It’s Official: It’s a Seller’s Market
Most people understand the basic adage of investing that you should buy low and sell high. In theory, it makes sense. Unfortunately, it can cause investors to worry more about timing the market than time in the market. It can result in people sitting on the sidelines when they think they missed the bottom, only to see the market continue to rise. It can also result in FOMO or fear of missing out. This can cause people to invest too late in upswings thinking the market will go higher, then it bottoms out. Timing a market is difficult. It is hard to sell perfectly at a peak or buy perfectly at its exact lowest point. Sometimes, the best approach is to take gains when they are available and not worry about whether gains are perfectly maximized. Today’s housing market is a seller’s market and might be a good example.
Today’s Real Estate Market is a True Seller’s Market
Today’s real estate market perfectly fits the definition of a seller’s market. Simply put, a seller’s market is when there is a low supply of available goods that many people want to purchase. This put’s the seller in a position of strength because they are able to ask more for their goods than they normally would. This is absolutely true of the position that homeowners are finding themselves in at this very moment. Today’s mortgage rates have been hovering in and around historic lows. These rock bottom rates are causing a huge demand from potential home buyers. Home buyers understand that low mortgage rates represent huge savings over the life of a home loan, so they want to buy houses now while rates are low. At the same time, housing inventories are also at record lows. This is putting home sellers in a position of power in the current real estate market.
Home Prices are at All-Time Highs
The sky high demand and limited homes for sale on the market are driving home prices to all-time highs. Over the past year, housing prices have increased by about 16%. The average home in the United States is now selling for about $331,590, which is a record high. Now, keep in mind that this is an average number that takes into account home sales in every market. Not all markets are created equal. This average takes into account places like California where $300,00 will not get you close to a home. It also takes into places like Kansas where the same amount will get you a very nice property. The bottom line is that prices are up all over the United States, so it is important to pay closer attention to the trend rather than the number. Higher prices obviously benefit home sellers.
Competition Between Home Buyers Benefits Sellers
Home sellers are benefiting from this seller’s market more than mere prices. Selling a home has never been easier because home buyers are competing with each other. About 64% of homes sold in Massachusetts are now seeing bidding wars. Bidding wars are great for sellers. Not only does it increase prices, but it also increases the convenience to the sellers. Many homebuyers are willing to forgo typical steps in order to make things easier for home sellers. In an effort to win bidding wars, many buyers are offering to skip home inspections. While, we do not think this is wise for any homebuyer, this eliminates costs and inconveniences for sellers. In fact, many homebuyers, especially millennials, are even willing to buy houses sight unseen. All of this indicates that buyers are so desperate to buy a home that they do not care what condition it is.
Another interesting facet of how sellers are benefiting from today’s seller’s market is that the number of cash offers are increasing. One fixer-upper outside of Washington, DC recently received 88 offers for the house and 76 of them were cash offers. Cash offers are great for sellers because you can have a lot more confidence that the transaction will go through. Because the buyer does not need a mortgage, there is not a chance that the lender will reject the transaction at the last minute. Cash offers usually tend to close quicker, as well. However, even without cash offers, homes are closing much quicker than before.
Final Thoughts
At this point it should be abundantly clear that seller’s markets benefit sellers. If you have had any thoughts about potentially selling your home, now is a great time to do it. Buyers are scrambling to get their hands on whatever homes are available. However, there is no telling how long today’s seller’s market will last. All it takes is for a number of seller’s to realize how great of a situation it is for the inventory to increase and the benefits of selling to be diminished.
While we are optimistic that today’s real estate market has a lot more steam and that prices will continue to increase, there is no telling how long it will go. It is easy to understand being reluctant to sell in today’s market out of fear that the market will skyrocket even more. However, locking in great gains now is better than risking them to timing the market perfectly. Remember, timing a market is difficult. Although everyone wants to sell perfectly at the market’s peak, it is fairly impossible to recognize a market’s peak until after it is already on the decline.
Now, it is important to remember that nobody has to sell their home. Buying a house is more than making an investment. It is also buying a home that can be enjoyed for future generations. If you are happy in your home regardless of the market, then there is no need to worry about whether or not it is the perfect time to sell. But, if you have thought about selling, it would be a great time to contact us! We can walk you through what that price would look like and what you can expect for your home on the open market.
