housing market Archives

Why Low Housing Inventory Means More Money

Why low housing inventory means more money for you, the For Sale By Owner.

My day job is helping people with their real estate needs. That entails answering questions, consulting, helping folks find homes to buy and listing homes for people that want to sell.

I also teach Ordinary People how to sell their homes themselves without having to hire a listing agent.

By ordinary people, I mean not real estate agents.

Why would I want to show someone how to do my job themselves, without me? It’s because I can see the future. Every year more and more home sellers are deciding to go it alone, to sell their homes themselves. It would be a much larger number if people knew how to do it, how easy it can be. If they weren’t nervous about it.

The number of For Sale By Owners is growing regardless.

It’s very profitable.

When I ask clients if they ever thought about selling their homes themselves the answers I get are I don’t know how or they think there’s a lot more to it than there is. Sometimes they don’t want to “deal” with it. Those are the homes I sell, and charge a lot to do so.

Not only do I teach strategies and tips for helping you to sell your house yourself, but occasionally I like to bring you information about market conditions.

Why Market Conditions Are Important

Market conditions are important to know because they dictate price and sell time, how long you can expect your house to be on the market before it sells. Price and sell time are the two biggest concerns for a home seller.

Knowing this information about the state of the real estate markets lets you know how long is too long for a house to be on the market for sale. This is very important information. That’s how you determine if your price is right or if it’s too high. If the house is sitting on the market for too long then it’s priced too high.

That’s important because time on the market can really affect price. The longer it sits the less it gets, but time on market is relative to market conditions.

For example:

Buyers Market

In a strong buyer’s market, meaning there is an oversupply of homes for sale, I expect a house to sit longer. If homes similar to yours are taking 3 months to sell, then you should expect yours to take around three months to sell.

Give it 3 months and if your home hasn’t sold you have to start thinking about a price reduction. If it sits too long, potential buyers will wonder what’s wrong with the house. When they do view it, they will look for problems to explain why it hasn’t sold.

That’s what I do for my buyer clients. When we look at a house that’s not selling I have to wonder why. Most of the time it’s simply because a house is overpriced but buyers don’t always understand price.

Sellers Market

Adversely in a seller’s market when there is not enough supply of homes to satisfy buyer demand then homes will sell fast and for more money. Simple supply and demand metrics. Not enough Supply to meet demand means higher prices.

Supply shortages cause bidding wars. When there is over one buyer making an offer on your home, that’s referred to as a bidding war. Bidding wars are good for sellers because it drives the price up. Buyers are competing against each other.

That’s why low housing inventory means more money. More people competing against fewer homes.

Market Conditions Summer of 2020

So finally let’s talk about this market. Right now, the summer of 2020, the country is in a very robust real estate market. It’s a seller’s market for sure. More so than your average seller’s market. There are some historical things happening in the real estate market right now despite the covid-19 recession, and because of it.

Let me explain.

This pandemic and the massive unemployment across the country caused by it has somehow not really affected real estate much. Most past recessions in the United States have caused home prices to drop, sometimes plummeting to historical lows. Not so with the covid-19 recession.

In fact prices are rising at a rapid pace. That’s a direct result of low housing inventory and why it makes you money.

According to Attom Data Solutions home prices nationwide rose 6’2% in 2019. The first half of 2020 has seen an even more drastic increase. First quarter data provided by the National Association of Realtors shows real estate prices rose 7.7% more over the same time in 2019. The second quarter shows no sign of slowing down.

Back in December of 2019 Zillow was writing articles about low housing inventory and it’s only gotten worse since.

Not Enough Supply

The very limited housing Supply across the country has been driving prices up at an alarming rate. Good for you if you’re selling your house yourself, not so much if you’re buying a house.

“Supply is extremely limited and there are simply not as many homes for sale to meet the demand among potential buyers” says Lawerence Yun, NAR’s chief economist.

Short supply and increased demand means higher prices. It’s economics 101.

To Much Demand

And that brings us to the demand side. It seems to me, in Kansas anyway, there are more buyers looking for a home this year then in previous memory. I hear the same thing from my colleagues around the country. It could be that there is a backlog of buyers building up because they can’t find homes to buy.

Another factor driving buyers out in droves is the massive rate cuts by the Federal Reserve. Mortgage interest rates are at historic lows, dipping below even the low rates during and shortly after the great financial recession of 2008-2009. last week I put a buyer client in contract on a 30 year fixed FHA loan at a 2.75% interest rate. 2.75%. Crazy.

Low Housing Inventory Causes Rising Home Prices

I’ve been helping people with real estate in Kansas for 11 years. I’ve seen nothing like this. Low Supply and high demand means more money for you as a for sale by owner. There literally has never been a better time to be a home seller.

Sometimes when real estate prices start Rising dramatically for no good reason appraisers will hold them back. That’s part of their job, but even the appraisers are justifying this current rapid rise in real estate prices because of the supply shortage.

