I have been meeting with many home sellers in the last few weeks and the story that is being told remains the same.
I want to sell my home, but I have been searching the market, and I can't find anything I would want to purchase.
We have seen the pendulum swing the opposite way from what we've seen in past years. We literally have no homes to sell! Most of the homes that are currently on the market have been on and off for some time now. They are also over priced and that is why they continue to get passed up. The new homes that come on the market that are priced right are going in 10 days or less. This is telling us that we have a problem with our local housing market.
I feel like this is like a game of poker. Everyone has their game face on and everyone is waiting for the other to make the first move. We're at a stalemate and unless someone steps up and starts the ball rolling, this will continue through the Winter and maybe into Spring. Home buyers are out and in full force, but I have noticed they are starting to get frustrated. Some have even given up because they can't find what they are looking for. They've exhausted everything that is currently listed and even going as far as looking in area's they normally wouldn't look.
The media hasn't helped our cause either. They really don't understand how to decipher the data they are looking at. They go on tv and tell you the market is slowing down, but fail to explain why. It's more than likely because they don't know the answer to that question and they don't bother to ask the experts. The truth is it boils down to good old fashioned "supply and demand". That's it!
Pierce County only has about 2 months worth of inventory. In a normal market, we should see 6-7 months worth of inventory. The misconceptions continue to be slung my way and I love to talk about this with anyone who will listen, the more you know, the better of you'll be. Sometimes hearing market stats can be boring and lame, but it is a huge part of buying and selling a home.
The slow down is because of two reasons; the first reason is we are heading into Fall. We always see a slow down the second all the little kiddo's go back to school. It's a national trend and it happens every year regardless of supply and demand. The second reason is the more important reason and this is what the media has been reporting incorrectly. The reason the market is slowing down is because we have buyers who are able to purchase, but we don't have enough homes for them to do so. Home buyers today are more picky than ever and they are very savvy when it comes to knowing the market. If you have an overpriced home, they know it! If your home isn't staged or clean enough, they will pass it by.
This doesn't normally happen in a supply and demand environment because usually the demand that occurs will take over and people will buy just about anything. This is not so much the case anymore. Home buyers will do extensive research online before even picking up the phone to contact a real estate broker. That's why I mention the poker game and the stalemate. It's something unlike we've ever seen before and I think it's causing more confusion than ever.
Now you know the reason for the hold up, lets look a little deeper into why and how we can make some changes in our housing market. I'm also going to tell you why "NOW" is the best time to sell and how we will overcome some of these challenges so everyone has a chance to buy or sell a home in the near future.
Interest rates continue to be low, but this will change come the end of December. The feds have already announced they will have to raise interest rates across the board at the end of December. This means they will begin to go up and a steady pace. The predictions from key economists is the interest rates will be close to 5% by the end of 3rd quarter of 2016. Currently they are in the low 4's. This is something that some forget will effect their purchase power. If the interest rate goes up enough, you could price yourself out of the market. This also effects sellers because if you are thinking of selling your home and then purchasing another, this might effect things for you too. It also effects sellers because interest rates also impact the amount of buyers who will have an opportunity to look and purchase your homes.
THIS IS WHY IT'S IMPORTANT TO BUY OR SELL NOW IF YOU ARE ABLE TO DO SO!
I had a client a few years ago tell me they had purchased one of their homes in 2007 which was right at the peak and before everything came crashing down. They were only able to purchase a home worth $250,000 or less due to the fact that the interest rate at the time was 7%. This same couple had to relocate 1 year later and moved across the country. They kept that home and decided to rent it out since they didn't have the means to sell due to the fact that they were now upside down due to the crash.
One year later they wanted to purchase a home in their new hometown. They thought for sure they wouldn't be able to get qualified or approved for enough to buy in the area they lived in. It was an expensive area and they knew they were going to have to rent forever! They spoke to some friends of their's and decided that they should talk to a loan officer just to see if they could make something work.
