A month goes by in a hurry it seems, so here we are! Did a month make a difference with the real estate market? YES. It is notably busier!
I don’t think I’m telling you anything you don’t already know, but the real estate market is on fire. Someone hit the gas pedal on the housing market in February and they have a lead foot. What does this mean specifically? Let’s look at the twin cities housing market as of Feb 18 2022.
If you are a seller – LIST NOW and you’ll be partying all the way to the bank.
Just about every listing is getting multiple offers in the first couple of days. The supply of buyers is so great and the supply of homes is so low right now – 15% fewer listings on the market than last year at this point!
Why are sellers hesitating? I assume that it’s because they are worried about finding THEIR next home. As an agent that represents a lot of buyers, I can tell you that sellers can not only command great prices for their homes they can still get a closing date that suits their needs. For example, if a seller is considering putting their home on the market, but are worried it will be gone in a blink, there is a great likelihood that the seller can ask for and receive a 60 close, flexible closing, or recently I’ve seen them asking for a seller’s home purchase contingency or lastly a rent back situation after closing remembering that most conventional loans require the transaction to close in 60 days on the buy side so no long term rentals this way! but this way the seller will have cash in hand and be able to buy while also have a roof over their heads while they wait for their next home to be available.
One of the things that I really like about real estate is that EVERYTHING is negotiable – as long as the parties work it out (within the law!) and get it in a signed contract, the parties can work together to find a solution that works for everyone. Do you have a creative way to structure a contract that lets everyone get what they need? Bring it up and there may be a way to make it work out!
This past week we had offer acceptance rates at 15%, which means that sellers are receiving 6-7 offers on average. But the average for the month is hovering around 35% according to Home Free Transaction Coordinators. I’ll give you more info on what they see in a successful offer after I take you through current market conditions.
It’s a seller’s market, but to what degree? In the past I’ve explained that the way that we determine this is based on the absorption rate or how many months worth of housing inventory we have at a given time if nothing new were added to the market. 5-6 months is considered balanced, more than that is a buyer’s market and less is a seller’s market. Obviously the more extreme the number the more it favors one or the other. That obviously varies by housing type.
Single family homes have a .56 months (about 17 days) supply now as compared to one year ago when they were at .62 (about 19 days). We have started this year off with available inventory down by 21% year over year. New listings this month are down by 15% from last year.
I was looking for a bright spot and looked at new construction. Builders are responding to the need for houses and have started increasing their production too.
This image shows the big dip and now the increase starting in single family new builds between $400 & $600K. Its not dramatic, but any amount helps – if you have 50 more houses that’s 50 buyers that have found something.
If you have been thinking about selling and are curious about what your home is worth today, let me know. I’ll give you a free estimate of what your home is worth today – absolutely no obligation, just for your information if you want to know – just send me an email. We need homes and now is definitely the time to get the maximum amount of money out of your sale! firstname.lastname@example.org if you’re curious. I’m happy to do it.
Townhouse/ Condo properties are at .97 months (29 days) vs 1.13 a year ago (34 days). Prices on Townhouses are at a median of $267,000 which is UP 12.2%. Average days on market for a townhouse is down 26% to 14.
Condo prices are at a median of $195,000 up 6.6% from last year and are on the market for about 30 days. If you are a first time buyer or someone that likes condo living, this is the softest spot in the market today and your biggest opportunity.
Single family homes in the 14 county metro area have a median price of $370,000, a gain of 12.1% year over year. They are on the market for NINE DAYS. Only about half of what we saw a year ago. And don’t fool yourself thinking you have 9 days to think about it, this is a listing going live on a Thursday, showing through the weekend, closing offers on Sunday and allowing a 5 day inspection period before heading to pending.
The combined absorption rate (all property types) is at .67 months or 20 days of inventory as opposed to one year ago when we had a whopping .75 months or 22 days of inventory.
What can you do if you’re a buyer?
Here are my suggestions and strategies:
1.my office posts properties to agents internally that are off market and that sellers are willing to part with before going onto the MLS, so having that network available helps a lot!
2. make sure you see what is available in “coming soon” and get in there quickly
3. even better if you have the nerve- offer “sight unseen” while in this status. if the seller will do it, you can usually negotiate an inspection this way and if there is something wrong with the property get out of the contract without losing your earnest money, this does require a good offer out the gate. It’s not a way to get a bargain, but is a way to quit losing in multiples.
4. make your offer more appealing are to offer appraisal gap coverage. This means that if you are financing you are stating that you have the ability to make a larger downpayment in order to cover the gap between your offer and what the bank is willing to loan you, having cash is a very important piece of the puzzle in this environment. You can offer any amount of appraisal gap coverage – it doesn’t have to be 100% of the difference!
5 Look at “wallflowers” these are properties that have been on the market for longer than 4 days. This means they have made it through a weekend without getting an offer and may be more willing to negotiate or look at a reasonable but not extreme offer. These can be homes that a buyer got cold feet on, that their financing fell through or other scenarios.
6. Don’t ignore properties that need work! You can get a home loan that rolls a remodel into it. Not everyone can look past a dirty unfinished basement but it’s rarely a bad investment to add finished square footage to a house – especially in an in demand neighborhood.
7. Do you have time? Offer on new construction. You eliminate multiple offers and choose your finishes. Just be aware that contracts allow builders to cancel your contract if the price of materials goes up and you can’t cover the increase. Don’t get yourself in too deep.
8. There aren’t a ton of these available but spec houses are a good option. They may be completed new builds OR they may be nearly completed with an estimated move in date already.
9. my last option coming to mind to look at loans that allow you to offer as if you’re offering CASH – without a financing contingency. This seems like a HUH??! moment, but in my video next week I’ll interview a lender with a program like this that may give you a leg up and I’ll post it here, of course!
OK – lets look at what’s been going on with offers per HFTC:
Buyers are waiving inspection 46% of the time, this is a lot, but that also means that 54% of the time they are getting an inspection.
Off market sales are at 12% – this is the “private listing network” that I mentioned where agents that have upcoming listings market them internally first.
Sales Contingent on the sale of the buyer’s home is down to 5% of the time.
Average sale to list price is 103.2%. I don’t know where these are happening because my buyers have been offering at 15% over and losing… We would be happy with 103%!
Cash is at 17% of offers, Conventional at 69%, FHA has ticked up to 5%, VA is at 0.
Hey! I would love to hear from you in a comment or an email or a smoke signal … reach out if you have questions!