Far too few people who want to sell or buy a home understand what it means to take the “temperature” of the real estate marketplace. That is because most people tend to think of their home as a place to live and not as an investment.
Make no mistake, real estate is an investment. Like any investment, there are good and bad times to sell. Unfortunately, when it is a good time to buy, it is almost certainly a bad time to sell. That is what the terms “buyer’s market” or “seller’s market” mean.
Right now, the US is in a hot seller’s real estate market, with serious buyers lining up to pay more than the list price of the home being sold.
Ellen Coleman had never received so many offers on a house in her 15 years of selling real estate, CNN Business reports. She listed a fixer-upper in suburban Washington, DC for $275,000 on a Thursday. By Sunday evening, she had accumulated 88 offers.
“The offers just kept coming,” she said. “I felt like Lucy with the chocolates. I’m thinking, ‘This is just out of control.'”
Of those 88 offers, 76 were all-cash, said Coleman, who works for RE/MAX Realty Centre. Some bidders did not even visit the property. She said 15 offers were made sight unseen.
The four-bedroom, 1,800 square-foot home sold for $460,000, nearly a 70% increase from the asking price. She said the winning bid was not the highest offer, but it was all-cash with no contingencies and it had paperwork in place.
“It was a lower priced property for the area and may have been an outlier,” she said. But even her other listings have typically been getting closer to 15 offers. “Several people came in wanting to be homeowners and do the repairs themselves. There is such low inventory out there and people feel like that is a way they can get into a home.”
The reason for this phenomenon is two reasons, low interest rates and record low inventory of available homes for sale. Because this record low inventory (homes for sale) prices have been continuing to rise because of lack of supply.
The median price of a home has risen 16% from last year, according to the National Association of Realtors, and they have increased even more in some regions of the country like the Northeast and West, which are both up 21% from last year, CNN Business stated.
Meanwhile, inventory has continued to linger at record lows. In February, the number of available homes for sale was down nearly 30% from a year ago.
“In the second half of this year we will see higher mortgage rates and, as they tick up, it will cool,” said Brad Dillman, chief economist at Cortland, a multifamily real estate development company.
“Homes will sit on the market longer, markets will accumulate more active listings. Home building will continue, and new homes will pile up a bit. Those will continue to moderate price appreciation,” he said.
But that does not mean homes will become that much more affordable for buyers.
“If you find the house you like and you can afford it, that house is not going to be around for long,” said Melissa Cohn, an executive mortgage banker with William Raveis Mortgage. “If you are comfortable you can buy it, you should proceed. Interest rates will go up. That is a certainty.”
She said that typically when rates go up, home prices go down — or at least stop rising so quickly. But not immediately and not everywhere. The housing market will ultimately cool, Cohn said. “But that doesn’t mean prices will drop 20%.”
Source: Newmax
