Our real estate market has shifted into overdrive and we’re now in a strong “seller’s market.”
But what does that really mean for buyers and sellers? Merriam-Webster defines “seller’s market” as “a market in which goods are scarce, buyers have a limited range of choice, and prices are high.”
So how do you define “scarce”? And what does that really mean for buyers and sellers?
Typically a balanced real estate market is considered one with a four to six month supply of homes for sale. Any excess supply would result in a buyer’s market and anything less would be s seller’s market, as we’re now experiencing.
The way you determine inventory is by dividing the number of homes on the market by the number of homes that sold in a month. So if you had 600 homes on the market and 300 sold in a month, you have a two months’ supply of homes. If no other homes came on the market, you’d be sold out within two months.
Currently, Long Beach has about a 1.5 month supply of homes. As a result, we’ve been seeing rapidly escalating prices. The average Long Beach home price in April 2013 was a whopping 27 percent higher than in April 2012, according to the Multiple Listing Service (MLS). Much of that appreciation has come in the past several months.
As a result, sellers are solidly in the driver’s seat. Multiple offers and bidding wars are common. Attractive, well priced, well located homes are a scarce commodity, meaning they often command well above the asking price.
We’ve begun to see more sellers demanding – and buyers agreeing to – the waiving of appraisal contingency and shortening of other contingencies. Offers contingent upon buyers selling their homes are now rare, as are offers below list price. Negotiating for the desired closing date, appliances, or other “perfect terms” or expecting to find the “perfect home” is a thing of the past for many buyers. Simply getting the house is now the perfect term.
It’s not uncommon to hear of buyers who’ve made offer after offer, only to get beaten out by higher offers, cash offers, or offers from others who were willing to waive all contingencies. Today I talked to someone who told me she’s made dozens of unsuccessful offers over the past few months.
So with prices and demand up and inventory down, why aren't more people selling their homes? Many of the sellers are waiting for prices to go up even more. They want to make sure they sell when prices are highest.
Of course, when we were in a buyer’s market, with plentiful inventory, many of the buyers who are now trying to buy were on the sidelines, waiting for prices to go even lower.
Timing the market can be tricky and mis-timing it can be costly, whether you are a seller or buyer.