a given year generally occur in April, May, and June, the NAR reports. So what should buyers and sellers be doing to prepare to buy or sell homes?
Tips for: Buyers
Identify a Realtor to work with in your area.
Real estate agents can offer helpful insights, including disclosing how fast homes are selling and for what price. They often can help you negotiate a price to make your offer stand out over others. To find an agent in your area, enter your zip code at www.realtor.com/realestateagents
Know your budget and stick to it
Before you even start shopping, figure out what you can afford to spend by receiving a pre-approval from a lender to learn the amount of money you’re qualified to borrow. When determining your final budget, examine other costs of homeownership, including property taxes, insurance, and utilities.
If listings are scarce in your market, home prices are likely to rise as bidding for available houses drive them up. Avoid cases where you are competing against other buyers and counter offering over what you can actually afford. Don’t be afraid to back off if the price exceeds your budget.
Identify needs versus wants
As you begin home searching, focus on what features you really want against what you can live with or without. For instance, ask yourself questions like do you want a three-bedroom home with an attached garage and basement? Do you want to be in a certain school district or near your job? Sites like Realtor, Zillow, and Trulia and others can help with that research.
Tips for: Sellers
Hire an agent
If your home is in good condition and affordable—in a price range from $250,000 to $500,000 in most areas—anticipate a lot of interest and potentially multiple offers quickly. Consider hiring an agent to market your listing, review offers from buyers, and help with negotiations to get the maximum amount for your house.
Use your equity for a sizable down payment on a new home
Most people sell a house so that they can buy another house. If selling to buy is in your plans, in many cases, you should have cash on hand to use as a down payment on your next purchase. The reason: Depending on how long you’ve lived in your home, chances are it has risen in value.
According to NAR, home prices have jumped over 40% in the last five years. In some areas with even tighter supply, price increases are much higher. If you decide to list, it’s a good bet you’ll likely sell your home for a higher price than what you paid.
Keep in mind interest rates are rising
The historically low-interest rate environment of the past few years is now over. In just the last six months, mortgage rates on average are nearly 1 percentage point higher and are forecast by NAR to be closer to 5% higher heading into next year. That means sellers should consider making a new purchase now as prices will likely move higher in 2018.
Jeffrey McKinney is a long-time freelance business writer and reporter, contributing to Black Enterprise magazine for several years on a broad range of business and financial topics.