Is is a seller’s market or is it a buyer’s market? Not an easy response to the question but as in anything else financial it’s complicated. Interest rates are going down. This is not news as they have been for some time. But how does that effect the housing market? How does the interest rate drive the process of buying and selling your home? How do the interest rates impact the number of new home construction?
The numbers: New home construction has gone up by 12% in August of 2019 making it the best single month increase since 2007. This signaled that the downturn in the beginning of 2018 may be over and that recovery is at hand for the housing market. Moreover, permits for building new homes has also risen by 8%,
What about the concerns about the potential impact of trade wars on consumer confidence and more to the point the slowing economic growth coupled with lower income taxes on corporations? As these factors continue to trouble economists, the housing market is being propelled by reductions in interest rates. The drop in interest rates, has eased the affordability factor faced by home buyers.
In line with these developments, builders are focusing their energies by providing more entry level housing but the short supply of developable land in desirable locations makes this task difficult. In my practice (the North Texas market), I have assisted home buyers with negotiating with new home builders to get my client the best selling price and adding builder incentives as well. But there have been instances when purchasing pre-owned homes was the best option. Of course, the choices are situational and no single course of action is best.
Real estate professionals often differentiate market conditions by referring to them as seller markets or buyer markets. There are times, when we should talk about them as being both. The current environment is the case in point.
In 2017, the real estate market was rife with multiple offer situations, offer and counter offer warfare and climbing price points. Most homes were snatched up prior to going to market as a “coming soon” or at listing and within 30 days of their appearance on MLS (Multiple Listing Service). The biggest issue was whether the property would actually appraise as market value (what a buyer would be willing to pay) and comparative market analysis clashed.
Since 2017, we have had a “market correction” of sorts. Property values are stabilizing and properties are lingering in the marketplace for longer periods of time. Multiple offers are rare and competition is down.
So is it a seller’s market or a buyer’s market? My thought is that it is both because of lowered interest rates.
Sellers are currently listing their homes at lower price points and are willing to reduce the price point as the property sits longer on the market. However, It is still a seller’s market because the number of days on the market are not exorbitant. The panic most home sellers face is due to a large degree on the recent past and not necessarily on true market conditions. I caution sellers to lower expectations of a fast sell and the need to jump on the first offer unless it is a good one. In determining whether it is a good offer, offered price is a big consideration but so are other considerations inclusive of type of loan, buyer viability, lender and a multitude of other factors. A measured realistic approach is best but at times difficult and counterintuitive.
It is also a buyer’s market because seller’s are more attuned to market activities in the recent past and more likely to jump at offers. Property tenure on the market is higher than previous years and even seasoned real estate professionals are not grasping that this in itself is a market correction. It is a buyers market chiefly because interest rates make these homes more attainable.
I am a real estate broker practicing in the North Texas area. Please contact me to discuss your options. My commitment is to provide you with honesty, integrity and information.