Today is May 4th . May the Fourth be with you!
Homebuyers in this market could use some good Jedi force when buying a home here in the Olympia area but what is stopping many homebuyers from becoming homeowners is they are getting the wrong information about the market. Today, I’d like to clear up some of this misinformation.
Here are the real-life conversations I’ve had with buyers lately about the market.
“I’m going to wait to buy until the market settles down.”
The fact is waiting could end up costing buyers more in housing prices and interest rates.
Homes prices are going up, not down. They are up on average over 20% from last year. Last spring, the median home price was $391,000; this spring it is over $470,000.
“I’m waiting for the bubble to burst.”
We are not in a bubble that is going to burst and then home prices will tumble down. The driver of our high prices is low inventory and high buyer demand. Risky lending and the subprime mortgage market was the main cause of the bubble burst in 2008 and we do not have that today.
“I’ll wait for better interest rates.”
Another challenge buyers are facing is rising interest rates. Buyers today are not only paying more for a home but also more in interest rates. To deal with inflation, rates are expected to continue to rise this year, not decrease.
I don’t necessarily see this dampening rising home prices nor competition. Of course, some buyers are getting priced out of the market and that will mean fewer buyers however the buyers who are in the market to buy a home do have lending options available to them. Remember the adjustable-rate mortgage? That’s coming back. And buyers are looking to move to more affordable counties and rural areas to save on housing costs.
“I don’t want to overpay for a house.”
There is a lot to unpack with this statement. The first question is what is the house really worth? If the listing agent says a house is worth $500,000, is that what it is worth? What about the appraiser and their evaluation? What do the sold comps say?
I can provide this information and as a former appraiser, I know how to make adjustments and come up with a value, however, the next question is what is the other buyer competition look like? This is the wild card that cannot be accounted for in determining value and/or what you should offer. What is another buyer willing to pay for a property? Are you willing to outbid them?
For my analytical buyers with their Excel spreadsheets, the buyer competition makes all of their analyses obsolete and can be very frustrating. It all boils down to what do you feel the value is? And it may be intrinsic value. It may not be value you can measure and rationalize. It just may be the house that fits your needs, has a good vibe, and is one of the few homes you can envision yourself living in. That is your value of the home.
The competing buyer is the one factor we can’t put a number on. There have been many homes my buyers have lost out on to the one buyer who submitted an astronomical offer, leaving the other buyers in the dust.
“Why did the seller underprice the home?”
This is a first. In every other market, buyers are saying the exact opposite: why is this priced so high?! But in this market, buyers know that an underpriced home will mean a wild bidding war and that does not make them very happy.
Sometimes pricing below the market is a listing strategy; other times, there is not enough data to come up with a list price.
In the last two weeks of April, agents were getting nervous that a shift in the market was happening because we saw fewer showings on our listings and fewer buyers competing for the same home. Listing agents probably were underpricing homes because we weren’t sure where the marketing was going. If you were looking to buy, the last two weeks of April was your time.
In looking at just my firm’s multiple offer count, the first week of April, 61% of our contracts had multiple offers. The week before Easter dropped to 45% and the week after Easter dropped even further to 23% but then in the last week, came back up to 61%. Spring break and the spring holidays seemed to have an impact on buyer activity.
So will there be another lull? Yes, and the next one will probably be mid-June with graduations and Father’s Day. Every year in June, we see lower buyer activity and I would expect the same this year. Buyer, don’t join the rest of the buyers and take this time off; be ready to jump in mid-June because you may not have to compete with a lot of other buyers!
“What do I have to do in order to get the seller to pick my offer?!”
Stick with the basics.
- Your agent will find out what terms are important to the seller and see if you can offer those terms.
- Have your financing in order.
- Provide proof of funds.
- Waive extraneous contingencies.
- Submit an organized, clean offer.
You do not need to write a love letter or offer a year’s worth of Nutella or give the seller a puppy. In the end, it will all work out. As Han Solo says, “let’s keep a little optimism here.”
If you are looking to make a move here to the Olympia area, give me a call and let’s chat. In the meantime, May the Facts be with you. Happy Star Wars Day!