Tight Inventory is the biggest obstacle we have in this Spring housing market! A normal real estate market has between a six-to-seven month supply of homes available. In West Michigan 2014 has our monthly supply of available homes for sale at about 4.5 months. This years inventory levels continue to run well below the average, with March 2014 listings being 26.5% less than last year. Overall home listing totals throughout 2014 so far are running 27.4% lower than the volume of 2013 in the first quarter. In fact, inventory levels are recorded as the lowest since 2002 according to data available from the Grand Rapids Association of Realtors monthly marketing update.
One of the reasons that inventory is lower is because there has been a shift in the types of homes that have been selling. More conventional sale's as opposed to distressed properties were reported. In fact, conventional sales were up last year by 12%. This may be good for seller's as the principal of supply and demand bring sellers a higher value for their home, but it slows the overall market as prospective buyers can't find the homes that they are looking for. Hence, homes are not being listed! Homeowners are putting off their desire to move until there are more homes to choose from.
Ultra-low interest rates are also playing a role in the short supply, as homeowners who recently refinanced their mortgages to lower rates are now reluctant to sell. The good news is that folks are still looking to buy and sell and they both need to plan accordingly. Here are a few tips for negotiating a successful outcome in this challenging market.
Sellers: With more buyers looking and less inventory you may end up with multiple offers or a biding war. Of course this isn't a certainty, but if your home is well-cared for, in a desirable area and you have priced it right....you may be in for some excitement. Getting top dollar for your home is always important, but in a seller's market, you can expect to see a higher selling price. One caution however, your home still needs to appraise for the asking price or above, so getting an appraisal ahead of time or an honest CMA may save some disappointment on the back end of any deal. Good news or bad news, the bottom line is that if you have prepared your home to sell and have priced it right it may sell fast! Sellers need to have a game plan if this happens. It could mean you will need to find a month to month rental, a possible move-in with family or a vacation rental until you can make your next permenant move. These arrangements should be investigated and communicated before putting the sign in the yard. Lastly, when it comes to negotiation on the terms of sale – from selling contingent upon your own home purchase to letting minor issues slide on a home inspection. If you have more than one buyer knocking at your door, you’re in a position to take the best offer available to you.
Buyers: In any market but especially now buyers need to get prequalified for a mortgage. You will need to know how much a lender will loan to you for your new home purchase. Don't waste valuable time at the wrong price point. With low inventory very often there may be only a few homes in your price range. If you can expand your search to other neighborhoods or areas this will give you many more choices in homes. Time is of the essence when searching and pre-viewing homes in a challenging market. When your realtor sends you listing, be sure to take a look at the listing quickly, do a drive-by and have your realtor set up an appointment to go through. Nice homes go quickly and (as you will find out) they may be gone before lunch! Be pro-active as a buyer and surf the web sites or drive around areas that interest you. You may find a FSBO that you would like the realtor to call on...that is allowed. Be ready to make a decision if you find a home that meets your needs. Make some decisions before hand about the "Must have's" and "Wants" for your new home. In any market the possibility of finding a home with everything that is on your list is hard to do. In a market with limited inventory it is almost impossible! Make competitive offers and please in this selling environment don't start with a low ball offer unless it has been on the market for 365 days. In this market (if the home is priced correctly) sellers are getting 95% of their listing price. In many cases you will only get one chance to write an offer. It's not like the old days when the seller's and buyer's go back and forth for a week....not in todays market. When you write that offer in this challenging market try and keep contingencies to a minimum. Asking sellers for posession at closing, lengthly inspections or heaven forbid that you need to sell your home before you can get a loan to purhase theirs are no-no's in this market. Lastly, don't get caught up in the maddness. If you are not sure about a home, or not ready to make a decision than by all means step away. The last thing you need to do is write an offer that is accepted and then have buyers remorse. This can be a costly mistake.