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Have you wanted to move, but have been holding off because you need to sell your house in order to buy a new one? It’s easy to understand the hesitation — the past five years have been tough on home sellers. With an oversupply of listings and declining prices, it has been a true “buyer’s market.” If this describes your situation, then you need to know there’s been a dramatic change in the real estate market, one that favors sellers, and especially sellers who’ve been waiting to buy a new home.
Many homebuyers have entered the market in the past twelve months, and some are frustrated by what they consider to be a lack of good choices. There has been a noticeable decline in the number of houses for sale and more buyers are discovering it harder than they thought it would be to find a suitable home. As a result, prices are rising, and yes, even multiple offers are becoming more common. This presents a tremendous opportunity for those who have been waiting to sell their present home. I believe if ever there were a time to sell a home within the past five years, it’s now!
Why This Change?
Though it may seem like this change in the market occurred overnight, in reality, the conditions have been building for this emergence of serious homebuyers. Here’s why:
Pent up demand
During the economic downturn many people held off on creating a new household, even though their life circumstances would have normally prompted a move. The recession and its after-effects seemed to last forever, yet our lives went on. People married, others divorced. Babies were born every day and kids started school. Generation Y graduated college. Boomers retired. Under normal economic conditions, these life events would have initiated moves. But the economy and declining real estate market made many people hesitant to invest in housing. Well, now the economy is forging ahead — it’s been growing (more slowly than we would have liked) since 2009. The real estate market hit bottom in 2011 and has been trending upward ever since. Today, most people believe “this is real,” and consumer confidence continues to rise.
Our particular market area did not experience foreclosures and distressed sales to a great extent, so these were much less an issue here than in other parts of the country. Nevertheless, strong foreclosure activity elsewhere put downward pressure on prices in our real estate market. Now, many sellers who were under water in their mortgage payments have refinanced and rising home prices are helping many homeowners regain lost equity. As a result, there are fewer foreclosures in the pipeline. This is great news for those property owners and our real estate market.
During and after the recession, economic uncertainty caused many people to rent rather than buy. The demand for rentals increased, so rental rates rose. Now, many renters believe buying costs less than renting, and they see the long-term value of owning a home.
Take advantage of the change, and sell now
You might ask, if prices are going up, shouldn’t I wait to sell my home? Prices did bottom out in 2011 and they are now rising, but the economists I trust aren’t predicting appreciation by leaps and bounds. Rather, they expect a slow and steady price increase — perhaps 3% a year. If you wait, any additional appreciation you may gain on the sale of your home is likely to be wiped out with higher mortgage rates when you do buy a new home. The Federal Reserve Bank is hinting that these days of extraordinarily low interest rates have already hit bottom. Why take the risk of waiting? Buyers are ready to buy now. And when you think about it, isn’t it about time to move to a new home that you really want, one that truly meets your current life situation and desires?
If you are “buying up” then you get the best of both worlds. When you look for the perfect new home, there will be a greater number of choices available to you as you go higher in price range. And as a homebuyer, you also get the same benefits that the buyers of your house achieve. The combination of current home prices and incredibly low interest rates means that affordability is high. As a consumer, you have never had such tremendous real estate buying power.
Words of Caution
This change in the market is good news for sellers, but it doesn’t mean that pricing homes is a free-for-all. There are two important reasons houses for sale must be priced correctly. First, today’s buyers view their purchase as a long-term investment. They are buying for the emotional and personal benefits of homeownership, and are not being influenced by the notion of quick appreciation. Second, the appraisal process required for mortgages tends to lag behind the market. Appraisers are required to use comparable properties that have already settled. In a seller’s market where demand is causing prices to rise, the settled data may lag behind the market.
If you’d like to know how much your home is worth in today’s seller’s market, contact your Prudential Fox & Roach sales associate now. And, in preparation for buying that new home you’ve waited for, have your Trident mortgage consultant pre-qualify you for a new mortgage. Don’t wait any longer!
Lawrence F. Flick, IV
Chairman and Chief Executive Officer
Prudential Fox & Roach, Realtors® and The Trident Group
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