Every spring, new buyers come into the market and we see a flurry of activity starting in March and April as they excitedly look for homes. This year, many were disappointed to find out that the inventory is so tight that they cannot find the homes they desire, and when they do find a good property for them, they sometimes resulted in bidding wars. One of my buyers lost out on five properties that were listed with agents, and were sold before he could see them in person. He finally found a private sale and we made an offer before the house could be even listed by an agent.
Typically we see inventory increase in the spring as sellers come out of the woodwork, but for the first time in 10 years we actually see less houses for sale now at the end of the first quarter than at the start of the year. “Despite considerable demand all year, pending sales have lost a step in recent months because low supply is pushing prices higher and making home buying less affordable in several parts of the country,” NAR Chief Economist Lawrence Yun said.
Since my fall market report, the real estate market has become firmly entrenched in a seller’s market with no respite in sight. Look at the Market Activity chart (data from TREND MLS which is the platform agents use to report properties for sale and closed sales) for the first quarter of 2018 as compared to the first quarter of 2016 and 2017, and again you see an increase in buyer activity and lack of good inventory.
Homes for sale in the first quarter of the year dropped from 699 to 614 (down 12%) and then to only 422 this year (another drop of almost one-third). That’s huge statistically! Closed sales were almost steady across the board, at 223, 207 and then 218 this year. This past fall, winter and into spring active buyers snapped up the inventory, while sellers were slow to bring their homes onto the market. It was the perfect storm to clean up old listings and get those sold, but it has created problems for serious buyers who are now ready to buy and cannot find a house that suits them.
As I reported in the fall, our MLS tracks not just inventory but also appointments made on the properties. If an agent uses ShowingTime (an appointment scheduler tied into the MLS) we can figure out which price ranges are getting the most activity. In March of this year 25 percent of the properties were priced between $100,000 and $199,999 yet they received 38 percent of the showings – which is almost the exact same figure from six months ago. This is the “hottest” price range then in our area, as it’s getting the most number of appointments. Overall, 60% of our properties for sale are listed under $100,000 and another 25% are listed at $100-199,999. That is our “bread and butter” in the real estate market. Anything priced higher than $200,000 is consider higher end and makes up only 15% of our properties here in Schuylkill County.
I looked at a few specific Southern Schuylkill zip codes and found a few statistics of note. The median sold price in all of the county the first quarter was $74,000. The highest median sales price was in Auburn (17922) with $180,000 and 15 closed sales. This represents an increase of 34% year-over-year.
Zip Code / Median Sales Price / Number of sales
17922 $180,000 15
17960 $156,100 3
17961 $165,000 21
17963 $129,500 15
17972 $139,900 15
WHAT IS GOING ON?
The hardest hit segment is the first-time homebuyer. They are finding themselves in a situation of lack of choices (inventory shortages), rising interest rates and in some cases increasing prices. While some towns still are flat or stagnant, southern Schuylkill is seeing the tight inventory increase sales prices. Some home buyers are surprised to find that – now that they can afford a home and have a down payment and/or cleaned up their credit – that they are being priced out of the market.
First-time homebuyers are finding there just are not enough homes for sale in their price range. If they’ve been searching a year or more, they may regret passing up “less than perfect” homes that now seem ideal in hindsight. Some are settling for something they would have not purchased in the past, as they realize they may not get a better choice as we move into summer. Others are giving up their search completely as they miss out on house after house and disappointment settles in.
Trade-up buyers are in a better position frequently than the first-time buyer. They are in a market where they should be strong demand for their current home, if they price it right. Also, the move-up price range does have a bit more inventory than the first-time demographic, so they should have more choices. It’s a dance moving from your current home to your next home, but we are seeing clients in this situation who are successfully navigating the process mostly because they are in a strong seller position.
If you look at inventory nationwide, only 22% of homes are considered entry-level (according to Zillow). Almost 27% are considered trade-up and the largest percentage – 51% – are “high end” homes. This is the slowest segment of our market. The highest end homes are a huge segment of what is still sitting on the market right now. So if you have an entry-level home to sell, or a trade-up home, and are thinking of selling – get it on the market now. Your best time to sell could be right now.
One reason sellers are staying put and not selling is because of “interest rate lock”. If a seller locked into a low interest rate in the past few years, he may be hesitant to move simply because he enjoys the benefit of that low rate. Many sellers will stay put and renovate a home to suit their changing needs rather than take on a mortgage with higher rates. This is one factor contributing to the lack of inventory levels. The higher interest rates go up, the more sellers become “rate-locked” and reluctant to take on a higher rate mortgage.
IF YOU ARE SELLING NOW
If you are thinking of selling in the future, here are a few reasons why you should get your home on the market this summer.
Demand is strong. We don’t know what will happen later in 2018 or 2019, but with demand so high you should take advantage of the seller’s market before it turns.
There is less competition right now, with a tight inventory. Next year you could be competing with many more properties. Now, buyers have less choices. This is in your favor.
The process with be quicker. Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the average time it took to close a loan was 41 days.
If your next move will be into a premium or luxury home, now is the time to move up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly, AND you’ll be able to find a premium home to call your own!
Prices are projected to appreciate by 5.2% over the next year, according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.