You are starting to hear it all the time. There just aren’t any houses on the market and the ones that go on the market are snapped up almost immediately. Homebuyers are bidding thousands of dollars of the asking price and home sellers can pick and choose the contracts that work best for them. It is the very definition of a “seller’s market” out there.
So, what, exactly is a “seller’s market?”
It’s a term that can certainly be overused. Agents and brokers have been known to use it to add urgency for their clients to sell their homes. “You need to sell your house now, while the market is hot!” “You should move fast to take advantage of this seller’s market.” When times are hard it can be a call to action that gets more houses on the market and more fees in the agent’s pocket.
Realistically, however, seller’s markets do exist and we are definitely going through one at this point in history.
Simply put, when the supply of houses is significantly lower than the demand by homebuyers, you have a seller’s market. It becomes increasingly difficult for buyers to find houses to purchase and gives rise to more competition between them. You will see bidding wars and sellers will get 3 or more offers on their home in just a couple of days.
Buyers have to submit very attractive offers if they want a house. Attractive offers translate into fewer contingencies in contracts, fewer repairs you need to make, and more cash offers. Ultimately, however, it means that they will pay a higher price paid if they want to buy your house.
If you remember your high school economics – Low Supply + High Demand = You could be in the best position to sell your house.
Not only are house prices rising, but, with fewer homes for sale, any house that goes on the market automatically receives a lot of attention. It’s not unusual for a house to start receiving offers just hours after it is listed.
If you combine this with record-low mortgage rates, interest rates, and the uniqueness of the last 18 months and you get buyers that are starting to look at things differently when thinking about where to buy a house. With people working from home, they can look at houses in areas that they might have skipped over before. For a buyer competing for properties, any house anywhere is fair game!
According to the latest information from the National Association of Realtors (NAR), The current supply of houses is alarmingly low. There is less than a 2-month supply of homes on the market. Historically, a 6-month supply is required for what is termed a normal or neutral real estate market.
If you are ready to sell your house then, by all means, sell your house. The current market offers you an amazing opportunity to make that move. You will, most likely sell your house pretty quickly, and get a great price for it. But remember, most home sellers are also home buyers.
You are still going to need a place to live. If you haven’t planned the market well, you are going to quickly change from a seller to a buyer. All of those advantages you had as a seller will work against you when you are looking to purchase your next house.
You are going to find yourself making those higher offers as fast as you can to beat out the other buyers. This is when the seller’s market that was enticing just weeks before, becomes a lot harder to deal with.
Like any healthy market, the real estate market is self-correcting. Experts are saying that we could be approaching less of a seller’s market and going more neutral by the end of 2021 or early 2022.
In the end, it is up to you. You are going to have to make a tough decision. The allure of the current market has to be balanced with what your ultimate goals are. It can be hard to pass up what you think of as easy money now for a better deal on a new home in a few months.
The urge to sell now and move might just put you in the buyer’s position before you or the market is ready. The world might be touting the advantages of a historic “seller’s market”, but that does not mean that it is necessarily the right time for you to sell your house.