September 19th, 2013 11:20 AM by Gregg Mower
Changing of the seasons once again, and we are experiencing a changing Real Estate Market. The trend for the last several years has been that big institutional funds have been buying Residential Real Estate. With the increase in interest rates that happened in June of this year (2013), we saw a significant slowing in residential Real Estate sales due to the higher interest rates. At the same time we saw the appetite of these big institutional buyers slow. So buy July of this year we saw, for the first time in a long time, demand slow for homes. Thus, we saw more houses coming on the market than were being sold. This has changed the market from a predominantly seller’s market to now a buyer’s market. What does that mean to the potential home buyer out in the real estate market today? It means home buyers have more choices than ever before and will not feel like they have to make offers on properties that may not be exactly what they want.
This has also stabilized the prices for homes. We saw double digit increases in home prices over the last few years. With the demand slowing and the increase in inventory of homes, prices have reached a temporary equilibrium point. I don’t see price going down unless the institutional Real Estate owners decide to dump their properties all at once. That could be disastrous for home owners if the institutions decided to dump all at once, as the increase in inventory would likely cause prices to decrease so the inventory could be sold, very similar to the foreclosure crisis of 2008-2011. Home buyers will also see sellers be more apt to pay some of the buyer’s closing costs, where, in the not so distant past, buyers were paying all the cost of purchasing a home and paying a premium price.
For home seller’s, on the other hand, things will be a little different than what you might have been expecting just a few months ago. When selling your home you will have to price the home at a point that may not be where you would have priced the home in June of this year. As a seller, you will have to do things to your home to make it more marketable. In order to get the highest price for your home you might look to paint, carpet, and do those little things that makes your house shine a little brighter than the house that is listed down the street. Sellers should be prepared to pay some of the buyer closing costs, clear a termite report, and be more open to accepting a lower offer on their home.
All in all we have moved to a more “Normal” Real Estate Market where both Buyers and Sellers are not being rushed to put together deals. Interest Rates have now started a decline again with the Federal Reserve Board stating that they will continue to purchase mortgage backed securities. It is always better to own Real Estate as it is a commodity that cannot be manufactured and there is a limited supply. As always please leave any comments you might have.