My sentiments, too. It seems to settle down right as it gets hot. Then it takes off again as it cools down in this area. You may want to avoid the fray the next few weeks and deliberately shop off season. I always do awesome amounts of business in the late Fall for this exact reason.
Seller's Market! 40 Offers! Over-bidding!
Buyers, I'm sure you are thinking: "when did this happen?" Well, somewhat slowly over the past couple months. If you've been working with a real estate agent, they have probably been warning you, and you've probably ignored the warning. I'm just guessing!
Ok, lecture over! :)
So now what? You see a new listing and there are hundreds of offers on it before you can even schedule an appointment? Well, maybe not hundreds, but certainly a lot. We've seen this market before. It's the beginning of a curve and it's wise to know that. Often a buyer's market is followed by a seller's market, it's a cycle.
This past buyer's market was different, however. Much of the buyer's market inventory was short sales. This is unique because the sales prices and values were largely driven by the lenders and even the real estate agents. Typically the sellers did not set the list price at all, they were not getting any money out of the deal, so they did not really care.
I believe that this kept the market artificially low for quite a while. It's much easier for an agent to sell a $400,000 home than a $600,000 one. Equity sellers saw their neighbor's home listed for significantly less than they owed and stayed put. Gradually lenders geared up for the short sales and the approval price became more reasonable. Bank of America, Chase, Wells Fargo....they stopped accepting just any offer price that was sent to them. They also stopped relying on real estate agents' opinions of price (BPOs) and started ordering real appraisals.
The result is the prices did start to rise, or at least the SOLD prices did.
At this point, the buyers were out and looking for deals. The interest rates were low and as they saw the great opportunity to buy a nice home at a reasonable price. Additionally, the uncertainty in the stock market and economy urged investors to move money into the real estate market. Not so much the flippers, although they are back now, but long term investors who were planning to capitalize on the hot rental market and low vacancy rates; the short sale sellers need to live somewhere.
So with values beginning to rise, and more buyers coming into the market, we started to see equity sellers return to the market. Buyers who had become worn out by long short sale waits and extra fees, were happy to consider a traditional 30 day sale. They were also willing to pay more for them. And there you go......prices rose, equity sellers came back.
So where are we now? I see a few factors which indicate that the seller's market will start to slow down.
First, a lot of those 40 offers are still from all cash investors. These are savvy buyers and only interested in deals. When those dry up....prices rise....they will also. There might be flippers in the market riding the tide, but even those are careful not to play in a very hot market. Also, I hear from buyers that they are going to "take a break." They are tired of playing the bidding game. They don't see a significant increase of interest rates coming and so they feel they can wait. Finally, more and more sellers are coming onto the market every day. Those acting today are very smart....get in at the beginning. Just as we can't predict the bottom of a market, we can't predict the top either. More inventory will allow slow things down and as a result, hopefully a healthy market.
I'm working with several very serious buyers right now. Frustration is a daily event, but we are moving forward. I typically look for homes which have been on the market for a bit....30+ days. The new girl in school always gets the most attention. We find that these sellers are motivated and often any issues have been discovered and can be handled up front. They might have gone through a buyer and then had it fall out. It's not that they are necessarily lower priced than they were at the beginning, but we are also typically not in a bidding war either.
I suppose this was a bit of a history lesson, as I see it. But I also think it's important to understand where we've been so that we can understand where we are coming. I suppose this is why I'm a real estate junkie, I think about these things. But as a buyer, I would encourage you to stay optimistic and keep watching, the market will settle down.
The Fiddler Realty Team/eVantage Real Estate
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