There’s been a lot of press across the nation regarding the low inventory levels in housing markets. Here’s a story from KING5 News about our own low inventory in the Greater Seattle/Eastside region. A by-product of a low inventory market are multiple offer situations. Our office has personally witnessed how much multiple offers are a market reality— we’re seeing it occur in about 50% of our office’s transactions. There’s also been much press about how buyers and their agents are approaching multiple offer transactions, like including seller “love letters” with their offer to create an emotional connection. Yet with all the press, and the conversations it’s generating, sellers are still hanging back.
I’m curious as to why sellers are waiting to sell. Is it a home’s lost equity? Is it the hope that prices will continue to rise? Prices will most likely continue to rise, however returning to the equity boom of the 2006 market will still take years. Take a moment to read this Keeping Current Matters blog post about home value. In the post, both Barclays’ U.S. residential credit strategy team and the analytics firm Fiserv are quoted. Their projections for the housing price rebound to reach 2006 levels is not until the early 2020s.
Is timing more of a concern for sellers? Spring time is often viewed as the best time to list a home. Again, the Keeping Current Matters blog put together a poignant post outlining why waiting to list may not make sense in our current market. Here’s the breakdown of the 5 reasons you should list now, per KCM Blog:
1.) Demand Is High
2.) Supply Is Low
3.) New Construction Is Coming Back
4.) Interest Rates Are Projected to Inch Up
5.) Timelines Will Be Shorter
The interest rate component is especially noteworthy, since most sellers will turn around and be buyers of a new home. Jennifer Burton, from Windermere Mortgage Services, sends out a weekly email with the current rates and articles pertaining to the real estate mortgage industry. In the week ending on 2/8/13, conventional mortgage rates were approximately the following: Conventional 30 year Fixed up to $417,000 3.5%-3.75%; Conventional 15 year Fixed 2.75%-2.875%; Conventional 30 year Fixed High Balance up to $506k 3.625%-4%; Jumbo and One Step Construction 30 year Fixed 4.25%-4.5%. All of those rates have shown slight increases in recent weeks. As mortgage rates start to inch up, the amount of home that can be purchased with the loan you qualify for goes down.
Take a look at this rate and buying power chart, also provided by Jennifer Burton. The chart illustrates how much more of a house a buyer can afford at lower interest rates. For example, if a buyer qualifies for an $800,000 loan at a 4% interest rate, at 5% that same buyer qualifies for $711,409. At 6%, that same buyer is now down to a $636,977 loan. It’s amazing how small changes in the interest rate impact how much of a home buyers can qualify for. Those who go to market now will be attractive to a larger pool of buyers, due to the favorable interest rates. Couple that with today’s low inventory levels, and the prospect of selling quickly could definitely be a reality. Sellers who will turn around and make a purchase then may have a better opportunity to achieve their own housing goals at a more affordable price.
Now it’s your turn sellers — what are you waiting for? Use the comment section below to share why you are choosing to wait to list your home.