Experts predicted a hot summer market as more buyers began to return to the market, even with historic lows in inventory. Last month, eager buyers acted fast to lock in low-interest rates and houses were rushing off the market. HousingWire found that “the percentage of newly listed homes to accept an offer within 14 days increased from 42% in May to 47% in June.” In some markets, like Columbus and Kansas City, homes made pending status in only four to six days.
As of July, mortgage rates hit another historic low, but buyer applications declined 6 percent weekly. However, the biggest difference was the16 percent rise year-over-year making that number half of what it was the previous week at 33 percent. This could be because of the on-again-off-again uncertainties of the surrounding pandemic, or from the lack of affordable homes available for buyers. Existing home sales are expected to decline 15 percent for the year.
Housing prices did flatten or have remained stable in most markets and experts predicted only a one percent gain for this year. As the year continues, others are saying prices will decline if the slow economic recovery continues. With so few homes currently available prices may get higher sooner, making the urge to buy now pinnacle.
So if buyers want more inventory choices and homes are flying off the market, why aren’t sellers rushing to list their homes?
Forbes reached out to market experts to find out what needs to happen to get more sellers in the market. The need for new inventory is a top hindrance, along with the status of economic reopening, and the luring health concerns.
Sellers will also have to look for new homes, and some are afraid they won’t find one quick enough after they sell.
“The challenge is that sellers are also buyers. About two-thirds of all homebuyers are existing homeowners. What will it take for more existing homeowner buyers to come back to the market? Ironically, more supply! Housing is not like most goods. It has to be “better” than the one the potential buyer currently owns now, and when the supply dwindles, it becomes harder to find a better house and easier to just refinance and do a renovation instead. This fear of not being able to find something better, the fact that selling and moving is, let’s face it, a pain and costly, combined with the fact that one can refinance into an amazingly low rate. Why move?”- Mark Flemming, Chief Economist at First American Financial Corporation
Some sellers are still reluctant and would rather wait out the pandemic.
“Lower coronavirus transmission rates within a community will ease some health concerns of sellers, and continual reopening of the economy will ease concerns about job losses as well. The longer the pandemic keeps businesses closed, the more cautious sellers will be about their own financial situation. But it’s also an issue of lack of inventory, which makes this a bit of a chicken or the egg issue. Move-up buyers need to find another home before they decide to list, but there aren’t enough homes for sale as sellers aren’t listing as much (relative to buyers making offers).” Taylor Marr, lead economist at Redfin
“A lot of boomers were already sitting tight in their homes, and now it’s understandable that people would delay moving into nursing homes. The best hope for a source of new listings might be builders, who seem to be recovering confidence after pressing pause on construction during shutdowns this spring.” – Jeff Tucker, Zillow economist
Last month, new home applications saw a 54 percent increase, and interest in newly constructed homes continues to rise. Builder sentiment spiked 14 points to 72, a pre-corona high, according to the National Association of Home Builders. This is a good sign for homebuilders but now there is a struggle to keep up after two months of non-activity and high supply costs.
Others simply won’t budge on reducing prices and will want to sell at the peak price.
“One absolutely clear beneficiary of the supply and demand imbalance in the market today will be price appreciation. We expect it to remain strong, even accelerate in many markets this summer. You can’t buy what’s not for sale. And buyers will likely feel pressure to escalate their bids to win the “bidding war” on homes that are for sale.”- Mark Flemming
Is there an opportunity for sellers in the current market?
With inventory being so low, sellers could receive multiple offers on their home. Listings placed on the market could stand out as buyers seek limited options. With so many economic changes, employment, and relocations, some buyers have no choice but to move. As buyers lock in low rates, the incentive to buy now is much higher versus not knowing what can happen in a month, week, or even a day.
Typically, the spring and summer months favor a seller’s market. Nicer weather encourages people to get out and look at homes. Natural sunlight and lush landscaping help with appealing photography and marketing. Of course, with mandated restrictions on in-person viewings, this may not factor in as significantly. With the rise in virtual and 3D home tours, the same concepts can help with the quality of visuals and overall allure. The winter months don’t always have this advantage.
At this point, no one truly knows how long the virus will persist, and when the economy will recover fully. Demand is expected to ease up come fall and winter, but now may be a great time to sell while deal activity remains mobile.
Consider taking a close look at your local market to get a clearer idea of where you stand. It’s always a good idea to reach out to a professional real estate agent or mortgage broker with specific questions. Call our office today and we’ll be happy to help guide you in making the best decision for your current buying or selling situation. We look forward to speaking with you.
This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc. with information from resources like CNBC, Forbes, and HousingWire.