Written by Sean Zelda
Web Content Specialist
CENTURY 21 AAA North
It’s been almost 10 years since the greatest recession since the turn of the new millennium left our nation in the wake of the most tremendous housing crash of modern times. But we’ve come a long way since then; in fact, it might be safe to say that the wreckage of that devastating collapse is squarely in the rear-view mirror. Some are even saying the market has done a complete 180.
Whatever words you use to describe the state of the nation then and now, one thing is clear – markets have bounced back in a big way, and confidence is through the roof. Homes are selling at record prices, and buyers are chomping at the bit to get a piece of the action, putting sellers in a very lucrative position.
The past two or three years, we have seen unsustainable levels of price appreciation as well as an inventory shortage, a commonplace recipe for record-low levels of homes for sale across the country. For buyers, this spells exhaustion, and there aren’t many cases where you won’t find buyers willing to make sacrifices just to get a foothold in the market.
You might plan on selling this year. Would it surprise you if we said it would be best to do so sooner rather than later? In fact, if you want to unload your home quickly and for maximum dollars, your window of opportunity may be tightening.
Check this out. According to a survey of over 2,000 adults conducted by a Harris Poll, 31% of respondents expect 2018 to be a better year for selling than 2017, and only 14% expect it to be worse. Ironically, given the great expectations, only 6% of respondents plan to sell this year.
Here’s why selling right now (ASAP) is a good, no, a GREAT idea.
Demand is high, supply is low
Real estate information companies like Realtor.com saw a HUGE spike in traffic on their websites on Dec. 26, with continued high rates of traffic through the first part of the New Year. The day after Christmas, buyers turned their attention away from the holiday and time with family and friends, and moved on to New Year’s Resolutions and what they hope to accomplish in 2018. And for many, that meant looking into buying a new home.
The home-buying season usually starts to heat up between March and June; however, right now buyers are already out looking for homes in droves, with the hope of beating out the competition before the season really gets hot. But these buyers are still falling victim to frustration and demoralization in dealing with the low inventory in most major markets, putting sellers at a huge advantage – right now.
There are simply more buyers than available homes. And it isn’t going to get better for a while.
Currently, we are in the hottest seller’s market in recent history. We’re seeing myriad bidding wars, which are driving up prices and offers beyond most sellers’ wildest dreams with very pro-seller terms, such as waiving appraisal contingency or forgoing repair requests.
And don’t forget about investors; many of them are cash buyers! They are snatching up homes in tight markets and keeping first-time homebuyers on the sidelines. But if you sell now as opposed to later, you stand a MUCH better shot at an all-cash offer that will be impossible to turn down.
But here’s the kicker, and it’s also the reason we’d like to give you for selling RIGHT NOW. Inventory levels are predicted to begin rising at the very end of 2018 (the first inventory gain since 2015), which means all of these benefits aren’t going to last, since housing gains are to come. So if you’ve been on the fence about selling, set the plan in motion now so you can reap the benefits of selling before inventory starts to climb and things start to level out.
Rates are low, which is drawing more buyers into the market
We may not quite be enjoying the rates of yesteryear, but by the industry standard, today’s 30-year mortgage rates, which are hovering just above 4%, are still pretty low. What this means is that “the gettin’ is still good” for buyers and consequently, for sellers looking to, well, sell! But why?
If you sell RIGHT NOW, rates are low. With lower rates, you will have more buyers clamoring to get in the game, which means more buyers competing for, say, YOUR home, which means bidding wars, which means you get higher offers, which means the endgame suggests your accepted offer will put more cash in your pocket. When all is said and done, you walk away feeling pretty good, having just made a lot more than you were expecting on your home.
But all will not be a Seller’s Utopia for long. We see rates rising when we look ahead; the Mortgage Bankers Association predicts 30-year fixed-rate mortgages will rise to 4.6 percent this year. Not only that, it expects rates to rise to 5 percent in 2019, and even 5.3 percent in 2020!
Now, it’s not all bad news. Rising interest rates are actually a sign of a good economy, but in the case of real estate, they can scoot some potential homebuyers out of the market. The current low rates serve as a catalyst for many potential homebuyers to get moving sooner rather than later, but the rising rates overall serve to decrease bidding wars, which is unwelcome news to you, the seller. Which is why NOW is the time to sell, before rates start to climb and while bidding wars are at a premium to sellers.
Home prices continue to increase
Home prices from coast to coast continue to climb, which means more money for you when you sell. Simple as that.
But gains in this regard are predicted to be a bit more moderate than in years past. Data suggests a 3.2% increase year over year, after 2015 saw a 5.5% year-over-year increase.
But the good news for you is you can list your house RIGHT NOW and you’ll stand to make a pretty good profit. But the longer you wait to list, the less you will make in the end. Just another reason to sell ASAP.
