Ready for an “OK CORRAL” shootout?
When we bring new buyers into the current market, I feel like I am leading them into an OK CORRAL shoot out. Almost every offer I write for Buyer clients is a multiple offer situation. I honestly hate them for my Buyer clients because there is no negotiations, simply “whats the most you are willing to pay for the home”. There is slightly more than that, but not much. However, overall, the local market is in a very good place of recovery. Let’s take a closer look…
DEMAND: No much new to report here other than demand continues to be 20% above last year. Of course this is great news overall in that the market continues to show good signs. One thing we can tell you, being extremely active in the current market is that it is showing signs of seasonal slowing. This won’t show up in the hard stats yet, but this is expected. So many go on vacations or do summer stuff and as a result, the market naturally slows.
RATES: This is the first time we have called rates out with the reason being that they are headed up. This week they have crossed that 4% line a few times. The experts we talk to on a regular basis feel that the rates are going to stay close or above 4%. While this isn’t the end of the world, those who were hoping to get a loan with an interest rate in the 3% range are going to be disappointed. 4% is still historically amazing. The difference in payment purchase of $300,000 between 3.5% and 4% is about $85. So again, it’s not devastating but it will affect what folks can or will afford.
SUPPLY: Historically, from January to June, we see the inventory increasing steadily. The amount of homes available for purchase remained about the same between April and May. That is unusual. What is also unusual is the increased demand, which seems to be eating up the new inventory coming on the market. What this means for Sellers is that they are going to get a much higher Sale Price Ratio, or buyers paying much closer to asking price. It also means, depending on location and a few other factors, that it may be likely to receive multiple offers. Right now, in specific markets, multiple offers are norm not the exception.
For buyers it means a tough market. Buyers have a LOT of competition in many area’s and if they face a multiple offer situation, they get one shot and it has to be their “highest and best”. Buyers have to have everything ready to go so that when they find the house that best meets their needs that they put in an offer that day. While that may seem like rushing a decision, the truth is it is. However, I’ve seen way too many clients lose out on homes that are an awesome fit because they hesitated and then regret that hesitation. It is the Buyers agents job to adequately prepare their clients to make the best decision and many times, all it takes is education.
LSPR: The List to sale price ratio continues to flirt with the 5 year averages. As I’ve said before, this a great indicator of where the market is heading. If we see this pop above the 5 year trend, then prices will be headed up. If they continue to mirror the 5 year trend, then the market is just stable.
PENDING: Just like DEMAND, pending home sales continue to indicate that activity will remain elevated over last year and the 5 year trend, at least for the next few months. If it continues to be high, then the market will continue to be very active.
CONCLUSION: The market continues to be an “OK CORRAL” shootout type environment for Buyers, with homes selling in a few days and multiple offers. You have to be quick on the draw and willing to go at or very close to asking price. For Sellers and home owners, this is very good news as it indicates the recovery of the market and prices. Despite climbing interest rates, the current market is still a great place to be active as prices are still a good 10% off what they “should” be given the 4% average appreciation per year over the last 25 years or so. However, each person’s situation is unique and it is always recommended to talk to a highly professional agent about whether it is the right time for you. If you are wondering that, please give us a call at 484-713-2413.