How do we know if it's a seller's market or buyer's market?

 

Question: One day we hear it’s a Buyer’s market, then we hear it’s a Seller’s market. Which is it now?

Answer:  A buyer’s market occurs when supply exceeds demand. To put it another way, there are plenty of homes for sale, but there’s a shortage of interested buyers. These conditions give buyers leverage over sellers because when supply is higher and demand is lower, the market is forced to respond.

In a buyer’s market, real estate prices decrease, and homes linger on the market longer. So, sellers must compete with each other in order to attract buyers. Typically, sellers will drop their asking prices to gain an advantage in the market. Furthermore, they are much more willing to negotiate offers to prevent buyers from walking away.

 A seller’s market arises when demand exceeds supply. In other words, there are many interested buyers, but the real estate inventory is low. Since there are fewer homes available, sellers are at an advantage.

In a seller’s market, homes sell faster, and buyers must compete with each other in order to score a property. These market conditions often make buyers willing to spend more on a home than they would otherwise. Therefore, sellers can raise their asking prices.

 Market activity is measured in terms of Absorption rate, aka Ab rate.

 For example, let’s look at Lansing, Il.

As of this writing, Lansing has 31 active single family detached properties for sale.

Lansing homes are selling at the rate of 13.6 homes per month.

31/13.6 = 2.3 Absorption rate. 

This indicates a Strong Seller’s Market.

 

If Ab rate is less than 5, it’s a Seller’s Market.

If Ab rate is 5-7, it’s a balanced market.

If Ab rate is greater than 7, it’s a Buyer’s Market.

 

Let’s look at Munster, In:

As of this writing, Munster has 32 active single family detached properties for sale.

Munster homes are selling at the rate of 28.3 homes per month.

31/28.3 = 1.1 Absorption rate. 

This indicates an even Stronger Seller’s Market.

 

The bottom line is that most of the area is experiencing a strong Seller’s market.

When will this change? Unfortunately, there is no crystal ball.

Market Opinion

 

We are Starting to get the Feeling that Buyer Demand is Slowing Down.

The main reasons for the surge in Buyers was Covid and Crime.

Covid is slowing. This may be part of the Reason, 

or should we say, part of the Guess.

Why so many shortages and high Prices?

 If everything seems like it's costing you more money right now that's probably because it is — the saving grace being that perhaps things get a bit cheaper in the fall.

But it's important to understand as an investor— and consumer —why inflation has picked up. Indeed it has major implications on everything from monthly budgeting of one's finances to investment portfolio construction. 

From Goldman Sachs Chief Economist Jan Hatzius: 

"First, during the pandemic demand for several consumer goods has surged far above normal levels, and production struggled to keep up. Second, the global shortage of microchips has limited the production of many consumer goods such as appliances and new cars and has also spilled over to shortages of used cars and rental cars. Third, labor shortages have led to large increases in low-end wages that appear to be flowing through to rising prices in categories that rely heavily on low-wage labor, such as food services. The gains in prices at the hands of these macroeconomic factors have been eye-popping to say the very least."

What a Great Idea !

 

Is there going to be a housing collapse in the near future? We are hearing crazy things about this Market.

 None of the experts say this will happen in the next year. But who can predict the future? Few people foresaw the housing market crash 13 years ago that ignited a worldwide recession. Fueled by low interest rates and loose mortgage lending, the housing bubble burst, some nine million families lost their homes to foreclosure or short sale. Housing values plunged 30% or more. But an entirely new regulatory agency was created to enforce this new regulatory framework. Lenders who do not comply with these standards risk severe penalties. As a result, the housing finance marketplace is now more robust and safer than it was 15 years ago. Any dip in the housing market will be cushioned by these stricter regulations.

No one could have predicted it. Not the economists, not the real estate agents, and not the nation’s homebuilders. But rising crime in some areas and the pandemic, caused an emotional run-on housing unlike any other.                                                                                             

Americans, unsure when they would be able to get back out in the world again, were looking for more indoor and outdoor space. They wanted dedicated rooms for working and schooling at home.

With new buyers continuing to enter the market and not enough homes for sale to meet demand, home prices are still going up. But keep this in mind: If the number of houses for sale goes crazy high and the number of buyers willing to buy them suddenly plummets, home prices would fall and that’s when a crash would be something to worry about. And don’t forget, pandemic-related mortgage bailouts are set to expire this summer. Other factors to watch: If interest rates rose too quickly. If Home prices rise to a point where affordability is diminished. If loans suddenly become harder to get, or an economic slowdown occurs due to government policies. These are all concerns, but not predictions.

Despite these concerns, the experts say that it is unlikely that the housing market will crash in 2021.

The longer the pandemic continues or the weaker the economy gets, the more of a gap there will be between those who can afford a home and those for whom the prospect of homeownership will become less and less attainable.

Typical Buyer, Haha!

 

Home Inspection, Now an FHA Inspection?

 Question:  I knew I would have to go through the buyer’s inspection when I accepted this contract, but now I am told that FHA has to inspect my Home and that the repairs they require must be completed in order for the buyer to get their loan. I am not happy about this. Is this correct?

Answer: First of all, congratulations on getting an accepted offer on your home. In many markets, that is not easy to do. But that does not mean that the deal will close. Contracts have contingencies that must be satisfied in order for a closing to take place. Example: Contingent on your buyer getting a loan, Contingent on a satisfactory home inspection, Contingent on your home appraising to at least the purchase price, etc.                                                                                                                                       

If you have a buyer who is obtaining FHA financing, your deal is also contingent on you completing the repairs required by the FHA inspector/appraiser. The FHA inspector is an appraiser sent to determine the value of the home and look for significant deficiencies according to FHA criteria such as obvious mold growth, chipped paint on windows older than 1978, broken glass, lack of GFCI’s by sinks, etc. If they find defects then they will require repairs which they will reinspect, to ensure the repairs were made correctly. 

These required repairs are usually minor if the homeowner has kept their home in good shape.

You are not required to do these repairs. You may say no and look for another buyer that is obtaining conventional financing or paying cash. The problem is that in many markets, the vast majority of all qualified buyers are using FHA financing.  

The smart move would be for you to do the repairs and enjoy your check at closing.