What is home equity? Equity is what your home is worth, based on the difference between your home’s value and the amount you still owe on your mortgage.
Just about 10 years ago, home values plummeted, sending mortgage after mortgage underwater. As discussed already, this tide has turned, and according to our research, only 8% of homes with a mortgage had negative equity at the beginning of 2016. If you want to get a better understanding of your own equity, talk to one of our agents and they will run a free comparative market analysis (CMA) to determine an approximate value for your home. It’s probably worth a lot more than you think!
That being said, if you find out you have at least 20% equity to use a down payment for your next home, the time is right to move on up to your next dream home.
We haven’t seen these types of equity gains in a while, and they won’t last forever. In fact, more people are in a great equity position than not, so if you’ve had even the slightest thought of selling, there’s no time like the present!
Renovations this year may not come back in full next year
Some of our research led us to a company’s analysis that most homeowners will focus on renovations and updates this year rather than selling. To those who are thinking of doing this, heed our warning: the time and energy you’re putting into the remodeling process may not come back to you when you sell (in full, at least).
Yes, you can see it now: new kitchen, new bathrooms, fresh coats of paint… but beware that your energies may only get you a percentage of what you put into them.
If the renovations are for you, and not to sell, more power to you!
But ultimately, the additional money you’re going to spend to make your home look amazing is going to be far less than the amount of money a buyer will pay. So when you decide to sell, it’ll turn out that the renovations put you in the red.
The key to taking full advantage of the seller’s market this year is not taking the tight inventory for granted. Buyers will definitely expect some effort on the part of the seller when they prep their property for sale. While buyers may be willing to overlook a dated kitchen, be careful about the clutter, the deferred maintenance, and the lack of curb appeal. These are the things that kill deals.
But if you decide to put your house on the market, take the process seriously, and you will most likely see substantial interest.
The economy is moving in the right direction
Right now, we are experiencing the perfect combination of low unemployment, growth in the stock market, and record levels of consumer confidence, which, when combined, come together to create the perfect recipe for high levels of homebuyer turnout. It is near unbelievable that the Fed is predicting unemployment dropping below 4% this year, while the stock market continues to experience surges and improvements, and people generally feel more confident in the economy.The economy is moving in the right direction
These facts have had a direct impact on the housing market: Existing-home sales rose 5.6% in November 2017 and reached their strongest pace in almost 11 years, according to the National Association of Realtors® (NAR).
The how and why of it is that incomes are increasing and a larger number of people are finding better and more stable jobs. People are ready to buy because they feel better about their finances than they have in a long time.
GOP tax legislation has really helped, too – it nearly doubles the standard deduction, which will cause fewer people to itemize, and the income effect of that is essentially that most people are getting a tax cut, which has helped buyer demand.
How does this all translate to you selling now? Combining these factors means more buyers on the prowess for homes with more money in their pockets to shell out on a home for sale – possibly YOURS! And like we mentioned earlier, with more buyers in the market, you will have more people competing for your home and you will sign a deal with the highest and best offer!
Millennials are becoming the homebuyers
Millennials used to be on the receiving end of all our jokes! But it’s high time we start taking them and their buying power more seriously. This generation is on the rise and planning their future. A future filled with spouses, kids and the American Dream of home ownership.
We published an infographic last year poking fun at millennials’ inability to afford a home as a result of student loan debt, rising interest rates, and high home prices. And don’t get us started on the $4 coffees and “avocado toast”! But now, conditions are FINALLY perfect for millennials to take the dive into home ownership.
Experts predict that millennials will make up a critical part of the buyer pool over the coming year: Millennials could account for 43% of homebuyers taking out a mortgage in 2018 (a 3% year-over-year increase). That’s a huge chunk!
As people move into their 30s, they’re looking to go from renting to owning, and it’s looking like that trend will continue even more this year.
Strike while the iron is HOT
Our agents are working in your market every day. They have seen the hordes of buyers streaming through every new listing that pops up. There are literally lines at the door to view a home on its first day on the market. The bidding wars are at full-tilt on almost every home, no matter what the condition or the amount of updates. Homes that should, under normal conditions, sit on the market for months, are selling in days. Bids are going over asking price in the double digits. It’s a feeding frenzy out there. There really is no better time than the present to sell!
Real estate, historically, is a solid investment. However, it is cyclical. We have periods of seller’s markets, which then turn into buyers markets. Timing is everything. You might want to hold out, thinking the good times will keep rolling. The data that has been collected throughout the decades tells us, they won’t. The folks who study these cycles have made their predictions and they are saying now is the time to sell. Time to place your bets and cash in on one of the greatest seller’s markets we’ve ever seen. Otherwise, it could take years to see this type of return on your investment. You decide. We’re here if you need us, ready to maximize your profits and find you your next dream home.