It is still a great time to be a seller, but the local real estate market has begun to soften. With significant increases in inventory, buyers now have more choices and less sense of urgency. If you are thinking about selling your home, pricing it correctly the first time is critical. Here’s why:
If you overprice your home, it won’t show up in some search results.
Buyers search for homes using the parameters they desire. Price range is one of the most critical. If you set an unrealistic price of $850,000 for your home, all the buyers searching for homes up to $825,000 will fail to see your property in their search results.
An overpriced home attracts the wrong buyer.
An overpriced home will not compare favorably with the realistically-valued homes in a buyer’s price bracket. If your home is missing the amenities, square footage or other features of homes within the price range you’ve placed it in it won’t sell.
Overpriced homes linger on the market and risk becoming “stale”.
The interest in a home is always highest when the listing first hits the market. When an overpriced home goes unsold for a long period of time buyers often wonder what is wrong with the property. When a buyer moves on from a listing they rarely come back, even if you drop the price.
You run the risk of getting less for your home than if you priced it correctly the first time.
A Zillow study showed that homes that linger on the market tend to sell for significantly less than their listing price. When a home sits on the market for an extended period of time, buyers feel they have lots of room to negotiate.
The longer your home remains on the market, the more expenses you incur.
Every month your home goes unsold you put out money for mortgage payments, utilities and other home expenses that you will never recover.
Setting a realistic price for your home from the start is critical. If you’re thinking of selling, our highly trained experts at Windermere Real Estate can provide you with a comprehensive pricing analysis based on current market conditions.
Luxury homes sales across the U.S. continue to perform strongly, but I’m noticing some headwinds starting to appear that are worthy of a closer look.
It’s often thought that luxury real estate runs totally independent of the overall market, and while this is true in some respects, there are definitely correlations between high-end housing and the rest of the market.
The first similarity is that the luxury market has suffered from some the same inventory constraints that are almost endemic across all price points in the U.S. But, similar to the overall market, we are starting to see a rise in inventory, which should be good news for real estate agents and luxury home buyers alike.
Impact of rising inventory
This increase in the number of luxury homes for sale has started to have a tapering effect on price growth, which again, is similar to what we’re seeing in the rest of the market. But as real estate professionals, we know full well that all housing is local and some markets are performing far better than others.
For example, luxury markets in Maui, Northern California, Colorado, and Sarasota, Florida, are all experiencing substantial price growth, while there are noticeable slowdowns in many parts of New York and New Jersey. Even Queens and Jersey City, which have continued to benefit from high demand, have seen price growth stall recently, indicating that those markets could be losing some steam.
Why the slowdown?
The slowing of luxury sales in certain areas around the country piqued my interest, so I decided to explore why this is happening. The first thing I noticed is that cities with high property taxes are fairly prevalent on the list of slowing markets; this includes cities like Boston, Austin, New York City, and Chicago. It is likely that the federal tax changes limiting the deductibility of property taxes are the culprit for such slowdowns in these areas.
Something else that has undoubtedly impacted luxury home sales in markets, such as New York City and Seattle, is the significant decline in foreign buyers from countries like China and Canada. According to the National Association of Realtors, the number of purchases by international buyers fell by 21 percent between 2017 and 2018, amounting to a drop of $32 billion – the largest decline on record. Foreign buyers spent $121 billion on 266,754 properties, making up 8 percent of the buyers of existing (previously lived in) homes.
My research tells me that foreign home buyers are pulling back amid political uncertainty in the U.S. Ongoing concerns about a potential trade war, combined with rhetoric against foreigners, have done their part to dampen some of the enthusiasm to invest in U.S. housing. Also playing a role in this slowdown is the Chinese Central Government which has started placing tighter controls on the ability to spend money outside of mainland China. And finally, rising home prices and a strong U.S. dollar are likely two other key factors behind the tumbling interest in luxury real estate from overseas buyers.
So how do I see the luxury market performing in 2019?
Luxury real estate sales in markets like Boston, Clearwater, Austin, and Alexandria, Virginia will continue to slow down for the reasons stated earlier, but in other parts of the country, home buyers will provide the demand needed to keep the market plugging along at a healthy pace.
