Sick of the snow yet? I can hear a resounding YESS!!! coming from those of you who are reading this. As I write this, on March 4th, the low tonight is 12 degrees. Not real pleasant. The weather has kept both buyers and sellers indoors and it’s showing up as both pending sales being low and new listings being exceptionally low. The current market is a really tough place for Buyers but a fun place for sellers. Let’s look at the details. . .
DEMAND: As mentioned in the introduction, the weather has definitely had an impact on the real estate market. The first place we are seeing it is in sold homes. While we generally see a slight dip in number of homes sold between january and february, we don’t usually see this much. In January, approximately 320 homes settled, so far, february is only showing 258 homes. I firmly believe that’s due to the weather, as well as there not being much of anything for buyers to look at. Moving forward, that is the big issue. The weather will subside, but the amount of, or lack thereof, homes for buyers to consider to buy is at a crazy low level and will have an affect on the amount of homes that get sold. Buyers are going to need a top notch agent that can stay on top of every new home that comes on the market and get them in asap. In addition they are going to HAVE TO be mentally prepared and physically prepared to write an offer on a home they see, while they are still at the house. That’s the kind of market we are facing right now.
SUPPLY & INVENTORY ACCUM: This is really the big issue right now – how many homes fit any given buyer’s criteria. . . The answer is – NOT MANY!! It’s downright discouraging. Typically the inventory does start to creep up between January and February, however, this time around, it actually dipped just slightly. For 2012 and 2013, the difference in homes for sale was just about 200 homes. This time around it went from 2292 to 2288. We believe that part of that issue is the weather, as well as the time of the year. We have a lot of people in our world that are going to be listing their homes in March and were just waiting for the warmer, sunnier weather. Right now, the inventory levels, measured in months is about 4.7. That is a STRONG seller’s market. However, another associate of mine has run the numbers and uses a slightly different calculation than we do and believes there is only about 3.7 months of inventory in Chester County. That number is certainly troublesome. It’s great news for sellers but really bad news for buyers.
SLPR: For the first time since 2006, the average List-to-sale-price ratio was above 95% this month. That’s the comparison between what sellers were asking and what sellers were actually getting. This is quite significant, as this time last year the LTSP ratio was only 92.8. Don’t forget that this takes into account those homes that sell for 90% of asking and those that sell for 100% of asking, which there are more and more. In many cases, the homes that most buyers are looking to get are closer to 97%+ of asking price. What this means for buyers is that there isn’t a whole lot of room to negotiate and then add on top of that the fact that there are a lot of multiple offer situations and it makes for a really tough time for buyers, especially if they still have their minds stuck in 2011.
RATES: We’ve seen a nice little dip in rates lately, where they’ve approach 4% again recently. For those that can take advantage of that, they better do it quickly. All bets point toward the rates starting to climb again back to the 5% range. At this point, that type of movement in rate shouldn’t affect momentum too much as those that really need or want to make a move, will. 0.50% of a difference in rates won’t prevent them from achieving what they want. It will affect those stretching to get what they want as it will put them out of the running.
CONCLUSION: This has to be the MOST DIFFICULT market for buyers that we’ve seen in the last decade, possibly longer. The extreme lack of inventory is really tough on buyers, especially those who have a very specific and urgent deadline. On the other hand, this is a great time for sellers as they have a majority, if not all of the power. The only issue we haven’t really touched a lot on in this article is the fact that we are probably going to see a lot of appraisal issues again this spring, as we did last fall. At least there is a very real possibility of it. So, if you are a buyer, brace yourself. If you are a seller, enjoy it!!