This Is The Year To Sell Your Home
Patience seems to have paid off for those who’ve postponed putting their homes on the market until this year, real estate analysts say. They stand to pocket the kind of profits not seen since the housing boom.
Prices surged more than 10% in many markets last year, bidding wars are once again common, and homes are routinely going for over the asking price in some cities. These trends make it seem like a return to the go-go days of the housing boom.
Single-family homes were selling at an average price of $244,300 at the beginning of the year, up 7.2% from a year prior and the highest price since August 2008, according to the latest data from the National Association of Realtors. “All in all, it’s a good time for people to put their home up for sale,” says Celia Chen, senior director with Moody’s Analytics.
The turnaround comes roughly seven years after the housing bust and amid signs that the economic recovery is picking up. As the unemployment rate drops and consumer confidence increases, more buyers are entering the housing market and sellers are finding that they have more leverage in negotiating the going prices of their homes.
Fueling this seller’s market are several factors that have unexpectedly converged: For-sale listings are limited, which is pushing prices up at the same time that mortgage rates are rising. That’s created a sense of urgency among buyers, many of whom fear that the door to affordable real estate in their market may be closing.
In fact, data suggests that buyers are snatching up properties faster now. Homes in November 2014 were selling 11% faster than they were a year prior, according to the latest data from Realtor.com, which tracks for-sale listings. In several cities, that rate is even higher: Homes were selling 20% faster in New York and Miami, for instance, and 18% faster in Chicago and Dallas.
To be sure, the recovery to date hasn’t been enough to get every homeowner out of the red. In the fourth quarter of 2014, according to real-estate analytics firm CoreLogic, nearly 6.4 million homes were underwater, meaning borrowers’ mortgages were greater than value of their homes. These homeowners for the most part cannot sell their home unless their lender agrees to a short sale, in which the home is sold for less than the debt owed on it.
Still, homeowners with enough equity can benefit from current housing conditions. Inventory remains limited, which allows sellers to ask for higher prices. There were just shy of 2.1 million existing homes for sale in the fourth quarter of 2014, which equals a 5.1-month supply, according to the latest data from the NAR, a figure indicative of a seller’s market. A balanced market, in contrast, would have about six to 6.5 months of supply.
Of course, a buyer’s problem is often a seller’s upside, which might incline homeowners to hold off selling even longer for the possibility of even higher prices. While sales prices could rise, waiting comes with several risks, which could slow or even reverse recent price gains. Should the economic recovery — in particular, job growth — stall, home sales and prices could drop. And if mortgage rates spike suddenly by one full percentage point or more, demand could dampen.
But the biggest risk is from the supply side. It’s expected that the number of for-sale homes will rise this year, with much of the extra supply coming from home builders. Moody’s Analytics projects that construction will begin on 1.43 million new homes this year, up from slightly under 1 million that were expected for last year. This event alone could stall price gains.
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Beyond the fourth quarter of 2014, more homes are expected to hit the market. Since the recession, investment firms, including private-equity firms and hedge funds, have been purchasing large numbers of single-family homes and turning them into rentals. Some analysts say that the supply-demand imbalance that has helped create this seller’s market is largely due to this trend. Those companies will likely put a large number of those properties for sale at the same time in a few years — which would put downward price pressure on nearby listings.