Facing the challenges of low inventory, acknowledging the facts and pushing forward
Some sellers are developing unreasonable expectations in this seller's market.
Investors and baby boomers aren't selling as expected, which is contributing to the issue of low inventory.
We are in what I call an epic seller’s market, and it is impacting every aspect of business from lead generation to how we use technology.
The seller’s market is fueled by lack of inventory, and it’s only growing stronger.
In today’s market, finding a qualified buyer to purchase a home is much easier than it was back in 2009, which is why some of the strategies for selling homes quickly work so much better now than they did then. Some agents are advertising their ability to sell homes quickly and with multiple offers.
What might be causing the shortage?
At times, the shortage of homes on the market feels like a crisis. Homeowners who had planned on putting their homes on the market this spring changed their minds because they could not find a home to move to. Other people still cannot sell their homes for the price they paid, so they are simply waiting for better offers.
Homeownership is at a 40-year low, rents are high and vacancies are scarce. Investors are not letting go of the homes they bought when prices were low, which may also be contributing to the lack of inventory.
Baby boomers are another group of people who might be adding to the issue.
Statistically, older people do not move as often as younger people do. It is assumed that people sell their homes and move into smaller ones when they turn 65; it’s also assumed that people move as soon as their children go off to college, but these are myths. Baby boomers own a lot of real estate, and they aren’t selling it.
Will there be a great sell off in 2020? Or will it happen closer to 2030 when the oldest baby boomers are in their 80s? If they do sell, where will they go?
Challenges of a seller’s market
Here are some of the obstacles created by the strong and enduring seller’s market that we did not see during the buyer’s market:
Agents are struggling to write offers fast enough.
Homebuyers don’t get enough time to make important decisions, like deciding which house they prefer.
Seller expectations are unrealistic at times; there is a limit to what homebuyers can and will pay for a home.
Instead of negotiating with buyers, some sellers reject offers until they get one they are satisfied with.
Home showings are up. Each home on the market is getting more showings before getting an offer, and they are occurring over a shorter period.
Finding people who want to sell their homes is getting harder.
Some homebuyers are skipping the inspection in hopes of making their offer stronger.
Buyer’s agents are writing more offers per buyer.
Sellers are asking buyers for “love letters” to help them decide which offer to accept when there are several to choose from.
Sellers are dictating some of the terms of the sale, like the closing date and the amount of earnest money required.
State of the market
There are agents who spend a lot of money capturing buyer leads. Having fewer listings means having fewer leads of any type, but from a business point of view, even a few buyers can seem like too many when there are so few homes on the market.
We are required to keep copies of rejected offers we have made on behalf of buyers, and we also keep offers rejected by our sellers. The dead offer file is getting impressively large as more offers are being both received and sent out.
In my local market, pending home sales were down 8.5 percent from last April, and there are 20 percent fewer homes on the market.
In some areas where I work, there are 30 percent fewer listings on the market this year than there were last year.
There is little new construction and the homes being built are huge and expensive.
Moving forward
Thanks to a modern MLS and a lot of great technology, writing an offer quickly, showing many houses and tracking buyer feedback on listings is easier than ever.
Educating our clients and agents is an important part of the job in any market.
I encourage sellers to negotiate for the best possible terms and strongly encourage buyers to have complete home inspections.
Sellers must be prepared for many showings, and buyers need to make their first offer their best offer and move on without looking back if they lose to another buyer.
This doesn’t seem like a good time to focus on finding buyer leads. I would rather spend money on marketing to potential homesellers and investing in technology that keeps us fast and efficient while lowing overhead costs.
Teresa Boardman is a Realtor and broker/owner of Boardman Realty in St. Paul. She is also the founder of StPaulRealEstateBlog.com.
Source: inman.com
