House Prices in a Competitive Market
And you may be thinking “Yay!” or at least “Whew.” You know you’re likely to have more interested buyers, better offers, and a quicker trip to contract than you’d have otherwise. But along with that good news comes the need to manage your expectations by understanding what determines house prices and home sales. Factors include the right real estate agent, local market conditions, buyer preferences, seasonality, and mortgage rates versus inventory.
Work with the Right Real Estate Agent to Sell Your Home
What is going on in the U.S. as a whole is different than what’s going on in Austin, Texas. And both are different than what’s going on in your neighborhood. You might hear that it’s a strong seller’s market, but your home may be in a micro buyer’s market.
Research your market on your own, then interview real estate professionals to find the best person to work with. Sellers should approach working with an agent as though they’re forming a team. You will be working together to create a plan together on how to maximize home pricing.
Consider Local Market Conditions that Affect House Prices
Sometimes an agent will recommend listing at high price because of the area’s lack of inventory and extremely low days on market. Sometimes home improvements are needed to maximize the price. Sometimes it is necessary to do some updates to appeal to more buyers. The 1950s tile in a bathroom may not appeal to many buyers. Sometimes reglazing a grungy tub or replacing faucets or light fixtures can make a big difference.
Think about Buyer Preferences that May Affect Your Home Pricing
In addition to home condition, other factors, including buyer preferences, affect price. Being located on a busy street, for instance, may deter some buyers.
Put yourself in the buyers’ shoes and what they may want in the home. For instance, many buyers are home schooling right now. That is influencing which features buyers want in a home in the current market.
Know that Seasonality May Be a Factor
Seasonality has historically been a factor, but 2020 was an exception, when strong home sales extended into late fall and early winter. Existing-home sales in November were up almost 26%, and sales prices nearly 15% from the previous year, according to the National Association of REALTORS®. Transactions and house prices nationwide traditionally trend up in the summer, when home shopping activity is high. They slow in the winter, when demand wanes. Demand also correlates with Americans’ higher mobility rates in the summer, when school is out. However, seasonality is also regional, with markets in the Northeast and Midwest peaking more significantly in the summer than the South and West, NAR reports.
Weigh Mortgage Rates Against Inventory
Low interest rates can of course make purchasing a home more affordable for buyers. However, the lack of homes on the market has created stiff competition among buyers. In fact, it often puts them in bidding wars, nullifying the benefit of the low rates. Record low interest rates have increased home buyers’ purchasing power, but higher home prices have cancelled out the effect.
In multiple offer situations, price is not the only factor that should be taken into consideration. It is important to evaluate offers to determine which one is not only the best, but also the most secure.
Why You May Need to Be Flexible
Flexibility is a plus, even when circumstances seem to favor sellers. Low inventory and aggressive house prices are compromising many buyers’ ability to afford a home. Sellers should be prepared to make adjustments if necessary. Even in a seller’s market, home sales depend on certain factors that may require you to be flexible.
Ideally, the seller should list at a price that gets attention and triggers a lot of interest.
When buyers are continuing to take advantage of ultra-low interest rates, a seller’s market will remain in areas with sought-after price points and a low inventory of homes for sale.
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