This was exemplified on one of my recent appraisals. The appraiser noted:

“There is a shortage of homes for sale. This in turn has caused fewer sales. As the sales indicate, there is a range in value. This is not considered unusual due to the limited number of homes for sale. A market condition adjustment was made to the sales. Recent data does not indicate an impact on values due to COVID 19. The market condition adjustment was based upon the most recent Federal Housing Finance Agency (FHFA) figures for the area.”

This Low Inventory Won’t Last Forever

This won’t last forever. It’s still to be seen how the Covid 19 recession will shake out. If the economy falters home prices will drop. As long as the Government is providing stimulus economists predict the economy will remain stable but more stimulus means more debt. It remains to be seen how much debt the country can stomach.

The short term good news is that low housing inventory means more money for you.

In conclusion, is it a good time to sell a house? That is a big fat yes. It’s a great time to be selling a house. Residential real estate prices are on the rise all across the country. Homes that are Priced right and properly prepared for market are selling at crazy high prices and they’re selling fast. Many times they’re selling with multiple offers in a day or two.

Is it a good time to buy a house? Not so much. With real estate prices on the rise you’re paying quite a bit more than you would have paid last year, six months ago or even last month in many cases.

If you are selling your house because you want to downsize, upsize or for whatever reason you’re buying it could get a little tricky. If you’re selling your house yourself and moving into a van, well, count your money.

Thank You

Thanks for reading and if you have questions ask Below in the comments. You can also take a look at my website, https://infinhomeservices.com/, for information, tips and strategies to help you sell your house yourself.

There’s also a member’s section, https://infinhomeservices.com/diy-real-estate-3/, with a step-by-step detailed guide to teach you everything you need to know to sell your house yourself fast and have a smooth transaction. It’s the same thing I teach new agents when they’re first time learning how to sell homes.

If you need state-specific real estate forms and disclosures there’s a link for that too.

How To Sell Your House Yourself

by Joel Weihe

Do you know how to sell your house yourself? Have you ever considered it?

for sale by owner real estate sign and beautiful house.

When you think of selling your home what’s the first thing that comes to mind? For most it’s where to find a realtor. How do I find the right Realtor? Many will go to their friends for referrals. Some will google and end up with a service that promises to find them the “best” Realtor.

The truth of the matter is the first thought should be can I do this myself? If you don’t think so then by all means you should hire a Realtor, but think about that commission. It might be worth learning how to do it yourself.

It’s really not that difficult. With some instruction it’s very possible. I’ve taught many new agents the art of listing and selling a home. Brand new agents with no more experience than you have. So why not pay yourself instead of an agent.

Take the money you save and put it down on your next house to lower the mortgage payments. Maybe you can finally afford that vacation you’ve been dreaming about. Or buy a new car. It’s your money. You should keep it.

The Basics

Here’s basically what you need to know to sell your house yourself and save thousands of dollars:

Price your house right!

Many for sale by owners (FSBO) fail and realtors love to point that fact out. The only reason a house doesn’t sell is because of price and everything is relative to price. Homes in the neighborhood may be selling in a certain price range and you think that’s what your’s should sell for. That may be the case but a few things to consider;

Is your home the same size? If the neighbors house is 2400 sq ft and yours is 1900 sq ft the neighbors house will be more.
Is your house in similar or better condition? The condition of a house factors into price.
Does your house need updating? If a home is stuck in the 80’s it will have an effect on price.

You can use the online real estate portals such as Zillow to find comparables when pricing your house.

Realtors that stalk FSBO’s that have been on the market awhile know that the price is to high and they have a strategy. When meeting with the seller they’ll brag about their record, go over marketing plans and convince you they can sell it knowing full well in a couple weeks they’ll be asking you for a price reduction. And you’ll agree. I’ve seen it happen time and again. Now you’re selling the house for what it should have been to begin with but you’re stuck paying those expensive real estate commissions.

Get Your House In Order.

Yes, clean your house. Upside down and inside out. Clean is a big deal when getting your house ready to sell.

Do an inventory of what needs to be repaired, improved upon or replaced. Consider;

Painting inside and out where needed.
Clean windows inside and out.
Insure the roof is in good condition.
Test all electrical, plumbing and appliances. repair or replace as needed.
Declutter by renting a POD or storage unit.
Powerwash the front porch area. Entire house if it needs it.
Mow often and maintain landscaping.
Clean or replace carpeting if needed.

It has been my experience that home buyers are always on the lookout for what’s wrong with a house, looking for negotiating points. If the carpet needs cleaning to a buyer that’s $5000 for new carpet. In reality it may cost $300 to have it cleaned. A dripping faucet means the plumbing needs to be replaced when the faucet just needs a new washer. You get the picture.

Remember, buyers want to move in and start living. They’ll look for a house that will let them do that.

