What You Didn’t Know About The Real Estate Balancing Act

Much of the data emerging from the real estate market points at a developing seller’s market in most parts of the country. But the fact is, there’s no such clear distinction as yet and it appears to be more of a balanced market. Inventory is low and home prices are on the rise after having been in the doldrums for a long time. At the same time, buyers are being cautious and not getting into bidding wars indiscriminately. The historically low mortgage rates are also helping keep home prices stable thus, balancing the buyer-seller equation.
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What the Figures Say

The sale of existing homes was up by 12.8 percent in December of 2012 compared to a year ago. Surveys have indicated that only half the number of prospective sellers plan on selling their homes in 2013. Only about 22 percent of this segment believes that now is an ideal time to sell. This is because many of these homeowners believe that prices will rise much more than what they are right now. A whopping 81 percent of surveyed homeowners said that they expect prices to rise this year. About 34 percent stated that they were holding off selling now for fear of losing out on future gains in terms of home prices. This feeling has led to housing inventories staying low across the country and listings have decreased by about a third from last year.

What it Means for Buyers and Sellers

Housing inventory is expected to ease as spring turns into summer and the tight supply is seen as a temporary trend by most industry experts. Debra Matthew, real estate credit consultant with rent to own homes aggregation service FindRentToOwn.com , says, “Homeowners are reluctant to sell fearing they might miss out on getting a better price. With the prospect of higher mortgage rates looming large, many are considering selling because higher interest rates might chase away the buyers.” The numbers indicate this is a prudent time for buyers to move in on property that they might have been evening for a while now before someone else moves in and takes that home off the market.

Bidding wars are not yet commonplace and interest rates are still low, making it conducive for buyers. If the Fed makes good on its promise of keeping interest rates low throughout the year, buyers would be wise to capitalize on this. Sellers, meanwhile, would be smart to take the plunge when the price is right instead of becoming greedy because if the economy sinks back into a recession, the amount of buyers could dissipate.

Foreclosures and short sales are still aplenty and as these houses come on the market, inventory is bound to increase. Buyers are likely to do well in states where the foreclosure process does not involve court approval. Construction activity is also picking up and the reluctance of existing home sellers might just push buyers to opt for new homes.

Location Matters

The bottom line for the rest of the year seems to be a balanced housing market. The various factors at play – interest rates, inventory, new construction, employment rates, and the economy – ensure that there is no clear cut seller’s or buyer’s market on the horizon as yet. Location is set to be a key decider in determining where the buyers will reign and where sellers will rule.
by Jared Diamond