The changes affecting mortgage interest deductions and property taxes will also continue to impact the luxury market in certain areas, but this will, to a degree, be offset by other tax changes that favor high-income households and increase their disposable income. Something else that will help keep the luxury real estate market afloat in the coming year is jumbo mortgage interest rates which remain remarkably competitive compared to historic standards.
On a whole, high-end real estate sales have been strong over the past few years. While I am predicting somewhat of a slowdown next year given the headwinds discussed earlier, 2019 will be remembered as a year where balance started to return to the luxury housing market.
Mr. Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.
Our housing market is finally cooling a bit, from scorching hot to slightly-less-sweltering. While some alarmists are talking bubble or impending crisis, the statistics tell a different story. The market does appear to be shifting, and that’s good news! The steep price increases of the past few years are not sustainable, and also risk pricing buyers out of the market altogether.
Where The Market Is Today
Inventory is up, but still far short of demand. Despite a considerable increase in inventory, King County has just six weeks of supply. Four to six months of inventory is what is considered a balanced market, and we’re far short of that.
Homes are staying on the market a bit longer. New listings have increased in the past few months, but the increase in inventory is primarily due to homes staying on the market longer. With buyers accustomed to homes being snapped up in days, “longer” is a relative term. Homes in King County are taking an average of 15 days to sell.
Prices appear to be moderating. While home prices are up compared to a year ago, the rate of increase is in the single digits rather than the double-digit surges of past months. Prices are down 4 percent from the record high reached this spring.
What This Means For The Housing Market
The shift towards slower, consistent appreciation will result in a healthier market.
Buyers have more choices and more time to make an informed decision.
It’s still a seller’s market, but sellers need to have realistic expectations about pricing their homes as the market softens.
More inventory is still needed to meet demand.
Whether you’re thinking about buying or selling, it’s important to have the most current information about the market. Our Windermere brokers can provide you with statistics about today’s market and answer any questions you may have.
The local real estate market looks like it might finally be showing signs of softening, with inventory up and sales down. More sellers have opted to put their homes on the market. Inventory was up 47 percent in King County and price increases were in the single digits. Despite the increase in inventory and slowdown in sales, it’s still a solid seller’s market. Over half the properties purchased in June sold for more than list price.
A booming economy offered little price relief for buyers looking on the Eastside. In a recent study of economic strength by state, Washington ranked number one in the country. An additional report targeting cities ranks the Seattle-Bellevue-Tacoma market as the nation’s fourth strongest economy. The median price of a single-family home on the Eastside rose 10 percent over a year ago to $977,759 setting another record. There is some good news for buyers. Inventory rose to its highest level in three years, with the number of homes for sale increasing 46 percent from the same time last year.
The number of homes on the market in King County soared 47 percent from a year ago, the biggest increase since the housing bubble burst. Despite the increase, there is just over one month of available inventory, far short of the four to six months that is considered a balanced market. The median price of a single-family home increased 9 percent over last June to $715,000. That’s down 2 percent from the $726,275 median in May. Home prices haven’t dropped from May to June in King County since the last recession.
Seattle trails only Bay Area cities when it comes to greatest profits for home sellers. That may help explain the surge in inventory in June. For example, the number of homes for sale in the popular Ballard/Green Lake area doubled from a year ago. Even though buyers are finally getting more choices, demand still exceeds supply. Homes sell faster in Seattle than in any other U.S. real estate market. That demand propelled the median price of a single-family home to $812,500; up 8 percent over last June and down from the record $830,000 set in May.
The largest jump in home prices in the region came in Snohomish County. While higher-priced markets in King County are seeing increases slowing slightly, the median price of a single-family home here jumped 14 percent to $511,500, a new high for the county. Buyers willing to “keep driving until they can afford it” are finding Snohomish County an appealing destination.
New listings and total home inventory took a big leap recently. In King County, more people put their homes on the market in May than any May in the past 10 years. And the total number of homes for sale increased by 40 percent from a year ago. Why the big leap? Home prices have risen so sharply that sellers are finally jumping into the market. That’s good news for buyers, who have more choices than they’ve had in years.
OLD NEWS: There still aren’t enough homes to meet demand.
While King County now has about a month of available inventory, four to six months of inventory is considered a balanced market. Despite the increase in listings, it’s still a seller’s market.
Whether you’re thinking about buying or selling, it’s important to have the most current information about the market. Contact one of our amazing brokers for recent statistics about the market today and to answer any questions you may have.