Marketing Your Home

In this day of the internet, marketing your home is really quite simple. That’s the big difference between pre internet real estate and real estate now. Before the internet, and sites like Zillow, the real estate industry held all the information. You needed a real estate agent to market your home. A real estate agent was also needed to research and visit homes.

Not anymore. Now consumers have all that information at their fingertips.

To effectively market your FSBO;

Put a for sale sign in your yard. You want all your neighbors to know there is a house for sale in the area.

2. Advertise your house online everywhere you can. This can mostly be done for free. Sites like Zillow posts FSBO’s. Craigslist is another popular place that home buyers search.

3. Host an open house. It’s best to hold your house open on the weekend. Find out when realtors do it your area. Start advertising in the online real estate portals where you listed at least a full week before the event.

Sell It

So now that you have priced your home right and prepared it for market your ready to start showing. Potential buyers will call you and ask to see it. If you’ve done everything right someone, or several someones, will make an offer.

A full price cash offer with no concessions is the best. If you don’t get that perfect offer right away but a lesser one you can counter offer. This will go on until you come to an agreement and then you put it in writing.

Ask your potential buyer for a pre approval letter from his/her lender. You’ll want to make sure it is a reputable bank or mortgage company. If you have any doubts research the firm and it’s OK to call.

Every state has a different contract and different rules and disclosures. There are also federal disclosures. You can find paperwork for your real estate transaction online. Search for it. Many title companies have contracts you can use. Make sure you do your research and have all the paperwork in order. Make sure everything is included in the contract. Any concessions or contingencies, such as inspections or paid closing costs, must be included.

It may be that you get get a low offer. What we call a lowball. If that happens do not get emotional. Keep your cool and either say no thank you or give a counter. Some buyers will test the water by making a low offer. They may very well be willing to pay what you want but you’ll never know if you you don’t give them a chance.

Closing

Arrange who will be handling the closing ahead of time be it an attorney or a tile company. This can also be a valuable source of information throughout the process. Keep the closing agent in the loop while you’re in contract.

Once you have a contract most of the hard work is done. The buyers lender and the title agent do most of the work from here on. Just be ready to answer any questions or provide any requested documents.

That’s It

It’s not always easy and sometimes there are complications but that happens with or without a real estate agent. The money you’ll save is well worth the effort.

High Fees and Costs Are Hurting The Housing Market

by Joel Weihe

The housing market is very low on inventory all across the country. While there are still plenty of buyers looking for homes the housing market itself is slowing. More people, especially millennial’s, are forgoing home ownership for now. Part of that is because of high fees and costs that are hurting the housing market. Some of that decline is simply because of the inventory. There are not enough homes to go around. Some of that decline is due to the high cost of buying a home.

According to I nvestopedia Millennial’s aren’t buying homes at the rate of previous generations. Millennial’s compose the largest segment of the U.S. population, nearly one forth, and if they’re not buying homes that could create a problem for the housing market.

Affordability is a big issue. There has been a considerable rise in housing prices the last few years. That increase has put home ownership out of reach for many when you include the high cost of buying and selling a house.

Transaction Fees When Selling A House

The Cost of Selling a House with a real Estate agent can be expensive. If a brokerage charges 6% of the contract price when listing a home that is a substantial cut into profits for the home seller. For example for a $250,000 price tag the home seller loses a full $15000.

Think of what you could do with $15000.

Some potential home sellers simply can’t afford to sell their house. People are staying put for longer periods of time which means less people selling and moving. Many homeowners would like to move up, or downsize or move to a different area. High transaction fees often prevent that from happening.

Closing Costs When Buying A House

High Fees and Costs Are Hurting The Housing Market through the buyer too. Closing costs and prepaid are expensive and the responsibility of the buyer to pay. These costs cannot be rolled into the financing and have to be paid out of pocket.

After saving for a down-payment a buyer also needs to have thousands more on top of that to cover closing costs and prepaids.

What are closing costs? Closing costs are all of the banks and government fees and taxes. Closing costs can include, but not limited to:

Loan origination fee
credit report
Appraisal fee
Title insurance
Closing fee paid to closer company. Could be a title company or a bank.
Recording fees
Underwriting fee
Food certification

Prepaids are taxes and insurance. A mortgage payment consist of principle & interest (the money you borrow and what you pay the bank to do so) taxes and insurance. When a real estate transaction closes there is a certain amount of money that needs to be escrowed for those taxes and insurance. That comes out of the buyers pocket.

All Together

All together the radical increase in housing prices the last few years, the shortage of inventory and the high fees and costs are hurting the housing market. The American Dream of home-ownership seems to be slipping from the grasp of a lot of Americans.

You as a home seller have the power to help fix that. One solution to this national problem is for home sellers to forego the huge transaction costs, real estate commissions, and sell their homes themselves.