You’ve heard all the buzz words—“picking up,” “stabilizing,” “back to normal.” Really?
How much of this is reality and how much is just wishful thinking? For those who have been slogging through the doldrums for the past five years, we hope this optimism is justified.
True, the housing market is slowly crawling back in some sections of the country. Foreclosures and short sales have receded. At least the market is no longer likely to implode in a mushroom cloud, but words like “normal” and “stable” may be a bit premature. Let’s not grow complacent when a more proactive approach may be to our advantage. What should you be telling your clients right now? Here are four key market factors that should influence your communication and their decision-making:
- All trends are local
- Inventory is down
- Appraisals are an issue
- Interest rates are low
- All trends are local. Looking at national statistics doesn’t tell you much about what’s happening in your own back yard. For example, home sales in Medford, Oregon are projected to increase 9.7% during 2013. In Miami and several California cities, they are projected to decrease 9-10%. North Dakota is having a boom, while Nevada is still a bust. This means you need to stay on top of exactly what is going on in your specific neighborhood. Even county sales figures don’t tell the whole story. Urban areas may be languishing while rural and suburban properties are trending up. To use a high-tech term, be hyperlocal.
- Inventory is down. About the only things trending down in many areas are inventory and sellers. With the limited supply of inventory, it’s common for sellers to receive multiple offers, especially on homes priced under $500,000. In some cases, sellers are pricing homes slightly under market in order to generate multiple offers for over the asking price. This means you and your buyers will have to act quickly and keep the transaction moving once it starts.
When values begin to climb, sellers who have some equity and have been sitting on the fence will begin to test the market. Many sellers appear to be playing the waiting game hoping prices will continue to go up. With inventory down, having fewer sellers has led to houses spending an average of 40 days less on the market than they did a year ago. This should be an incentive to your prospective sellers.
- Appraisals are an issue. If a home is in selling condition and priced right, there will probably be multiple offers. But some Realtors say that appraisals are affecting their transactions, mostly in a bad way. Appraisers in many areas have not yet recognized the sharp increase in buyer activity, coupled with limited inventory. This means you need to cultivate good relationships with appraisers in your community. Keep lines of communication open and provide them with plenty of data.
- Interest rates are low. Only a crystal-ball-gazer will tell you how long this particular factor will remain, but conventional wisdom thinks it’s not indefinite. While it does last, however, you need to be encouraging your clients, from first-time homebuyers to savvy investors, to lock in those rates for the long term. Know which brokers and financial institutions are the best match for different types of buyers.
We don’t need to tell you that we’re in an up-and-down business. We hope there will be no more “bubbles,” but we will always experience gains for a time and then immediately get hit with losses that could be as much as 20 to 30 percent. While gains have historically outperformed losses, the people who hang on to their properties during these cycles and don’t jump too fast either way are those who win in the long run.