They were surprised to find out that they could purchase a home and because the interest rate was so low at the time (under 4%) they were able to qualify to purchase up to a $300,000 home while still owning the other home. If it wasn't for the lower interest rates they would have never been able to buy at that time!
All the lenders I work with are willing to help you figure this out and even if you can't purchase tomorrow, they will help you figure out how to get to your goal.
Inventory seems to be our biggest challenge right now above any other problem. Like I discussed before, this is why we all have our poker faces on. I thought about getting a T-shirt made that says, "I'm waiting until 2016". This phrase has been said time and time again to me this year at most of my listing appointments. The funniest part about it is, the reason remains the same even though none of these people even know each other.
"I'm waiting until 2016 because I think the home prices will be higher and there will be more homes for me to choose from on the market."
lets talk about why there are so many things wrong with this statement. If you simply look at this from a "supply and demand" perspective this doesn't make sense. If there is more inventory (supply) then home prices will either even out or go down. It would depend on how much supply we have. You will more than likely get more for your home now, rather than waiting until 2016.
You will more than likely have more homes to choose from to purchase, but you also have to remember the interest rates will be much higher too. You will more than likely be able to afford more home now, then if you wait until 2016.
I'm sure you are all tired of hearing the term "millennials", but it is very important to know why you should care and pay attention. Millennials currently make up the largest age demographic in our country right now. They have officially surpassed the "baby boomers" and they are the one's who are buying homes. The largest age group are 22 year olds. I have worked with many of them this year and they have ranged from 20-25 years old. They are smart and more savvy then ever before.
For sellers this is HUGE to know this information. You have to know who your buyer is and how to maximize your home to attract them to your home instead of your neighbors. They are picky and refuse to settle for anything less than what they want. If you are planning on selling your home, you must have a real estate broker who understands this demographic and to know how to market your home so the millennials will want to purchase.
Some examples are you must have an updated, ready to move in, home. If your home doesn't offer that you will have a hard time selling to this demographic and you will more than likely have to sell your home for much less. They are not interested in doing DIY or fixing up any home for that matter. If you haven't done any updating on your home since you owned it, you might want to think of how this could impact your sale and how much you will get for your home.
Sellers must also provide the most marketing available for their homes once they decide to sell. Professional photos and videos are great marketing tools which helps home buyers to see your home in it's best light. If your real estate broker isn't offering this to you, maybe you should re-think your decision.
The final concern for our housing market is the effect of high rents. The media has been all over this lately as well and in some places, like Seattle, there is talk of placing rent caps due to the lack of affordability. We aren't seeing that here in Pierce and Kitsap Counties, but it doesn't mean it couldn't happen in the near future.
Our rents are the highest they've ever been and that demand remains high. We live and work in an area that has a huge military presence. There is a need for affordable rents for these individuals. Some of opted to purchase instead because it has become more affordable to buy. When and if they get deployed they simply rent out their homes and use a property manager to help them manage it. This is very smart, but not the best option for everyone.
My rental clients tell me they would love to buy a home, but they don't think they can afford to buy. Nine times out of ten, when I have them meet with my lenders they are surprised that they actually CAN buy a home. Most of my renters have told me they are afraid to talk to a real estate broker or a loan officer. When I ask why, they usually say, "I'm afraid of them telling me no". I don't want anyone to have this feeling and that is why I have built a network of loan officer's who will not just tell you "no", but who will find out what your goals are and help you make that goal a reality.
We all know that our housing market can change very quickly and it's important to stay on top of it all even if you aren't planning on buying or selling anytime soon. If you have thought about buying or selling, lets talk! Waiting may not be your friend and from what I've heard and seen in the current housing market, my gut is telling me waiting could be costly for some. Of course if I had a crystal ball, I would be able to tell you without certainty, what will happen in 2016. Since I don't, I can only go with what I know and my gut.
Contact me to talk about this is more detail!